Congressional leaders huddle on bailout deal

By Donna Smith and Tabassum Zakaria

WASHINGTON (Reuters) - Congressional leaders locked themselves behind closed doors on Saturday with an urgent mission to reach a deal on a proposed $700 billion bailout of the financial industry amid the worst financial crisis since the Great Depression.

Pressed to act before Asian markets open on Monday, leaders from the Senate and House of Representatives pledged to hammer out an agreement on buying distressed debt from financial institutions that are staggering under the weight of failed mortgages.

Senate leader Mitch McConnell of Kentucky said "time is not our ally" and set a goal of holding a vote on a Monday.

House Speaker Nancy Pelosi said she hoped a deal would be clinched on Saturday so Congress could act on Sunday or Monday.

But House Republicans expressed reservations about the proposal by President George W. Bush, saying they wanted Wall Street to share more of the cost of cleaning up balance sheets and were less concerned about the deadline of Monday's opening bell.

"We're not moving on any kind of artificial time line. We're moving toward the very best solution in the shortest period of time we can get to the very best solution," said Republican Rep. Roy Blunt of Missouri.

Treasury Secretary Henry Paulson joined the talks as pressure increased to reach a deal following last week's white-knuckle ride on the financial markets.

Big, heavily indebted banks teetered, collapsed or refused to lend money to each other at low rates of interest threatening to grind the economy to a halt, after central banks injected liquidity into the markets to try to get them moving.

Meanwhile, further signs pointed to a recession with unemployment up, orders for durable goods down, and housing starts plunging to 17-year lows.

In the latest chapter in the transformation of Wall Street, regulators seized savings and loan Washington Mutual Inc on Thursday in the biggest bank failure in U.S. history, selling its assets to JPMorgan Chase & Co.

The Capitol Hill talks picked up after negotiators from both chambers, the White House and the Treasury Department worked through the night when much of the country paused to watch Friday's first debate between the presidential candidates, Democrat Barack Obama and Republican John McCain.

"The basic understanding is when we get in that room as principals, we're going to stay there until we reach an agreement or can't reach an agreement -- which hopefully won't happen," said New Hampshire Sen. Judd Gregg, chief negotiator for Senate Republicans.

"We will stay until we've done something that addresses this issue in a very comprehensive and effective way."

Gregg and Blunt were among four "principals" leading the talks along with Democratic Sen. Christopher Dodd of Connecticut and Democratic Rep. Barney Frank of Massachusetts.

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