The victory was a critical reversal from the House defeat earlier in the week of the federal government’s efforts to ease the economic crisis by purchasing many of the bad loans and other investments that have clogged the credit system and threatened to bring the financial system to its knees.
“This is the kind of vote we were sent here by our people to cast,” Senate Minority Leader Mitch McConnell, R-Ky., said just before the vote Wednesday night. “I think it is one the finest moments in the history of the Senate.”
Senate Majority Leader Harry Reid, D-Nev., echoed McConnell’s sentiments, stressing that the vote posed “a critical test of leadership for every senator.”
The modified Senate proposal included several key changes including authorizing the Treasury secretary and chairman of the Federal Reserve to spend $250 billion to purchase problematic loans. Another $100 billion could be spent at the discretion of the president and a final $350 billion would be available, but only after Congressional review.
The proposal also included additional tax cuts for business and middle class voters while also attempting to limit the liability to taxpayers.
The Senate vote came just two days after the House defeated a different version of the economic legislation 228-205, a move that prompted a massive 770-point drop in the New York Stock Exchange.
Senators said they understood that Congress had to move on the legislation to try and restore some stability to the financial system.
“Inaction is not an option,” Senate Majority Leader Harry Reid of Nevada said. “This is not a bailout for Wall Street. It’s a bailout for our country.”
Despite the clear decision in favor of the final bill, the vote did not come easily for most in the chamber.
Sen. Dianne Feinstein explained she was voting for the bill even though of the 91,000 calls her office had received from Californians, 85,000 had opposed the plan.
Both presidential candidates urged their colleagues to vote for the measure, returning from the campaign trail to both vote “aye”.
In Missouri, before flying to Washington, Republican nominee Sen. John McCain, R-Ariz., warned, “If we fail to act, the gears of our economy will grind to a halt.”
“I know many Americans are wondering what happens next,” Sen. Barack Obama, D-Ill., said. “Passing this bill not be the end of our work to strengthen our economy. It’s just the beginning of a long, hard road ahead.”
Analysts said the Senate passage indicated the continuing power of the moderates from both parties in the upper house of Congress.
“The Senate has a center,” Norm Ornstein, congressional scholar at the American Enterprise Institute told the NewsHour ahead of the vote. “The House of Representatives has pretty much lost that center. And this was a coalition of people strongly on the right with people strongly on the left who brought it down in the House.”
But Ornstein added that, “Keep in mind that two-thirds of the Senate are not up for election this time, so they don’t have those immediate electoral pressures. In the House, almost all the members in tight districts, where they face challenges, ended up voting against this particular package.”
Indeed, Democrat Mary Landrieu, facing a difficult re-election campaign in Louisiana, was one of the 25 senators that voted against the final bill.
The House appeared likely to take up the modified proposal as early as Friday. Prospects for more support appeared to brighten on Wednesday, with several key Republicans indicating they may vote in favor of the bill after voting “no” on Monday.
Asked by the Associated Press if he was ready to switch from no to yes, Rep. Steve LaTourette, R-Ohio, said: “Not yet, but it’s getting there.”
The Senate version of the economic plan included $100 billion in tax breaks for businesses and the middle class, as well as a GOP proposal to raise from $100,000 to $250,000 the cap on federal deposit insurance.
But the changes appeared to ease opposition from House Democrats, like Rep. Peter DeFazio who said his key problem with the legislation — the power granted to Treasury Sec. Henry Paulson — remained unchanged in the new bill.
“It’s the original Paulson program with bells and whistles,” he said before the Senate voted. “He can buy any sort of asset he determines. That could be credit card debt. It could be auto loans… It might be pawn shop certificates, maybe office buildings, anything he wants, at any price he wants, under any conditions he wants, but he’ll have to tell us after he’s done it. This is unbelievable power to give to this guy. He will be God on Wall Street.”
Despite the moves towards adopting a sweeping government intervention in the global financial market, some experts cautioned the underlying issues that led to the crisis would be slow to correct.
“[E]ven if the Fed and the Treasury come out swinging, let’s say, Monday morning and buy $100 billion worth of stuff, does that really relieve the deeper, underlying problems in the credit market? I’m not sure it does,” Simon Johnson of the MIT Sloan School of Management said ahead of the vote. “I think it stabilizes the situation… a vote would be seen, I think by everyone, as a positive step, but a pretty small step at this time in the right direction.”