It took arm-twisting, cajoling, pleading, and promises from President George Bush and Treasury Secretary Henry Paulson, but a USD 700 bail-out of Wall Street and America’s banks got final Congressional approval and a swift signature from the president – but no signs it would work. After initially being rejected by the House of Representatives, the bill was changed in the Senate, with amendments that would help the districts of former opponents, and then easily won its reconsideration by lawmakers, paving the way for the largest government intervention in capital markets in the history of the country.

The law allows the government to acquire defaulted mortgage assets that are at the heart of the credit crisis, but no real plans on how they would be repaid. “By coming together on this legislation we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Bush said in a statement at the White House. Banks in Europe were keeping a wary eye on the plan, even as the Netherlands took over the failed Fortis Bank and others, such as Dexia, which had to be bailed out by France, Belgium and the Netherlands. EU leaders were worried that failure to pass the American rescue would reverberate across the Atlantic and set off a near-panic among investors and bankers, which some American lawmakers said was used by the Bush Administration to create an attitude of fear to ensure it would get Congressional approval.
US markets reacted haltingly to the passage. The Dow Jones Industrial Average initially fell after the House approved the bill on October 3, retreating from its early highs as investors appeared to take a wait- and-see approach on whether the bail-out would really free up credit availability, especially after jobless figures showed an additional 159,000 Americans were out of work in September, the highest jump in five years. Bush warned that it would take some time for the new legislation to have its full impact on the economy. Paulson, the architect of an original rescue plan, promised to move “rapidly” but “methodically” with his new powers. The legislature approved the bill in a mood of resignation. Many members found themselves in a politically untenable position just one month before the November 4 general election. Congress has received tens of thousands of phone calls from angry voters who oppose using tax money to rescue Wall Street from investments gone wrong.
Democratic Representative Charles Rangel of New York kicked off the debate with a complaint that Congress was acting on the plan “with a political gun at our heads.” Government officials and congressional leaders from both parties had warned legislators of the dire consequences of another failed vote, and promised future measures to keep better tabs on financial institutions and keep the economy going. “Now that we’ve dealt with the immediate emergency, it’s time to bring our economy back to full health,” said Democratic Majority Leader Steny Hoyer, who noted earlier that the world was watching the US legislature’s actions. Members of the House let out a cheer as it became clear the bill would be passed, but it was uncertain whether their constituents would agree on turn on those who had initially voted no, and lawmakers warned there was no cause for celebration, and that a recession for the world’s largest economy was still likely. “Let’s not kid ourselves. We’re in the midst of a recession.
It’s gonna be a rough ride, but it will be a whole lot rougher ride if we don’t pass this bill,” Republican Minority Leader John Boehner said ahead of the vote. Some representatives were moved to support the new version by the massive stock market crash that followed the initial rejection, and welcomed some of the tax provisions and bank savings guarantees for average Americans that have since been added to the bill. Others said some constituents had also changed their mind, with many people now calling to urge passage of the plan out of concern for their pensions and ability to get credit at the bank.