WASHINGTON – The Senate overwhelmingly approved the $700 billion bailout of the mortgage industry last night after adding tens of billions of tax breaks, then sent the bill back to the House, which narrowly defeated an earlier version on Monday.
The Senate version adds to the prior bill which would have the Treasury buy up to $700 billion in distressed mortgage securities from banks and credit unions by more than doubling the coverage for federally insured bank and credit union deposits to $250,000 per account, from the current $100,000, for one year. The move is aimed at shoring up depositor confidence in federally insured banks and credit unions.
The bill, which passed on a 74-to-25 vote, was also expanded to include an extension of the so-called Alternative Minimum Tax, which will cost the Treasury an estimated $150 billion a year in revenues; add billions of dollars of tax breaks for alternative energy projects and provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.
The House, which defeated the bill on a bipartisan 228-to-205 vote Monday, is expected to vote the newest version on Friday.
CUNA President Dan Mica cited the credit union inclusion in the bill. "It is important to America’s credit unions that they have parity with banks in any increase in federal deposit insurance coverage," said Mica in a prepared statement "Another goal of ours has been to ensure credit unions are not excluded from having access if necessary to the legislation’s relief measures for troubled assets. By providing this access, the Senate legislation is careful not to place credit unions at a disadvantage."
"We are very pleased to see that we have achieved parity for our industry in this historic legislation," said NAFCU President Fred Becker. "While credit unions did not create the current economic crisis, we have been working tirelessly with members of Congress and the NCUA to ensure credit unions continue to be treated fairly and thank the administration and members of the Senate for listening to our concerns."
During a six-hour debate in the Senate, almost every senator said he or she is opposed to the idea of the huge bailout, but the majority said they believe a crash in the credit markets will ensue if the bailout is not approved.
"This is a sad moment in many ways, but a moment that has to come," said Democrat Christopher Dodd of Connecticut, who helped fashion the bill as chairman of the Senate Banking Committee.
"The costs of inaction are far too great," said Democrat Hillary Clinton, of New York, who voted for the bill. "Our economy runs on credit and trust and both the credit and trust is running out."
"Regrettably, a rescue plan is needed," said Democrat Barbara Mikulski of Maryland, summing up the position of many senators who voted for the bailout. "Like the taxpayers; I know that they are angry and mad as hell and so am I."
"Time is short, we must act, because the crisis will only grow worse," said Republican Susan Collins, of Maine, who also voted in favor.
But many senators maintained the bailout would benefit Wall Street investors, many of whom caused the meltdown in the mortgage markets, at the expense of taxpayers.
"I just do not believe that this bill gets the job done," said Republican Jim DeMint, of South Carolina, who voted against it. "In fact, I believe in the long term it will do more harm than good."
An angry Independent Bernard Sanders, of Vermont, said he could not vote to bailout the entities who profited from the huge run-up in mortgage prices. "This bill is still not good enough. It should be rejected by the Senate," said Sanders, whose bid to add a 10% surcharge to people earning over $500,000 to pay for the bailout, failed.
Sanders, the only avowed Socialist in the Congress, was joined by the conservative Republican Richard Shelby, of Alabama, who denounced the investors on Wall Street he said caused the meltdown in the financial system. "We did not get into this situation in a matter of days and we are not going to get out of it with a piece of legislation quickly cobbled together in the backroom of the United States Senate," said Shelby, the leading Republican on the Banking Committee.
"This bill does nothing for the average American," Shelby said. "The American taxpayer will pay for it coming and going."
