The House is scheduled to vote on the financial sector bailout package later today. If it passes, the Senate will take it up on Wednesday.

The package itself retains the core Paulson proposal to give Treasury the authority to purchase $700 billion in problem mortgages held by banks and other financial institutions. The goal of the plan is to restore confidence in these institutions by eliminating this source of fear and uncertainty for the next two years. The ultimate cost of this plan to taxpayers will depend on how much further home prices fall. Some observers believe the taxpayer will be made whole when Treasury resells the securities.

In the past few months, we have seen the entire American investment banking industry disappear, the world’s largest insurance company fail, the largest failure of a bank in history, and Wachovia sold at a fire sale. Meanwhile, banks overseas are experiencing runs as well. Belgian giant Fortis was bailed out by European authorities this morning.

Opposition to the plan is now focused on questioning whether this plan will address the underlying problem — the lack of capital for our lending institutions and the pending run on our banks. One challenge for the plan as negotiated is it will take time for Treasury to begin buying these assets. Getting these assets off the banks’ books may help, but will it arrive in time?

Here’s some background material for those interested.

Observers expect the plan to pass both bodies, but it is going to be close. In the meantime, the world’s credit markets are watching very closely.

Extenders on Hold

At the beginning of the year, we would have bet money — serious money — that there is no way Congress would leave for the year without addressing the expiration of tax provisions like the AMT patch, R&E tax credits, and a long list of credits and deductions designed to encourage renewable energies.

The House is scheduled to take up yet another version of the energy extenders later today, and expects to adjourn for the elections shortly thereafter. The pending House action marks the six or seventh time this year that body has considered extender packages that include offsetting tax increases to cover the revenue loss.

The Senate has demonstrated repeatedly that it does not have the votes to adopt fully-offset extender packages, so why the House is taking yet another vote on this issue is unclear. Last week, the Senate passed a $150 billion package of extenders that included $25 billion in offsets. Both the Senate Leadership and the White House have communicated to the House that $25 billion is as high as they are willing or able to go.

The House action today suggests that if there is going to be an extension of these tax provisions before the end of the year, it’ll have to take place in a lame duck session. Now the question becomes, is there going to be a lame duck?