House leaders optimistic for bailout bill

WASHINGTON (Reuters) - U.S. House Democratic leaders expressed optimism on Thursday that a revised $700 billion financial industry rescue bill passed by the Senate will clear the House of Representatives, which rejected the bailout earlier in the week and rocked financial markets worldwide.

"We're not going to take a bill to the floor that doesn't have the votes. I'm optimistic that we will take a bill to the floor," House Speaker Nancy Pelosi, a California Democrat told reporters.

As congressional leaders scrambled to shore up support for the controversial plan, House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters earlier on Thursday "there's a good prospect" of passing the revised bill in the House on Friday.

But he emphasized that House Republican leaders needed to deliver many more votes for the package than they did on Monday when roughly two thirds of Republicans voted against it.

Many lawmakers had turned against the plan when their offices where flooded with calls from taxpayers vehement that they should not be asked to bail out Wall Street. The House vote sent stock markets into a tailspin.

During the week, President George W. Bush and congressional leaders began making a clearer case for the need for the bailout, arguing that a widespread credit freeze was beginning to hurt consumers and businesses seeking loans.

In the Senate on Wednesday, a strong majority of both Republican and Democratic senators voted 74-25 for a revised plan sweetened with a package of tax cuts and an increase in bank deposit insurance, sending it to the House for another vote.

Now lawmakers said they see public sentiment shifting somewhat more in favor of the controversial bill.

The bill is aimed to free up tight credit markets by empowering Treasury Secretary Henry Paulson to buy mortgage securities and other financial instruments that have lost value because of the deteriorating housing and credit markets.

Both Pelosi and Hoyer said it was likely the House would not try to amend the Senate-passed bill, which also raises bank deposit insurance to $250,000 from $100,000 and includes a package of about $150 billion in tax breaks for renewable energy, businesses and individuals.

Pelosi said time was of the essence to restore confidence in U.S. financial markets and any changes would mean the bill would have to go back to the Senate, where it would take a number of days to bring it up for another vote.

SUPPORT OF BUSINESS GROUPS

A White House spokesman also expressed optimism about the legislation's prospects. However, he said the overall economy faces "very severe" challenges that likely would extend into 2009.

New government data released on Thursday showed jobless claims rose 497,000 last week. A more extensive report on U.S. unemployment last month will be released early Friday, which could further influence the House vote later in the day.

Besides House leaders working to round up the necessary votes for passage, business groups were urging their members to contact targeted lawmakers in hopes of winning their support.

The U.S. Chamber of Commerce was urging a "grassroots and grasstops" effort aimed at getting about three dozen House members, mostly Republicans, to switch to vote 'yes.'

Although some Democrats have voiced opposition to changes in the Senate version, Hoyer said he did not think a significant number of the Democrats would change their "yes" votes cast on Monday to "no" on the Senate version.

"I think it is going to be minimal," Hoyer said when asked whether fiscally conservative Democrats might abandon the legislation. Many Democrats are upset because the $150 billion in tax cuts added to the revised bill are not fully paid for by spending cuts or other revenue raising measures.

Kevin Smith, a spokesman for House Minority Leader John Boehner, an Ohio Republican, said that Wednesday's Senate vote "was encouraging and we're moving in the right direction, but we're going to need more Democrat and Republican votes to pass this bill tomorrow."

(Additional reporting by Patrick Rucker, editing by Jackie Frank)