Tag : U
United States - * U.S. stocks close higher on hopes of bailout by Monday
* Wachovia (nyse: WB - news - people ) said in early talks to be bought by Citibank
* WaMu seized in biggest U.S. bank failure; Fortis (other-otc: FORSY.PK - news - people ) slides
* Pelosi says talks back on track, progress made
(Updates with market close, Wachovia deal talk, Pelosi)
By Mark Egan and Jason Szep
NEW YORK (Reuters) - The biggest bank failure in U.S. history andnose diving banking stocks added pressure on the U.S. Congress toagree to a $700 billion financial rescue plan to breath life backinto credit markets.
After days of talks had collapsed in acrimony and roiled globalmarkets, President Bush expressed optimism that Congress and theWhite House would come together on the proposal.
As Republican and Democratic lawmakers clashed over the plan, andas Treasury Secretary Henry Paulson huddled in talks on CapitolHill, global financial turmoil deepened.
Shortly after U.S. stocks closed higher in hopes of a bailout dealbefore markets open on Monday morning, U.S. House Speaker NancyPelosi promised that Congress would work through the weekend andsaid progress was being made.
"The markets need a message from us ... that we understand time isimportant," Pelosi told reporters.
Just before Wall Street trading closed, The New York Times saidWachovia Corp, the No. 6 U.S. bank, was in early talks with Citigroup (nyse: C - news - people ), but no deal may emerge.
Stock in Wachovia, the sixth-largest U.S. bank, tumbled 36 percenton Friday before closing 27 percent lower on the possible deal.
Midwest regional bank National City Corp (nyse: NCC - news - people ) skidded 29 percent and California's Downey Financial Corp (nyse: DSL - news - people ) tumbled almost 48 percent amid a rising tide of homeforeclosures and loan defaults that has spawned the worst financialcrisis since the Great Depression.
In Europe, Belgian-Dutch financial group Fortis NV denied it had aliquidity problem after its shares tumbled more than 20 percent toa 14-year low. Later, Fortis sacked its interim chief executive.
U.S. regulators seized savings and loan Washington Mutual Inc (nyse: WM - news - people ) late Thursday, the biggest ever U.S. bank failure, and sold itsassets to JPMorgan Chase (nyse: JPM - news - people ) & Co.
Banks worldwide hoarded cash and showed a growing reluctance tolend, driving rates that institutions charge each other on loans toa record high in London.
"What you're going to see is the strong stronger, and the weak aregoing to die off," said William Smith, president of Smith AssetManagement in New York.
Global money markets dried up, forcing increased injections of cashfrom central banks. And with no relief in sight, investors flockedto the safety of cash and U.S. government securities.
The view of many experts was that Congress had better reach a dealbefore the stock market's opening bell rings on Monday morning orthere will be carnage on Wall Street.
"Wall Street is banking on a definitive agreement in place beforemarkets open on Monday," said Fred Dickson, director of retailresearch at D.A. Davidson & Co in Lake Oswego, Oregon.
"The plan is crucial to keeping the economy afloat."
Pelosi sought to reassure markets, saying talks were back on track."We will not leave until legislation has passed that will be signedby the president."
The $700 billion bailout, the largest of its kind in U.S. historyand more costly than the Iraq war, aims to remove soured assetsfrom the books of fragile banks and revive frozen credit markets.The value of the assets, mostly mortgage-related, tumbled as theU.S. housing market slumped.
Even with a deal, the U.S. economy faces serious problems --sluggish growth and rapidly falling home prices.
Further U.S. interest rate cuts may not help, said James Bullard,the president of the St. Louis Federal Reserve Bank. "Theconsequences of this turmoil on real economic performance entailclear downside risk," he said.
Adding to the anxiety, reports showed U.S. economic growth wasweakening and consumer confidence diving.
Citing the crisis, Europe's biggest bank, HSBC Holdings Plc (nyse: HBC - news - people ) , said it was cutting 1,100 jobs, adding to more than 80,000 joblosses across the banking landscape in the past 18 months.
Friday's U.S. stock gains came at the end of a week which was stillthe worst for the benchmark S&P 500 since May.
"The markets are just caught like a deer in the headlights,watching Washington, trying to figure out what the next step is,"said Boris Schlossberg, director of currency research at GFT Forexin New York.
The crisis reverberated in the world's ports as banks ceasedlending, leaving some cargo stranded on docks and slowing trade,the top executive of a Greek shipping company Excel Maritime Carriers Ltd (nyse: EXM - news - people ) said.
Gold prices rose as investors sought safety in bullion . Theprecious metal is up about 20 percent since Sept. 11, wheninvestment banking titan Lehman Brothers Holdings Inc (nyse: LEH - news - people )'s stock price collapsed, raising questions about the globalbanking system.

QUESTIONS SURROUND BAILOUT
Hopes for a speedy deal on the plan, crafted by Paulson and FederalReserve Chairman Ben Bernanke, had faded after a group ofconservative Republican lawmakers proposed a radical alternativethat provides for no government money up front.
House Minority Leader John Boehner said a majority of his fellowRepublicans may not go along with a bipartisan proposal favored byDemocrats unless their alternative is given serious consideration.
The conservatives' plan calls for the government to offer insurancecoverage for the roughly half of all mortgage-backed securitiesthat it does not already insure.
Senate Majority Leader Harry Reid complained that presidentialpolitics had hurt the talks.
Although Democrats control Congress, they are hesitant to pass abailout bill without rank-and-file Republican support because itcould leave their party politically exposed just weeks before theNov. 4 presidential and congressional elections.
The 13-month-old credit crisis came to a head this month after thegovernment's takeover of mortgage companies Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ), the bailout of insurer American International Group Inc (nyse: AIG - news - people ), as well as the bankruptcy filing by Lehman Brothers. (Reportingby Tabassum Zakaria, Nick Carey, Donna Smith, Jeremy Pelofsky,Andrea Hopkins, Juan Lagorio, Jonathan Stempel, Richard Cowan andEllis Mnyandu; Writing by Jason Szep; Editing by John Wallace,Jeffrey Benkoe, Leslie Gevirtz) Copyright 2008 Reuters, Click for Restriction
European Banks: A Better Bet?
Top Story: Wachovia Shakeup