George W Bush has welcomed news of the vote - which saw three-quarters of senators pass the new legislation.
Lawmakers in the US senate have passed the treasury's £350 billion "bad bank" bailout plan, by 75 votes to 24.
The vote, a significant victory for treasury secretary Henry Paulson and other backers of the legislation, means that the plan's adoption now depends on its passage through the house of representatives. However, lawmakers in the house already voted against it earlier in the week.
It is hoped that, with the bill's passing, a "bad bank" will be created in order to buy up some of the most toxic assets held by US financial firms. In turn, this would boost confidence in the banking sector and increase capital flows.
Lawmakers in Washington DC remain optimistic that the house - many of whose members are concerned over public antipathy towards the "bad bank" scheme and its potential cost to the public purse - will pass the plan this time around, however. This is because Monday's vote to reject sparked near-panic in the financial markets, with New York's Dow Jones index dropping by a record 777 points and economists making dire threats that the US risked falling into a deep recession.
Moreover, the plan has also been significantly revised, with added "sweeteners" designed to ensure a positive vote. For example, depositor insurance - the guarantee savers have against their bank going bust - has more than doubled to around £125,000, and tax breaks for small businesses have also been introduced.
Senate majority leader Harry Reid commented: "This is…a piece of legislation for all Americans… inaction is not an option. It is my expectation the house of representatives will follow suit."
In a statement, president George W Bush said: "With the improvements the senate has made, I believe members of both parties in the house can support this legislation. The American people expect - and our economy demands - that the house pass this good bill this week and send it to my desk."
