Senate poised for dramatic bailout vote

The US Senate was poised to vote Wednesday on a 700-billion-dollar Wall Street rescue, reworked after the House of Representatives rocked global markets by spurning a first plan to quell the financial crisis.

Presidential candidates Barack Obama and John McCain were set to rush back to Washington for the dramatic vote, as hopes rose that a strong Senate endorsement of the package would prompt the House to quickly follow suit.

US officials say the bailout must be passed quickly to restore confidence in the financial system and thaw out frozen credit markets which are already hampering the day-to-day running of the economy.

"I'm hopeful that tonight we'll see a strong vote in support of this plan and bipartisanship shown in the Senate today will spark the House of Representatives to do the same," said Senate Majority leader Harry Reid.

"The security and well-being of the American people are at risk and we have to work together to solve this crisis."

The surprise vote was called late Tuesday, after Democratic and Republican negotiators agreed on the terms of the reframed bailout, which includes extended tax cuts for businesses designed to woo Republicans in the House.

In another sweetener, the measure, which requires 60 votes in the 100-member chamber to pass, raises the ceiling on federal insurance for bank deposits from 100,000 dollars to 250,000 dollars.

It retains most facets of the original plan which gives Treasury Secretary Henry Paulson the power to buy up toxic mortgage-related assets in troubled banks and includes restrictions on "golden parachute" payoffs for CEOs.

Opponents of the bill have balked at handing that much power to one man, and reject the notion of using taxpayer money to bailout out disgraced Wall Street firms.

New talks were underway in the House meanwhile on tweaking the package to ensure it gets through on a second vote, after lawmakers sensationally killed off the original bill on Monday by 228 to 205 votes.

House Majority leader Steny Hoyer raised concerns that some of his fellow Democrats who originally voted for the bailout might reject it over the Senate's extension of expired tax breaks for businesses.

"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.

Conservative Democrats previously rejected extending such tax breaks unless they can be offset in other areas of the budget in an attempt to curtail the growth of the deficit.

The White House said President George W. Bush would lobby senators ahead of the vote, after being criticized for not doing enough to pressure House members to back a deal he says is vital to staving off an economic nightmare.

"We look forward to the debate, and hope to see strong support. The president will be speaking with senators today," said spokesman Tony Fratto.

"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."

The bailout bill is expected to encounter less resistance in the Senate than the House, partly because only a third of the chamber's lawmakers are up for reelection on November 4.

Every House member faces voters and many lawmakers in tight re-election fights opposed the package on Monday. The subsequent plunge of stocks, which took many 401k market-based pension plans down with them, may have altered the political calculation.

"Calls to members offices have changed from being 90 percent don't do this; they're at least 50-50," said Republican House minority whip Roy Blunt on NBC.

"In some offices they're 90 percent, 'You have to do something. This may be the best thing out there.'"

Wednesday's vote means the Senate will, unusually for a finance bill, consider the bailout before the House finalizes the measure.

After Monday's stocks plunge, securities staged a rebound on Tuesday.

But the word on the market was caution on Wednesday, as the Dow Jones Industrial Average dropped 102.74 points (0.95 percent) to 10,747.92 in the first exchanges after a 485-point gain on Tuesday.