Political wrangling stalls US’s $700 bn bailout deal

Political wrangling stalls US’s $700 bn bailout deal

Washington: Political wrangling on Thursday blocked a potential deal on a bailout package for the battered US financial system, after US markets rallied on optimism that a deal was imminent.

Top Democrats accused Republican White House contender John McCain of sabotaging the $700 billion package, which they said had largely been agreed upon.

President George W Bush met with top lawmakers from both parties and the men vying to succeed him - McCain and Democrat Barack Obama - at the White House, but failed to clinch a deal.

“We are in a serious economic crisis in the country, if we don’t pass a piece of legislation," said the president. “I want to thank the spirit of bipartisan cooperation that’s taken place here in Washington."

Shortly before the talks, senior US lawmakers announced the outlines of a deal to rescue Wall Street and shore up the fragile economy, but some Republicans dragged their feet.

Democrats also were calling for limits on pay deals for executives whose companies get rescued under the government deal. And they said that any deal must include strict oversight by federal regulators.

After the White House meeting, Senate Majority Leader Harry Reid, a Democrat, announced a new round of late-night discussions Thursday in a bid to get the deal back on track, with Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke.

The talks broke off shortly after 10:00pm and were set to reconvene Friday, at 11:30am.

Democrats said that McCain’s intervention only made the negotiations more difficult.

“John McCain did nothing to help, he only hurt the process," Reid told a joint news conference with Senate banking committee chairman Christopher Dodd.

Barney Frank, the Democratic chair of the House of Representatives financial services committee, said: “I think this was a campaign ploy for Senator McCain."

Lawmakers have reported hearing an avalanche of criticism from their constituents over what many see as a reward to financiers who now need taxpayer relief to escape the system-wide consequences of their enormously risky investments.

In New York, stock markets saw big relief rallies, although credit markets remained under stress with banks reluctant to lend to each other.

The Dow Jones Industrial Average rallied 1.82% and the Nasdaq composite jumped 1.43%. The Standard & Poor’s broad-market index rose 1.97%.

The news also lifted spirits in Europe, where London’s FTSE index rose 1.99%. In Paris, the CAC 40 gained 2.73%while in Frankfurt the Dax added 1.99%.

World leaders remained on edge

Germany Finance Minister Peer Steinbrueck warned that “the United States will lose its superpower status in the global financial system" as a result of the crisis that has humbled some of the greatest names in US finance.

French President Nicolas Sarkozy called for an overhaul of the world’s financial system and warned that the global financial crisis would hit French growth and jobs.

UN Secretary General Ban Ki-moon said the crisis now threatened the world’s most vulnerable populations as well.

“The current financial crisis threatens the well-being of billions of people, none more so than the poorest of the poor," he said.