The Big Story: Deal or no deal? Debate or no debate?

From The Associated Press

WASHINGTON, D.C.—Urgent efforts to lash together a $700 billion rescue plan for the national economy broke apart Thursday night, hours after key lawmakers had declared they had reached a deal.

Weary congressional negotiators worked into the night, joined by Treasury Secretary Henry Paulson in an effort to revive or rework the $700 billion proposal that President Bush said must be quickly approved by Congress to stave off potentially "a long and deep recession."

They gave up after 10 p.m. EDT. Talks were to resume Friday morning.

That left the question of whether U.S. presidential candidates Barack Obama and John McCain would go forward with their highly anticipated debate Friday night in Mississippi remained unresolved after their White House meeting failed to conclusively produce an economic bailout agreement.

McCain didn’t plan to participate in the debate unless there was a consensus. Obama still wants the face-off to go on, arguing that Americans need to hear from the candidates. The Democrat was scheduled to travel to the debate site in Oxford, Miss., on Friday.

“I believe that it’s very possible that we can get an agreement in time for me to fly to Mississippi,” McCain said late Thursday. “I understand how important this debate is and I’m very hopeful. But I also have to put the country first.”

In turn, Obama said: “It is my intention to be in Mississippi and obviously the biggest priority is making sure that we get this deal done. But I also think it’s important to describe to the American people where the next president wants to take the country and how he’s going to deal with this crisis.”

The heart of the enormous bailout plan involves the government buying up sour assets of shaky financial firms, action designed to keep essential credit markets open and preventing what some fear would be an economic calamity not seen since the Great Depression of the 1930s.

After six days of intensive talks on the unprecedented package proposed by the Bush administration, with Wall Street tottering and presidential politics intruding six weeks before the election, there was more confusion than clarity.

The day’s earlier apparent breakthrough, announced with fanfare at midday, was followed by a White House summit bringing together President Bush, presidential contenders John McCain and Barack Obama, and top congressional leaders. But that meeting, aimed at showing unity in resolving a national financial crisis, broke up with conflicts in plain view.

Inside the session, House Republican leader John Boehner expressed misgivings about the emerging plan and McCain would not commit to supporting it, said people from both parties who were briefed on the exchange. They spoke on condition of anonymity because the session was private.

The earlier agreement by key members of Congress from both parties — but not top leaders — would have given the Bush administration just a fraction of the money it wanted up front, subjecting half the $700 billion total to a congressional veto.

But conservatives were still in revolt, balking at the astonishing price tag of the proposal and the hand of government that it would place on private markets.

Sen. 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.”

One group of House GOP 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 U.S. purchase the assets.

Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead. The price tag of the administration’s plan to bail out tottering financial institutions — and the federal intrusion into private business matters — have been major sticking points for many Republican lawmakers.

There is wide agreement the U.S. economy is in peril, with financial institutions going under or near the edge and recession looming along with the resulting layoffs and increased home foreclosures.

Bailout money would be phased in

WASHINGTON, D.C. (AP) _ Congressional aides say the would-be bailout gives the Bush administration just a fraction of the $700 billion it’s requested up front, with half the money subject to a congressional veto.

Under the plan, the Treasury secretary would get $250 billion for the plan immediately and could have another $100 billion if he certifies it’s needed. The last $350 billion could be blocked by a vote of Congress.

The plan is designed to give lawmakers a stronger hand in controlling the unprecedented rescue plan.