The House of Representatives finally approved Friday the $700 billion bailout plan aimed at stabilizing the financial system. Applause and cheers echoed through the House chamber as the number of “aye” votes crossed the threshold needed for passage. The vote was 263 – 171, a reversal from Monday, when House lawmakers shocked the financial world by voting against the initial version of the plan structured to buy up toxic assets from financial institutions.
Within an hour, the legislation had been conveyed to the White House and signed by President Bush. Mr. Bush welcomed the plan’s approval, saying it will help the nation’s economy withstand the financial turmoil. The legislation, said the president, “is essential to helping America’s economy weather the financial crisis.” However, Mr. Bush warned, notes WSJ – that “Americans should also expect that it will take some time for this legislation to have its full impact on our economy.”
In a statement Treasury Secretary Henry Paulson stressed the importance of the bill’s passage saying:
By acting this week, Congress has proven that our Nation’s leaders are capable of coming together at a time of crisis, even at a critical stage of the political calendar, to do what is necessary to stabilize our financial system and protect the economic security of all Americans.
Mr. Paulson also reiterated the fact that the plan contains a broad set of tools that can be deployed to strengthen our financial institutions. In the coming days the Treasury Dept., said Mr. Paulson – will work with the Federal Reserve and the FDIC to develop strategies that deploy these tools. Mr. Paulson however, pointed out that while the Treasury Dept. will move rapidly to implement the new authorities, a methodical approach will be also exercised in order to maximize the effectiveness of the plan.
The Fed Chair Ben Bernanke, applauded the action taken by the Congress, stating:
The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses.
The credit crisis has continued to worsen and has deteriorated further since Monday’s vote, impacting even more negatively an already weak U.S. financial system.
Since Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke asked Congress to create the bailout plan on Sept. 18., the banking system has remained under considerable stress. U.S. states and municipalities from New York to California are being faced with deteriorating finances. The latest evidence came in California, where Gov. Arnold Schwarzenegger warned, in a written letter e-mailed to Treasury Secretary Henry Paulson last night, that the state might need an emergency federal loan of up to $7 billion within weeks if it can’t access the credit market.
Even with the bailout, local economies will still have to face financial complications as result of jobs and tax losses prompted by bank failures and consolidations brought on by the collapse of the housing market.