WASHINGTON - Warned that time was running short to bolster the distressed economy, congressional Republicans and Democrats reported agreement in principle today on a $700 billion bailout of the financial industry, and said they would present it to the Bush administration in hopes of a vote within days.

Emerging from a two-hour negotiating session, Sen. Chris Dodd, D-Conn., said, "We are very confident that we can act expeditiously.''

"I now expect that we will indeed have a plan that can pass the House, pass the Senate (and) be signed by the president,'' said Sen. Bob Bennett, R-Utah.

The bipartisan consensus on the general direction of the legislation was reported just hours before President Bush was to host presidential contenders Barack Obama and John McCain and congressional leaders at the White House for discussions on how to clear obstacles to the unpopular rescue plan.

Key lawmakers said at midday that few difficulties actually remained.

"There really isn't much of a deadlock to break,'' said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.

Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed is urgently needed to calm the markets and restore confidence in the reeling financial system. His top spokeswoman, Dana Perino, had told reporters earlier today that "significant progress'' was being made.

Financial markets were mixed in early trading; the Dow Jones industrial average rose more than 200 points on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan's effectiveness drove demand for short-term, safe-haven assets.

House Speaker Nancy Pelosi, D-Calif., said Bush's agreement with Democrats on limiting pay for executives of bailed out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.

Even as political figures haggled over the shape and price of the bailout, new economic indicators showed that orders for big-ticket manufactured goods plunged in August by the largest amount in seven months and that new applications for unemployment benefits were at their highest level in seven years.

And new home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record. It served to further dramatize the problem that Washington is trying to solve.

Bush acknowledged Wednesday night that the bailout would be a "tough vote'' for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold,'' Bush said as he worked to resurrect the unpopular bailout package. "Our entire economy is in danger.''

Bush's warning came soon after he invited Obama and McCain, one of whom will inherit the economic mess in four months, as well as key congressional leaders to a White House meeting Thursday to work on a compromise.

With the administration's original proposal considered dead in Congress, House leaders said they were making progress toward revised legislation that could be approved.

Paulson and Federal Reserve Chairman Ben Bernanke have been crisscrossing Capitol Hill in recent days, shuttling between public hearings on the proposal and private meetings with lawmakers, to sell the proposal.

Obama and McCain are calling for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

"The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail,'' they said in a joint statement Wednesday night. "This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe.''

Presidential politics intruded, nonetheless, when McCain said earlier Wednesday he intended to return to Washington and was asking Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown.

Obama said the debate should go ahead.

Lawmakers in both parties have objected strenuously to the rescue plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on more conditions and help for beleaguered homeowners.

But many in both parties said they were open to legislation, although on different terms than the White House has proposed.

On the Net:

White House: http://www.whitehouse.gov

House Financial Services Committee: http://financialservices.house.gov

Stocks rise on bailout hopes; credit remains tight

By TIM PARADIS

AP Business Writer

NEW YORK (AP) - Financial markets were mixed Thursday as lawmakers moved closer to hammering out a deal aimed at reviving the crippled financial system. The Dow Jones industrial average rose more than 200 points on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan's effectiveness drove demand for short-term, safe-haven assets.

To help ease credit markets, the Federal Reserve early Thursday issued more than $20 billion in collateral such as Treasury bills in exchange for dollars to help meet demand for safe assets.

Meanwhile, disappointing readings on employment and demand for big-ticket manufactured goods, as well as a sobering forecast from General Electric Co., were underscoring the broad effects of the more than year-old credit crisis.

But stock investors were hopeful that a $700 billion bailout plan would win approval, albeit with some important changes, following two days of testimony on Capitol Hill by the country's top economic leaders. The momentum intensified Thursday as President Bush summoned congressional leaders to a meeting aimed at securing the legislation.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged lawmakers on Tuesday and Wednesday to quickly sign off on the plan, which would help prop up the economy by removing billions of dollars in risky mortgage-related assets from financial firms' balance sheets. The president highlighted the urgency in a national address Wednesday night.

White House officials have yielded to a key demand by congressional leaders, agreeing to include widely supported limits on pay packages for executives whose companies benefit. Major elements are still being worked out, including how to phase in the mammoth cost of the package and a plan to let the government take an ownership stake in troubled companies as part of the rescue.

