Hope reviving for a bailout

Monday's House vote was a stinging setback to leaders of both parties and to Bush. The administration's proposal, still the heart of the legislation under consideration, would allow the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believe, that would help lift a major weight off the already sputtering national economy.

But the proposal ignited furious responses from thousands of Americans, who flooded congressional telephones, and the deal went down. Some lawmakers reported a shift in constituent calls pouring into their offices Tuesday after the record stock market decline. Many callers, they said, want Congress to do something without "bailing out Wall Street."

Bush renewed his efforts, speaking with McCain and Obama and making another statement from the White House. "Congress must act," he declared.

Though stock prices rose, more attention was on credit markets. A key rate that banks charge each other shot higher, further evidence of a tightening of credit availability.

Bush was talking about everyday Americans on Tuesday, not banks or other financial institutions. And no supporters were using the word "bailout."

"The dramatic drop in the stock market that we saw yesterday will have a direct impact on retirement accounts, pension funds and personal savings of millions of our citizens," Bush said. "And if our nation continues on this course, the economic damage will be painful and lasting."

Republicans said the FDIC proposal might attract lawmakers on the left and right who want to help small business owners and avert runs on banks by customers fearful of losing their savings.

Another possible change to the bill would call on regulators to modify "mark to market" accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.

Some House Republicans say current rules forced banks to report huge paper losses on mortgage-backed securities, which might have been avoided.

There was a note of irony in that proposal. One Republican familiar with the discussions conceded it amounted to step toward deregulation at a time when Obama, McCain and House members in both parties are clamoring for greater controls on the financial industry.

Liberal Democrats who opposed the bill were suggesting other changes. Their ideas include banning some forms of "short selling," in which investors bet that a stock's value will drop. Republicans showed little interest.

The rescue package was Topic A on the presidential campaign trail.