US Senate passes stimulus in partisan vote

US Treasury Secretary Geithner puts $2 trillion tag on bank bailout.

Geitner Obama 88 248 (photo credit: )
Geitner Obama 88 248
(photo credit: )
The Senate on Tuesday passed an economic stimulus bill that President Obama and congressional Democrats called crucial to pull the US economy out of its downward spiral but that drew scant support from Republicans. Senators voted 61 to 37 to approve the massive bill, which the Congressional Budget Office now says would cost $838 billion over 10 years. Only three Republicans voted in favor of it. In the House, an $819 billion version of the package passed on January 28 with no Republican support. A procedural vote in the Senate yesterday cleared the way for final passage today. In that 61-36 vote, the same three moderate Republicans senators - Susan Collins and Olympia J. Snowe of Maine and Arlen Specter of Pennsylvania - broke with their party leaders and supported the legislation. The three joined all 56 Democrats and two independents in voting for the bill today. One Republican senator, Judd Gregg (N.H.), who has been nominated by Obama to be the new commerce secretary, did not vote. The package now heads to a House-Senate conference to resolve differences between the two versions. Obama, who hopes to sign the resulting bill into law before Presidents' Day on Monday, has publicly encouraged negotiators in recent days to restore some education provisions that were stripped from the Senate version to reduce its overall cost. Obama continued lobbying for the bill today on a visit to Fort Myers, Fla., which had the highest foreclosure rate in the nation last year. As he was speaking at a town hall meeting, he was handed a note from press secretary Robert Gibbs informing him of the Senate vote, and he announced the news to the crowd, sparking loud applause. "That's good news," Obama said. "It's a good start." The president was introduced in Fort Myers by Florida Gov. Charlie Crist, one of the few Republicans who are backing the stimulus plan. Crist, bucking complaints from conservatives who say the plan costs too much and does not include enough tax cuts, praised Obama yesterday for continuing to "work hard to reignite the US economy." In a speech before taking questions at the Fort Myers meeting, Obama said Crist and other governors and mayors across the country share his conviction that creating jobs and rescuing the economy transcend party affiliation. "When the town is burning, we don't check party labels," Obama said. "Everyone needs to grab a hose!" Obama, speaking a day after a similar appearance in Elkhart, Ind., said the stimulus plan "will save or create up to 4 million jobs over the next two years, ignite spending by business and consumers alike and make the investments necessary for lasting economic growth and prosperity." He said the package "includes $1,000 of badly needed tax relief for middle class workers and families," as well as "a partially refundable $2,500-per-student tax credit" to help families send their children to college. Also Tuesday, Treasury Secretary Timothy Geithner pledged government financing for as much as $2 trillion of efforts to spur new lending and address banks' toxic assets, seeking to end the credit crunch hobbling the economy. "Instead of catalyzing recovery, the financial system is working against recovery," Geithner said in unveiling the Obama administration's overhaul of the government's financial-bailout plans in Washington today. "At the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it." The main components of the Treasury's package today are a joint public- and private-sector fund to buy as much as $1 trillion of illiquid assets and a $1 trillion program to supply new credit to consumers and businesses. The administration also will inject additional taxpayer funds into banks, imposing tighter restrictions that will include limits on dividend payments, acquisitions and executive pay. "I want to be candid: this strategy will cost money, involve risk, and take time," Geithner said today. The initial bailout effort, which he helped administer in his previous job as head of the Federal Reserve Bank of New York, was "essential" while "inadequate" to support the financial system and the secondary-lending market, he said. Illiquid securities, mainly tied to mortgages, have spooked investors away from putting new money into banks and made lenders loath to extend new credit. Rather than borrow at the Fed's target rate for overnight funds - now as low as zero percent - to lend, banks have instead parked a surplus of $793b. of cash at the central bank itself. The Treasury will also work with the Federal Reserve to finance as much as $1 trillion in new consumer and business loans. The newly established Consumer and Business Lending Initiative is modeled on an earlier program to support new credit. Under today's plan, regulators will subject banks to new tests to determine whether they have enough capital. The Treasury, Fed and other supervisors in the President's Working Group on financial markets will develop guidelines for the examinations, which are aimed at ensuring that the country's largest banks can withstand a worsening economy.