Washington, Oct 1 (IANS) The US Senate scheduled a vote Wednesday 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 reverse a shocking defeat in the House.
But even before the news of a Senate vote came Tuesday night after lawmakers spent the day scrambling to fine tune the defeated rescue plan for the US financial system, stocks reversed course and headed right back up.
The Dow industrials jumped 485.21 points, erasing more than half its record 778-point plunge Monday, their worst drop since 1987, following the 228-205 vote rejection in the US House of the plan worked out by congressional leaders and the Bush administration. Bank stocks rose sharply, investors were lured out of Treasury bonds and the dollar soared.
The two presidential candidates, Democrat Barack Obama and Republican John McCain announced separately that they support a plan that some House Republicans had pushed earlier: raising the federal deposit insurance limit from $100,000 to $250,000.
The House will reconvene Thursday but it is unknown when another bailout package will emerge.
'What is absolutely clear is that the threat to our economy and millions of working Americans requires that we act,' House Majority leader Steny Hoyer said in a written statement.
The Senate's plan to take up a bailout bill was announced Tuesday evening by Senate Majority leader Harry Reid, who said it would be part of a series of votes scheduled for 7.30 p.m. Details of the bill are still being worked out.
Earlier Tuesday, President George W. Bush made his second statement in as many days from the White House, vowing to keep fighting for a rescue plan despite its stunning defeat on Monday. He also spoke with Obama and McCain.
'Congress must act. I recognise this is a difficult vote for members of Congress, but the reality is we are in an urgent situation and the consequences will grow worse each day if we do not act,' Bush said.
House Republican leader John Boehner expressed support for McCain and Obama's call for a higher deposit insurance cap, saying congressional Democrats had rejected it Saturday.
Another possible change to the bill would modify 'mark to market' accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.
The White House signalled a willingness to accept some changes to the bill. Spokesman Tony Fratto said there are plenty of good ideas to help the financial markets and 'we're going to look at all of those'.
He would not comment on any specific proposal. He said the White House would want to see 'if it will help the economy, it will help deal with this problem in our financial markets and the strength of our financial institutions, and if it will help in being able to pass legislation'.
Senate Banking Committee chairman Christopher Dodd told reporters: 'I'm told a number of people who voted 'no' yesterday are having serious second thoughts about it.' He added, however, 'there's no game plan that's been decided'.
Senate Republican leader Mitch McConnell said it was time for all lawmakers to 'act like grown-ups, if you will, and get this done for all of the people.' He predicted a bill would pass this week.
Bush noted that the maximum $700 billion in the proposed bailout was huge, but was dwarfed by the $1 trillion in lost wealth that resulted from Monday's stock market plunge.
'Because the government would be purchasing troubled assets and selling them once the market recovers, it is likely that many of the assets would go up in value over time. Ultimately, we expect that much - if not all - of the tax dollars we invest will be paid back,' he said.
'The dramatic drop in the stock market that we saw yesterday (Monday) will have a direct impact on retirement accounts, pension funds and personal savings of millions of our citizens,' Bush said. 'And if our nation continues on this course, the economic damage will be painful and lasting.'
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