Bailout deal vote, market verdict awaited

By Richard Cowan and Patrick Rucker

WASHINGTON (Reuters) - U.S. lawmakers pushed to finalize a deal to create a $700 billion government fund to buy bad debt and halt the financial crisis as European regulators scrambled to prevent two banks from collapsing.

However, questions abound as to whether the U.S. financial rescue plan, which would use taxpayer funds to buy up toxic mortgage debt, would restore confidence to shaky markets and head off a deeper downturn.

In a sign of the spreading crisis, Belgian-Dutch financial group Fortis faced a takeover or break-up as European Central Bank President Jean-Claude Trichet joined emergency talks with Dutch and Belgian lawmakers.

In London, regulators were preparing to nationalize troubled mortgage lender Bradford & Bingley and were discussing a sale of its savings deposits and branches, people in the banking industry familiar with the matter said.

Meanwhile, congressional leaders from both parties emerged early on Sunday in Washington with a tentative agreement that altered key parts of a Wall Street bailout program initially proposed by the Bush administration.

But rank-and-file lawmakers had not seen the final version of the financial rescue plan and U.S. House of Representatives Republicans cautioned that they would not sign off on the plan until they were certain it would shift some costs to a new form of bad debt insurance funded by Wall Street.

A House debate on the bailout deal was set for Monday, leaving Asian markets to open the week with lingering uncertainty over the final form of a bailout that ranks as the largest in U.S. history.

Both U.S. presidential candidates offered qualified support for the bailout proposal, an issue that threatens to overshadow their campaigns with less than six weeks until the election.

"This is something that all of us will swallow hard and go forward with," Republican John McCain said in an interview with the ABC television network. "The option of doing nothing is simply not an acceptable option."

Democrat Barack Obama said he was likely to back the package. "My inclination is to support it," he told CBS television's "Face the Nation."

"We have to remember how we got here. Not so much to allocate blame, but to understand the choices that will face the next president," he added.

U.S. Treasury Secretary Henry Paulson lobbied hard for the package saying it would keep credit markets from grinding to a halt under the weight of bad mortgage-backed debt.

"I think we're there," Paulson said as he emerged with congressional leaders earlier on Sunday to announce a bargaining breakthrough that produced a framework for legislation.

At one point, lawmakers consulted by phone with billionaire investor Warren Buffett, who last week invested $5 billion in Goldman Sachs and warned that markets were in a "dangerous situation" and on the verge of breaking down.

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