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Bailout plan heads to the House

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After the Senate passed a revised bailout plan late yesterday, all eyes turned to the House, where leaders are expected to spend today trying to get the votes needed to pass the measure, the Associated Press reported.

The package, which would let the government buy billions of dollars’ worth of bad debt, especially mortgage-related securities that have plagued financial institutions, now includes $100 billion in tax breaks for businesses and the middle class, as well as a provision to raise the cap on federal deposit insurance to $250,000 from $100,000.

The changes, especially in tax credits, are expected to encourage the 133 House Republicans who voted against the first plan on Monday to vote in favor of the new legislation. However, it could discourage some Democrats over concern that the tax credits will increase the federal deficit.

The Senate passed the bill on a 74-25 vote.

Party leaders say the bailout plan is necessary to encourage financial institutions to start lending again and prevent a potential economic disaster, but critics in both parties say the plan is a handout for Wall Street with little benefit for most Americans. Proponents argue the financial sector’s problems are hurting Americans in the form of unaffordable credit and underperforming retirement savings.

Meanwhile, the Securities and Exchange Commission extended its ban against short-selling shares of more than 800 financial companies until three business days after enactment of the bailout plan, or no later than Oct. 17.

The practice of short selling involves borrowing a company’s shares, selling them and then buying them when the stock falls and returning them to the lender, while the short-seller keeps the difference in price. Though the common practice on Wall Street can increase capital in the markets, regulators say that it has exacerbated the financial crisis and contributed to the collapsing values of investment- and commercial-bank stocks.