WASHINGTON — Congress yesterday gave final approval to what may be the biggest government bailout in American history, authorizing the Bush administration to spend $700 billion to try to thaw frozen credit markets and prevent a deep recession.

In an unusual display of urgency, President Bush signed the bill less than two hours after the final 263-171 House vote.

But it remains unclear how or when the measure will begin to affect the nation's sluggish economy.

"Let's not kid ourselves: We're in the midst of a recession. It's going to be a rough ride, but it will be a whole lot rougher ride" without the rescue plan, said Rep. John A. Boehner, R-Ohio, the minority leader.

In a statement at the White House, Bush praised congressional leaders for setting in motion an unprecedented federal action aimed at loosening a credit market choked for businesses and consumers alike.

"By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said before leaving for his Texas ranch.

Prodded in part by calls from fearful constituents reporting an alarming drop in their ability to borrow money, many lawmakers also were swayed by revisions to the bill that offer fresh cash for disaster assistance and extend an array of tax breaks for families and businesses worth an additional $107 billion over the next 10 years.

Treasury Secretary Henry Paulson said he plans to start spending the money within weeks. The measure gives Paulson expansive powers — unprecedented outside of wartime — to intervene in financial markets by relieving faltering firms of bad assets backed by home mortgages, which are falling into foreclosure at record rates.

Experts said the plan might not be enough to offset widening problems with the overall economy. The Dow Jones industrial average dropped 157.47 points yesterday, or 1.5 percent, despite the measure's passage, and gloom lingered over credit markets.

The market for short-term credit remained essentially frozen, making it difficult for money-market funds to meet investors' demands and threatening the ability of small businesses, giant corporations, universities and state and local governments to obtain money for day-to-day operations.

Many financial experts warned that the Treasury may soon need to provide short-term financing to companies other than banks.

Particularly galling to fiscal conservatives were tax breaks in the bill including those for auto racing and Puerto Rican and Virgin Island rum importers.

"$192 million for rum," complained Rep. Steven LaTourette, R-Ohio, calling on the House to take another look at the measure and "do it right. ... We can save half a trillion dollars, and we can cut the pork. The pork doesn't belong in this bill."

NO MAGIC BULLET

Just four days earlier, the previous version of the bill was sent down to defeat, largely at the hands of angry conservative Republicans. Yesterday, a total of 33 Democrats and 25 Republicans switched from opposition to support. In all, 91 Republicans joined 172 Democrats to support the measure while 108 Republicans and 63 Democrats voted "no."

Bush acknowledged that many people "have concerns about this legislation, especially about the government's role and the bill's cost."

He also conceded that the measure is no magic bullet, and that "it will take some time for this legislation to have its full impact on our economy," which "continues to face serious challenges."

White House spokesman Tony Fratto noted that the rescue package is not designed to boost the economy.

"No one should be over-promising what this legislation will do," Fratto said. "This legislation is to fix a problem in our financial markets. It's not sold as giving a boost to our economy. ... It's averting a crisis."

Among the measure's benefits, Bush cited a provision critical to attracting support from House Republicans: a new federal insurance program, funded by the banks, that would cover bad assets.

The program would require actuaries to set a value for those assets based on historic mortgage failure rates. The firms would then pay a premium for insurance that guarantees a floor value for those assets, permitting them to be bought and sold.

Yesterday's vote capped a period of high political drama that roiled financial markets and refocused the presidential campaign on the economy.

Paulson sent Congress a three-page request for $700 billion two weeks ago. The measure has since grown to more than 400 pages and is formally labeled the Emergency Economic Stabilization Act.

Treasury officials have said they plan to conduct reverse auctions, where firms compete to offer assets at the lowest price.

The money will be released in segments, with $250 billion available immediately and another $100 billion released upon White House certification that it is necessary. Congress will be given 15 days to object before Paulson — or his successor — receives the other half.

Meanwhile, there were fresh signs that the credit crisis is taking a toll on the global economy. Yesterday, the Labor Department reported that the nation shed 159,000 jobs in September, the ninth straight month of job loss.

In England, the auto industry cut back to a four-day week in response to falling sales. And the leaders of Britain, France, Italy and Germany plan to meet today to discuss the spreading crisis.

DEFICIT IMPACT UNCLEAR

It is unclear how the program will impact the federal deficit, which is already approaching record levels. Because the money will be used to purchase assets that can theoretically be sold for a profit, the nonpartisan Congressional Budget Office has concluded that it was impossible to judge the program's cost.

What is clear is that the Treasury will have to borrow the money: The bill increases the legal debt limit by $700 billion, to $11.3 trillion.

Lawmakers demanded a variety of provisions to protect taxpayers. Firms that take federal cash must give the government warrants to buy stock so that taxpayers benefit if the firms return to profitability. And if the program is in the red after five years, the measure requires the president to offer a plan for recovering the outstanding balance from the financial services industry.

Lawmakers insisted on strict oversight of the program, including an independent inspector general and a powerful oversight board staffed by the Treasury and housing secretaries, the chairman of the Federal Reserve and other federal regulators.

CANDIDATES' INFLUENCE

Sen. Barack Obama's outspoken support for the package was cited by five vote-switching freshmen as a key motivator. Obama was particularly successful in persuading members of the Congressional Black Caucus, which was deeply divided on Monday.

Yesterday, 13 black caucus members switched to vote for the measure. "What helped me is Barack Obama, who called and said 'We really do have to do this,' " said Rep. Elijah E. Cummings, D-Md., adding that Obama promised to do more to help homeowners at risk of foreclosure if elected president.

On the Republican side, House Minority Leader Boehner pulled in votes from close allies such as Judy Biggert of Illinois and Pat Tiberi of Ohio.

The Republican presidential candidate, Arizona Sen. John McCain, also worked the phones, but none of the GOP vote switchers interviewed yesterday cited him as a major factor.