This article was reported by David M. Herszenhorn, Carl Hulse and Sheryl Gay Stolberg and written by Ms. Stolberg.
WASHINGTON — The day began with an agreement that Washington hoped would end the financial crisis that has gripped the nation. It dissolved into a verbal brawl in the Cabinet Room of the White House, urgent warnings from the president and pleas from a Treasury secretary who knelt before the House speaker and appealed for her support.
“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.
It was an implosion that spilled out from behind closed doors into public view in a way rarely seen in Washington.
By 10:30 p.m., after another round of talks, Congressional negotiators gave up for the night and said they would try again on Friday. Left uncertain was the fate of the bailout, which the White House says is urgently needed to fix broken financial and credit markets, as well as whether the first presidential debate would go forward as planned Friday night in Mississippi.
When Congressional leaders and Senators John McCain and Barack Obama, the two major party presidential candidates, trooped to the White House on Thursday afternoon, most signs pointed toward a bipartisan agreement on a grand compromise that could be accepted by all sides and signed into law by the weekend. It was intended to pump billions of dollars into the financial system, restoring liquidity and keeping credit flowing to businesses and consumers.
“We’re in a serious economic crisis,” Mr. Bush told reporters as the meeting began shortly before 4 p.m. in the Cabinet Room, adding, “My hope is we can reach an agreement very shortly.”
But once the doors closed, the smooth-talking House Republican leader, John A. Boehner of Ohio, surprised many in the room by declaring that his caucus could not support the plan to allow the government to buy distressed mortgage assets from ailing financial companies.
Mr. Boehner pressed an alternative that involved a smaller role for the government, and Mr. McCain, whose support of the deal is critical if fellow Republicans are to sign on, declined to take a stand.
The talks broke up in angry recriminations, according to accounts provided by a participant and others who were briefed on the session, and were followed by dueling news conferences and interviews rife with partisan finger-pointing.
In the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.
“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”
Mr. Paulson sighed. “I know. I know.”
It was the very outcome the White House had said it intended to avoid, with partisan presidential politics appearing to trample what had been exceedingly delicate Congressional negotiations.
Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate banking committee, denounced the session as “a rescue plan for John McCain,” and proclaimed it a waste of precious hours that could have been spent negotiating.
But a top aide to Mr. Boehner said it was Democrats who had done the political posturing. The aide, Kevin Smith, said Republicans revolted, in part, because they were chafing at what they saw as an attempt by Democrats to jam through an agreement on the bailout early Thursday and deny Mr. McCain an opportunity to participate in the agreement.
The day seemed to hold promise as it began. On Wednesday night, Mr. Bush had delivered a prime-time televised address to the nation, warning that “our country could experience a long and painful recession” if lawmakers did not act quickly to pass a huge Wall Street bailout plan.
After spending Thursday morning behind closed doors, senior lawmakers from both parties emerged shortly before 1 p.m. in the ornate painted corridors on the first floor of the Capitol to herald their agreement on the broad outlines of a deal.
They said the legislation, which would authorize unprecedented government intervention to buy distressed debt from private firms, would include limits on pay packages for executives of some firms that seek assistance and a mechanism for the government to take an equity stake in some of the firms, so taxpayers have a chance to profit if the bailout plan works.
“I now expect we will indeed have a plan that can pass the House, pass the Senate, be signed by the president, and bring a sense of certainty to this crisis that is still roiling in the markets,” said Robert F. Bennett, Republican of Utah, a member of the banking committee.
He made a point of describing that meeting as free of political maneuvering. “It was one of the most productive sessions in that regard that I have participated in since I have been in the Senate,” Mr. Bennett said.
But a few blocks away, a senior House Republican lawmaker was at a luncheon with reporters, saying his caucus would never go along with the deal. This Republican said Representative Eric Cantor of Virginia, the chief deputy whip, was circulating an alternative course that would rely on government-backed insurance, not taxpayer-financed purchase of mortgage assets.
He said the recalcitrant Republicans were calculating that Ms. Pelosi, Democrat of California, would not want to leave her caucus politically exposed in an election season by passing a bailout bill without rank-and-file Republican support.
“You can have all the meetings you want,” this Republican said, referring to the White House session with Mr. Bush, the presidential candidates and Congressional leaders, still hours away. “It comes to the floor and the votes aren’t there. It won’t pass.”
House Republicans have spent days expressing their unease about a huge government intervention, which they regard as a step down the path to socialism.
Mr. Smith, the aide to Mr. Boehner, said the leader had directed a group of Republicans a few days ago to see whether they could come up with alternatives that relied less on tax funds in providing the rescue package; that led to Mr. Cantor’s mortgage-insurance approach. He said Mr. Boehner thought Mr. Cantor’s idea should be taken into consideration in the talks.
At 4 p.m., Mr. Bush convened his meeting at the White House; Mr. McCain had already met with House Republicans to hear their concerns. He later said on ABC that he had known going into the White House that “there never was a deal,” but he kept that sentiment to himself.
The meeting opened with Mr. Paulson, the chief architect of the bailout plan, “giving a status report on the condition of the market,” Tony Fratto, Mr. Bush’s deputy press secretary, said. Mr. Fratto said Mr. Paulson warned in particular of the tightening of credit markets overnight, adding, “that is something very much on his mind.”
Mr. McCain was at one end of the long conference table, Mr. Obama at the other, with the president and senior Congressional leaders between them. Participants said Mr. Obama peppered Mr. Paulson with questions, while Mr. McCain said little. Outside the West Wing, a huge crowd of reporters gathered in the driveway, anxiously awaiting an appearance by either presidential candidate, with expectations running high.
Instead, the first politician to emerge was Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, waving a sheet of paper that he said detailed his own concerns. “The agreement,” Mr. Shelby declared, “is obviously no agreement.”
The House Republicans’ revolt shocked Democrats; the Senate majority leader, Harry Reid of Nevada, said later that he was under the impression that Mr. Boehner had been a strong advocate for moving forward with the Paulson plan.
Representative Barney Frank, the Massachusetts Democrat, who attended the White House meeting, was shocked as well. “We were ready to make a deal,” Mr. Frank said later.
At 8 p.m., an exasperated Mr. Frank, the lead Democratic negotiator, walked back to the Rules Committee room on the second floor of the Senate side of the Capitol, with a pack of reporters on his heels. He was headed for another late-night meeting with Mr. Paulson and many other lawmakers to see whether they could restart the negotiations — and ward off a Friday morning bloodbath in the markets.
Ms. Pelosi told reporters that she was open to considering ideas proposed by the House Republicans. And Mr. McCain and Mr. Obama both said they held out hope that a deal could be reached soon.
At the White House, Mr. Bush was holding fast to the approach that Mr. Paulson has championed.
“In case there’s any confusion,” Mr. Fratto, the deputy press secretary, wrote in an e-mail message. “The president supports the core of Secretary Paulson’s plan.”
Elisabeth Bumiller contributed reporting.