US senators to vote on bail-out

George Bush says the cost of not acting will be higher than the $700bn rescue deal

The US Senate will vote on Wednesday on a version of a financial rescue package after the House of Representatives rejected the $700bn (£380bn) plan.

The Senate version is expected to be similar to the House's initial plan, but will include some new measures to ease its passage through Congress.

One of those new clauses will raise the government's guarantee on savings from $100,000 to $250,000.

The vote comes after senior Democrats pledged to find a bipartisan solution.

"Working together, we are confident we will pass a responsible bill in the very near future," Senator Harry Reid and House of Representatives Speaker Nancy Pelosi wrote to President George W Bush.

The Senate is attaching the new plan to a bill that deals with renewable energy tax incentives.

We're facing a choice between action and the real prospect of economic hardship for millions of Americans President Bush Q&A: US $700bn rescue plan

If it passes, the House of Representatives could be under pressure to accept some of the changes when it meets on Thursday.

However, some members of Congress are continuing to press for more fundamental changes, for instance for a system of insurance for bad loans, rather than the removal of the loans from the books of financial companies, says the BBC's Americas editor Justin Webb.

Earlier President Bush had warned of "painful and lasting" consequences for the US should Congress fail to agree a rescue plan.

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The Dow Jones index closed up 4.7% on Tuesday, recouping some losses from Monday's rout, after the markets reacted favourably to the president's statement.

Markets in Japan and Australia saw gains as they opened on Wednesday morning, with the Nikkei climbing 1.2%.

Possible momentum

Analysts say the Senate is more likely to pass the bill because senators are not facing the same pressure from voters as members of the House.

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All representatives face re-election in November compared with only one-third of senators.

The measure will require 60 of the 100 senators to vote in favour in order to pass.

The BBC's Jonathan Beale, in Washington, says a positive vote in the Senate is likely to give the bill momentum when it goes back to the House.

Presidential candidates John McCain and Barack Obama, who both support Mr Bush's efforts to bail out the economy, say they will return from campaigning to vote in the Senate.

'Not the end'

Mr Bush said at the White House: "We are in an urgent situation and the consequences will grow worse each day if we do not act."

The economy was depending on "decisive action on the part of our government", he added.

He said he wanted to "assure our citizens and citizens around the world that this is not the end of the legislative process".

"Our country is not facing a choice between government action and the smooth functioning of the free market," he said.

"We're facing a choice between action and the real prospect of economic hardship for millions of Americans," he warned.