WASHINGTON - The Senate was expected last night to approve a modified $700 billion bailout plan that included more than $2 billion of bond-related tax extensions, renewable energy incentives, and disaster relief, as well as a one-year "patch" to the alternative minimum tax.
The vote could not come any sooner for California Treasurer Bill Lockyer, who warned yesterday that Congress' inability to get an economic rescue package enacted into law was jeopardizing the state's ability to issue bonds for its basic infrastructure needs.
"Without action, we will be unable to sell voter-approved bonds for highway construction, schools, housing, or water projects," he said yesterday. "The credit market is frozen because financial institutions are afraid to commit capital amid enormous uncertainty. Congress and the president need to adopt a responsible recovery plan, and get the job done quickly."
The Senate planned to vote on the legislation late last night, with the expectation that it would be passed. Senate leaders from both parties generally have been in sync on drafting legislation to address the crisis, as opposed to the House, where Democrats and Republicans have struggled to find a consensus and failed to pass their bailout package Monday by a vote of 228 to 205.
However, the inclusion of the so-called extenders package, which is only partially offset with revenue-raising provisions, could help win over House Republicans who mostly voted against the bailout package but also objected to the extenders legislation pushed by House Democrats for containing too many tax hikes to offset the intended tax breaks.
The two chambers of Congress have been locked in a standoff during the past week about how to advance on the extenders legislation. After a number of failed attempts, the Senate finally passed its own package last Monday.
By including the extenders package in the bailout legislation, some House Democrats will have to decide whether the fight for their own tax package and budgetary standards are worth voting against a bailout package.
House Ways and Means Committee chairman Charlie Rangel, D-N.Y., who along with the fiscally conservative Blue Dog Coalition have been pushing their own fully-offset extenders package in accordance with "pay-as-you-go" budgetary rules, yesterday complained about the addition of the Senate extenders package to the bailout bill. But he stopped short of opposing it, calling it an "unprecedented gamble" that he hopes "is not accepted as some new constitutional attitude by [the Senate's] leadership."
House Majority Leader Steny Hoyer, D-Md., also said he was "not particularly pleased" with the move.
The extenders portion of the bill would create a special category of qualified private-activity bonds not subject to the PAB volume cap that seven counties in Texas and Louisiana could 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, could issue these bonds in amounts up to $2,000 times their population - up to $2.3 billion of debt, based on 2007 census figures for the counties.
The package would also create a category of private-activity bonds called "Midwestern disaster area bonds" that could be issued by nine states in the Midwest outside of the volume cap and over the same time frame. Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, and Wisconsin could each issue these bonds in an amount up to $1,000 times the portion of their population located in a disaster area to finance relief projects.
In addition, the package would authorize Midwestern disaster states to issue debt service tax-credit bonds, which would provide the holders with tax credits in lieu of interest payments, so that states could give assistance to communities unable to meet their debt service payments as a result of disasters.
A state could issue up to $100 million of these tax-credit bonds if it had at least two million persons in a disaster area, and up to $50 million if it had a population of one to two million in a disaster area. The bill would also relax mortgage revenue bond rules for both disaster areas.
The measure also 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 would authorize $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 would be allocated to states, municipalities, and tribal governments. It also would extend existing authority through 2012, but not provide additional funding for, qualified green building and sustainable design project bonds.
The bailout portion of the bill largely mirrors the measure that failed in the House on Monday, with a few changes meant to entice additional lawmakers' support. The bill would temporarily increase 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, the bill would restate the Securities and Exchange Commission's authority to suspend the application of mark-to-market accounting rules.
