Ahead of the Senate voting on an updated version of the U.S. Emergency Economic Stabilization Act of 2008, many senators are confident the bill can reach the House of Representatives for a second vote later this week.
Still, given the the events from two days ago when the House rejected the first version of the bill, fear that the legislation may yet again face defeat permeates every corner of the market.
"Speculation is rife that the Senate will pass the US$700 bailout plan this evening - exact time of voting is still not confirmed," said Matthew Strauss, senior currency strategist from RBC Capital Markets.
"The revisions were proposed by some of those that opposed the bill on Monday and should be sufficient to ensure its passage in the Senate," he added.
He said the Senate vote should be less influenced by the upcoming election since only 35 out of the 100 Senate seats will be contested, unlike the House where all 435 seats will be contested.
"Confidence is rising that House Republican opposition to the plan will succumb to pressure, with the House eventually passing the plan as a flood of calls from irate voters (and most likely Wall Street investors) to Congress yesterday added weight to the need for a comprehensive bailout plan," Strauss said.
The bill now includes a revision to the FDIC's insurance limit from $100k to $250k and possible additional homeowner tax breaks and unemployment legislation. Nevertheless, it is virtually identical to the one that failed in the House of Representatives earlier this week. The bill would allow the Treasury to purchase up to $700 billion in illiquid assets from financial institutions in various chunks.
Speaking on the Senate floor on Wednesday, Chris Dodd, Head of the Senate Banking Committee, said the White House has engaged in a more aggressive manner for working on a bailout bill, and that he expects a positive result from the plan over the next couple of days.
On Tuesday, Senate Majority leader Harry Reid said both Senate Democrats and Republicans believe it is essential to work quickly on the legislation to "restore confidence to our financial system and strengthen the economy."
"It is my hope that with the improvements we have made to the administration's proposal, the Senate will pass the legislation [Wednesday] and the House of Representatives will follow suit soon after," he said.
In an interview with CNBC Wednesday morning, U.S. Senator Bob Corker said he fully expects that the Senate will pass the $700 Billion rescue plan.
"I believe the Senate will pass it overwhelmingly tonight," said Corker, a Republican who serves on the Senate banking Committee.
Corker said in the interview that he was pleased with provisions for increased depositor insurance limits, adding he doesn't want to see any more measures added on.
In an interview with CNBC, Republican Senator Richard Shelby who opposes the bill said it would also probably pass.
The Senate should put the bill to a vote between 7:30 and 9:30 p.m. EDT.
However, even if the bill does not pass, the main opponent will remain the House of Representatives which shot down the package on Monday which shot down the legislation 228 votes to 205, triggering unprecedented losses in Wall Street's major indexes.
In a press conference on Wednesday, House speaker Nancy Pelosi said the bill could not return to the House floor before Friday.
By Erik Kevin Franco
©CEP News Ltd. 2008