The White House said today it was "fairly optimistic" the US House of Representatives would pass a $700 billion financial rescue bill on Friday, but it would likely take "at least weeks" for the Treasury Department to begin buying bad debt.
Passage of the bill would open the way for the rescue measure to be sent to President George W. Bush's desk to be signed into law.
"We feel fairly optimistic that we have a good chance for a successful vote tomorrow," White House spokesman Tony Fratto told reporters, adding that Mr Bush had called about three dozen House members over the past two days to lobby them for their votes.
Asked how soon after the bill's passage Treasury would start buying up toxic debt clogging the financial system, he said: "Treasury wants to do it as quickly as possible but they can explain to you how they will implement this going forward.
"It's a complicated thing that they'll be trying to put in place. ... I think it's at least weeks," he said.
The Senate passed a revised $700 billion bailout plan on Wednesday night, and its fate now lies with the House, which had rejected an earlier version and is expected to vote on the new bill on Friday.
The Senate voted by a large majority to endorse a revised bailout package that would allow the Bush administration proceed with its plan to inject $700 billion into the financial system by buying "toxic" mortgage assets from vulnerable banks, writes Arthur Beesley, Senior Business Correspondent, on Wall Street.
By a margin of 74 to 25, the Senate backed the revised package after original Bill was amended to include new tax breaks and an increase the limits of the Federal insurance scheme on bank deposits.
The House vote against the plan prompted a precipitous drop in US stock markets last Monday. House Republicans voted by a margin of two to one against the Bill and some 60 per cent of Democrats voted in favour of the measure.
Given uncertainty about the voting intentions of many House members, there have been suggestions that the revised Bill would not be immediately put to a vote in the House if there were indications beforehand that it was unlikely to be carried.
The Senate vote, which followed swift bipartisan agreement on revisions to the controversial pact, was welcomed last night by US Treasury Secretary Hank Paulson.
“This sends a positive signal that we stand ready to protect the US economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going,” he said in a statement. “I urge the House to act promptly to pass this Bill.”
Even before last night’s vote, the Congressional leaders of the Republican and Democratic parties – and respective presidential candidates John McCain and Barack Obama – phoned House members opposed to the pact and met them in efforts to persuade them to change their vote.
Although Mitch McConnell, Republican leader in the Senate, acknowledged in advance of the last night’s vote that those supporting the plan were hopeful of its prospects in the House, he would not predict that it will be carried.
“I do hear reports – and you all have reported – that there’s growing optimism that the House will be able to get the job done,” he told journalists. “But I don’t think I should be predicting what the House will do.”
However, there have been indications since Monday that a number of legislators who voted against the plan were open to changing their mind.
The original bill, agreed last weekend after a difficult negotiation between the government and Congressional Democrats and Republicans, was voted down after House members received a welter of complaints from their constituents about package.
In addition to raising the cap on individual bank deposits guaranteed by the federal government to $250,000 from $100,000, the revised Bill also embraces a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade.
In advance of the the Senate vote, the White House said yesterday that the revised package was significantly more likely to pass Congress.
Both Mr Obama and Mr McCain returned to Washington from their campaigns to vote in favour of the plan. Mr Obama addressed the Senate, but Mr McCain did not.
“To Democrats and Republicans who have opposed this plan, I say step up to the plate,” Mr Obama said in his speech.
The plan was required to prevent “catastrophe” in the economy, he said, noting that many ordinary Americans lost money when US stock markets fell on Monday.
“While that decline was devastating, the consequences of the credit crisis that caused it will be even worse if we do not act now. We’re in a very dangerous situation, where financial institutions across this country are afraid to lend money.
“Potentially we could see thousands of businesses close. No end of jobs could be lost.”
Mr McCain, speaking on CNN television before votes were cast, said he was confident that the package would be endorsed by the Senate and the House.
“We’re in the worst financial crisis of our lives. This is affecting Main Street, people's ability for small businesses to obtain lines of credit for people who want to buy a car, to get a loan, it’s affecting them dramatically,” he said.
The vote last night took place against the backdrop of a warning from European Central Bank president Jean Claude Trichet, who called for a positive vote “for the sake of global finance”.
Additional reporting: Reuters