U.S. House approves and sends Bush $700 bln financial rescue plan

The House approved the financial rescue plan by a vote of 263-171, sending the measure to U.S. President George W. Bush and concluding two weeks of legislative haggling in Congress that had roiled and captivated global markets. In new signs of spreading crisis, California said it was running out of money, France said the world stood on the "edge of the abyss" and European leaders were divided over their own response to the global crisis. Fed Chairman Ben Bernanke said they would all they can to combat the crisis.The House had shocked world markets on Monday by rejecting a previous draft. With elections on Nov. 4, lawmakers from both parties were wary of voter backlash in asking taxpayers to pay for Wall Street's mistakes. On Friday, speaker after speaker from both parties said rejecting the bailout could have devastating consequences for an already slowing U.S. economy, arguing the bill was as important for small businesses, homeowners, students and pensioners as it was for the financial sector. Congressional leaders had worked together to win over more Republican and Democratic votes amid signs that businesses are already being hurt by a failure to procure credit, triggered by the US subprime mortgage crisis."While the focus has been on the Dow Jones and Wall Street, we are addressing the real pain felt by Mr. and Mrs. Jones on Main Street," said House Speaker Nancy Pelosi, a California Democrat. Said House Republican leader John Boehner: "We have to act, and if we do not this crisis is likely to worsen and put us into an economic slump like many of us have never seen." Rahm Emanuel, a senior member of the House Democratic leadership spoke out in support the bill from the House floor."This is only the first step. While we address the balance sheets of banks, the next step must now address the checkbooks for middle class families and the struggles that they face," he said.The Senate passed a revised version of the bailout package 74-25 on Wednesday, including sweeteners on extending bank deposit insurance and expired tax breaks in order to get more Republicans behind the legislation. "DECISIVE ACTION"

Bush said the bill was a "decisive action to ease credit crisis" that threaten the U.S. economy and the U.S. administration's intervention was clearly necessary.

"We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush told reporters after the voting.It would take some time for this legislation to have its full impact on the economy, adding the economy continues to face serious challenges, said Bush who waged an aggressive campaign to secure passage of a plan to pump up to 700 billion dollars to save troubled US banks ease a credit crunch. DETAILS OF THE BILL

The bill would allow the U.S. Treasury to buy toxic debt from U.S. banks, which many economists said is needed to head off the worst financial crisis since the Great Depression.

The amended version of the plan is laced with 150 billion dollars in tax breaks to coax reluctant lawmakers from both the Democratic and the Republican parties to get on board.

The bailout gives the US Treasury power to buy up toxic mortgage debt which has been choking the financial industry and would create a 700-billion dollar federal program to buy bad assets from banks and other financial firms.The Senate raised the ceiling on federal insurance for bank deposits from 100,000 dollars to 250,000 dollars, and added up to 150 billion dollars in tax break extensions for middle class families and business.They also retained limits on "golden parachute" severance payments to disgraced Wall Street executives.STOCKS ON RISE

U.S. stocks rose on hopes for the bailout plan and the deal to buy Wachovia. Wells Fargo, one of the strongest U.S. banks, said it didn't need the government help that Citigroup Inc required in an earlier effort to rescue Wachovia.

The Dow Jones industrial index and S&P 500 index had jumped more than 1 percent after the voting in the House.

The dollar continued to rally against the euro and European stocks rose about 3 percent.

A collapse in the U.S. housing market and resulting bad mortgages have shattered confidence in the financial sector, with banks across the United States and Europe needing support from governments or outside investors this week.

Interbank lending and credit to businesses and private individuals has all but seized up. Central banks have injected billions of dollars to maintain some flow of funds.