WASHINGTON (AP) - President Bush summoned Barack Obama, John McCain and legislative leaders to an extraordinary White House summit, warning Americans and Congress on Wednesday night that failing to act on a $700 billion financial industry bailout could lead to "a long and painful recession."
Earlier, Bush bowed to Democratic demands to limit the pay of executives whose tottering companies would be rescued. Democrats and Republicans were nearing agreement on the rescue legislation, the most sweeping government intervention in the market since the Great Depression, and set a meeting early Thursday to draft a bipartisan bill.
Bush acknowledged in a prime time television address Wednesday night that the bailout would be a "tough vote" for lawmakers. The administration appeared to be softening its resistance to Democrats' demand that the eye-popping cost be phased in rather than dispensed all at once. But Bush strongly urged Congress to act quickly to pass the plan, warning Americans in his 12-minute speech that failing to act fast risked dire economic consequences such as disappearing retirement savings, rising foreclosures, lost jobs and closed businesses.
"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold," Bush said as he worked to resurrect the unpopular bailout package. With the administration's original proposal considered dead in Congress, top House leaders issued an upbeat statement late Wednesday saying there was progress toward revised legislation that could pass.
"We are committed to continuing to work cooperatively and on a bipartisan basis to safeguard the interests of the American taxpayers," said Speaker Nancy Pelosi, D-Calif., and House Republican leader John Boehner of Ohio. Sen. Dick Durbin of Illinois, the Senate's No. 2 Democrat, expressed optimism that Congress could work through the weekend and pass the measure, possibly by the time markets open on Monday.
The heart of the unprecedented plan, unveiled less than a week ago, involves the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke spent most of the day at the Capitol, shuttling between public hearings on the proposal and private meetings with lawmakers. Presidential politics intruded, as well, when McCain said he intended to return to Washington and called on Bush to convene crisis meetings until an agreement was reached on legislation. In their statement, Pelosi and Boehner said, "We agree that key changes should be made to the administration's initial proposal. It must include basic good-government principles, including rigorous and independent oversight, strong executive compensation standards, and protections for taxpayers."
Earlier, Paulson agreed to demands from critics in both parties to limit the pay packages of Wall Street executives whose companies would benefit from the proposed bailout.
"The American people are angry about executive compensation and rightfully so," Paulson told the House Financial Services Committee. "We must find a way to address this in the legislation without undermining the effectiveness of the program."
The administration and congressional negotiators also were nearing accord on parceling out the $700 billion so it would not be available all at once, although key details remained to be worked out. "Ultimately $700 billion has to be available but ... they are making progress about how to give people some assurance that it is not going to go to $700 billion in one fell swoop," said Rep. Barney Frank, D-Mass., who was leading negotiations with Paulson on the plan.
Paulson also was said to have accepted the idea of allowing the government to take an equity stake in some of the companies aided - rather than just purchasing their bad assets, as Bush originally proposed - but there was no agreement yet on how the plan would work. Given the progress on the talks, Frank said the White House summit would be relegated to little more than a publicity event.
"We're going to have to interrupt a negotiating session tomorrow between the Democrats and Republicans on a bill where I think we are getting pretty close, and troop down to the White House for their photo op," Frank said. "I wish they'd checked with us."
Away from Washington, debate over the bailout became embroiled in presidential politics as McCain said he was returning to the capital and was asking his rival Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead and that his campaign staff was working with McCain's on a statement the candidates might make, spelling out major points they believe the rescue legislation must include.
Congressional Democrats dismissed McCain's dramatic announcement as a political ploy and said his involvement in the talks six weeks before the elections would only muddle the extraordinarily sensitive debate.
"With all due respect to my friend John McCain, we're doing just fine. We should not have presidential politics enter what we're doing here," said Sen. Harry Reid, D-Nev., the majority leader. He added that McCain "is trying to divert attention from his failing campaign."