As U.S. Economy Tailspins, Lawmakers Inch Closer to $700B Bailout Pact

As federal lawmakers inch toward agreement on an emergency bailout plan for the U.S. economy that could cost taxpayers some $700 billion, government regulators both announced the biggest bank failure ever and offered specifics about the multimillions of dollars that state and local government officials can expect to help struggling neighborhoods get back in the black under legislation enacted earlier.

A group of Republican legislators initially derailed a preliminary agreement yesterday between a bipartisan group of legislators and Bush administration officials concerning a rescue plan proposed by U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. But today the Republican lawmakers agreed to return to the negotiation table, Bloomberg reports.

Meanwhile, key Democrats and President George W. Bush have expressed confidence that agreement will be reached over the weekend, if need be, so that the bailout legislation can be approved by Congress by Monday, reports the Wall Street Journal.

"Also raising the stakes: The demise of Washington Mutual Inc., the largest banking failure in U.S. history, sent a fresh message to Washington of the fragility of the financial system," the WSJ writes.

Share prices of several banks tumbled today, and "the view of many experts was that Congress had better reach a deal before the stock market's opening bell rings on Monday morning or there will be carnage on Wall Street," reports Reuters in an article filed early this evening.

However, the overall stock market closed higher, apparently based on expectations that the bailout legislation will move forward, and U.S. House Speaker Nancy Pelosi says Congress will work through the weekend, the news agency writes. "We will not leave until legislation has passed that will be signed by the president," Pelosi states.

Implementing federal legislation enacted earlier, Steve Preston, the secretary of the U.S. Department of Housing and Urban Development, announced today that a total of $3.92 billion in federal grants is being given to state and local governments to help them purchase and rehabilitate foreclosed homes, reports the New Orleans Times-Picayune.

States will have to present plans about how the Neighborhood Stabilization Program money will be spent, under new rules that are scheduled to be published on Monday, a HUD spokesman said.

Related coverage:

Reuters (analysis): "Congress wants to avoid blame, Great Depression"

London Times: "Renewed hope for bailout deal after George Bush plea"

London Times: "Tempers flare as $700bn US rescue deal stalls"

Boston Globe: "Foreclosure aid comes to Massachusetts"

Atlanta Journal-Constitution: "Atlanta area to get $70 million for foreclosure problems"

Los Angeles Times: "Los Angeles to get $50 million in federal foreclosure relief"

Miami Herald: "Florida to get $541 million in foreclosure funds"