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'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.

More on the World's Economy News at www.e-worldbusiness.com

I don't quite agree the US economy will crumble in one day. Regardless of the present crisis in the financial sector of their economy, they are still by miles the world's largest economy and employ more people than any other country in the world.

The American economy wasn't built in a day, I strongly believe they have reached their peak though and are gradually loosing it, but it just won't happen suddenly and abruptly.

A major bounce back is imminent in the coming year. I strongly believe this. Just take a look at their forays in science and technology coupled with the fact that they possess more patents than any other country of the world.

those patents and technological advances don't happen without money.The credit crisis is going to affect a lot of financial institutions which borrow money and hence a lot of industries

"What should have been a day of hope turned into a day of desperation," said Marco Annunziato, chief economist for UniCredit in London. "We are facing a systemic crisis of confidence in the global financial system that is pushing us increasingly close to a complete meltdown."

World stocks, as measured by the MSCI's world index, lost about $1.7 trillion for the day.

GLOBAL CONTAGION

Investors said there were ample signs that a financial crisis that started with risky lending to the overheated U.S. property market had gone rapidly global.

"The crisis is going to affect everybody. It's a very difficult situation and it's going to affect economies everywhere," Mexican billionaire Carlos Slim said.

Earlier, the governments of Belgium, the Netherlands and Luxembourg moved to partly nationalize Belgian-Dutch group Fortis NV, and German lender Hypo Real Estate Holding AG secured a credit line from the German government.

Earlier, European shares had dropped to a 3-1/2-year closing low, with bank shares weighing heavily.

The world's central banks, led by the U.S. Federal Reserve, announced a $330 billion expansion of currency swap arrangements, which allows them to increase the amount of money they can provide in their home markets, effectively throwing more money at the crisis.

The Wachovia deal was the latest in a series of events that has transformed the American financial landscape and wiped out hundreds of billions of dollars of shareholder wealth.

Things are getting worse as the bailout was rejected, Read more on www.e-worldbusiness.com

toluaddy:

I don't quite agree the US economy will crumble in one day. Regardless of the present crisis in the financial sector of their economy, they are still by miles the world's largest economy and employ more people than any other country in the world.

This is not the issue of US economy. its affecting the world economy. The bailout fund that can reduce the downfall of the economy has been rejected. NYSE is in big depress now.