Strained credit markets tightened, suggesting investors are waiting to see the details.

Demand remained high for the 3-month Treasury bill, considered the safest short-term investment, with the yield trading at 0.47 percent, down from 0.49 percent late Wednesday. That means investors are still willing to earn the slimmest of returns in exchange for a safe place to put their money. The yield on the benchmark 10-year Treasury note rose to 3.84 percent from 3.81 late Wednesday.

In another sign of credit market tightness, the benchmark three-month London Interbank Offered Rate, a bank-to-bank lending rate known as LIBOR, jumped 0.29 percentage point to 3.77 percent.

In midmorning trading, the Dow Jones industrial average rose 236.80, or 2.19 percent, to 11,061.97. The Dow fell 563 points, or 4.95 percent, in the first three sessions this week.

Broader stock indicators also rose Thursday. The Standard & Poor's 500 index rose 22.86, or 1.93 percent, to 1,208.73, and the Nasdaq composite index rose 38.32, or 1.78 percent, to 2,194.00.

The dollar was mixed against other major currencies, while gold prices fell slightly.

Light, sweet crude for November delivery fell 6 cents to $105.67 on the New York Mercantile Exchange.

Meanwhile, the Labor Department said the number of people requesting jobless benefits increased by 32,000 to a seasonally adjusted 493,000 last week, the highest level in seven years and much greater than analysts' expectations of 445,000. Hurricanes Ike and Gustav added about 50,000 new claims in Louisiana and Texas, the department said.

The Commerce Department said sales of new homes fell sharply in August to the slowest pace in 17 years. The average sales price also fell by the largest amount on record. New homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales rate since January 1991.

The department also said orders for manufactured goods sank in August by the largest amount in seven months as demand for both airplanes and cars sank. Durable goods orders fell by 4.5 percent last month, far worse than the 1.6 percent decline that economists expected and the biggest drop since a 4.7 percent fall in January.

GE fell 74 cents, or 3 percent, to $23.85 after lowering its forecast for third-quarter and full-year earnings, citing unprecedented weakness and volatility in the financial services markets.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 103.9 million shares.

The Russell 2000 index of smaller companies rose 5.34, or 0.77 percent, to 703.10.

Overseas, Japan's Nikkei stock average was down 0.90 percent. Britain's FTSE 100 rose 0.27 percent, Germany's DAX index rose 1.31 percent, and France's CAC-40 added 1.60 percent.

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Analysis: Bailout blues may help define Bush term

By BEN FELLER

Associated Press Writer

WASHINGTON (AP) - Talk about a rough way for a Republican president to end two terms in office: The era of big government is back.

Just when the war in Iraq is going better, President Bush finds himself with a domestic crisis so vast it could redefine how he is remembered. To save a tanking economy, Bush is backing a bailout of historic proportions, brimming with federal intervention and taxpayer risk and a pile more debt.

Bush did promise to sprint to the finish. No one expected Wall Street to line the track with hurdles.

Aggressive lending to people with spotty credit led to record foreclosures, which imperiled investment houses and froze credit, the lifeblood of the economy. The upshot for people trying to make sense of it all: plummeting stock values, rising unemployment, shrinking confidence.

It could be much worse. And it will be. That is, Bush says, unless Congress acts fast to approve a bailout plan worth a staggering $700 billion.

How bad? Try this: A long and painful recession.

In a prime-time address Wednesday, that's how Bush described the risk of failing to cover Wall Street's excesses.

The president acknowledges that people are wondering who is at fault.

His response: "Now is not the time to play the blame game. There's plenty of time to analyze the situation.''

That's all relative. There is not plenty of time in the Bush presidency. His term ends in less than four months.

Yet there is time left to shape how Bush's tenure will be defined. No matter how much his administration raised warnings about risks in the financial system, no matter how much the private sector is the one that went off the rails, one of the biggest financial crises in generations still happened on Bush's watch.

"This has the potential to move up there in the first tier,'' said Ken Duberstein, a Republican strategist and former chief of staff to President Reagan. Describing history's likely take on Bush, he said: "9/11 is in there. Katrina is in there. The Iraq war. And the financial crisis that we're experiencing now.''

