U.S. senators have passed a revised US$700-billion rescue plan for Wall Street, aimed at calming North American markets and restoring faith in the country's troubled economy.

The plan passed by a margin of 74 to 25, and will now head back to the House of Representatives for another vote.

If ultimately approved, the plan will allow the federal government to purchase mortgage-banked assets from struggling lenders, once again giving them the ability to offer loans, stimulating the economy and helping head off a recession.

Congress defeated an earlier version of the bill on Monday. The revisions include richer backing from the Federal Deposit Insurance Corp. to offer broader protection for bank deposits, and further tax cuts.

"I think that the markets will be pretty much in waiting mode at this time," Martin Lefebvre, senior economist at Desjardins Group, told CTV Newsnet on Wednesday.

"Hopefully, this time, the vote will be in favour of accepting the... plan."

The Dow Jones and TSX took a slight bruising Wednesday hours before the vote, but mostly bounced back before the markets closed. Here are the day's market numbers after the closing bell:

  • In Toronto, the S&P/TSX composite index slipped 38.39 points to 11,714.51.
  • In New York, the Dow Jones fell 19.59 points to 10,831.07.
  • The Nasdaq dipped 22.48 points to 2,069.40.
  • The dollar was trading at 94.16 cents US, up 19-100ths from Tuesday's close.

On Monday, the original bailout was rejected at the 11th hour by the House of Representatives. The 'no' vote sent markets in Toronto and New York tumbling, with some of the losses being regained Tuesday.

Speaking to CTV's Canada AM Wednesday, Finance Minister Jim Flaherty said Canada's economy is in a much better state than that of the U.S. But he said the turmoil south of the border will have an impact here if the bailout doesn't get final approval.

"We didn't have a housing bubble in Canada, we don't have a large sub-prime housing sector, but it's important we get some relief in the credit markets because that has an effect eventually on the real economy," Flaherty said.

"We need to have money flowing so that companies can borrow money, can expand, can invest. So the action that we expect will be taken by the Americans will be significant in the longer term for Canada."

With the U.S. election just weeks away, many members of Congress -- Republicans especially -- wanted to avoid appearing as if they were bailing out Wall Street executives and CEOs on the taxpayers' tab, for fear of a backlash at the polls.

"People were protecting their constituencies and reflecting the feeling of the ordinary American," Kane said.

Overseas markets

Overseas, FTSE 100 rose two per cent in afternoon trading in London, while Germany's DAX fell 0.4 per cent and the Paris CAC-40 slipped 0.3 per cent.

Japan's Nikkei stock average jumped 108.40 points or almost one per cent to 11,368.26, after losing 4.1 per cent Tuesday.

Australia's S&P/ASX-200 index rose 4.2 per cent after sinking 4.3 per cent Tuesday. Markets in Hong Kong, mainland China and several other Asian countries were closed for a holiday.

With files from The Associated Press