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LIVE: Bush speaks about financial crisis

Despite earlier hints that a bi-partisan deal was at hand to implement the White Houses's $700 billion financial rescue package, US Democratic presidential candidate Barack Obama said no consensus had been reached on "the core concepts of the plan."

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White House and Capitol Hill bi-partisan discussions over a 700billion dollar finance rescue plan hit problems late on Thursday, dashing hopes for a quick recovery of the banking and market sectors.

 

As he emerged from an unprecedented emergency meeting with his rival John McCain and US President George Bush, a grim-looking Barack Obama told reporters that “President Bush and Treasury Secretary Paulson still need some work with certain Republicans that have problems with the core principles of the plan.”

 

“The congress doesn’t really want the plan -- no-one really wants the plan-- but the alternative is too bad to contemplate”, Jan Lambregts of Rabobank global financial markets told Reuters.

 

“A political theatre”

 

US lawmakers braced for a new day of drama after presidential campaign politics intruded into round-the-clock deliberations in congress. Angry Democrats accused Republican presidential hopeful John McCain of sabotaging the deal so as to salvage his electoral chances against Democratic candidate Barack Obama. The Democrat leads polls by a wide margin following growing popular discontent at perceived Republican mishandling of the economy.

 

McCain rushed back to Washington to take part in the crisis talks, putting his campaign on hold, in what Democrats lambasted as a “political theatre”. He also asked that Friday’s first presidential debate at the University of Mississippi be called off, a demand Obama rejected.

 

“John McCain did nothing to help, he only hurt the process”, senate majority leader Harry Reid said after the White House emergency talks convened by President George W. Bush with both presidential candidates and congressional leaders.

 

Earlier Thursday, an optimistic Senate banking committee chairman Christopher Dodd emerged from Capitol Hill talks to announce “a fundamental agreement on a set of principles” between Democrats and Republicans. Overall hopes of clinching a deal before the day was out were high.

 

Later that day, however, hopes for a deal unraveled at the White House talks. “What was supposed to be a spectacular top-level agreement turned out to be a spectacular top-level disagreement”, says Jean-Bernard Cadier, FRANCE 24 international affairs specialist. “Apparently tempers rose, and President George W. Bush could do nothing to appease discussions”, he adds.

 

“A right-wing revolt against big government”

 

At the core of the disagreement lies “a revolt from the right-wing base of the Republican party”, explains Cadier. “They won’t accept the plan for ideological reasons, because they are against big government interventions. Some have even called the plan a ‘socialist intervention’ and refuse it categorically.

 

It is unclear whether John McCain instigated the revolt or whether he is just subjected to its consequences. He insists that that Democrats had been premature in talking up prospects for a deal, given the high level of Republican discontent at the Paulson plan.

 

“Apparently McCain said almost nothing during the entire meeting, and his opinion on the bailout plan remains unclear”, says Cadier, adding that “he will eventually have to clarify his position.”

 

As for President Bush, he appeared very much the lame-duck president, unable to make his own party accept his proposals.

 

Market stress

 

Money markets have stabilized somewhat but lending between banks remained sluggish, and confidence low. The US dollar weakened against the Yen and Swiss Franc, two currencies associated with stability.

 

“What’s really required at the moment is the US congress to step forward and show a united front on the bailout plan. That’s really what will give markets a catalyst for a turnaround”, Commonwealth Securities equities economist Savanth Sebastian told Reuters.

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