WASHINGTON (Reuters) - The Senate agreed to vote on Wednesday night on a $700 billion financial rescue package that will include a sharp increase in the amount of bank deposits insured by the FDIC, but also includes a package of tax breaks the House of Representatives has rejected.
Senate Democratic leader Harry Reid received unanimous consent from the Senate on Tuesday to schedule the vote on the revised package the White House says is needed to avoid a broad economic downturn.
The rescue plan, which would allow the Treasury Department to buy problem mortgage-related assets from banks, had been the main hope for government action to unlock credit markets and head off a deeper economic downturn in the United States and abroad.
But Senate leaders attached the measure to a package to extend business and energy tax breaks that a number of House Democrats have opposed, which could imperil votes there after Monday's narrow defeat of the original bill.
House Republicans leaders quickly embraced the revised package, while House Democratic leaders issued cautious statements.
In a stunning vote on Monday that sent global markets reeling, the House rejected the bailout largely with opposition from conservative Republicans who may be lured to support a new package with the tax breaks.
"We welcome the progress made by Senators Reid and (Senate Republican leader Mitch) McConnell toward a modified bill and to schedule a vote," said White House spokesman Tony Fratto.
House Minority Leader John Boehner "was consulted on (the revised package) and gave it the green light," his spokesman said.
Boehner "supports it and believes it should pass," said spokesman Kevin Smith, adding that the Ohio Republican believed the additional FDIC insurance and tax breaks, which included relief for taxpayers hit by the alternative minimum tax, should appeal to House Republicans."
Republican House members voted against the rescue package on Monday by about 2-to-1. A majority of Democrats voted in favor.
House Majority Leader Steny Hoyer, a Maryland Democrat, said he was "talking to my House colleagues about the Senate action and how best to proceed ..."
House Speaker Nancy Pelosi of California said House Democrats remained "strongly committed to a comprehensive bill that stabilizes the financial markets, restores confidence, and protects taxpayers, and we hope Congress can agree on legislation in the very near future."
OBAMA, MCCAIN TO VOTE
Presidential contenders Democrat Barack Obama and Republican John McCain and Democratic vice presidential candidate Joe Biden will be in Washington for the Senate vote, their campaigns said. Both Obama and McCain said they backed lifting the limit on bank deposit insurance as a way to restore confidence.
"We have worked in a bipartisan way to do so, and it is my hope that with the improvements we have made to the administration's proposal, the Senate will pass this legislation tomorrow and the House of Representatives will follow suit soon thereafter," said Reid, a Nevada Democrat.
A Democratic aide predicted that "the Senate will pass it."
Under the agreement to move the bill to the floor quickly, the measure will require 60 votes to pass instead of a simple majority in the 100-member chamber.
The Senate bill would increase to $250,000 from $100,000 the amount of individual deposits the Federal Deposit Insurance Corp insures, seeking to shore up consumer and business confidence in banks and win over lawmakers trying to sell their constituents on an expensive plan funded by taxpayers and seen as benefiting wealthy financiers.
The House returns from a two-day break on Thursday, but there was no immediate word on when it would vote on the bill.
"Ever since yesterday's vote, House leaders have been in frequent communication with each other and the White House to find a plan that can win strong bipartisan approval in the House," Pelosi said.
The defeat of the original in the House was driven by a collection of Republicans and Democrats, many of whom face tight re-election races on November 4 and are getting angry calls and e-mails from constituents upset at the idea of bailing out Wall Street.
Many Americans see the rescue as an excessive burden to taxpayers and believe the money would reward reckless Wall Street executives. They also are irked by the idea of helping people who took out larger home mortgage loans than they could afford and then were unable to pay for them.
(Writing by Vicki Allen; additional reporting by Tabassum Zakaria; editing by Chris Wilson)