House grits teeth, approves Wall St bailout

By Richard Cowan and Kevin Drawbaugh

WASHINGTON (Reuters) - The U.S. House of Representatives set aside doubts that prevailed a few days ago and passed a landmark $700 billion Wall Street bailout bill on Friday that President George W. Bush promptly signed into law.

Eyeing both the November 4 elections and stock market indexes, lawmakers voted 263-171 to approve the government's biggest market intervention in decades, despite deep reservations about its mechanics, enormous cost and ideological significance.

In a stunning vote on Monday, the House had rejected the bailout proposal, sending stock markets plummeting.

Amid the ensuing financial market volatility and voters' fears, the Senate responded on Wednesday and passed the bill, attaching $150 billion in popular tax break extensions and a boost in bank and credit union deposit insurance to rally more House support.

The strategy paid off and four days after rejecting the bill, the House easily approved the revised measure, with 32 Republicans switching the "no" votes they cast on Monday to "yes" on Friday and 26 more Democrats voting yes.

House Minority Leader Roy Blunt, a Missouri Republican, credited the "active participation" of Republican presidential candidate John McCain and Democratic candidate Barack Obama in convincing some House members to support the bill.

Conservative Republican House members, aware of a wave of opposition to the bill as they prepared for November 4 elections, attacked it as a step toward "socialism," while liberal Democrats blasted it as a bailout for Wall Street "fat cats."

But a majority decided to forge ahead with the plan, first proposed on September 20 by the Bush administration and modified over two weeks of frantic negotiations on Capitol Hill.

Massachusetts Democratic Rep. Barney Frank, chairman of the House Financial Services Committee, said the bailout package represented emergency first-aid for Wall Street.

"We will be back next year to do some serious surgery on the financial structure," Frank said. "Starting in January, we have to rewrite housing finance in America."

He also told reporters, "We have to provide new constraints on risk" in the overall financial services industry."

For Frank, an important negotiator for the bill, the Senate's add-ons were not as important to House passage as evidence this week of a seriously worsening U.S. economic picture.

"States like Massachusetts and California couldn't roll over notes" to help finance their day-to-day operations and credit for private borrowers also was freezing up, he noted.

VOTES CHANGED

Maryland Democratic Rep. Elijah Cummings told reporters he changed his "no" vote on Monday to "yes" on Friday after Obama, of Illinois, called him to urge him to change his position.