Lawmakers scramble to revise bailout bill

WASHINGTON — Congressional leaders scrambled Tuesday to come up with changes to help them sell the failed $700 billion financial bailout to rank-and-file members. One idea gathering support: raise the federal deposit insurance limit to reassure nervous savers and help small businesses.

Presidential rivals John McCain and Barack Obama announced separately that they support a plan that some House Republicans had pushed earlier: raising the limit from $100,000 to $250,000. Within hours, the Federal Deposit Insurance Corp. chairman asked Congress for temporary authority to raise the limit by an unspecified amount.

That could help ease a crisis of confidence in the banking system, said chairman Sheila Bair.

President Bush spoke with both nominees during the day and made another statement in the White House. "Congress must act," he demanded in front of the cameras.

As the pace of legislative jockeying quickened, the atmosphere on Wall Street seemed to be improving. The Dow Jones industrials rose nearly 500 points on the day after it had plunged 788. But more attention was on credit markets as a key rate that banks charge each other shot higher, further evidence of a tightening of credit availability.

"I recognize this is a difficult vote for members of Congress," Bush said. "But the reality is we are in an urgent situation and the consequences will grow worse each day if we do not act."

Republican House aides said the FDIC proposal might attract some conservatives who want to help small business owners and avert runs on banks by customers fearful of losing their savings.

House Republican leader John Boehner welcomed McCain's and Obama's embrace of a higher insurance cap, saying congressional Democrats had rejected it Saturday.

Another possible change to the bill would 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.

Liberal Democrats who opposed the bill are suggesting other changes. Their ideas include extending unemployment insurance and banning some forms of "short selling," in which investors bet that a stock's value will drop.

The White House signaled a willingness to accept some changes to the bill. Spokesman Tony Fratto said there are plenty of good ideas to help the financial markets and "we're going to look at all of those."