New bill will extend tax cuts and raise federal deposit insurance

WASHINGTON - The US Senate was to vote Wednesday on a revised US$700 billion Wall Street bailout after the House of Representatives rejected the original package, sending shockwaves through global markets.

The surprise vote, following pleas from President George W Bush for quick action before the US economy slumps into a deep recession, is expected after sundown on Wednesday when the Jewish Rosh Hashanah holiday ends.

In a bid to build Republican backing for the bailout in the House, the Senate bill will include measures that extend tax cuts set to expire and an expansion of federal insurance for bank deposits to $250,000.

"Senate Democrats and Republicans believe it is essential that we work quickly on this important legislation to restore confidence to our financial system and strengthen the economy," said Senate Majority Leader Harry Reid.

"It is my hope that with the improvements we have made to the administration's proposal the Senate will pass the legislation tomorrow (Wednesday) and the House of Representatives will follow suit soon after," he said.

Senate Finance Committee chairman Max Baucus reframed the revised bill as a boost for ordinary Americans, trying to win over sceptical lawmakers and their constituents wary of funding a Wall Street rescue.

"A ‘yes' vote on the financial rescue plan is now a vote to rescue America's working families from this financial crisis, with the right tax relief at just the right time," Baucus said.

White House rivals Barack Obama and John McCain will add to the sense of drama by rushing back from the campaign trail to cast their votes, just five weeks from election day as the economy dominates their bitter race.

Both candidates have said they support the bill.

Obama's running mate Senator Joseph Biden was also bound for Washington, aides said, for what will be a dramatic close encounter between the three lawmakers on the floor of the Senate.

Wednesday's vote means that the Senate will, unusually for a finance bill, consider the bailout before the lower house of the US Congress finalises the measure.

The package is expected to have a much easier path through the 100-member Senate than it had in the House, where in a shock vote representatives rejected it on Monday by 228 votes to 205.

The move sent stocks into free fall and sparked fears of an even deeper economic meltdown, but markets rebounded on Tuesday as expectations rose that a revised bailout could make it through Congress.

News of the planned Senate vote boosted hopes that Congress will send Bush a bailout bill that would allow the US government within days to buy up bad mortgage debts crippling the financial industry.

Earlier, Bush pleaded with lawmakers to accept that inaction would deepen the US financial crisis.

"The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," he said. AFP