Page last updated at 23:29 GMT, Saturday, 27 September 2008 00:29 UK

US edges closer to bail-out deal

President George W Bush meeting Congressional leaders
A meeting on Thursday ended in acrimony

US Congressional leaders have said they hope to reach agreement on a massive rescue plan to aid the financial markets before they open on Monday.

Senior members of the Democratic and Republican parties are trying to forge a compromise deal on buying bad assets that are freezing up financial markets.

The Bush administration wants $700bn (380bn) to help the finance sector.

Democrats are seeking safeguards on how public money is spent. Some Republicans want to see private money used instead.

House and Senate leaders have been holding meetings, after negotiators from Congress, the White House and the Treasury worked through Friday night on details of a plan.

Democrat senator Harry Reid said "significant progress" had been made, but stressed there was still "a long way" to go.

Republican Senator Mitch McConnell said the goal was to announce an agreement on Sunday and to have a vote on Monday.

'Artificial timeline'

Negotiators want to have the outline of a deal to reassure the markets before they reopen on Monday.

But House Republican leaders, who do not like some elements of the Bush administration's proposal, said they will not be rushed.

We hope sometime [Sunday] evening we can announce there has been some kind of agreement in principle so that the only thing that will have to be done is the legislation
Democrat Senator Harry Reid

"We're not moving on any kind of artificial timeline," said Republican Representative Roy Blunt.

"We're moving toward the very best solution in the shortest period of time we can get to the very best solution."

House Republicans object to using public funds to rescue private companies.

"We should not be bailing out Wall Street on the backs of American taxpayers," said Republican John Boehner, the House Minority Leader.

President George W Bush used his weekly radio address to try to reassure the many Americans worried about the burden on taxpayers of the deal, saying the package would end up costing less than the headline figure of $700bn.

He said the value of these assets would rise again, allowing the government to recoup much or all of its expenditures.

Election fears

Both sides have made compromises in order to move closer to agreement.

House Speaker Nancy Pelosi said Democrats would drop their proposal to amend bankruptcy laws to allow judges to suspend repossessions.

Republicans had feared that such a move would discourage banks from issuing new mortgages.

The Bush administration appeared to move to appease its Republican opponents by agreeing to include - but only as an option - their proposal to insure bad mortgage-backed assets rather than buying them outright from Wall Street firms, the centrepiece of the administration's proposal.

Correspondents say many voters do not like the idea of using their money to rescue the financial sector.

As well as the presidential vote, most members of Congress face re-election in November.

Congress was supposed to recess on Friday, but has been forced into a rare weekend session over the need to agree on a financial rescue package.

Market wobbles

The need for some kind of rescue plan was underscored on Thursday with the biggest bank failure in US history. Regulators seized Washington Mutual and sold its assets to JPMorgan Chase & Co.

Investor worries have spread beyond the US too.

In London, troubled bank Bradford & Bingley is to be nationalised, the BBC has learned.

Meanwhile, central banks have injected funds into the financial system to prevent inter-bank lending from seizing up.

The US Federal Reserve took the lead by organising swaps with other central banks across the world, including Japan, the UK, Switzerland, and Australia.


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