In scrambling to fix the problem, seldom have so many leaders moved toward a plan they dislike so much.

"It's a terrible plan,'' said Republican Rep. Tom Davis of Virginia. "But I haven't heard anything better.''

Bush's chief spokesman on the matter, Treasury Secretary Henry Paulson, says he hates having to do it.

So do the conservative lawmakers who have long made up Bush's base. Altering the free-market system is not exactly part of their election-year platform.

And, of course, Democrats are all over Bush for letting this happen, even though multiple players are at fault.

Bush himself, a man of gut instinct, says he has to go against his own in this case. His experts have told him that government intervention is essential.

"Look, I'm sure there are some of my friends out there saying: 'I thought this guy was a market guy? What happened to him?''' the president said.

Events happened to him. Terrorist attacks early in his presidency, financial upheaval at the end.

Consider the Texas Gov. Bush who did well in presidential debates against Vice President Al Gore back in 2000. He scored points by stating forcefully that he was an advocate of less government and that he would not use the U.S. military as a force of nation-building.

Now he is poised to oversee a massive bailout, on top of the wars in Afghanistan and Iraq, where U.S. troops remain to help protect new democracies.

In the public's mind, expanding government to help protect the country is one thing. Even with weakened power, Bush still wins battles on national security.

But helping Wall Street giants? Spending taxpayer money to make up for other people's bad decisions? There's no love for that.

Lawmakers are likely to go ahead anyway. Inaction on a teetering economy is acceptable to no one. The prospects of a bill passing soon seem strong.

Still, Bush is getting hit from all sides. The shots from inside his party always stand out a little more.

Conservatives don't like hearing a Republican president describe a bailout this way: "You bet it's big, because it needed to be big.''

Former House Speaker Newt Gingrich said the plan that Bush and Paulson are pushing is a "very un-Republican idea.'' Texas Rep. Jeb Hensarling, a leader of conservatives in the House, said, "We are concerned that the federal government is becoming the lender and guarantor of last resort.''

The White House says Bush is being practical, not betraying principle about smaller government. He defers to his experts in the field. One of them, Federal Reserve Chairman Ben Bernanke, warned plainly that the economy will head closer to recession and not be able to recover normally without the bailout bill.

"I think people understand that the philosophy you have can be one way, but you have to be realistic,'' Duberstein said. "If the experts are saying that if we didn't act we'd be in much worse shape, then the president had no good alternative. If that's the case, then the president acted wisely.''

Besides, Bush says there is no such thing as an accurate short-term history. Time and perspective put bold decisions in a different light.

Yet White House aides already know some of Bush's best moves are sure to be overshadowed. Successfully fighting disease in Africa, raising educational expectations across America, building up American defenses against another terrorist attack - these are unlikely to make the first paragraphs of history.

Perhaps a story of resilience will, though. That's how Bush sees it.

"Since 2001,'' he said, "our economy has faced a recession, the bursting of the dot-com bubble, major corporate scandals, an unprecedented attack on our homeland, a global war on terror, a series of devastating natural disasters. Our economy has weathered every one of these challenges.''

And now, there's one more.

EDITOR'S NOTE - Ben Feller covers the White House for The Associated Press.

Deal said to be near on big financial bailout plan

By JULIE HIRSCHFELD DAVIS

Associated Press Writer

WASHINGTON - President Bush is bringing presidential candidates Barack Obama and John McCain into negotiations on a $700 billion rescue of Wall Street as Democrats and Republicans near agreement on a bailout plan with more protections for taxpayers and new help for distressed homeowners.

Senior lawmakers and Bush administration officials have cleared away key obstacles to a deal on the unprecedented rescue, agreeing to include widely supported limits on pay packages for executives whose companies benefit.

They're still wrangling over major elements, including how to phase in the eye-popping cost - a measure demanded by Democrats and some Republicans who want stronger congressional control over the bailout - without spooking markets. A plan to let the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also was under intense negotiation.

A bipartisan meeting was set for Thursday to begin drafting a compromise, which top Democrats said they hoped could pass within days.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.

