The bill adds new provisions - including raising the FDIC insurance cap to $250,000 from $100,000 - and will be attached to an existing revenue bill that the House also rejected Monday, according to several Democratic leadership aides.
The vote is scheduled for after sundown, in observance of Rosh Hashanah. Republican presidential nominee John McCain and Democratic nominee Barack Obama and his running mate Joe Biden confirmed that they would be present for the vote.
Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., announced the plan Tuesday.
"Senate Democrats and Republicans believe it is essential that we work quickly on this important legislation to restore confidence to our financial system and strengthen the economy," Reid said in a statement.
White House spokesman Tony Fratto said the administration welcomes the "modified bill" and the scheduled vote.
Democratic sources told CNN that they expect bipartisan support.
Earlier Tuesday, Federal Deposit Insurance Corp. Chairman Sheila Bair asked Congress to allow her agency to increase the $100,000 limit per account that has been in place since 1980. To do so would help restore confidence in the markets, she said. Bair did not say what she thinks the new limit should be.
The revised bailout bill also includes a "Mental Health Parity" provision, which would require health insurance companies to cover mental illness at parity with physical illness.
Because the bill must originate in the House, the Senate is attaching the rescue plan to a bill that deals with renewable energy tax incentives. This would allow the Senate to vote before the House.
House Speaker Nancy Pelosi, D-Calif., said that House leaders are discussing ideas offered by other lawmakers about how to modify the bill defeated on Monday. "House Democrats remain strongly committed to a comprehensive bill that stabilizes the financial markets, restores confidence, and protects taxpayers," she said.
Round 1 failedThe bailout package, a collaboration of Treasury Secretary Henry Paulson and leaders from both parties, was rejected by the House in a 228-205 vote Monday. Two-thirds of Republicans and about one-third of Democrats voted against the bill.
Following the defeat, the Dow Jones industrial average dropped 777 points, its biggest one-day point decline ever. The decline of nearly 7% was the largest percentage decline since the Black Monday crash of 1987.
But stocks rallied Tuesday, with the Dow jumping 485 points on bets that Congress will pass a version of the government's $700 billion package.
The bill, if approved, would allow the federal government to buy troubled mortgage-related investments from financial institutions, freeing them up for lending in a bid to pull the economy out of its credit freeze.
Proponents of the bill believe it would prevent the United States from sliding into a serious financial crisis, but opponents saw it as an unbearable burden to taxpayers and a rescue for Wall Street.
The Bush administration and key lawmakers had regrouped on Tuesday and vowed to push ahead. "Unfortunately, the measure was defeated by a narrow margin," President Bush said in a brief televised address at the White House. "I'm disappointed by the outcome, but I assure our citizens, and citizens around the world, that this is not the end of the legislative process."
The House is adjourned and not scheduled to return to session until Thursday at noon.
Bush pushed hard for lawmakers to act. "Our economy is depending on decisive action from the government," he said. "The sooner we address the problem, the sooner we can get back on the path of growth and job creation. This is what elected leaders owe the American people, and I am confident that we'll deliver."
On Tuesday, Bush spoke to Obama and McCain about the financial crisis, according to Fratto. The presidential candidates "offered ideas and reaffirmed what they have said publicly - that this is a critical issue that needs to be addressed," Fratto said.
CNN's Jessica Yellin and Ted Barrett contributed to this story.
House passes drilling bill
