WASHINGTON (Reuters) - The Bush administration tried to tighten the screws on squabbling members of Congress on Friday as an increasingly bitter Washington debate over a $700 billion financial rescue held Wall Street in thrall.
President George W. Bush acknowledged that there were disagreements over the plan, which is aimed at getting bad debts off of banks' books and reviving frozen credit markets that threaten to plunge the U.S. economy into a deep recession. But he said he expected Congress to pass legislation and a White House spokeswoman said it felt like a deal was close.
"There are disagreements over aspects of a rescue plan but there is no disagreement that something substantial must be done," Bush told reporters at the White House.
As stock markets fell over concern that a deal would not come as quickly as expected, Vice President Dick Cheney canceled a trip to New Mexico and Wyoming to help push the legislation through Congress.
Lawmakers began reviewing a 102-page proposal based on a consensus outline hammered out by members of the House and Senate on Thursday, but divisions remained over how best to shield taxpayers from losses that could reach hundreds of billions of dollars.
"Our efforts are toward reaching agreement (so) that we can stabilize the economy and make sure we don't go deeper into recession or even into depression," House of Representatives Majority Leader Steny Hoyer, a Maryland Democrat, told CNBC.
Anger among voters has made the political maneuvering particularly complicated. In addition to the presidential campaign, the entire House of Representatives and one-third of the Senate is up for re-election on November 4.
Some Congressional Republicans, whose party historically advocates less government involvement in business, have objected to what they see as the heavy hand of government interfering in a private-sector problem that ought to involve more of a private-sector solution.
House Republican Leader John Boehner said a large majority of House Republicans may not support the plan as envisioned by the Treasury Department.
Treasury wants authority to buy $700 billion worth of assets that banks are struggling to value, but it has been a tough sell on Main Street, where many taxpayers see it as the government's demand that they pay for mistakes made by wealthy Wall Street executives.
"The legislative process is sometimes not very pretty. But we are going to get a package passed. We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan," Bush said.
Both presidential candidates, Republican Sen. John McCain and Democratic Sen. Barack Obama, left Washington for Mississippi, where the first presidential debate is scheduled for Friday night. McCain had wanted the debate postponed in light of the financial crisis, but agreed to participate.
Stock markets soared on Thursday after Sen. Christopher Dodd, who chairs the Senate Banking Committee, said House and Senate negotiators had reached "fundamental agreement" on a set of principles guiding the bailout plan.
But that consensus crumbled when a group of conservative House Republicans pushed for an alternate plan that would have Washington offer insurance coverage for the roughly half of all mortgage-backed securities that it does not already back.
The Dow Jones industrial average was down slightly in afternoon trading, and prices for U.S. government debt rose on the fresh uncertainty.
"We in the Treasury market are still eternally mesmerized by the goings-on in Washington -- we want to know what the bailout will look like," said David Ader, head of government bond strategy at RBS Greenwich Capital, in Greenwich, Connecticut.
House Republican Leader Boehner said he had appointed Republican Whip Roy Blunt as his lead negotiator.
The White House said it was willing to give some ground to get a deal done, although it was unlikely to accept the mortgage proposal. "Their concerns are legitimate. Their ideas are good ones. We've been able to accept many of them and we're open to accepting more." Ed Gillespie, a senior adviser to Bush, told reporters at the White House.
Obama said he was "optimistic" that a deal would get done, and Treasury Secretary Henry Paulson had agreed to consider including some of the House Republican proposals in a "menu of options," which helped break a logjam.
McCain's campaign said he would return to Washington immediately after the debate to resume the bailout negotiations. He spent the morning talking to members of the administration and Congress to try to reach agreement.
Democrats accused McCain of making matters worse by jumping off the campaign trail on Thursday to fly to Washington and join the talks.
Senate Majority Leader Harry Reid from Nevada told reporters the process of reaching a bill had been set back by "presidential politics," adding that it was unclear where McCain stood on the issue.