WASHINGTON — Warning that the U.S. is "in the midst of a serious financial crisis," President George W. Bush painted a dire portrait of an economy at risk of a "long and painful recession" to convince a skeptical public that his $700 billion rescue plan is essential.
"Our entire economy is in danger," Bush said in a prime time address to the nation Wednesday night, his most stark comments to date on the meltdown consuming world financial markets.
"Without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold," Bush said. "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account."
The president's appeal caps a day of high stakes lobbying to persuade taxpayers and lawmakers in both parties that the bailout needs to be wrapped up quickly to avert economic catastrophe.
Both presidential candidates and Congressional leaders from both parties will meet Bush at the White House Thursday to continue the push for legislation. Top lawmakers say their round-the-clock negotiations are now bearing fruit, with both parties agreeing that changes to the $700 billion proposal are necessary.
"Working in a bipartisan manner, we have made progress," House Speaker Nancy Pelosi, D-Calif., and House Republican Leader John Boehner, R-Ohio, said in a rare joint statement.
Bush said there is "widespread agreement" on the principles of the bailout package, including the need to protect taxpayers and ensure that failed executives don't receive a windfall at taxpayers' expense. He also said the measure should create a bipartisan oversight board.
Congressional leaders are expected to sit down Thursday morning to draft final bipartisan legislation to craft a rescue package for U.S. financial institutions, a Democratic source said Wednesday night.
The source said that no major outstanding issues remained between Democratic and Republican lawmakers standing in the way of a deal.
Lawmakers have been slow to embrace the rescue amid public doubts over its necessity and the perception that it would simply provide a lifeline for Wall Street firms and wealthy bankers. According to the latest Wall Street Journal/NBC News poll, 33% of voters disapprove of the plan, while 31% approve of it and 28% have no opinion.
In that environment, Democrats have pushed for Bush to take his case to the public.
"There are a lot of people out there who still don't understand why it is necessary to do anything," Rep. Mel Watt, D-N.C., said Wednesday at a House Financial Services Committee hearing. "President (Bush) has to tell the American people enough to justify why we are doing anything."
Bush acknowledged Americans' questions, and used much of his remarks to detail the origins of the situation and the consequences of inaction. He said massive money flows into the U.S., easy access to credit, and poor decision-making led to the housing boom and the securitization of mortgages that ultimately went bust.
"The decline in the housing market set off a domino effect across our economy," Bush said.
Under normal circumstances, Bush said he wouldn't endorse government intervention in financial markets.
"These are not normal circumstances," he said. "The market is not functioning properly. There has been a widespread loss of confidence and major sectors of America's financial system are at risk of shutting down." Still, the president's move toward intervention is seen by many as a repudiation of eight years of administration policies that fueled home lending and construction and failed to rein in Fannie Mae and Freddie Mac.
The bailout debate seeped further into the political landscape Wednesday, after Republican presidential nominee Sen. John McCain, R-Ariz., said he would suspend his campaign to focus on the economic crisis. McCain also called for the presidential debate scheduled for Friday to be postponed, an idea his Democratic rival, Sen. Barack Obama, D-Ill., rejected.
Late Wednesday, the McCain and Obama campaigns issued a joint statement calling for bipartisan cooperation.
"The plan that has been submitted to Congress by the Bush Administration is flawed, but the effort to protect the American economy must not fail," the campaigns said.
Top Democrats in the House and Senate hope to craft a single bill to move in concert through both chambers. Senate Banking Chairman Christopher Dodd, D-Conn., met with House Financial Services Chairman Barney Frank, D-Mass., Wednesday to work on the legislation. Time is short, however, with Congress hoping to adjourn soon for the November elections and financial markets desperate for clarity.
Frank, sending a crucial signal to markets, said progress is being made. "I hope we'll have something by tomorrow," Frank said.
Later, Frank complained that the Thursday meeting at the White House would detract from lawmakers' work on the legislation. "I thought we were trying to rescue the economy, not the McCain campaign," Frank said.
The final measure will not look like the brief bill drafted by the Treasury Department last week. Horse trading over a series of Democratic priorities is ongoing, and the administration appear to have made some critical concessions.
Treasury Secretary Henry Paulson conceded Wednesday that executive compensation — a top concern of Democrats — will be dealt with in the bill. He was short on specifics.
"We must find a way to address (executive compensation) in the legislation but without undermining the effectiveness of the legislation," Paulson told the House Financial Services Committee.
Other questions surround the potential for the government to take ownership positions in participating banks and the size of the program, specifically whether the authority to buy bad debt will come in a $700 billion lump sum or smaller increments.
Paulson, in his second straight day of Congressional testimony, said he welcomes oversight over the program, and stressed the plan wouldn't only be available to big institutions but to community banks, savings and loans and credit unions as well. Paulson said he envisions hundreds and even thousands of institutions participating in the programs.
Democrats have been sharply critical of Bush's performance during the crisis, accusing the president of staying behind closed doors while Paulson leads the administration's lobbying effort.
The White House rejects that criticism, pointing to a number of public statements Bush has made over the past week.
Though his speech was bleak at times, the president, who has been lambasted by Democrats for frequently referring to the economy's solid fundamentals, said Americans have reason to be confident over the long term. "Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised," Bush said. "It has unleashed the talents and the productivity and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back."