WASHINGTON — Senate leaders scheduled a vote tonight on a $700-billion financial bailout package after agreeing to add tax breaks and a higher limit for insured bank deposits in a bid to attract enough votes to reverse a defeat in the House and send legislation to President Bush by the end of the week.
After a day of behind-the-scenes maneuvering, top lawmakers said the Senate proposal would include a tax package caught in a stalemate with the House as well as a plan endorsed on Tuesday by both major presidential candidates and the Bush administration to raise government coverage for bank deposits from $100,000 to $250,000.
"It has been determined, in our judgment, this is the best thing to move forward," Senate Majority Leader Harry Reid, D-Nev., said in announcing the surprise move. "This is good for the country."
The senators issued no details of their proposal and said none would be available until today. The lawmakers were gambling that the popular tax breaks for businesses and alternative energy would appeal to lawmakers who helped sink the measure in the House on Monday in a 228-205 vote. The lawmakers also hope the plan does not drive off Democrats who have opposed extending the tax incentives without offsetting spending cuts elsewhere.
Sen. Chris Dodd, D-Conn., the chairman of the Senate banking committee, said the Senate decided to move quickly, citing signs from some House members that they regretted their initial vote after the markets plunged in response. "I think their will is coming back having heard from their constituents," Dodd said.
After the 777.68-point plunge in stock market that followed the rejection of the package on Monday, lawmakers described the experience as sobering and said it could enhance prospects for a revised plan. Some anxiety lifted on Tuesday, as the stock market regained more than half of the value it had lost in Monday's sell-off, with the Dow Jones Industrial Average up 485 points on the day, or 4.7 percent.
President Bush joined the two major presidential candidates, Sens. John McCain and Barack Obama, in calling for quick action to stabilize the markets and avoid what Bush characterized as the threat of "painful and lasting" damage to the economy.
On the morning after the sell-off on Wall Street, congressional offices reported a shift in angry calls from constituents, with some now demanding that lawmakers take some corrective action — a distinct change from the outpouring of public opposition that contributed to the defeat of the plan.
"I started hearing from a lot of people who lost money on their investments thanks to the big drop on Wall Street yesterday," said Rep. Steven C. LaTourette, R-Ohio, who voted against the plan.
As they explored ways to tinker with the proposal in consultation with the Bush administration, all sides agreed any revisions would not change the underlying concept of granting the Treasury Department access to up to $700-billion to purchase — and eventually resell — troubled securities that were clogging the financial system.
It was a delicate balancing act for the architects of the proposal, who had to be careful that in adding elements to entice new support they did not lose the support they already had.
The Senate left the door open slightly to additions to the bill, but other revisions would have to get the agreement of the full Senate, meaning major provisions such as new homeowner tax credits sought by the House would not be considered.
The Senate tax bill would cost more than $100-billion and extend and expand many individual and business tax breaks, including tax credits for the production and use of renewable energy sources, like solar energy and wind power. The bill would extend the business tax credit for research and development, expand the child tax credit, protect millions of families from the alternative minimum tax, and provide tax relief to victims of recent floods, tornadoes and severe storms.
Members of the House and the Senate say the bill would create tens of thousands of jobs and reduce the nation's dependence on foreign oil. But the two chambers have been at odds over whether and how to offset the cost of extending the many tax breaks covered by the legislation. The Senate approved the tax measure last week on a 93-2 vote.
The idea of increasing from $100,000 to $250,000 the amount of a bank deposit that would be insured by the federal government gained currency as a consensus change in the initial plan.
Obama and McCain early Tuesday both embraced the deposit insurance proposal.
Federal Deposit Insurance Corp. Chairman Sheila Bair asked Congress for temporary authority to raise the limit on deposits by an unspecified amount.