U.S. bailout pressure mounts

By Jason Szep

NEW YORK (Reuters) - Pressure mounted on lawmakers Friday to agree on a $700 billion (380 billion pounds) financial rescue plan after talks at the White House broke down in acrimony and the biggest bank closure in U.S. history roiled global markets.

President George W. Bush said that while there were disagreements on parts of the bailout plan, legislation would be passed by Congress. "We are going to get a package passed," he said in a brief appearance at the White House.

U.S. authorities shut bank Washington Mutual Inc on Thursday, selling its assets to JPMorgan Chase(JPM.N). In Europe, Belgian-Dutch financial group Fortis NV (FOR.BR)(FOR.AS) denied it had a liquidity problem after its shares tumbled for a fifth straight day.

Banks worldwide hoarded cash and demonstrated a growing reluctance to lend, driving rates that institutions charge to each other on loans to a record high in London on mounting uncertainty over what would be the largest financial bailout in U.S. history.

Global money markets dried up, forcing increased injections of cash from central banks as dollar borrowing rates remained high, particularly for three-month money. The market stress was aggravated by the looming quarter-end next week.

"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 Forex in New York.

Fallout from the crisis battered shares of Wachovia Corp WB.N, the sixth-biggest U.S. bank, which fell as much as 26 percent. KeyCorp (KEY.N), a large Midwest bank, slid nearly 7 percent.

Adding to the anxiety, new data showed U.S. economic growth was not as strong as previously thought in the second quarter as consumers boosted spending less vigorously and businesses trimmed investments, a sign confidence was sagging even before market turmoil deepened.