Congress Agrees Deal on $700bn Banking Bail-out

Congressional leaders said yesterday they had reached a deal to authorize the government to purchase $700bn in troubled debt in what could be the biggest bail-out in US history.

After days of bargaining Democratic leaders last night embarked on the equally daunting challenge of selling the rescue package to Congress and the US public.

Nancy Pelosi, the House speaker, said last night she hoped the 106-page bill could be put to a vote in the House of Representatives as early as today. The Senate is expected to schedule a vote on Wednesday.

Congressional leaders yesterday claimed to have made the economic rescue package far more accountable than the plan first put forward by the White House. In another concession, the bill will set limits on salary packages for Wall Street executives whose companies benefit from the bill. "The party is over. The era of golden parachutes for high-flying Wall Street operators is over," Pelosi told a press conference.

The Democrats realize that there is public resentment at the idea of a rescue package for Wall Street, and were at pains to argue yesterday that the bail-out would benefit ordinary Americans.

It was not immediately clear how Republicans would react to the bill. House Republicans, who led a revolt against an earlier version last week, were reviewing the document at a meeting last night.

Earlier yesterday, Roy Blunt, the Republican congressman from Missouri who was a lead negotiator, said it was too early to come to a decision. "We need to look and see where we are on paper," he said. "We have been talking about how we can make these things work in a way that our conference can come together."

The Democrats have the votes to push the measure through Congress, but that could be political suicide in an election year. It could also undermine economic confidence, Barney Frank, a leading house negotiator for the Democrats, said.

The proposal would allow the treasury department to buy up distressed mortgage-backed securities held by financial institutions. The government would later resell the assets after they had recovered much of their value. Pelosi said the treasury would post details of all transactions on the internet within 48 hours.

But the potentially toxic nature of the rescue in an election year was underlined by the extreme secrecy surrounding the negotiations and the occasionally stormy exchanges inside. At one point documents were passed around by hand to prevent leaks. Pelosi even confiscated Blackberries. There were reports of a shouting match on Saturday with the Democratic senator, Max Baucus.

In the last fortnight, it has become clear that the rescue is unpopular among ordinary Americans who see it as a handout for Wall Street, and Democrats, as well as Republicans, were nervous yesterday about a payback in the November election.

On Saturday George Bush used his weekly radio address to try to reframe the plan as a measure that would benefit all Americans. "If it were possible to let every irresponsible firm on Wall Street fail without affecting your family, I would do it," he said. "But that is not possible. The failure of the financial system would mean financial hardship for many of you."

The potential political difficulty of embracing the deal was underlined by the guarded reaction of the two presidential candidates yesterday. "This is something that all of us will swallow hard and go forward with. The option of doing nothing is simply not an acceptable option," John McCain told ABC television.

Barack Obama told CBS he wanted to review the language of the deal. But he was inclined to back it because: "I think Main Street is now at stake."

Senators also consulted with the billionaire investor Warren Buffett, Kent Conrad, a Democratic senator from North Dakota, told reporters. Buffett warned that if they failed to reach an agreement they risked the "biggest financial meltdown in American history", CNN reported yesterday.

Under the compromise plan, the treasury would only get an immediate $250bn to buy up troubled securities and other bad debt held by financial institutions.

Congress would have to approve further dispersements and there would be stricter oversight of the program by four government agencies and an independent Inspector General.

The government would also receive an equity stake in some of the companies that seek aid, which could pass on a benefit to taxpayers should the rescue plan work and the companies recover. The deal would also set what were described yesterday as "reasonable" limits on severance packages to executives of companies which will benefit from the government plan.