Congress to vote today as compromise reached on US rescue

Lawmakers in Washington are set to vote today on the largest single financial bailout in American history after leaders from both parties nailed down the details of the package, capping several long days – and nights – of tense and sometimes tempestuous negotiation.

As the office of House Speaker Nancy Pelosi released a first draft of the text yesterday, aides said they were confident that the House of Representatives would vote this morning to approve the package authorising the US Treasury to spend as much as $700bn (£380bn) to relieve banks of distressed debt. The unprecedented action is meant to free up the flow of credit again and avert a global economic calamity.

Aware of the size of the stakes, negotiators had been racing to complete the deal in time to reassure investors before the opening of financial markets today in Asia and later London and New York. Members of Congress, moreover, are anxious to leave Washington and return to their constituencies ahead of the election in November. After the House vote today, the Senate should follow tomorrow or Wednesday.

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Although party leaders expect the package to be approved, some conservatives may still vote against it. Barack Obama, the Democrat presidential nominee, said he would back the deal, if reluctantly. "My inclination is to support it," he told CBS. "We have to remember how we got here. Not so much to allocate blame, but to understand the choices that will face the next president." His Republican rival, John McCain, gingerly offered his support.

Most obstacles to the deal were cleared during intense negotiations that went late into Saturday night. After the proposed bill was committed to paper – over 101 pages – throughout yesterday, Ms Pelosi and other Democrat leaders emerged again last night to announce they were ready for today's votes.

While the bill remains inspired by the original plan presented nearly a week ago by the Treasury Secretary Henry Paulson, it includes several new elements, including executive pay caps, designed to calm anger among voters that so much taxpayer money is being used to correct the failings of Wall Street and among conservative Republicans in Congress for whom it looked like an affront to free-market capitalism.

"We sent a message to Wall Street, the party is over," Ms Pelosi announced last night. "The era of golden parachute severance packages is over."

The changes meant the Treasury no longer has carte blanche simply to purchase debt to help the banks out. The $700bn will not, for example, be made available all at once, but rather in tranches. The first $250bn will be available immediately with an additional $100bn on offer "upon a report from Congress". The final $350bn will be released thereafter if Congress sees fit.

Key to ending the logjam were the provisions capping pay, bonuses and golden parachutes for top executives at any institution benefiting from the programme. However, a proposal first floated by Mr McCain, to peg the pay of bank chiefs to the highest salary available to government officers – $400,000 – was discarded.

Other amendments to the plan include giving considerable oversight powers to Congress, allowing the government to take some equity stake in companies that receive help and empowering the Treasury to take steps to help homeowners struggling with mortgage payments to avoid foreclosure. The Treasury will also have the option of offering government insurance to banks weighed down by distressed debt, something pushed for by the Republicans as a means to reducing the direct burden on taxpayers.

After the dramas of the past few days, no one last night was taking anything for granted. They had not forgotten the false dawn of last Thursday when President George Bush invited congressional leaders and both the men bidding to succeed him to the White House to seal the deal only to see it collapse. Only when the bill goes to the floor will we know whether rebellious House conservatives have been mollified.

But hopes remained high that there will be the votes to assure the package's passage. "This was never going to be a bill that was going to make people happy," said Barney Frank, chairman of the House Banking Committee. "No solution to a problem can be more elegant than the problem itself. Given the dimensions of the problem, I believe we have done a good job. It includes genuine compromises."

No economist can predict how effective the package will be. Still to be worked out, for instance, is how the assets that the Treasury is proposing to buy should be priced.

A failure to agree on the bailout, however, could have "resulted in a major meltdown of our economy," Christopher Dodd, the Senate Banking Committee chairman, said.