Bush: Bail Out Economy, or Face 'Long and Painful Recession'

Congressional negotiators emerged today and announced they had reached a deal in principal on President Bush's $700 billion proposal to buy up a mountain of Wall Street debt that has threatened to torpedo the U.S. economy.

Led by Sen. Chris Dodd, D-Conn., nine members of the House and Senate announced that the deal was struck on several key items that would form the framework for the agreement the Bush administration has argued was needed immediately.

Dodd told reporters they had reached a" fundamental agreement on a set of principals."

The four Republicans and five Democrats said the package will include an oversight board to monitor the bailout, protection for taxpayers and a cap on the compensation for executives of companies whose debt will be purchased by the federal government.

A source told ABC News that there was a problem resolving the issue of how to help homeowners facing foreclosure. Democrats want to rewrite bankruptcy laws to enable judges to renegotiate mortgages; Republicans do not.

The broad agreement on principals came just a few hours before Bush was to meet at the White House with presidential rivals Barack Obama and John McCain.

The deal is not yet finalized. There are details still to be worked out and the lawmakers said it had to be agreed to by their caucuses and the Treasury Department.

It also came a day after Bush went before the nation to argue for his administration's proposed $700 billion bailout of the financial system, which had been met with skepticism by some in Congress and the American public.

"Our entire economy is in danger," Bush said, urging Congress to take quick action and outlining his rationale for the bailout.

Failing to pass a rescue plan, Bush said, would create the risk of a "long and painful recession" -- meaning more foreclosures, lost jobs, declining home values, business failures, stock losses and difficulty getting loans.

Bush tried to rally support for the negotiations in his address to the nation Wednesday night.

"I'm a strong believer in free enterprise, so my natural instinct is to avoid government intervention," Bush said. "I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course.

"But these are not normal circumstances," he added. "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. The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold."

White House spokeswoman Dana Perino said the president decided to make the 12-minute address because he wanted to tell Americans directly about the severity and stakes of the financial emergency, which she described as a "once-in-a-century crisis in our financial markets."

Bush felt the public case had to be made that the financial crisis is about "Main Street, not Wall Street," and the "costs of not acting are far greater than the costs of acting," a senior White House official told ABC News' George Stephanopoulos.

Bush spoke after Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke continued to press for the administration's plan today before Congress.

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