Bailout Negotiations Breakthrough Reached

The bill includes pay limits for executives whose firms seek help, aides said. And it requires the Government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures. In some cases, the Government would receive an equity stake in companies that seek aid.

As they approached a final deal, both sides appeared to have given up a number of contentious proposals, including a change in the bankruptcy laws sought by some Democrats to give judges the authority to modify the terms of first mortgages and a temporary suspension of mark-to-market accounting rules sought by some Republicans.

Congressional leaders and the treasury secretary, Henry M Paulson Jr emerged from behind closed doors at 12.30 am on Sunday morning, after two days of protracted meetings.

8220;We have made great progress toward a deal, which will work and be effective in the marketplace,8221; Paulson said at a news conference in Statuary Hall in the Capitol.

In the final hours of negotiations, Democratic lawmakers were carrying pages of the bill by hand, back and forth from House Speaker Nancy Pelosi8217;s office, where the Democrats were encamped, to Paulson and other Republicans in the offices of Rep John A Boehner of Ohio, the House minority leader.

At the same time, a series of phone calls was taking place, including conversations between Pelosi and Bush, between Paulson, John McCain and Barack Obama and between the two candidates and top lawmakers.

In announcing a tentative agreement, lawmakers and the administration achieved their goal of sending a reassuring message ahead of Monday8217;s opening of the Asian financial markets. Lawmakers were also anxious to adjourn and return home for the fall campaign season.

Officials said they had agreed to include a proposal by House Republicans for an alternative that gives the Treasury authority to issue Government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.

Public opinion polls show the bailout plan to be deeply unpopular. Conservative Republicans have denounced the plan as an affront to free market capitalism, while some liberal Democrats criticising it as a giveaway to Wall Street.

The centerpiece of the rescue effort is a plan for the Government to purchase up to 700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the economy. It could become the largest Government bailout in the nation8217;s history.

8220;The rescue effort we8217;re negotiating is not aimed at Wall Street, it is aimed at your street,8221; Bush said in his weekly radio address. 8220;There is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled assets.8221;

The ultimate cost of the rescue plan to taxpayers is virtually impossible to know. Because the Government would be purchasing assets of value 8212; potentially worth much more than Government will pay for them 8212; there is even a chance the rescue effort will eventually return a profit.

Now: Obama UP

Barack Obama leads John McCain 49 to 44 in the latest Gallup Poll Daily tracking update

This is one of Obama8217;s best showings since the Republican National Convention, and suggests he had some momentum going into Friday8217;s debate