US Senate may take up rescue plan today

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Shudders were felt on both sides of the Atlantic after the Dow’s historic fall on Monday in the wake of the US House of Representatives rejection of a $700-billion financial-rescue package. As lawmakers in Washington scrambled to save the deal, bank rescues spread in Europe and the London interbank offer rate (Libor) soared.

There were indications on Tuesday that the US Senate will try to salvage the package, but lawmakers won’t have a lot of room to negotiate. While they need to tweak the legislation enough to win over reluctant Republicans, they’ll risk losing votes from Democrats if they veer too far from the delicate compromise that congressional leaders hammered out with the US treasury.

“They’re not going to totally revamp the Bill,” said Pete Davis, president of Davis Capital Investment Ideas in Washington, who spoke to House and Senate leaders on Monday. “They’ll make some minor changes and pass it. This is all about political cover.”

The House rejected the legislation on Monday in a 228 to 205 vote, sending the Dow Jones Industrial Average tumbling 778 points for its biggest point drop ever and erasing more than $1 trillion in market value. Senators say they have no choice but to revive the measure, which is designed to restore confidence in the nation’s banking system. “We don’t intend to leave here without the job being done,’’ said banking committee chairman Christopher Dodd, a Connecticut Democrat, who said the senators may deal with the Bill as early as Wednesday.

House Republican conservatives are likely to keep pressing for a mandatory insurance programme they initially proposed for mortgage-backed securities. They may also try to force the Securities & Exchange Commission to suspend mark-to-market accounting and require bank regulators to assess the real value of the troubled assets, lawmakers say. Either measure could drive away Democratic votes. House Republicans are also lobbying the White House to get the Federal Deposit Insurance Corp to play a greater role in shoring up the financial system, said a House Republican aide.

Democrats say they may seek stronger oversight over the plan, tougher limits on executive compensation and more relief for homeowners facing foreclosure. The Senate won’t hold any roll-call votes on Tuesday because several lawmakers will be celebrating Rosh Hashanah, the Jewish New Year.