A Republican revolt stalled efforts in Washington to agree a national economic rescue plan with negotiations broken off for the night and to resume later today.
It was a chaotic turnaround on a day that had seemed headed for a successful conclusion after President George Bush hosted leading politicians, including both presidential candidates, at an extraordinary White House meeting.
Weary congressional negotiators worked into the night joined by Treasury Secretary Henry Paulson in an effort to revive or rework the $700bn (€478bn) proposal.
They gave up after 10pm local time. Democrats blamed the House Republicans for the apparent stalemate.
Republicans have complained the plan would be too costly for taxpayers and would be an unacceptable federal intrusion into private business.
An apparent breakthrough had been announced with fanfare at midday by key members of Congress from both parties – but not top leaders.
Wall Street cautiously showed its pleasure, with the Dow Jones industrials closing 196 points higher.
But the good news and the market close were followed by a rash of less-positive developments.
Washington Mutual Inc was seized by the Federal Deposit Insurance Corp in the largest failure ever of a US bank, after which JPMorgan Chase & Co Inc came to its rescue by buying the credit union’s banking assets.
And a late-afternoon White House summit bringing together President George Bush, presidential contenders John McCain and Barack Obama, and top congressional leaders, described as “a full-throated discussion” by one person in the room and “a contentious shouting match” by Mr McCain’s campaign, broke up with conflicts in plain view.
Conservatives were in revolt over the astonishing price tag of the proposal and the hand of government that it would place on private markets.
Senator Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement “is obviously no agreement”.
Mr McCain’s campaign issued a statement saying “the plan that has been put forth by the administration does not enjoy the confidence of the American people as it will not protect the taxpayers and will sacrifice Main Street in favour of Wall Street”.
The White House, too, acknowledged there was no deal, only progress.
Meanwhile a group of House Republican lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions’ sour assets.
This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the US purchase the assets.
Meanwhile Mr McCain, who dramatically announced on Wednesday that he was suspending his campaign to deal with the economic crisis, stayed silent for most of the session and spoke only briefly to voice general principles for a rescue plan.
Weary congressional negotiators then resumed working into the night, joined by Mr Paulson in an effort to revive or rework the proposal that Mr Bush said must be quickly approved by Congress to stave off potentially “a long and painful recession”.
They gave up after 10pm, more than an hour after the lone House Republican involved, Representative Spencer Bachus of Alabama, left the room.
Talks were to resume this morning on the effort to bail out failing financial institutions and restart the flow of credit that has begun to starve the national economy.
The Bush administration plan’s centrepiece remained for the government to buy the toxic, mortgage-based assets of shaky financial institutions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retirement savings, rising home foreclosures, closed businesses and lost jobs.
The earlier bipartisan accord establishing principles and important details would have given the Bush administration just a fraction of the money it wanted up front, subjecting half the $700bn (€478bn) total to a congressional veto.
The treasury secretary would get $250bn (€170bn) immediately and could have an additional $100bn (€68bn) if he certified it was needed, an approach designed to give politicians a stronger hand in controlling the unprecedented rescue.