Congress expected to pass rescue package

UPDATED:

Key lawmakers who struck a post-midnight deal on a $700 billion bailout for the financial industry predicted Sunday it would pass Congress, putting in place the largest government intervention in markets since the Great Depression.

Flexing its political muscle, Congress insisted on a package that gives lawmakers a stronger hand in controlling the money than the Bush administration had wanted. The rescue plan casts Washington’s long shadow over Wall Street with the federal government taking over huge amounts of devalued assets from beleaguered financial firms in exchange for more oversight.

Under the plan, lawmakers could block half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification — and subject to a congressional resolution of disapproval.

Still, the resolution could be vetoed by the president, meaning it would take extra-large congressional majorities to stop it.

• Click here for a summary of the proposal

• Statements from President Bush, Henry Paulson

• Letter from Jim Nussle, director of the Office of Management and Budget (PDF)

The proposal is designed to end a vicious downward spiral that has battered all levels of the economy, in which hundreds of billions of dollars in investments based on mortgages gone bad have cramped banks’ willingness to lend.

Lawmakers had to navigate between angry voters — many of whom view the plan as a rescue package for the wealthy on Wall Street — and Bush administration officials, who warned that inaction would cause the economy to seize up and spiral into recession.

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Negotiators sought Sunday to iron out the final shape of the legislation, which House Republicans still had to review. It was their fierce opposition to a federal rescue that nearly torpedoed an emerging bipartisan pact late in the week.

But officials in both parties were hopeful for a House vote Monday, and the two presidential candidates said they probably would support it.

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