Still no deal on U.S. bailout

By Mark Egan

NEW YORK (Reuters) - The biggest bank failure in U.S. history and nose-diving banking stocks added pressure on the U.S. Congress to agree this weekend to a $700 billion (380 billion pound) financial bailout to breathe life back into credit markets.

That left the bailout as the contentious issue that dominated barbed early exchanges on Friday night in the first presidential debate between Republican John McCain and Democrat Barack Obama in the run-up to the November 4 election.

A second day of intense negotiations between rancorous Democrats and Republicans failed to reach accord on how to structure a deal allowing the government to buy up toxic mortgages choking credit, but congressional leaders promised to stay all weekend until a compromise was reached.

Talks on Thursday collapsed in acrimony and roiled global markets. But President George W. Bush expressed optimism on Friday that Congress and the White House would come together on the proposal. Still, as U.S. Treasury Secretary Henry Paulson huddled in talks on Capitol Hill, global financial turmoil deepened.

Shortly after U.S. stocks closed higher in hopes of a bailout deal before markets open on Monday morning, U.S. House Speaker Nancy Pelosi promised that Congress would work through the weekend and said progress was being made.

"The markets need a message from us ... that we understand time is important," Pelosi told reporters.

During the debate, Obama said America's biggest economic crisis since the Great Depression of the 1930s was the "final verdict on eight years of failed economic policy promoted by (President) George Bush and supported by Senator McCain."

Obama said he was "optimistic" a deal could be reached.