Even as political figures haggled over the shape and price of the bailout, new economic indicators showed that orders for big-ticket manufactured goods plunged in August by the largest amount in seven months and that new applications for unemployment benefits were at their highest level in seven years.

And new home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record. It served to further dramatize the problem that Washington is trying to solve.

On Wall Street, stocks initially rose Thursday on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan's effectiveness drove demand for short-term, safe-haven assets.

Bush acknowledged in a prime-time television address Wednesday night that the bailout would be a "tough vote'' for lawmakers.

But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold,'' Bush said as he worked to resurrect the unpopular bailout package. "Our entire economy is in danger.''

Bush's warning came soon after he invited Obama and McCain, one of whom will inherit the economic mess in four months, as well as key congressional leaders to a White House meeting Thursday to work on a compromise.

With the administration's original proposal considered dead in Congress, House leaders said they were making progress toward revised legislation that could be approved.

Rep. Barney Frank, D-Mass., who has led negotiations with Treasury Secretary Henry Paulson on the package, said that given the progress of the talks, the White House meeting was a distraction.

"We're going to have to interrupt a negotiating session tomorrow between the Democrats and Republicans on a bill where I think we are getting pretty close, and troop down to the White House for their photo op,'' said Frank, the House Financial Services Committee chairman. "I wish they'd checked with us.''

Paulson and Federal Reserve Chairman Ben Bernanke have been crisscrossing Capitol Hill in recent days, shuttling between public hearings on the proposal and private meetings with lawmakers, to sell the proposal.

Obama and McCain are calling for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

"The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail,'' they said in a joint statement Wednesday night. "This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe.''

Presidential politics intruded, nonetheless, when McCain said earlier Wednesday he intended to return to Washington and was asking Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown.

Obama said the debate should go ahead.

Lawmakers in both parties have objected strenuously to the rescue plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on more conditions and help for beleaguered homeowners.

Former President Clinton said Thursday that one thing lawmakers must avoid is any bill that effectively rewards bad judgments and dangerous risk-taking among financiers.

"You have to be careful not to have unjust enrichment,'' he said on CBS's "The Early Show.''

But many in both parties said they were open to legislation, although on different terms than the White House has proposed.

Some partisan sticking points remain.

Democrats are pushing to allow bankruptcy judges to rewrite mortgages to ease the burden on consumers who are facing foreclosure - a nonstarter for Republicans.

Democrats acknowledge privately that the provision will almost certainly be dropped in the interest of a bipartisan deal. Obama told reporters it's "probably something that we shouldn't try to do in this piece of legislation.''

Democrats also want any potential proceeds the government reaps from the bailout to go to a fund designed to pay for housing for poor families. Many Republicans oppose the very existence of the fund, which they say is a backdoor means of funneling money to liberal political groups.

Democratic demands that Congress be given greater authority over the bailout and that the government be required to help homeowners renegotiate their mortgages so they have lower monthly payments already have been accepted in principle.

Under the bailout bill, which will let the government buy huge amounts of toxic mortgage-related assets, "we're now the biggest mortgage holder in town, and we can do serious foreclosure avoidance,'' Frank said.

On the Net:

White House: http://www.whitehouse.gov

House Financial Services Committee: http://financialservices.house.gov

Stocks rise on bailout hopes; credit remains tight

By TIM PARADIS

AP Business Writer

NEW YORK (AP) - Financial markets were mixed Thursday as lawmakers moved closer to hammering out a deal aimed at reviving the crippled financial system. The Dow Jones industrial average rose more than 200 points on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan's effectiveness drove demand for short-term, safe-haven assets.

To help ease credit markets, the Federal Reserve early Thursday issued more than $20 billion in collateral such as Treasury bills in exchange for dollars to help meet demand for safe assets.

Meanwhile, disappointing readings on employment and demand for big-ticket manufactured goods, as well as a sobering forecast from General Electric Co., were underscoring the broad effects of the more than year-old credit crisis.

