Rather than wait for another round of wrangling in the House, the Senate plans to vote tomorrow night at 7:30 on the Treasury’s $700 billion plan to rescue the financial sector. In order to sweeten the package enough to win over the Republican votes needed for passage, the bill will also include a new proposal to increase FDIC insurance for individual bank accounts from $100,000 to $250,000 for a year, along with changes in the Alternative Minimum Tax and backing for unrelated tax breaks for business and alternative energy that had been stalled in Congress. Legislators and regulators hope that bolstering insurance for bank deposits will help calm the popular backlash against the bill, by giving something to average Americans increasingly anxious over the safety of the funds they have stashed in banks. The increased insurance is also something many small businesses and banks have long clamored for.
Senate leaders appear confident that by increasing FDIC insurance, they will ensure enough support for the bill to pass the Senate, after which it will move to the House. And after Monday’s debacle, it is also likely that House leaders have tallied up the votes and are comfortable predicting that the additional FDIC insurance would be enough to bring a victory in the House as well. “They must know that adding in the FDIC coverage can get the bill past the House too,” predicted Scott Talbott, a senior vice president for the Financial Services Roundtable, a group of the industry’s largest players. “Otherwise, they wouldn’t bring the bill up again yet.”
Democratic presidential contender Barack Obama announced plans to come back for the vote. No word yet on rival John McCain's plans.
The shift came after a day of manuevering in Washington, in which all sides attempted to figure out what additions would be needed to gain more Republican support for the rescue package.On Tuesday afternoon, FDIC chief Shiela Bair herself had come out in support of the idea. "To address this crisis of confidence, I do believe that it would be helpful for the FDIC to have the temporary ability to raise deposit insurance limits," Bair said in an e-mail to the trade publication American Banker. "This would provide the dual benefits of providing additional liquidity to banks for lending as well as provide some additional reassurance to depositors above the current limits."