Stand by for Black Monday: Meltdown as Bush battles to pass mutiny-hit £400bn bail-out



U.S. president George W. Bush continues his fight this weekend to reach an agreement over his proposed £400bn bail-out plan to rescue Wall Street.



As the debate raged on, politicians said they're making progress and hope to reach an agreement this weekend to protect bankers from the bad loans that threaten to derail the economy and send it into a deep and long depression.

In a sign of movement, House Republicans dispatched their second-ranking leader, Roy Blunt, to join the talks after their objections to an emerging compromise had brought negotiations to a standstill.

Negotiators were pushing for a deal before Asian markets open Monday.

Embattled: President Bush yesterday admitted: 'We have a big problem'



"I'm convinced that by Sunday we will have an agreement that people can understand on this bill," said congressman Barney Frank, a key Democrat in eight days of up-and-down talks designed to stave off an economic disaster.

House Speaker Nancy Pelosi added that "progress is being made," although Friday came and went without senior lawmakers from both parties sitting down together. Talks were to resume Saturday.

Neither she nor Frank divulged details at a late-afternoon news conference in the Capitol, though there was word of a large Democratic concession.



Despite the optimism, President Bush admitted he had a ‘big problem’ as he tried to quell a humiliating mutiny in his own Republican Party over his £400billion bailout plan for Wall Street.

With markets around the world plunging back into despair, he pleaded with Congress to ‘rise to the occasion’ amid a revolt by Republicans on Capitol Hill who fear the bill is too much for taxpayers to bear.

Amid scenes of high drama, and talk of a ‘slanging match’, Vice President Dick Cheney was called back to Washington to help paper over the cracks in the Republican Party and strong-arm through the legislation.

At the same time, Republican presidential candidate John McCain suddenly changed his mind and took part in a televised debate with Barack Obama after being accused of derailing a bipartisan agreement on the plan just as politicians from both parties thought they had struck a deal.

‘There are disagreements over aspects of the rescue plan,’ President Bush conceded, adding that the proposal is ‘not pretty’.

But he insisted: ‘We’ve got a big problem and we need a rescue plan. There is no disagreement that something substantial must be done.’

His terse statement came as details emerged of the White House meeting which was supposed to seal the bail-out deal but ended in disarray with the two sides further apart than when they started.

Democrats spoke of a verbal brawl in which some Republicans accused the President of trying to sell them socialism.

Mr Bush replied: ‘If money isn’t loosened up, this sucker could go down.’

After the meeting, Treasury Secretary Hank Paulson is said to have literally begged Democrats to help keep the threatened deal afloat.

Bending down on one knee in the Roosevelt Room of the White House, the 6ft 5in former American Football star nicknamed the ‘Hammer’ begged Democrat leaders: ‘Please don’t blow this up.’

House Speaker Nancy Pelosi jokingly shot back: ‘I didn’t know you were Catholic.’

People power: People rally in front of the New York Stock Exchange in the financial district against the proposed government buyout of financial firms

The extraordinary sight of the Republican Party’s financial lion genuflecting to his Democrat congressional foes underlined just how desperate the Bush administration was to push through its controversial economic rescue package.

But the humiliation was not over for Secretary Paulson. As he got back to his feet after Thursday’s ill-fated White House summit, Nancy Pelosi reminded him: ‘We’re not the ones trying to blow this up – it’s the House Republicans.’

‘I know, I know,’ the glum treasury chief reportedly replied.

With elections less than six weeks away and widespread public outrage over the bail-out, some Republicans in Congress have mutinied over what they see as the heavy hand of government interfering in a private- sector problem.

The White House has now set a deadline for the package to be agreed before the financial markets open on Monday.

But if a deal is not signed experts predict the London Stock Exchange could fall by up to 1,000 points when it opens next week if the deal is not signed.

It would be a 'Black Monday' meltdown similar to the financial crash of 1987. Other world markets would also be sure to fall dramatically.

But President Bush’s press secretary, Dana Perino, was more hopeful.

‘We feel like we’re close, but we’re not quite there yet,’ she said.

Talks: Leaders, including John McCain, far left, and Barack Obama, far right, meet to solve the turmoil at a White House summit hosted by George Bush, centre

Mr McCain was under particular fire for delaying the agreement. ‘It is time for presidential politics to leave the negotiating table,’ said Harry Reid, the Democrat leader in the Senate, who specifically blamed his Republican opponents for derailing the financial rescue.

Negotiators from both parties said they agreed on a basic framework when Republicans threw a spanner in the works by proposing an alternative plan.

Instead of the government buying up the distressed assets, the new plan would have banks pay the Treasury to insure the bad debts.

After the meeting, Democrats complained that Mr McCain derailed negotiations by appearing to show support for the rival proposal.

Barney Frank, chairman of the House Financial Services Committee, called it ‘an ambush plan.’

He said the survival of the bailout depended on Republicans ‘dropping this revolt’ against the President. When tempers flared

during the White House meeting, he said he felt like a referee in a Republican ‘ideological civil war’.

‘This is the President’s own party. I don’t think a President has been repudiated so strongly by the congressional wing of his own party in a long time.’

Last night, lawmakers were studying the 102-page proposal based on the consensus outline worked out before the White House fall-out.

As he prepared for last night’s debate with Mr McCain, Mr Obama tried to put an optimistic light on the chaos, saying he thinks a deal can still be struck.

‘I think there is real progress being made,’ he added.