The Senate appears poised to pass "Paulson Plus", their own rescue plan which includes some tax cuts:
WASHINGTON (AP) - In a surprise move to resurrect President Bush's $700 billion Wall Street rescue plan, Senate leaders slated a vote on the measure for Wednesday - but added a tax cut plan already rejected by the House. Majority Leader Harry Reid, D-Nev., and GOP Leader Mitch McConnell of Kentucky unveiled the plan Tuesday.
The move to add a tax legislation - including a set of popular business tax breaks - risked a backlash from House Democrats insisting they be paid for with tax increases elsewhere.
But by also adding legislation to prevent more than 20 million middle-class taxpayers from feeling the bite of the alternative minimum tax, the step could build momentum for the Wall Street bailout from House Republicans. The presidential candidates Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., intend to fly to Washington for the votes, as does Sen. Joe Biden of Delaware, the Democratic vice presidential candidate.
The tax plan passed the Senate last week, on a 93-2 vote. It included AMT relief, $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana, and some $78 billion in renewable energy incentives and extensions of expiring tax breaks. In a compromise worked out with Republicans, the bill does not pay for the AMT and disaster provisions but does have revenue offsets for part of the energy and extension measures.
That wasn't enough for the House, which insisted that there be complete offsets for the energy and extension part of the package.
Raising the FDIC insurance cap (discussed here) looks like the most popular revision of the package.
HURRY, SUNDOWN: CNN answers your Constitutional question:
Because the bill must originate in the House, the Senate is attaching the rescue plan to a bill that deals with renewable energy tax incentives. This would allow the Senate to vote before the House.
And the timing:
The vote is scheduled for after sundown, in observance of Rosh Hashanah.
VISIONARIES: House Republicans are preparing their alternative:
The failure of Monday's vote on the $700 billion bailout package—which these Republicans doubt is likely to cause an economic "doomsday" scenario—emboldened the group to press forward with its own plan, sources said.
The group pressing the alternative plan is doing so for largely ideological reasons: They're opposed to the federal government taking a large role in financial markets, sources say.
They don't want a large federal government role in the financial markets? They're about a century too late. Geez, it must gall them to see bonds quoted as a spread to Treasuries.
The first Republican proposal cited is inconsistent with the notion of a limited Federal role:
Require the Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan's enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.
"[A]ssessing a premium on outstanding mortgage-backed securities"? Read my lips - that is a new tax. And not all mortgage backed securities are created equal - if I, as a prudent investor, carefully bought a high-quality senior tranche of a mortgage backed security and the value has held up nicely, why in the world should I be subject to an ex post tax intended to bail out speculators and yield hogs?
Well, part of the answer is that if the House Republicans only tax the busted bonds there won't be anything to fund the insurance. But that is essentially the Willie Sutton argument for robbing banks. They are taxing the good bonds because that is where the money is, not because there is any economic logic or justice to it.
My previous denunciation of this scheme is here.