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'Sweeteners' could make bailout package sour for House Dems

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  • NEW: Senators pass $700 billion financial bailout package
  • Top Senate Democrat says chances are "good" plan will pass House
  • Tax extensions, increase in FDIC limit meant to attract House Republicans
  • Measures added to attract Republicans could drive off conservative Democrats
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WASHINGTON (CNN) -- Congressional leaders Wednesday added "sweeteners" to a $700 billion financial bailout plan to attract enough House members, particularly Republicans, to pass the plan, which failed in the House just two days ago.

The measures -- a mix of tax extensions, an increase in federal deposit insurance and other measures -- include many items that are appealing to Republicans.

The Senate approved the modified financial rescue plan in a 74-25 vote late Wednesday.

Democratic leadership aides said the House vote could occur at midday Friday.

Rep. Barney Frank, chief Democratic negotiator of the bill in the House, said the House has a better chance of passing the bill the second time around.

"The reality has hit some members," Frank said late Wednesday, adding, "The main change is reality. It's not possible now to scoff at the predictions of doom if we don't do anything." Video Watch reaction to the Senate's passage of the bill »

Speaker Nancy Pelosi indicated that the House "will act in a bipartisan way to restore market confidence as well as Main Street's confidence in our economic future."

The bailout plan has new provisions, including an increase in the Federal Deposit Insurance Corp. cap from $100,000 to $250,000. It makes $250 billion immediately available to purchase bank assets, leaving $100 billion at the president's discretion and $350 billion subject to congressional review.

The bill also includes a "mental health parity" provision, which would require health insurance companies to cover mental illness at parity with physical illness.

Because tax bills must originate in the House, the Senate attached the rescue plan to a bill that deals with renewable energy tax incentives. This allowed the Senate to vote before the House to approve a bailout bill.

"I would not have moved forward on this if I didn't think the chance in the House was good," said Senate Majority Leader Harry Reid, D-Nevada.

House Majority Leader Steny Hoyer, D-Maryland, said Wednesday afternoon that he would bring the Senate bill to the House floor "if there is bipartisan majority support" for the package.

"I'm going to be talking to the Republican leadership -- Mr. Boehner, Mr. Blunt -- to see where they are on votes before we bring it to the floor," Hoyer said Wednesday on CNN's "Situation Room."

Senate bailout bill

The Senate bill passed Wednesday night included measures that:
  • Allow Treasury Secretary Henry Paulson to buy up to $700 billion in bad mortgage-related securities and other bad assets.
  • Allow the Treasury Department to modify mortgage terms to help homeowners avoid foreclosure.
  • Permit the government to receive equity in companies it helps so taxpayers get a share of any future profits.
  • Restrict executive pay for companies aided by the program.
  • Create an independent oversight board to oversee the Treasury Department program.
Source: Senate Banking Committee

Rep. John Boehner of Ohio, the top Republican in the House, believes that the additional measures will make it easier to pass the controversial bill, a spokesman said. Follow the plan with the Bailout Tracker »

Boehner and Rep. Roy Blunt, the Republican whip, were calling members Wednesday, urging them to support the bill, Republican leadership aides said.

"Republicans are doing everything we can to encourage more Republicans to vote for this bill," said the spokesman, Kevin Smith.

"We believe we'll have a better chance to pass this bill than the one that failed," Smith added.

The "sweeteners," however, could drive away conservative Democrats, which would leave leaders short of the votes needed to pass the bill.

In particular, the additional tax extensions meant to persuade some House Republicans to switch their votes in favor of the bill could cause some fiscally conservative, or "Blue Dog," Democrats to drop their support because the tax cuts are not paid for and will drive up the federal deficit.

Hoyer, the No. 2 Democrat in the House, said he wasn't pleased the tax exemptions were added to the bill and admitted that they may result in fewer House Democrats supporting the proposal.

"There's no doubt the tax package is very controversial. The Senate, in my opinion, is adding that on because they think that's the only way they can get it passed," Hoyer told NBC on Wednesday.

All three senators running for president or vice president -- Republican Sen. John McCain and Democratic Sens. Barack Obama and Joe Biden -- returned to Washington to vote for the bailout package.

The Senate vote came two days after the House voted against the measure, 228-205. A majority of House Democrats voted for the bailout package, 140-95, but a majority of Republican members voted against the bill, 133-65. Video Watch Rep. Paul oppose the bailout package »

Before Monday's vote, House members were bombarded with constituent calls in opposition to the bill. The calls to one Republican opponent of the measure, Rep. Mike Pence of Indiana, were running 85 percent to 90 percent against the bailout, said Bill Smith, Pence's chief of staff.

The servers hosting the Web sites of the House and its members were also overwhelmed with millions of e-mails, forcing administrators Tuesday to implement the "digital version of a traffic cop" to handle the overload -- for the first time ever. Video Watch how opposition is running high »

Despite the strong public outcry, President Bush is pressuring lawmakers to pass a financial bailout package quickly. He and other administration officials warn the troubles in the financial industry could spill into the broader economy.

"This morning, we're seeing increased evidence of the credit squeeze on small businesses and municipalities all across the country, so it's critically important that we approve legislation this week and limit further damage to our economy," White House spokesman Tony Fratto said.

The modified bailout package will include the core measures the House rejected -- a plan that would allow Treasury Secretary Henry Paulson to buy up to $700 billion in bad mortgage-related securities and other bad assets that are undermining credit markets worldwide -- as well as a mix of other measures that previously passed in the Senate.

The "sweeteners" in the package include:

  • An increase in the amount that the Federal Deposit Insurance Corp. will insure in bank accounts: to $250,000, up from $100,000.
  • A fix that would prevent middle-class taxpayers from paying the alternative minimum tax.
  • A number of tax extensions favored by either Republicans or Democrats.
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  • Tax exemptions for renewable energy.
  • A measure that would require health insurers to treat mental health issues the same way they treat physical illnesses.
  • CNN's Jessica Yellin, Deirdre Walsh, Carol Costello and Scott J. Anderson contributed to this report.

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