James Rowley and Brian Faler
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Oct. 1 (Bloomberg) — The Democratic and Republican leaders of the U.S. Senate predicted that a $700 billion financial-rescue package would win approval tonight and urged opponents in the House to drop their objections to the bill.

“There are a few people in the House who would rather we did this some other way,” said Senate Majority Leader Harry Reid, a Nevada Democrat. “We’ve tried other ways. We’ve got to get this done.” Minority Leader Mitch McConnell, a Kentucky Republican, forecast “victory” and urged the House to take up the measure, which is designed to end a credit crunch and restore confidence in the nation’s banking system.

The Senate will vote after 7:30 p.m., Washington time, on the legislation that links the rescue plan to an increase in bank-deposit-insurance limits and tax breaks. The House of Representatives will likely take action Friday, said Brendan Daly, a spokesman for House Speaker Nancy Pelosi.

The House rejected a rescue plan two days ago, and revisions were made to attract the votes of Republicans. Those changes might have soured House Democrats, Reid said.

House Majority Leader Steny Hoyer told MSNBC News that no Democrats who opposed the measure earlier this week have pledged to back it, and he’s not aware that Republican support has increased either. “We don’t have any more Democrats at this hour,” he said.

The measure the Senate will take up tonight includes temporarily raising the limit on federal deposit insurance to $250,000 from $100,000. That increase was proposed by Republicans critical of the plan authorizing Treasury Secretary Henry Paulson to buy troubled debt from lenders.

Tax Breaks

Also linked to the legislation is a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, another move popular among House Republicans. Two-thirds of House Republicans and 40 percent of Democrats defeated the bailout plan on a 228-205 vote. President George W. Bush and Senate leaders vowed to revive the legislation.

Hoyer said some Democrats, concerned about the widening federal deficit, may oppose the addition of the tax breaks without offsets such as spending cuts or tax increases. The Senate plan doesn’t contain any offsets.

“I’m not particularly pleased with that addition myself, very frankly,” he said in an earlier interview on “The Today Show,” acknowledging it is aimed at winning Senate passage. The provision may cause some Democratic defections, he said.

Pressure Mounts

The Senate is expected to pass the bill, with most Democrats and Republicans behind it. Pressure is also mounting on the House to go along.

After a week-long torrent of calls and e-mails from angry voters opposing the rescue package, the tide turned after markets plunged on Sept. 29 in response to the House vote.

“Over $1 trillion worth of market value was wiped off the books by the stock market drop,” said Senator Robert Bennett, a Utah Republican. “It is ordinary people looking at ordinary pensions, with their ordinary Main Street kind of 401(k) plans, who lost that $1 trillion. And they lost it in a matter of minutes.”

Texas Republican Representative Joe Barton’s office said constituent calls and e-mails swung to as much as 70 percent in favor of congressional action, after having been overwhelmingly against a taxpayer rescue of Wall Street.

Barton, who voted against the measure in the House, said the changes made by the Senate won’t alter his vote.

The Same Bill

“The bill that they are going to send back is the same bill that I voted against two days ago,” Barton said in an interview with Bloomberg Television. “Why would I turn around and vote for it?”

He said he supported the tax and FDIC provisions in the measure, but added they won’t do anything to solve the underlying credit crisis, and that failing to offset the tax cuts will add billions of dollars to the deficit.

The Dow Jones Industrial Average’s record 778-point nosedive two days ago ratcheted up pressure on Congress.

The flood of e-mails to Capitol Hill swamped congressional computers, slowing communications and Internet access, said Kyle Anderson, a spokesman for the House Administration committee. On Google Inc.’s search engine, “bailout vote” and “House vote” were the fifth- and sixth-most-searched terms on Sept. 29. “Roll call vote” and “who is my congressman?” also made the top 50.

Forcing Congress’s Hand

House Minority Whip Roy Blunt, the Republicans’ chief vote counter, predicted that voters’ economic worries would force Congress to act. “The impact this could have on the markets will have a big impact on getting people back to wanting to work together to get this problem solved,” Blunt said.

House Republican leader John Boehner, who backed the House measure that failed, said he supports the Senate legislation.

Other lawmakers say their constituents are still opposed, and they have no regrets about killing the plan that was presented to the House. “One of the best votes of my career,” said Representative Peter DeFazio, an Oregon Democrat.

The bank-rescue package would give the Treasury secretary broad power to buy troubled assets, chiefly mortgage-backed securities, that are burdening investors and financial institutions.

The Senate’s final version of the legislation is still being drafted. Under the accord, announced on the Senate floor, Reid and McConnell must still agree on the language before a vote can take place. It will be offered as an amendment to a piece of House-passed legislation awaiting Senate action.

Blue Dogs

The tax package that’s part of the legislation also includes $17 billion in tax credits for the development of solar, wind and other forms of renewable energy. It passed the Senate on a 93-2 vote last week and differs from a version the House also approved. The package would spare 24 million households from a $62 billion alternative-minimum tax that is due to take effect this year.

Fiscally conservative House Democrats known as Blue Dogs opposed the Senate bill because it wasn’t fully offset by new tax revenue. The House version of tax breaks was paid for. Senate leaders refused to consider the House bill, saying it would never pass in that chamber. The financial rescue measure won support from 24 of the Blue Dogs on Monday.

To help restore confidence in the nation’s lenders, FDIC Chairman Sheila Bair sought the temporary increase in the bank- deposit insurance limits.

Under the measure, banks will not be required to pay additional premiums for the coverage, which expires in 2009.

The FDIC change was endorsed by both Republican presidential nominee John McCain and Democratic rival Barack Obama. Both presidential candidates plan to return to Washington for tonight’s vote, their aides said.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net; Brian Faler in Washington at faler@bloomberg.net
Last Updated: October 1, 2008 15:52 EDT