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Bush says bail-out will be passed Bush says bail-out will be passed
(20 minutes later)
President George W Bush has said that legislators will "rise to the occasion" and pass the Wall Street rescue plan.President George W Bush has said that legislators will "rise to the occasion" and pass the Wall Street rescue plan.
In a statement he said there were still disagreements because "the proposal is big and the reason it's big is because it's a big problem".In a statement he said there were still disagreements because "the proposal is big and the reason it's big is because it's a big problem".
President Bush is expected to resume talks with Congressional leaders later on Friday to try to reach an agreement.President Bush is expected to resume talks with Congressional leaders later on Friday to try to reach an agreement.
He wants to pass a $700bn (£380bn) rescue package to buy mortgage-backed assets from US banks.He wants to pass a $700bn (£380bn) rescue package to buy mortgage-backed assets from US banks.
'Shouting match''Shouting match'
"There is no disagreement that something substantial must be done," he added."There is no disagreement that something substantial must be done," he added.
The Republican critics of the bail-out plan are worried about both its cost and how it would involve the government in the financial sector. Republican critics of the bail-out plan are worried about both its cost and how it would involve the government in the financial sector.
Instead, they want a government-backed insurance policy for the huge amounts of bad debt built up by US banks.Instead, they want a government-backed insurance policy for the huge amounts of bad debt built up by US banks.
Financial markets are gummed up because banks do not know exactly how much bad debt they hold and are therefore reluctant to lend to businesses, consumers and each other.Financial markets are gummed up because banks do not know exactly how much bad debt they hold and are therefore reluctant to lend to businesses, consumers and each other.
The fall-out of this credit crunch continues to have a huge impact:
  • The United States suffered its largest bank failure yet, when regulators moved in to close down Washington Mutual and then sold it to US rival JP Morgan Chase for $1.9bn
  • In a co-ordinated move the European Central Bank, the US Federal Reserve, the Bank of England, Bank of Japan and the Swiss National Bank announced new short-term loans to the banking sector worth tens of billions of dollars
  • Banks continued to cut costs, with UK banking giant HSBC saying it would axe 1,100 jobs
  • Shares in UK bank Bradford & Bingley fell another 20% to 17 pence before recovering slightly
The fall-out of this credit crunch continues to have a huge impact:
  • The United States suffered its largest bank failure yet, when regulators moved in to close down Washington Mutual and then sold it to US rival JP Morgan Chase for $1.9bn
  • In a co-ordinated move the European Central Bank, the US Federal Reserve, the Bank of England, Bank of Japan and the Swiss National Bank announced new short-term loans to the banking sector worth tens of billions of dollars
  • Banks continued to cut costs, with UK banking giant HSBC saying it would axe 1,100 jobs
  • Shares in UK bank Bradford & Bingley fell another 20% to 17 pence before recovering slightly
Plan blockedPlan blocked
Talks to agree the huge bail-out of the financial industry ended in a "shouting match" on Thursday.Talks to agree the huge bail-out of the financial industry ended in a "shouting match" on Thursday.
After several hours of discussions with President Bush, a group of Republican members of Congress blocked the government plan.After several hours of discussions with President Bush, a group of Republican members of Congress blocked the government plan.
Congressman Scott Garrett, a Republican member of the House Financial Services Committee disputed that a deal had been done by Democrats that was only being held up by Republicans.
"They have 218 votes, the Democrats, so if there was a deal they could get it done and we could go home, but obviously there never was a deal," he told BBC News.
He added that his colleagues object to the central part of the bail-out plan.
"The better alternative is one where you do not put the taxpayers' dollars on the hook but instead you ask Wall Street to reinvest themselves with a federal backstop," he said.
On one knee
The proposal would have seen the government buy bad debts from US banks to prevent more of them collapsing.The proposal would have seen the government buy bad debts from US banks to prevent more of them collapsing.
The leader of the Democrats in the House of Representatives, Nancy Pelosi, told ABC News that she "hoped" a bailout plan could be agreed within 24 hours, because "it has to happen". Earlier, the leader of the Democrats in the House of Representatives, Nancy Pelosi, told ABC News she "hoped" a deal would be agreed in the next 24 hours as "it has to happen".
The intense discussions reportedly saw US Treasury Secretary Henry Paulson literally down on one knee, begging Ms Pelosi to help push through the bail-out package.The intense discussions reportedly saw US Treasury Secretary Henry Paulson literally down on one knee, begging Ms Pelosi to help push through the bail-out package.
However, the agreement unravelled when a group of Republican legislators objected to the principle of the plan.However, the agreement unravelled when a group of Republican legislators objected to the principle of the plan.
The talks at the White House, led by Mr Paulson and US President George W Bush, then descended into what one participant described as "a full-throated discussion".The talks at the White House, led by Mr Paulson and US President George W Bush, then descended into what one participant described as "a full-throated discussion".
The BBC's Adam Brookes in Washington predicted a tough day of negotiations.
"Republicans in the House are going to continue, they say, to try to resist this plan," he said.
"They are also trying to convince Senator John McCain, the presidential contender, to jump in their direction."