WASHINGTON - The second time was the charm for House members Friday, as they reversed Monday's defeat of the $700 billion financial rescue package, which included more than $3 billion in new bond authorizations, and approved it by a vote of 263 to 171.
President Bush signed the bill into law less than two hours later.
In its action, Congress not only signed off on the economic rescue provisions, but also cleared another legislative hurdle by finally getting the House and Senate to agree on a set of tax provisions, many bond-related, intended to extend expiring tax breaks, provide disaster relief, create renewable energy incentives, and "patch" for one year the alternative minimum tax.
The AMT, which applies to interest earned on private-activity bonds and some governmental and 501(c)(3) bonds, was created to prevent high-income households eligible for several tax breaks from paying little or no taxes. However, the AMT is not indexed to inflation, so more taxpayers become subject to it each year.
The Senate included its version of the "extenders" package in the bailout bill, which it approved Wednesday by a vote of 74 to 25.
The extenders legislation, while generally supported in both the House and Senate, had hit a roadblock over a fundamental disagreement about the extent to which the costs of the package should be offset with revenue-raising provisions. The Senate had agreed upon a package that was only partially offset, while the House, particularly Democrats, were adamant that the extenders be fully paid for with offsets. But ultimately, that demand by lawmakers in the House did not prove adamant enough to prevent them from approving the extenders once they were included in the bailout bill, despite protests to the contrary.
"They're in essence holding a gun to our heads and daring us to vote 'No,' " said Rep. Ron Kind, D-Wisc., who is a member of the fiscally conservative New Democrat Coalition that favored the offsets. "We gave them that gun last week" when the House failed to pass the bill initially, he added.
The extenders portion of the new law creates a special category of qualified private-activity bonds not subject to the PAB volume cap that seven counties in Texas and Louisiana can issue through Dec. 31, 2010, to finance relief efforts in the wake of Hurricane Ike. The Texas counties of Brazoria, Chambers, Galveston, Jefferson and Orange, as well as Calcasieu and Cameron parishes in Louisiana, can issue these bonds in amounts up to $2,000 times their population - a total of up to $2.3 billion of debt, based on 2007 census figures for the counties.
The package also creates a category of private-activity bonds called "Midwestern disaster area bonds" that can be issued by nine states in the Midwest outside the volume cap and over the same time frame. Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, and Wisconsin can each issue these bonds to finance relief projects in an amount up to $1,000 times the portion of their population located in a disaster area.
In addition, the package authorizes Midwestern disaster states to issue debt service tax-credit bonds, which provide the holders with tax credits in lieu of interest payments, so that states can give assistance to communities unable to meet their debt service payments as a result of disasters.
A state can issue up to $100 million of these tax-credit bonds if it has at least two million persons in a disaster area, and up to $50 million if it has a population of one to two million in a disaster area. The law also relaxes mortgage revenue bond rules for all of these disaster areas.
The measure includes an additional $400 million of state and local qualified zone academy bonds for each of 2008 and 2009.
The energy portion of the package authorizes $800 million of new clean renewable energy bonds, as well as $800 million in qualified energy conservation bonds, a new category of tax-credit bonds that is allocated to states, municipalities, and tribal governments. It also extends existing authority for qualified green building and sustainable design project bonds through 2012 but does not provide additional funding.
Several House members noted a few modifications from Monday's failed measure as key improvements that won over the lawmakers.
The law temporarily increases the maximum deposit insured by the Federal Deposit Insurance Corp. to $250,000 from $100,000 per account, a move that was supported by both parties, as well as the two presidential candidates, Sens. John McCain, R-Ariz., and Barack Obama, D-Ill. In addition, it restates the Securities and Exchange Commission's authority to suspend the application of mark-to-market accounting rules.