The Senate approved a bill 74 to 25 late Wednesday that is designed to stabilize the financial markets.
The crux of the bill would let the Treasury Department purchase and hold up to $700 billion in troubled assets from banks and other financial institutions.
The Senate added several provisions to the bill in an attempt to win more Republican support, including tax credit extensions and an increase in deposit insurance coverage to $250,000 per depositor.
The House plans to take up the bill Friday if leaders believe they have secured sufficient support. The chamber failed to pass the bill on Monday, rejecting it 228 to 205, amid strong Republican opposition.
Senate Majority Leader Harry Reid said the Senate would have to stay in session until the House acts.
"We'll see Friday we'll see what the House does," said the Nevada Democrat. "They are coming back into session tomorrow, so we are going to have to be in session until a decision is made when the House is going to take up the legislation.
But Reid added that he hoped the Senate vote would encourage the House to follow suit. "I'm very proud of this vote... It sends a strong message to the House."
Several of the votes opposing the bill in the Senate came from members of the Senate Banking Committee: Republican Sens. Richard Shelby of Alabama, Wayne Allard of Colorado, Jim Bunning of Kentucky, Mike Crapo of Idaho, Elizabeth Dole of North Carolina, and Michael Enzi of Wyoming.
On the Democratic side, Sen. Tim Johnson of South Dakota and Sen. Jon Tester of Montana voted against the bill as did former committee member Sen. Debbie Stabenow of Michigan.
Both presidential candidates, Sen. Barack Obama, D-Ill., and Sen. John McCain, R-Ariz., voted for the bill. The legislation was also supported by Sen. Joe Biden, D-Del., the Democratic vice presidential candidate.
During the debate on the Senate floor, lawmakers rejected by voice vote an amendment offered by Sen. Bernie Sanders that would have taxed individuals making at least $500,000 or families making $1 million an additional 10% to help offset the governments costs.
If we are going to bailout Wall Street, it should be those people that caused the problem, those people who have benefited from Bushs tax breaks for millionaires and billionaires, those people who have taken advantage of deregulation; those people are the people who should pick up the tab, said Sanders, I-Vt.
Shelby, the Banking Committees top Republican, voiced his opposition to the overall bill during the debate.
As often as I have argued that we needed to address systemic risks in the financial markets, my advice has been dismissed and my concerns have proven to be fully justified, said the Alabama lawmaker. I now have serious concerns about the bailout package we are preparing to pass.
Making his plea on the Senate floor, Sen. Judd Gregg, the Budget Committees top Republican who negotiated on behalf of GOP members, backed up Shelbys foresight while urging senators to support the bill.
If this nation had listened to Richard Shelby we probably wouldnt be here, said the New Hampshire Republican. If there had been adequate capital formation of these institutions, if there had been adequate oversight, if there had been proper underwriting we probably wouldnt be here, but unfortunately we are here, and the hand we have been dealt is a pretty bad hand. And the options are really few. Our situation in the Congress is this: if we fail to act, we will fail the nation.
Just before the vote on the bill, Senate Banking Committee Chairman Chris Dodd told reporters that although he spoke with House Financial Services Committee Chairman Barney Frank on Tuesday, he did not have a good feel for the bills outlook in the House. "I don't know" if it will pass, he said.
Dodd said that Federal Deposit Insurance Corp. Chairman Sheila Bair asked Congress for power to grant unlimited deposit insurance coverage, but that such an open-ended request was off the table.
"Sheila Bair came to us with that and she wanted more than we gave her and I think she had a point but I wasn't about to give her more than $250,000, he said. They are regulators they would like no limits.
The decision to add tax extenders was above my pay grade, he said.
"So I'm not sure whether that changes the equation or not but I'm told by those who are counting all this stuff, it helps," he said.
Dodd added that there were other items he would have liked to have included in the bill but said the balancing act was tricky and every potential change spurred others to ask for more, each threatening to alter votes.
"We all had things that we would have liked to have added but the decision was to stick to what we had instead of opening that door to add-ons because then it becomes never-ending in negotiations, he said. Every time I brought something up there was something that someone else wanted so we just had to compromise.