$700 billion deal done

WASHINGTON -- After the House reversed course and gave final approval to the $700 billion economic bailout package, President Bush quickly signed it into law Friday, authorizing the Treasury to undertake what could become the most expensive government intervention in history.

But even as Bush declared that the measure would "help prevent the crisis on Wall Street from becoming a crisis in communities across our country," congressional Democrats said that it was only a first step and pledged to carry out a sweeping overhaul of the nation's financial regulatory system.

The final tally in the House was 263-171, with 91 Republicans joining 172 Democrats in favor. That was a wider bipartisan majority than vote-counters in both parties had expected, completing a remarkable turnabout from Monday, when the House defeated an earlier version of the bill, 228-205.

The financial markets, however, were not enthusiastic. Already weighed down by another round of bleak economic data, including a report showing that 159,000 jobs were lost in September, the Dow fell 157 points to close at 10,325, or nearly 818 points lower than when the week began, before the House's initial rejection of the bailout.

Some measures of the credit markets improved after the bill was approved, but only modestly. Analysts said it was too soon to tell whether borrowing rates -- the interest rates banks charge one another for loans, and a key indicator of the flow of credit -- would fall.

The change in course by the House was prompted by fears of a global economic meltdown, and by old-fashioned political inducements added by the Senate: a portfolio of $150 billion in popular tax provisions, including credits for the production of solar, wind and other renewable energy, and an adjustment to spare middle-class families from paying the alternative minimum tax.

In the end, 33 Democrats and 24 Republicans who had voted "no" on Monday switched sides Friday to support the plan. Both Sen. Barack Obama of Illinois and his Republican rival in the presidential election campaign, Sen. John McCain of Arizona, voted for the measure when the Senate approved it Wednesday, and both hailed Friday's outcome.

Appearing in the Rose Garden, Bush praised Congress for acting just two weeks after Treasury Secretary Henry Paulson requested the emergency bailout legislation with a warning that the American economy was at risk of the worst economic collapse since the Depression.

"We have shown the world that the United States will stabilize our financial markets and maintain a leading role in the global economy," Bush said.

But it was a hollow victory for the administration, which after long favoring a hands-off approach toward the financial industry has found itself interceding repeatedly this year to avert one calamity after another.

Pelosi and other Democrats, who expect to widen their majority in Congress in the November elections, said they intended to tighten controls.

"High-fliers on Wall Street will no longer be able to jeopardize that personal economic security of Americans," Pelosi said, "because of the bright light of scrutiny, accountability and the attention given under regulatory reform."

Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee, said, "We will be back next year to do some serious surgery on the financial structure."

Opponents of the bailout called it a costly Band-Aid that did not address the core problems in the financial system.

Many said they agonized over the decision amid a torrent of calls from constituents. Several who switched to "yes" cited a provision added by the Senate increasing the amount of savings insured by the federal government to $250,000 per account, from $100,000.

Fears about the economy also motivated support. "Nobody in East Tennessee hates the fact more than me that I am going to vote 'yes' today after voting 'no' on Monday," Rep. Zach Wamp, a Republican, said.

"Monday, I cast a blue-collar vote for the American people," he continued. "Today, I am going to cast a red, white and blue-collar vote with my hand over my heart for this country, because things are really bad and we don't have any choice."

Obama, speaking in Abington, Pa., said he had urged lawmakers from both parties to "not make the same mistake twice." But he warned that passage of the measure should be just "the beginning of a long-term rescue plan for our middle class."

McCain, speaking in Flagstaff, Ariz., warned that the bill was not perfect and there was more to be done. "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." McCain said he spoke to House Republican leaders before Friday's vote and urged them to approve the bill.

Supporters said the bailout was needed to prevent economic collapse; opponents said it was hasty, ill-conceived and risked too much taxpayer money to help Wall Street tycoons, while providing no guarantees of success.

The rescue plan allows the Treasury to buy troubled securities from financial firms in an effort to ease a deepening credit crisis that is choking off business and consumer loans, the lifeblood of the economy, and contributing to a string of bank failures.

Officials say the final cost of the bailout will be far less than $700 billion because the government will resell the assets that it buys.

The final agreement disburses the money in parts, with Congress able to block the second $350 billion. It also provides for tighter oversight of the program by two boards, and requires the government to do more to prevent home foreclosures.

Lawmakers also included efforts to restrict so-called golden parachute retirement plans for some executives whose firms seek help, and a provision allowing the government to recoup any losses after five years by assessing the financial industry.