WASHINGTON - US lawmakers on Monday debated a 700-billion-dollar bailout plan for struggling Wall Street banks as US President George W. Bush appealed to Congress to quickly approve the deal to free up frozen credit markets.
"I fully understand that this will be a difficult vote," Bush said at the White House before the House of Representatives began debate on the proposal amid stiff opposition from some members of his Republican party.
But he said the rescue package "will help keep the crisis in our financial system from spreading throughout our economy."
The US president spoke after a compromise proposal was hammered out in high-stakes negotiations between rival party leaders in Congress and White House officials over the weekend before global markets reopened on Monday.
The plan would mark the largest government economic intervention since the Great Depression of the 1930s, and is designed to shore up a troubled economy suffering from a burst US housing bubble that has ravaged the global banking system.
The proposal grants the Treasury secretary authority to buy up toxic mortgage-related assets in troubled banks in hopes of easing the flow of credit and reviving the moribund housing market.
As the pivotal debate began in Congress, the shakeup of the US banking sector continued with Citigroup on Monday agreeing to takeover Wachovia Bank. US regulators backed the deal that grants the government a stake in one of the nation's biggest banks.
The takeover came as Wachovia faced a near collapse of its share price and weakening confidence because of its exposure to troubled mortgage assets.
Congressional leaders, mindful of the approaching November 4 general elections, acknowledged the vote could be close while some conservative Republicans and liberal Democrats vowed to oppose the measure.
"We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price?" Republican Congressman Michael Pence, a critic of the bailout, asked in a letter to colleagues.
White House hopefuls Republican John McCain and his Democratic rival Barack Obama have offered cautious backing for the plan, both claiming that demands they had made had been included in the new bill.
Despite the weekend deal, the financial crisis spread anxiety across global markets, prompting nationalizations and rescues of European banks while sending stocks down in Asia and Europe.
Britain had to nationalize Bradford & Bingley bank, governments intervened to prop up Belgian-Dutch group Fortis and other European banks got sucked into the storm.
Federal Reserve chairman Ben Bernanke echoed Bush's appeal, voicing support for the bailout bill.
"This legislation should help to restore the flow of credit to households and businesses that is essential for economic growth and job creation, while at the same time affording strong and necessary protections for taxpayers," he said in a statement.
Democratic leaders portrayed the revised plan, that ran more than 100 pages, as much improved from the three-page version sent days earlier by the White House, saying it included stricter oversight, safeguards for taxpayers and caps on executive pay packages.
"Working in a bipartisan way, we sent a message to Wall Street. The party is over," said House Speaker Nancy Pelosi.
"The era of golden parachutes for high flying Wall Street operators is over. No longer will the US taxpayer bail out the recklessness of Wall Street."
The proposed rescue, posted on financialservices.house.gov and formally titled the Emergency Economic Stabilization Act of 2008, calls for the immediate release of 250 billion dollars to enable the government to buy up troubled assets.
Under the bill, the president is authorized to approve a further 100 billion dollars, but the plan gives Congress a veto power over purchases above that limit and sets a ceiling for all purchases of 700 billion dollars.
The rescue operation will be overseen by a board including the chairman of the Federal Reserve, the Treasury secretary and the chairman of the Securities and Exchange Commission.
The bill prohibits "golden parachutes" for CEOs or other executives who lose or leave their jobs at companies participating in the plan as long as the Treasury holds equity in those firms.
The negotiations were reportedly marked by bitter disagreement over how to pay for possible losses suffered by taxpayers after debt has been bought and sold.
Democratic lawmakers had called for financial firms to help pay for the losses but the draft legislation left the question open for the next US president to tackle.