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UPDATE: Financial-Rescue Bill Gains Support Before House Vote

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10/03/2008 09:25 AM
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UPDATE: Financial-Rescue Bill Gains Support Before House Vote
By Laura Litvan and Brian Faler

Oct. 3 (Bloomberg) -- Lawmakers in the U.S. House of Representatives who helped defeat a financial-market rescue package this week are reconsidering their votes amid signs the Wall Street crisis is spreading.

At least eight lawmakers, including Republican Zach Wamp of Tennessee and Democrat Emanuel Cleaver of Missouri, now say they would support the measure. Four others say they may switch their ballots before the House votes again, at about 12:30 p.m. today on the bill, which failed by a dozen votes on Sept. 29.

The legislation allows the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains provisions favored by House Republicans, including $149 billion in tax breaks, a higher limit on federal bank- deposit insurance and changes in securities law.

It also reiterates securities regulators' authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis. The Senate on Wednesday night approved the $700 billion bill, in a 74-25 vote.

``I feel very comfortable about where we stand,'' House Majority Whip James Clyburn, the Democrats' top vote-counter, told reporters last night. ``Of course, I felt very comfortable on Monday.''

Swaying Gerlach

The add-ons may help sway lawmakers such as Jim Gerlach, as did phone calls from his suburban Philadelphia constituents. Many of his supporters shifted from opposing the bailout to backing it following the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the bill.

U.S. stock-index futures climbed as lawmakers said they may switch their votes. Futures on the Standard & Poor's 500 expiring in December gained 9, or 0.8 percent, to 1,133.40 at 7:19 a.m. in New York. Dow Jones Industrial Average futures added 59, or 0.6 percent, to 10,616. Nasdaq-100 Index futures rose 10.25, or 0.7 percent, to 1,520.75.

Lawmakers planning to switch their votes to yes from no also include Democrats Shelley Berkley of Nevada and Gabrielle Giffords of Arizona and Republicans Ileana Ros-Lehtinen of Florida, John Shadegg of Arizona and Jim Ramstad of Minnesota. At least three other Republicans, Gerlach and Tim Murphy of Pennsylvania and Patrick Tiberi of Ohio, and Democrat Bill Pascrell of New Jersey, may vote yes on the measure.

Representative Paul Ryan, a Wisconsin Republican who supports the measure with reservations, said he's talked to some lawmakers he didn't name who've agreed to change their votes.

`Going to Pass'

``It's not going to be a big margin, but I think it's going to pass,'' he told CNBC in an interview today.

At a meeting of Democrats last night, Representative John Lewis of Georgia announced to the caucus that he would switch his vote to yes and urged others to help boost the flagging economy, a Democratic aide who spoke on condition of anonymity said.

House Majority Leader Steny Hoyer spoke by phone last night with Republican Whip Roy Blunt to see if there were enough votes to pass the measure. Both agreed to go ahead with the vote, according to Stacey Bernards, a spokeswoman for Hoyer. Clyburn, Blunt's Democratic counterpart, said Democrats have more votes for the legislation than the 140 they garnered in the failed bill.

`Broad Feeling'

``There is a broad feeling that the economy is at risk and that average Americans will be badly hurt if the economy continues to go downhill, and that action is necessary,'' Hoyer said.

Debate will begin at about 9:30 a.m. today, said House Rules Committee Chairwoman Louise Slaughter, a New York Democrat.

Minority Leader John Boehner said the rescue plan won't come up for a vote until leaders are confident it will pass. ``We're getting there, one at a time,'' said Boehner, declining to say whether he had the votes yet.

Republicans cited the economy as the main reason they were switching their votes.

Shadegg said on Bloomberg Television that he'll now support the measure, citing a ``breakdown'' in credit markets that makes it difficult for small businesses to pay employees. Ros-Lehtinen said in a statement she'll back the bailout because it boosts Federal Deposit Insurance Corp. limits and adds tax breaks for families.

Companies are also pushing Congress to pass the measure, saying the curtailment of credit may result in job cuts.

Automakers said tougher loan standards partly accounted for a 27 percent plunge in U.S. auto sales last month.

Commercial Paper

The market for commercial paper, short-term borrowing by businesses, suffered the biggest one-week drop on record, the Federal Reserve said yesterday. The amount of commercial paper outstanding fell by $94.9 billion, or 5.6 percent, during the week ended Oct. 1.

Yet the addition of the tax cuts and special breaks for companies such as an Oregon-based maker of wooden arrows and Virgin Islands rum-makers may turn off some deficit-wary Democrats.

Representative Mike Ross, an Arkansas Democrat who supported the original bailout measure, said he didn't know how the so- called Blue Dog coalition of fiscally conservative Democrats would vote on the version with the Senate's add-ons.

``I don't even know what I'll do,'' Ross said.

So far, Democrats who may be put off by the added tax cuts haven't said they're switching positions. In all, 140 Democrats backed the bill along with 65 Republicans.

Two dozen of the 44 Blue Dogs voted for the bailout on Sept. 29. Four said this week they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible. Another, Allen Boyd of Florida, said yesterday he was undecided after voting for the measure earlier this week.

`A Travesty'

The extra spending on federal projects is also repelling some Republicans.

Representative Spencer Bachus, an Alabama Republican who supported the earlier bailout plan, called the Senate version ``a travesty,'' saying in an interview that he is ``strongly considering'' voting against it.

About a dozen Republicans were seeking to amend the measure to allow the Treasury to spend $250 billion immediately and require a separate vote by Congress before any more of the $700 billion can be used to buy troubled assets. The amendment would have taken out special tax breaks.

The Democratic-controlled Rules Committee said no amendments would be allowed.

Some of the 133 Republicans who opposed the measure aren't budging.

``The bill that they are going to send back is the same bill that I voted against,'' Representative Joe Barton of Texas told Bloomberg Television.

Representative Steve King, an Iowa Republican, said he would vote against the legislation today. ``Right now, I do not think that they have the votes'' to pass the legislation, he told Bloomberg TV. ``But they might have done something in the night that I do not know about.''

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Brian Faler in Washington at faler@bloomberg.net.
Last Updated: October 3, 2008 09:05 ED
[link to www.bloomberg.com]
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