Europe rescues more banks as Bush pushes bailout

Bank rescues spread in Europe yesterday and US President George W. Bush gave assurances that a $700 billion bailout plan for the financial sector was not dead, giving markets around the world a boost.

The US House of Representatives rejected the bailout plan on Monday, sending US stocks to their biggest percentage decline in 20 years.

Mr Bush, Treasury Secretary Henry Paulson and congressional leaders pledged to continue negotiations, but the earliest that Congress could start work would be today.

"There's an overarching belief that at some point this week, whether it's Wednesday or Thursday, we'll get something passed by the House," said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.

Without the bailout plan, which would allow the US Treasury to buy toxic mortgage-related assets from banks, credit markets around the world could remain frozen, which could lead to a recession.

"I assure our citizens and citizens around the world that this is not the end of the legislative process," Mr Bush said before the stock market opened.

The White House said Mr Bush had "constructive" talks with presidential candidates Senator John McCain, a Republican, and Senator Barack Obama, a Democrat, yesterday. Both candidates have urged their fellow members of Congress to pass the bailout package, which has overshadowed their campaign for the November 4 election.

Ireland unveiled a blanket guarantee for savings held by its banks, covering up to €400 billion ($575 billion) in liabilities, sending Irish bank stocks roaring up against a weaker sector trend.

Russia for the second time in a month briefly clamped its stock markets shut after just seconds of trading.

Shares of British bank HBOS Plc fell on fears that Lloyds TSB Group Plc could renegotiate a deal to buy HBOS.

France joined Belgium and Luxembourg in a €6.4 billion lifeline for bank Dexia and said it would come to the aid of savers with new bank measures by the end of the week.

On Monday, US regional bank Wachovia and Dutch banking and insurance group Fortis became the latest banks to succumb to the crisis.

Wall Street stocks rose 2.5 per cent yesterday morning as investors bet that the rescue package would be approved by the US Congress this week. The dollar rose against the yen and oil rebounded.

Leaders are trying to reassure global markets as financial shares reel, threatening the existence of major banks, which have stopped lending to one another despite enormous injections of funds by central banks.

With yesterday's end of the financial quarter, Christian Noyer, a European Central Bank governing council member, sought to reassure investors.

"There is no reason to be frightened and to give in to panic," he said on France's RTL radio. "I don't say there won't be things that will appear in the accounts that are published in the next weeks or months, but there is no drama in front of us."

The defeat of the bailout bill in the US House was driven by a collection of Republicans and Democrats - many of whom are in tight re-election races - who received angry calls and e-mails from constituents upset at the idea of bailing out Wall Street. Republican House members voted against the rescue package by a more than two-and-one margin. A majority of Democrats voted in favour.

The House normally considers spending bills before the Senate does, but some in Congress have said the Senate could take up the Bill today on its return after a holiday for the Jewish New Year. The House returns tomorrow.

Under other scenarios, the Treasury could tweak the existing plan to draw in more House Republicans, or proponents of the plan could aim to sway Republicans who voted against it on Monday.