WASHINGTON: The US Congress raced to strike a deal on a proposed $700 billion bailout of the financial industry in an urgent weekend negotiating session to try to alleviate the worst financial crisis since the Great Depression.
Pressed to act before Asian markets open tomorrow, negotiators worked through the night and into yesterday after much of the country paused to watch the first debate between the presidential candidates, Democrat Barack Obama and Republican John McCain.
“Time is not our ally, and this urgent need will not benefit from delay,” said Senate Republican leader Mitch McConnell of Kentucky. “The goal would be to announce an agreement tomorrow and to have a vote on Monday.”
President George W. Bush said he was confident the legislation being negotiated would be passed “very soon” and there was “widespread agreement” on major principles.
Senate Democratic leader Harry Reid said negotiators had about 15 issues unresolved but that lawmakers had made “significant progress.”
“If we could do it by 6 o’clock tomorrow (2200 GMT) that would be really important because that’s when the Asian markets open,” Reid said.
Pressure to reach a deal was intense after last week’s white-knuckle ride on the financial markets in which some big, heavily indebted banks teetered, collapsed or refused to lend money to each other at low rates of interest. That threatened to grind the financial system to a halt.
In the latest chapter in the transformation of Wall Street, regulators seized savings and loan Washington Mutual Inc. on Thursday in the biggest bank failure in US history, selling its assets to J.P. Morgan Chase & Co.
In Europe, Belgian-Dutch financial group Fortis NV fired its interim chief executive after investor concerns over liquidity pushed shares down more than 20 percent to a 14-year low. Europe’s biggest bank, HSBC Holdings PLC, said it was cutting 1,100 job.
After Democrats from both the House of Representatives and Senate and Senate Republicans agreed in principle to a White House plan in which the Treasury would buy distressed debt from financial institutions staggering under the weight of failed mortgages, House Republicans demanded a more market-oriented approach.
Democrats offered to add a mortgage insurance option to bring on board conservative Republicans, who preferred to offer government insurance for troubled debts rather than buy them.
As the majority in Congress, Democrats could have sought to force a bill through the House and Senate and onto the president’s desk for signature into law, but leaders demanded a deal that would satisfy both parties.
The aim is to re-establish confidence in the markets after a week of record central bank liquidity injections failed to bring down high interbank lending rates.
“If there is the belief that there is a bipartisan agreement, it takes us a long way in terms of market reaction,” said Sen. Richard Durbin, an Illinois Democrat.
But with the entire House and one-third of the Senate facing re-election on Nov. 4, some lawmakers were fighting a popular backlash to the plan in their home districts.
Sen. Bob Corker, a Tennessee Republican who serves on the Senate Banking Committee, said lawmakers were encountering extraordinary voter anger.
Referring to his own Senate office, Corker said, “We had, I’m going to guess, 3,500 calls this week about this particular issue. I’ve had 95 calls in support of it if that gives you any indication.”
In Friday’s debate, Obama, an Illinois senator, lent support to the plan proposed by Bush and Treasury Secretary Henry Paulson even though he called the troubles “a final verdict on eight years of failed economic policies promoted by George Bush, supported by Sen. McCain.”
