WASHINGTON — A day after an emergency financial rescue plan collapsed in the House of Representatives, the Senate scheduled a Wednesday vote on an amended plan that includes tax cuts for businesses and renewable energy, a higher ceiling on federal bank deposit insurance and a fix to the alternative minimum income tax that forces millions of Americans to pay higher individual income taxes.
Money bills ordinarily originate in the House, and the Senate's plan to act first, coupled with the tax cuts and the increase in federal deposit insurance, is likely to add to the pressure on the House to approve the measure, or else shoulder all the blame for the consequences of refusing to do so.
The new bill, announced by Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., would raise the cap on federally insured bank deposits from $100,000 to $250,000, a move that Sens. Barack Obama and John McCain both endorsed Tuesday. Both presidential candidates also said they’d return to Washington for the vote.
As phone calls flooded Capitol Hill switchboards — many from constituents whose stock-based retirement accounts were hammered by Monday's 778-point plunge in the Dow Jones Industrial Average — lawmakers displayed a more conciliatory tone Tuesday as they regrouped after the House's surprise rejection of the administration's bailout plan.
Never miss a local story.
President Bush, in a televised statement to the nation, renewed his call for congressional action, despite the House vote that handed him one of the worst defeats of his presidency.
"I'm disappointed by the outcome, but I assure our citizens and the citizens around the world that is not the end of the legislative process," Bush said. Stocks surged upward Tuesday, with the Dow Jones average climbing 485 points, brightening the mood of lawmakers as they looked for compromise.
Bush spoke by phone with both Obama and McCain on the need to get Congress to enact some kind of financial system rescue.
The presidential candidates tried to spell out in Main Street terms what would happen if Congress doesn't pass a rescue plan that many voters view as a golden parachute for Wall Street fat cats. Obama stressed that the House's rejection of the plan led Wall Street stocks to lose more than $1 trillion on Monday alone, at least on paper, which hurt ordinary Americans.
"The 401Ks and retirement accounts that millions count on for their family's future are now smaller," Obama said in Reno, Nev. "The state pension funds of teachers and government employees lost billions upon billions of dollars. Hardworking Americans who invested their nest egg to watch it grow are now watching it disappear."
McCain, campaigning in Des Moines, told an economic forum that one lender to the Sonic fast food chain, GE Capital, stopped extending loans to restaurant franchisees. He also said that 100 Milwaukee Area Technical College students couldn't get private loans, forcing the school to come up with emergency loans.
"When small companies like Sonic franchisees can't borrow, contractors don't get that remodeling work, equipment makers lose sales, and restaurants go out of business," McCain said. "It hurts the entire economy."
Both candidates urged Bush to take whatever steps he could without congressional action to help quell the crisis. Both recommended that the FDIC immediately be granted the authority to increase the deposit insurance cap to $250,000. Later, FDIC Chairman Sheila C. Bair endorsed the call, but Congress must authorize the increase.
In addition, McCain urged the Treasury to use a $250 billion stability fund it has available to help shore up financial institutions. He also called for the Treasury to buy "up some of these terrible mortgages and help stabilize the situation."
As McCain and Obama weighed in, Bush lamented Congress's failure to pass the bailout package and attempted to assure the public that some sort of rescue package will pass.
"I recognize this is a difficult vote for members of Congress. . . . But the reality is that we are in an urgent situation, and the consequences will get worse each day if we do not act . . . . For the financial security of every American, Congress must act," Bush said from the White House.
On Capitol Hill, the House was in recess for the Jewish holiday Rosh Hashanah while the Senate remained in session, but took no votes to allow Jewish members to observe the holiday.
Some anger over how the package was rejected still lingered, after some Republicans blamed a partisan floor speech by House Speaker Nancy Pelosi, D-Cal., for enraging some GOP members to vote against it.
Rep. John Shadegg, R-Ariz., speaking on MSNBC's "Morning Joe," called Pelosi's speech "stupid," but said it wasn't why House Republicans rejected the package.
Instead, Shadegg blamed Treasury Secretary Henry Paulson for "arrogantly coming to Congress, giving us four hour's notice of a crisis of generational proportions and then saying it was his bill or no bill at all."
"What happened yesterday was that Mr. Paulson got a civics lesion which he desperately needed," Shadegg said.
(Douglas reported from Des Moines, Iowa, and Montgomery from Washington.)
MORE FROM MCCLATCHY