President Bush addressed the nation on the economic crisis again this morning, saying the $700-billion bailout "is big and substantial because we got a big problem."
But he assured Americans that he and Congressional leaders were working around the clock to come up with a bailout plan for the tanking economy.
"There are disagreements over aspects of the rescue plan," he said, "but there is no disagreement that something substantial must be done. We are going to get a package passed."
As he spoke, the Dow Jones opened with a 120-point drop as efforts to approve a $700 billion financial bailout unraveled and Washington Mutual Inc. was seized by federal regulators in the largest failure ever of a U.S. bank. By mid-morning trading stocks were only down 36 points.
In another dose of unnerving news, the Commerce Department said the spring's economic rebound was less robust than previously estimated.
The market was already tense after the Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion. It was the largest bank by far to fail in the country's history and the latest financial firm to collapse under the weight of enormous bad bets on the mortgage market.
The grim although expected development came as government efforts to avoid an economic meltdown fell into chaos. Confusion reigned on Capitol Hill after Republican lawmakers rejected the emergency financial rescue package over the enormous price tag of the White House-backed proposal, hours after congressional leaders from both parties announced they were nearing agreement on a deal.
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The rescue would remove billions of dollars of bad mortgages and other risky assets off the books of financial firms in a bid to free up lending and revive the economy. In a last-minute shakeup, some Republican lawmakers want an alternative plan under which the government would provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.
