US lawmakers were hoping for investor optimism after President George W. Bush signed an historic 700-billion-dollar Wall Street bailout that still would not be an instant fix for the crisis.
The House of Representatives Friday voted 263 to 171 to pass the largest US government economic intervention since the 1930s, after sparking market and political turmoil by rejecting an earlier version of the bailout on Monday. "I am hopeful that we have gone a long ways towards restoring confidence in our markets," said Democratic Senate Majority whip James Clyburn.
Lawmakers said that the combination of tumbling stocks, which pulled down market-linked pension plans, and a credit freeze that had bitten deep into the day-to-day economy, had changed the political calculation since Monday.
But in the initial reaction US stock markets fell sharply Friday, mirroring losses in Asia. The declines appeared to reflect the realisation that the plan would not be a panacea for the broad economic and banking woes in the United States. Following two weeks of high political drama, Democratic leaders credited White House nominee Barack Obama for helping to win over votes of wavering Democrats and ending a political crisis which became a major test of leadership between him and Republican rival John McCain.
However, McCain called the bailout package a necessary "outrage" and vowed to clean up Wall Street if elected. "This rescue bill is not perfect, and it is an outrage that it's even necessary," he said. "But we must stop the damage to our economy done by corrupt and incompetent practices on Wall Street and in Washington."
Top House Republican John Boehner said that the version of the bailout passed by the House was superior to the original version requested by the Bush administration, which some critics described as a "blank check". "The passage of this flawed but necessary bill is not cause for celebration," he said, saying Congress had allowed sectors of the finance industry to "run amok."
House speaker Nancy Pelosi immediately signed the bailout package, which allows the US Treasury to buy up billions of dollars in bad mortgage debts choking the US economy, and sent it to Bush for his signature.
"I really want to commend Barack Obama," said Pelosi, a Democrat, adding that the Illinois senator had helped reassure lawmakers in tough reelection fights. "He really gave them confidence that this was the right thing to do," Pelosi said.
Obama said while campaigning in Pennsylvania that he was glad "we finally got this dealt with" and called on the Treasury to carry out the plan in a way that "protects taxpayers" and helps avert further foreclosures. "I want those plans on tap quick so that we start getting some relief to homeowners out in neighbourhoods," he said.
The Senate passed a revised version of the bailout package 74-25 on Wednesday, including sweeteners on extending bank deposit insurance and expired tax breaks in order to get more House Republicans behind the legislation.
The debate resumed amid more shocking news for the world's largest economy which shed some 159,000 jobs in September, as the weight of the housing collapse and credit crunch hit a broad swath of industries. The unemployment rate held at 6.1 percent, a five-year high, with payrolls having fallen by 760,000 this year, the Labour Department said.
Democratic leaders said the next Congress and president would be compelled to follow up with not only tougher regulation of the banking and financial institutions but also more economic stimulus measures aimed at creating jobs.
"This is only the first step," said Representative Rahm Emanuel, chairman of the House Democratic Caucus. "While we address the balance sheets of banks, the next steps must address the chequebooks of families and the challenges they face."
The amended version of the plan is laced with 150 billion dollars in tax breaks to coax reluctant lawmakers from both the Democratic and the Republican parties to get on board. The bailout gives the US Treasury power to buy up toxic mortgage debt which has been choking the financial industry and would create a 700-billion dollar federal program to buy bad assets from banks and other financial firms.
The Senate raised the ceiling on federal insurance for bank deposits from 100,000 dollars to 250,000 dollars, and added up to 150 billion dollars in tax break extensions for middle class families and business. They also retained limits on "golden parachute" severance payments to disgraced Wall Street executives.
The Washington Post said in an editorial Saturday that additional steps would be needed to overcome the current economic troubles. "Yesterday's action by no means ensures that the problem has been solved. The bad economic news continued to mount, with a drop in orders for manufactured goods and a seven-year high in claims for unemployment benefits," the paper said. "Maybe the only sure thing is that without the congressional action, prospects would be far bleaker."
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