But stock investors were hopeful that a $700 billion bailout plan would win approval, albeit with some important changes, following two days of testimony on Capitol Hill by the country's top economic leaders. The momentum intensified Thursday as President Bush summoned congressional leaders to a meeting aimed at securing the legislation.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged lawmakers on Tuesday and Wednesday to quickly sign off on the plan, which would help prop up the economy by removing billions of dollars in risky mortgage-related assets from financial firms' balance sheets. The president highlighted the urgency in a national address Wednesday night.

White House officials have yielded to a key demand by congressional leaders, agreeing to include widely supported limits on pay packages for executives whose companies benefit. Major elements are still being worked out, including how to phase in the mammoth cost of the package and a plan to let the government take an ownership stake in troubled companies as part of the rescue.

Strained credit markets tightened, suggesting investors are waiting to see the details.

Demand remained high for the 3-month Treasury bill, considered the safest short-term investment, with the yield trading at 0.47 percent, down from 0.49 percent late Wednesday. That means investors are still willing to earn the slimmest of returns in exchange for a safe place to put their money. The yield on the benchmark 10-year Treasury note rose to 3.84 percent from 3.81 late Wednesday.

In another sign of credit market tightness, the benchmark three-month London Interbank Offered Rate, a bank-to-bank lending rate known as LIBOR, jumped 0.29 percentage point to 3.77 percent.

In midmorning trading, the Dow Jones industrial average rose 236.80, or 2.19 percent, to 11,061.97. The Dow fell 563 points, or 4.95 percent, in the first three sessions this week.

Broader stock indicators also rose Thursday. The Standard & Poor's 500 index rose 22.86, or 1.93 percent, to 1,208.73, and the Nasdaq composite index rose 38.32, or 1.78 percent, to 2,194.00.

The dollar was mixed against other major currencies, while gold prices fell slightly.

Light, sweet crude for November delivery fell 6 cents to $105.67 on the New York Mercantile Exchange.

Meanwhile, the Labor Department said the number of people requesting jobless benefits increased by 32,000 to a seasonally adjusted 493,000 last week, the highest level in seven years and much greater than analysts' expectations of 445,000. Hurricanes Ike and Gustav added about 50,000 new claims in Louisiana and Texas, the department said.

The Commerce Department said sales of new homes fell sharply in August to the slowest pace in 17 years. The average sales price also fell by the largest amount on record. New homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales rate since January 1991.

The department also said orders for manufactured goods sank in August by the largest amount in seven months as demand for both airplanes and cars sank. Durable goods orders fell by 4.5 percent last month, far worse than the 1.6 percent decline that economists expected and the biggest drop since a 4.7 percent fall in January.

GE fell 74 cents, or 3 percent, to $23.85 after lowering its forecast for third-quarter and full-year earnings, citing unprecedented weakness and volatility in the financial services markets.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 103.9 million shares.

The Russell 2000 index of smaller companies rose 5.34, or 0.77 percent, to 703.10.

Overseas, Japan's Nikkei stock average was down 0.90 percent. Britain's FTSE 100 rose 0.27 percent, Germany's DAX index rose 1.31 percent, and France's CAC-40 added 1.60 percent.

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Analysis: Bailout blues may help define Bush term

By BEN FELLER

Associated Press Writer

WASHINGTON (AP) - Talk about a rough way for a Republican president to end two terms in office: The era of big government is back.

Just when the war in Iraq is going better, President Bush finds himself with a domestic crisis so vast it could redefine how he is remembered. To save a tanking economy, Bush is backing a bailout of historic proportions, brimming with federal intervention and taxpayer risk and a pile more debt.

Bush did promise to sprint to the finish. No one expected Wall Street to line the track with hurdles.

Aggressive lending to people with spotty credit led to record foreclosures, which imperiled investment houses and froze credit, the lifeblood of the economy. The upshot for people trying to make sense of it all: plummeting stock values, rising unemployment, shrinking confidence.

It could be much worse. And it will be. That is, Bush says, unless Congress acts fast to approve a bailout plan worth a staggering $700 billion.

How bad? Try this: A long and painful recession.

In a prime-time address Wednesday, that's how Bush described the risk of failing to cover Wall Street's excesses.

The president acknowledges that people are wondering who is at fault.

His response: "Now is not the time to play the blame game. There's plenty of time to analyze the situation.''

