US politicians grappled overnight to set aside political divisions and the distractions of the White House race to hammer out a $US700 billion ($840bn) Wall Street bailout and reassure jittery markets.
Regrouping after fractious late night talks, the Senate`s Democratic majority leader, Harry Reid, vowed Congress would stay in session, and not adjourn as planned ahead of the November 4 elections, until the unprecedented economic package is agreed.
But stock markets, nervously watching the protracted week-long congressional talks, took another battering as investors remained unconvinced by pledges that a deal was in the works from politicians and President George W. Bush.
Mr Bush urged all sides to work together, after convening talks at the White House yesterday where a tentative deal collapsed in the face of the revolt from his own party in Congress.
"The legislative process is sometimes not very pretty, but we are going to get a package passed. We will rise to the occasion, Republicans and Democrats will come together and pass a substantial rescue plan,`` Mr Bush said in a televised statement.
Senator Reid vowed politicians would work through the weekend to try to put something in place before markets open again on Monday.
"We`re going to get this done and stay in session as long as it takes to get it done. We`ll work with the president, modify his plan to make it better for taxpayers and homeowners,`` he said.
He said there was no reason why a deal could not be reached before Monday, as four politicians - two from each party representing the House and the Senate - were left to handle the nitty-gritty of the negotiations.
Senator Reid blamed the Republicans for delaying tactics.
A deal was almost there yesterday "and then guess who came to town,`` Senator Reid said after Republican White House hopeful John McCain had dashed back to Washington, putting his campaign on hold to take part in crisis talks.
"The insertion of presidential politics has not been helpful. It`s been harmful,`` the Democrat said.
Senior Republicans, however, defended Senator McCain`s role as they presented a rival package designed to take the burden off taxpayers and put it back on private investors.
"I think McCain`s role has been entirely constructive. He`s had suggestions. We`re taking these into account and we are going forward,`` said Senate minority leader Mitch McConnell.
The McCain campaign said there had been no deal until the Arizona senator arrived in Washington to bring politicians together, and that now he was optimistic that there had been significant progress.
"Both parties in both houses of Congress and the administration needed to come together to find a solution that would deserve the trust of the American people,`` the campaign said in a statement.
"And while there were attempts to do that, much of yesterday (Thursday) was spent fighting over who would get the credit for a deal and who would get the blame for failure.``
Senator McCain later headed for the first presidential debate of the US general elections in Oxford, Mississippi against Democratic White House hopeful Barack Obama.
There was more bad news for the economy as the savings and loan giant Washington Mutual collapsed, closed by the Government and sold to JPMorgan Chase for $US1.9 bn, the largest bank failure in US history.
The new Republican plan proposes that the Government set up an expanded insurance system financed by banks to rescue individual home mortgages, so that taxpayers do not have to fund the bailout.
In a letter to Democratic House of Representatives Speaker Nancy Pelosi, House Republican leader John Boehner said the alternative proposal "reflects the core free-market, pro-taxpayer principles of our party".
But Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke have already rejected the insurance plan as unworkable, and say only the Government has the clout to execute the system-wide rescue.
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