The House approved the $700 billion financial industry rescue package by a 263-171 margin on Friday, after defeating it on Monday.

Lawmakers debated the bailout package on the House floor, with many saying they were approving the bill reluctantly. “Nobody in East Tennessee hates the fact more than me that I am going to vote yes today after voting no on Monday,” said Zach Wamp, R-Tenn.

“It is a difficult vote,” acknowledged House Speaker Nancy Pelosi, D-Calif. “It is a vote we must win for the American people.”

The Senate attached an additional $150.5 billion worth of tax breaks, including a temporary patch to keep the alternative minimum tax from spreading to millions more taxpayers and extensions of expiring and already-expired tax credits and deductions, including the research and development credit, before it approved the package on Wednesday by a 74-25 margin (see Bailout Plan Clears Senate). The bill also included a provision modifying the penalty for understatement of a taxpayer’s liability by a tax return preparer. In addition, it provides the IRS with permanent authority to run undercover operations.

President Bush signed the bill soon after receiving it from Congress. “By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country,” he said in a statement.

The bill also includes tax incentives for clean energy sources such as solar and wind power, along with a standard property tax deduction for those who do not itemize on their federal returns. The bill provides for stronger taxation of executive compensation and severance packages to prevent executives of troubled financial companies from getting so-called “golden parachutes.” The deductibility of executive compensation for companies will be cut in half from the level in current law, and companies will also lose deductions currently available for excessively large severance packages.

The bill also gives the Securities and Exchange Commission the authority to suspend fair value, or mark-to-market, accounting (see Senate Backs SEC on Mark-to-Market Accounting). It authorizes the SEC to conduct a study of mark-to-market accounting standards, including the effects on a financial institution’s balance sheet, the impact on bank failures this year, the impact on the quality of financial information available to investors, the process used by the Financial Accounting Standards Board in developing accounting standards, the advisability and feasibility of modifying the accounting standards, and alternatives to FASB Statement 157 on fair value measurements. The report is due in 90 days after enactment of the bill.

The American Institute of CPAs issued a statement praising passage of the bill. “The AICPA is pleased Congress avoided calls by some for an immediate suspension of fair value accounting rules,” said AICPA president and CEO Barry Melancon. “The bill includes a call for an objective study of mark-to-market accounting. We look forward to participating with the Securities and Exchange Commission and the Financial Accounting Standards Board in a thoughtful review. Accounting standards are the keystone of our financial reporting system and are designed to provide investors and management with timely signals about the financial condition of our publicly traded companies. Our longstanding position is that accounting standards ultimately should be set by the private sector.”

To win support, the bill also included some odd provisions, including an exemption from the excise tax for “certain wooden arrows designed for use by children.” Extra tax breaks were also granted to motor sports racing tracks and rum producers in the Virgin Islands and Puerto Rico. Legislators expressed their concern about the unprecedented authority given to Treasury Secretary Henry Paulson in carrying out the rescue plan, but he issued a statement designed to reassure the public about the "transparency" he plans to bring to the process.

"We will move rapidly to implement the new authorities, but we will also move methodically," he said. "In the coming days we will work with the Federal Reserve and the FDIC to develop strategies that deploy these tools in an expedited and methodical way to maximize effectiveness in strengthening the financial system, so it can continue to play its necessary and vital role supporting the U.S. economy and American jobs. Transparency throughout this process will be important, and I look forward to providing regular updates as we move ahead to implement this strategy."

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