The New Nation - Internet Edition

BBC Online

Talks to agree a huge $700bn (£380bn) bail-out of the US financial industry have ended in a "shouting match".

After several hours of discussions with President George W Bush, a group of Republican members of Congress blocked the government plan.

The proposal would have seen the government buy bad debts from US banks to prevent more of them collapsing.

Both sides have agreed to resume talks later on Friday. The leader of the Democrats in the House of Representatives, Nancy Pelosi, told ABC News that she "hoped" a bailout plan could be agreed within 24 hours, because "it has to happen".

Financial markets are gummed up because banks do not know exactly how much bad debt they hold and are therefore reluctant to lend to businesses, consumers and each other.

The fall-out of this credit crunch continues to make a huge impact:

The United States suffered its largest bank failure yet, when regulators moved in to close down Washington Mutual and then sold it to US rival JP Morgan Chase for $1.9bn

In a co-ordinated move the European Central Bank, the US Federal Reserve, the Bank of England, Bank of Japan and the Swiss National Bank announced new short-term loans to the banking sector worth tens of billions of dollars

Banks continued to cut costs, with UK banking giant HSBC saying it would axe 1,100 jobs

Shares in UK bank Bradford & Bingley fell another 20% to 17 pence before recovering slightly.

On Thursday, Democrat and Republican legislators appeared to have struck a deal.

A group of Democrats and Republicans even made a public statement, with Senator Christopher Dodd, chairman of the Senate Banking Committee, announcing that they had reached "fundamental agreement" on the principles of a bail-out plan.

But after the White House meeting, the top Republican on the committee, Richard Shelby, told reporters: "I don't believe we have an agreement."

The intense discussions reportedly saw US Treasury Secretary Henry Paulson literally down on one knee, begging Ms Pelosi to help push through the bail-out package.

However, the agreement unravelled when a group of Republican legislators objected to the principle of the plan.

The talks at the White House, led by Mr Paulson and US President George W Bush, then descended into what one participant described as "a full-throated discussion".

Officials with the campaign team of Republican presidential candidate John McCain spoke of "a contentious shouting match". Democrat candidate Barack Obama and McCain were supposed to meet in Oxford, Mississippi.

But McCain said he wanted to pull out and focus on getting a bailout plan agreed instead. Democrats accused him of posturing and avoiding telling voters how he would solve the crisis.

President Bush on the ongoing bail-out talks President George W Bush has said that legislators will "rise to the occasion" and pass the Wall Street rescue plan.

In a statement he said there were still disagreements because "the proposal is big and the reason it's big is because it's a big problem".

President Bush is expected to resume talks with Congressional leaders later on Friday to try to reach an agreement.

He wants to pass a $700bn (£380bn) rescue package to buy mortgage-backed assets from US banks.

"There is no disagreement that something substantial must be done," he added.

The Republican critics of the bail-out plan are worried about both its cost and how it would involve the government in the financial sector.

Instead, they want a government-backed insurance policy for the huge amounts of bad debt built up by US banks.