A spoonful of sugar helps the medicine go down.
It's not obvious why a side agreement to increase the amount of money insured in individual bank accounts would restart the drive toward a financial bailout, but it has.
The Senate plans to vote on a bill to buy as much as $700 billion in troubled mortgage assets after
7:30 tonight, or after sundown in observance of the Jewish holiday.
Both presidential candidates, Barack Obama and John McCain, are expected to return for the voting. The proposal has had greater support in the Senate than in the House.
Oh, and did we mention the $149 billion in tax breaks?
In addition to increasing the limit on Federal Deposit Insurance
Corporation-insured accounts to $250,000 from $100,000, the Senate bill would also extend tax breaks for businesses and alternative energy for two years. Bloomberg News estimates that those extensions would mean savings of $149 billion over the next decade, noting that such a move would be "popular among House
Republicans."
House Republicans were instrumental in the stunning defeat of the bill on Monday, although there were many Democratic defections as well.
Appeasing House Republicans, however, may come at a cost.
Politico.com notes that the tax-break extensions are not being offset by any increase in revenue, and that may not play well with the more fiscally conservative
"blue dog" Democrats.
Politco quotes an unnamed House Democratic leadership aide saying that the Blue Dogs were "furious" over the tax compromise.
The essentials of the plan—allowing Treasury to buy distressed securities with Congressional and agency oversight and limits on executive severance packages—remain the same.
Making sausage is usually an unattractive task, but the negotiations over such a crucial piece of legislation have taken some unusual turns, even for
Washington.
Why did no one think of raising the F.D.I.C. limits before? The Wall Street Journal reports that "Republicans say they pushed it, only to be rejected. Democrats counter that it wasn't floated during the last round of negotiations over the weekend."
If they had made such a proposal over the weekend, would they really have kept it quiet until now? It's a proposal that has an obvious Main Street appeal, yet there remains the problem of asking the same banks that are troubled to increase the premiums they pay for the insurance fund.
The markets, so happy on Tuesday that there were signs of any movement in Washington, are mixed this morning. Stocks in London are higher, but Frankfurt is lower. U.S.
stock-index futures are pointing to a modestly lower opening on Wall
Street.
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