WASHINGTON — WASHINGTON - In a roller-coaster day of hopes raised and hopes dashed, efforts to negotiate a compromise on the $700 billion plan for rescuing the nation's financial system bogged down yesterday, with conservative Republicans denouncing the strategy as ill-conceived and Democrats accusing GOP presidential candidate John McCain of encouraging the opposition.
Weary congressional negotiators worked into the night, joined by Treasury Secretary Henry M. Paulson Jr. in an effort to revive or refashion the proposal that President Bush said must be quickly approved by Congress to stave off a potentially "long and deep recession."
They gave up after 10 p.m., more than an hour after the lone House Republican involved, Rep. Spencer Bachus of Alabama, left the room. Democrats blamed the House Republicans for the apparent stalemate. Those conservatives have complained that the plan would be too costly for taxpayers and would be an unacceptable federal intrusion into private business.
Talks were to resume this morning on the effort to bail out failing financial institutions and restart the flow of credit that has begun to starve the national economy.
At midday yesterday, key congressional negotiators had announced agreement in principle on a compromise. But House Republican leaders quickly declared that no deal had been struck.
And Bush's White House summit later in the day, which included congressional leaders of both parties and Democratic presidential challenger Barack Obama as well as McCain, failed to break the apparent deadlock. An atmosphere of optimism faded as the standoff continued.
The presidential candidates declined to speak to reporters.
In the meantime, a group of House Republicans - encouraged by House Minority Leader John A. Boehner of Ohio - put forward a drastically different approach.
Last night, Democrats resumed meeting on possible ways out of the impasse.
"That agreement is obviously no agreement," said Sen. Richard Shelby of Alabama, the banking panel's ranking Republican, after he left the White House. Like many conservatives, especially in the House, Shelby has opposed the rescue effort.
McCain, who has had a sometimes unhappy relationship with House conservatives, was working to get their position heard, his campaign said.
Even before the White House meeting fell apart, Democrats were skeptical about McCain's move.
Rep. Rahm Emanuel, an Illinois Democrat and an Obama ally, criticized McCain's call for the White House meeting, saying it was unneeded because elected officials were already moving toward a deal.
"Even in Washington, it was a rare moment when we were getting things done without politics involved," Emanuel said. "This interjected the presidential campaign into it."
As the White House meeting began, Bush praised the bipartisan spirit and said it demonstrated that officials were taking "this issue very seriously and we know we have to get something as quickly as possible. This meeting is an attempt to move the process forward. My hope is that we can reach an agreement very shortly."
That optimism was shared earlier by congressional negotiators.
"Some of us have been invited to go to the White House today, to try and break a deadlock," Rep. Barney Frank a Massachusetts Democrat and chairman of the House Financial Services Committee, said after a two-hour negotiating session earlier in the day. "I'm glad we'll be able to go and tell 'em that there really is not much of a deadlock to break. But I'm always glad to be able to go the White House."
Frank said the negotiators had agreed to break up the $700 billion into three parts, a concession to balky members of Congress of both parties who objected to approving a blank check. Other compromises included bipartisan oversight and an agreement to protect taxpayer funds.
Both houses' Republican leaders, Boehner and Sen. Mitch McConnell of Kentucky, issued statements saying there was no agreement.
"The question is: Do they have the votes?" asked Rep. John Campbell of California, a conservative who has supported a rescue plan.
In an interview outside the House chamber, he said he was seeing movement among his Republican colleagues. "I think a lot of members recognize the consequences of not acting. ... I think more are ready to vote for it now. I don't know if there is a majority yet," he said.
At issue is a plan devised by Paulson to borrow as much as $700 billion to buy up troubled mortgage-backed securities to get them off the books of financial institutions, allowing those firms to resume their normal roles in the economy.
Paulson, Federal Reserve Chairman Ben S. Bernanke and Bush contend that only by taking such an audacious step can the country put a quick end to the 14-month-old financial crisis and save the economy from a serious recession.
Moreover, they say, if all goes as planned and the financial system stabilizes, the government would get back all or most of its money, although the $700 billion would be in addition to potentially hundreds of billions committed to earlier rescues.
Also at issue were calls for some oversight so that the Treasury secretary couldn't act by unilaterally.
House Speaker Nancy Pelosi said Bush's agreement with Democrats on limiting pay for executives of bailed-out financial institutions and giving taxpayers an equity stake in the companies cleared out a significant logjam in the negotiations.
The Associated Press contributed to this article.
online For developments in efforts to deal with the nation's economic crisis, go to baltimoresun.com