That's all relative. There is not plenty of time in the Bush presidency. His term ends in less than four months.

Yet there is time left to shape how Bush's tenure will be defined. No matter how much his administration raised warnings about risks in the financial system, no matter how much the private sector is the one that went off the rails, one of the biggest financial crises in generations still happened on Bush's watch.

"This has the potential to move up there in the first tier,'' said Ken Duberstein, a Republican strategist and former chief of staff to President Reagan. Describing history's likely take on Bush, he said: "9/11 is in there. Katrina is in there. The Iraq war. And the financial crisis that we're experiencing now.''

In scrambling to fix the problem, seldom have so many leaders moved toward a plan they dislike so much.

"It's a terrible plan,'' said Republican Rep. Tom Davis of Virginia. "But I haven't heard anything better.''

Bush's chief spokesman on the matter, Treasury Secretary Henry Paulson, says he hates having to do it.

So do the conservative lawmakers who have long made up Bush's base. Altering the free-market system is not exactly part of their election-year platform.

And, of course, Democrats are all over Bush for letting this happen, even though multiple players are at fault.

Bush himself, a man of gut instinct, says he has to go against his own in this case. His experts have told him that government intervention is essential.

"Look, I'm sure there are some of my friends out there saying: 'I thought this guy was a market guy? What happened to him?''' the president said.

Events happened to him. Terrorist attacks early in his presidency, financial upheaval at the end.

Consider the Texas Gov. Bush who did well in presidential debates against Vice President Al Gore back in 2000. He scored points by stating forcefully that he was an advocate of less government and that he would not use the U.S. military as a force of nation-building.

Now he is poised to oversee a massive bailout, on top of the wars in Afghanistan and Iraq, where U.S. troops remain to help protect new democracies.

In the public's mind, expanding government to help protect the country is one thing. Even with weakened power, Bush still wins battles on national security.

But helping Wall Street giants? Spending taxpayer money to make up for other people's bad decisions? There's no love for that.

Lawmakers are likely to go ahead anyway. Inaction on a teetering economy is acceptable to no one. The prospects of a bill passing soon seem strong.

Still, Bush is getting hit from all sides. The shots from inside his party always stand out a little more.

Conservatives don't like hearing a Republican president describe a bailout this way: "You bet it's big, because it needed to be big.''

Former House Speaker Newt Gingrich said the plan that Bush and Paulson are pushing is a "very un-Republican idea.'' Texas Rep. Jeb Hensarling, a leader of conservatives in the House, said, "We are concerned that the federal government is becoming the lender and guarantor of last resort.''

The White House says Bush is being practical, not betraying principle about smaller government. He defers to his experts in the field. One of them, Federal Reserve Chairman Ben Bernanke, warned plainly that the economy will head closer to recession and not be able to recover normally without the bailout bill.

"I think people understand that the philosophy you have can be one way, but you have to be realistic,'' Duberstein said. "If the experts are saying that if we didn't act we'd be in much worse shape, then the president had no good alternative. If that's the case, then the president acted wisely.''

Besides, Bush says there is no such thing as an accurate short-term history. Time and perspective put bold decisions in a different light.

Yet White House aides already know some of Bush's best moves are sure to be overshadowed. Successfully fighting disease in Africa, raising educational expectations across America, building up American defenses against another terrorist attack - these are unlikely to make the first paragraphs of history.

Perhaps a story of resilience will, though. That's how Bush sees it.

"Since 2001,'' he said, "our economy has faced a recession, the bursting of the dot-com bubble, major corporate scandals, an unprecedented attack on our homeland, a global war on terror, a series of devastating natural disasters. Our economy has weathered every one of these challenges.''

And now, there's one more.

EDITOR'S NOTE - Ben Feller covers the White House for The Associated Press.

Bush warns 'entire economy is in danger'

By JENNIFER LOVEN

Associated Press Writer

WASHINGTON- President Bush said Wednesday that lawmakers risk a cascade of wiped-out retirement savings, rising home foreclosures, lost jobs and closed businesses if they fail to act on a massive financial rescue plan. "Our entire economy is in danger,'' he said.

