WASHINGTON — With the economy on the brink of meltdown and elections looming, a reluctant Congress abruptly reversed course and approved a historic $700 billion government bailout of the battered financial industry Friday. President Bush swiftly signed it.
The 263-171 vote in the House capped two weeks of tumult in Congress and on Wall Street, punctuated by urgent warnings from Bush that the country confronted the gravest economic disaster since the Great Depression if lawmakers failed to act.
“We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Bush said shortly after the plan cleared Congress, although he conceded, “our economy continues to face serious challenges.”
His somber warning was underscored on Wall Street, where enthusiasm over the rescue gave way to worries about obstacles still facing the economy, and the Dow Jones industrials dropped 157 points. The Labor Department said earlier in the day that employers had slashed 159,000 jobs in September, the largest cut in five years.
The historic vote was a striking turnaround from the measure’s spectacular failure earlier in the week, which had triggered a massive stock sell-off and prompted jittery lawmakers — fearing a crushing economic contagion that was spreading to their constituents — to reconsider.
“Let’s not kid ourselves: We’re in the midst of a recession. It’s going to be a rough ride, but it will be a whole lot rougher ride” without the rescue plan, said Rep. John Boehner, R-Ohio, the minority leader, as he prepared to cast his vote for the most sweeping federal intervention in markets in decades.
Treasury Secretary Henry Paulson pledged quick action to get the program up and operating.
The bailout, which gives the government broad authority to buy toxic mortgage-related investments and other distressed assets from tottering financial institutions, is designed to ease a credit crunch that began on Wall Street but is engulfing businesses across the nation.
“In these past two weeks, we’ve seen things we never thought we would see before in terms of the economic insecurity of our own country,” said House Speaker Nancy Pelosi, D-Calif. She said the measure would “begin to shape the financial stability of our country and the economic security of our people.”
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said the rescue bill was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort he compared to the New Deal.
“We were the EMTs rushing to the rescue of an economy that suddenly found itself choking, but now we have to perform more serious reform,” Frank said.
58 switched votes
Just four days earlier, the previous version of the bill was sent down to defeat, largely at the hands of angry conservative Republicans. On Friday, a total of 33 Democrats and 25 Republicans switched from opposition to support. In all, 91 Republicans joined 172 Democrats to support the measure, while 108 Republicans and 63 Democrats voted “no.”
The reversal reflected a high-stakes political environment just four weeks before Election Day. Some lawmakers were worried about their own jobs, but others — mostly Democrats — focused on the prospect that a new president could have a far more significant effect on the economy than any one piece of legislation.
Several of the Democratic switchers were members of the Congressional Black Caucus who said they changed course after securing commitments from presidential candidate Barack Obama that he would back legislation to help struggling consumers and homeowners facing foreclosures if he wins the White House.
“It’s not too often you get the future president telling you that his priority matches your priority,” said Rep. Elijah Cummings, D-Md., one of 13 black lawmakers who switched to “yes.”
Republican presidential candidate John McCain also lobbied for the measure, according to aides who declined to say whom he called. Rep. Roy Blunt, R-Mo., the party vote-counter, said McCain phoned Rep. John Shadegg, a fellow Arizonan who switched to “yes.”
September alert
The legislation’s roller-coaster ride through Congress began at a somber meeting in Pelosi’s office in mid-September, where Paulson and Federal Reserve Chairman Ben Bernanke frightened senior Democrats and Republicans with their warnings of an impending economic collapse without quick legislative action.
As lawmakers scrambled to draft a bill, they were barraged by angry calls from constituents to reject what many saw as a huge giveaway to the very financial institutions that helped cause the subprime-mortgage meltdown at the root of the economic crisis — with nothing to help its ordinary victims.
“Pray for our republic,” intoned Rep. Marcy Kaptur, D-Ohio, a leading opponent of the measure. “She’s being placed in very uncaring and greedy hands.”
Supporters said the prospect of economic disaster superseded their political fears.