"Without immediate action by Congress, American could slip into a financial panic and a distressing scenario would unfold,'' Bush said in a 12-minute prime-time address delivered from the White House East Room that he hoped would help rescue his tough-sell bailout package. "Ultimately, our country could experience a long and painful recession.''

Said Bush: "We must not let this happen.''

The unprecedented $700 billion bailout, which the Bush administration asked Congress last weekend to approve before it adjourns, is meeting with deep skepticism, especially from conservatives in Bush's own Republican Party who are revolting at the high price tag and massive private-sector intervention by government. Though there is general agreement that something must be done to address the spiraling economic problems, Bush has been forced to accept changes almost daily, based on demands from the right and left.

Seeking to explain himself to conservatives, Bush stressed he was reluctant to put taxpayer money on the line to help businesses that had made bad decisions and that the rescue is not aimed at saving individual companies. He tried to address some of the major complaints from Democrats by promising that CEOs of failed companies won't be rewarded, while warning he would draw the line at regulations he determined would hamper economic growth.

"With the situation becoming more precarious by the day, I faced a choice: to step in with dramatic government action or to stand back and allow the irresponsible actions by some to undermine the financial security of all,'' Bush said.

The president turned himself into an economics professor for much of the address, tracing the origins of the problem back a decade.

But while generally acknowledging risky and poorly thought-out financial decisions at many levels of society, Bush never assigned blame to any specific entity, such as his administration, the quasi-independent mortgage giants Fannie Mae and Freddie Mac or the Wall Street firms that built rising profits on increasingly speculative mortgage-backed securities. Instead, he spoke in terms of investment banks that "found themselves saddled with'' the toxic assets the government is now proposing to buy and banks that "found themselves'' with questionable balance sheets.

Intensive, personal lobbying of lawmakers is not usually Bush's style as president, unlike some predecessors. He does not often make calls or twist arms on behalf of a legislative priority.

But with the nation facing the biggest financial meltdown in decades, Bush took the unusual step of asking Democrat Barack Obama and Republican John McCain, one of whom will inherit the financial mess in four months, and key congressional leaders of both parties to a White House meeting on Thursday to work on a compromise.

Obama spokesman Bill Burton said the senator would attend the meeting scheduled for the afternoon, and senior McCain advisers said he would, too. The plans of the other invitees were unknown. The White House said that the idea for the joint meeting was McCain's and that aides went about setting it up after Bush and McCain spoke Wednesday afternoon.

In another move welcome at the White House, Obama and McCain issued a joint statement using their own dire language to urge lawmakers to act. The two candidates - bitterly fighting each other for the White House but coming together over this issue - said the situation offers a chance for politicians to prove Washington's worth.

"The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail,'' they said. "This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe.''

However, the Oval Office rivals were not putting politics aside entirely. McCain asked Obama to agree to delay their first debate, scheduled for Friday, while Obama said it should go ahead.

White House and administration officials have warned repeatedly in recent days of a coming "financial calamity.''

But that has not closed the deal, which for many recalls previous warnings of grave threats from Bush - such as before the Iraq war - that did not materialize. So Bush's goal with his speech, his first prime-time address in 377 days, was to frame the debate in layman's terms to show the depths of the crisis, explain how it affects the people's daily lives and inspire the public to demand action from Washington.

He said that more banks could fail, the stock market could plummet and erase retirement accounts, businesses could find it hard to get credit and be forced to close, wiping out jobs for millions of Americans.

He ended on a positive note, predicting lawmakers would "rise to the occasion'' and that the nation's economy will overcome "a moment of great challenge.''

With so many crises hitting the United States at once, the presidential race has taken a back seat and so has Bush's involvement in politics. Bush canceled a campaign trip to Florida on Wednesday to deal with the problem, the third time in a week that he has scrapped his attendance at out-of-town fundraisers, either because of the market turmoil or Hurricane Ike.

The economic crisis also is almost certain to overshadow the rest of Bush's four months left in office and could hugely impact his legacy. It has been assumed that the long-term view of Bush's presidency was to be shaped largely by Iraq, Hurricane Katrina and the Sept. 11, 2001, attacks. Now, the dire economic problems and the aftermath of the government's attempted solution will certainly be added to that list.