The presidential campaigns of John McCain and Barack Obama were in perilous waters yesterday as the candidates joined forces with George Bush in an attempt to persuade Congress that the only way to avert a global economic collapse is to adopt a huge and controversial rescue plan before Monday.
The stand-off over tomorrow night's presidential debate remained unresolved, however. Amid rapidly moving political events both candidates were aggressively jockeying to claim a leadership role. Republican and Democratic members of Congress have balked at the sheer scale of the plan fearing a backlash of hostility from distressed voters who are now expected to pick up the tab for Wall Street's excesses.
Both candidates are committed to getting a rescue package agreed, with conditions, and have heeded Mr Bush's prime-time warning on Wednesday night, that failure to adopt the deal could cause panic across America and melt down the already faltering economy.
"Now is the time to come together, Democrats and Republicans, in a spirit of co-operation on behalf of the American people," Mr Obama said.
He also declared that after the White House summit he intends to fly to Oxford, Mississippi, to await his adversary for tomorrow's presidential debate. It was not clear if Mr McCain would show up, although the non-partisan Commission on Presidential Debates has urged him to.
Mr McCain made the biggest gamble of his political life on Wednesday when he called for the debate to be postponed and also suspended his election campaign. He has cancelled all advertising and appearances while casting himself as a bold and decisive leader by thrusting himself into the heart of delicate negotiations in Congress on the $700bn (£380bn) rescue package.
The risk he has taken is that voters will dismiss his reluctance to debate his adversary as a reckless act of impetuousness. Even as signals emerged from Washington that a deal on the bailout was close, the McCain campaign was not ready to say that Senator McCain would attend the debate after all. "There's no deal until there's a deal. We're optimistic but we want to get this thing done," McCain spokesman Brian Rogers said.
Mr McCain cast his move as a country-first, bipartisan gesture which demonstrated the sort of leadership which is needed in the White House. He has already forced his Democratic opponent to capitulate and fly to Washington to play a direct role in the rescue negotiations.
Mr Obama has sought to insulate himself from any backlash by setting out clear principles for any deal that would protect taxpayer interests. Just 40 days before the election Mr McCain's strategy is high risk, high reward. Coming at a time when the Democrats are reaping rewards from the legacy of economic mismanagement by the Bush administration, he has tried to recast the issue before voters as one of leadership.
But Mr McCain's poll figures are increasingly dire, especially on the issue of economic competence. A Wall Street Journal poll finds that only a third of voters are in favour of the rescue initiative, with a third against and a third unsure.
Senator McCain's poor grasp of economics and his pugnacious style of negotiating also make it difficult for him to earn the trust of the Republican party which he now leads. The former House Speaker Newt Gingrich called the rescue package "a dead loser on election day" and conservatives are aghast at the scope of powers over the economy which are being handed to the Treasury Secretary under the terms of the deal.
Mr McCain returned to Washington saying "time is short and doing nothing is not an option", after being warned by Wall Street executives that the financial crash is turning into a national security crisis.
Mr Obama has allowed the Democratic leadership in Congress to make the running in talks about the rescue package. But he has outlined minimal demands which he believes will make the plan palatable to ordinary voters who object to paying higher taxes for Wall Street's mistakes.
Both candidates are striking populist poses on the campaign trail where they are railing against corporate greed and fraud. But they are also personally embroiled in pushing for a controversial deal that may keep the economy afloat while alienating voters.
And whichever candidate is elected president in November, their hands will be tied by the terms of the deal being struck on behalf of a lame-duck administration.
Explainer: The Federal bailout
What's the problem?
As George Bush memorably put it a few weeks ago, the world's financial system is suffering one hell of a hangover after a record-breaking lending binge. So bad is the hangover that some of the world's most powerful and venerable financial institutions have been destroyed by it, and no one knows who's next. Hence the mood of paranoia; no one much wants to lend to anyone else, and the banks want to lend to each other least of all.
Why does it matter?
When banks stop supplying credit to an economy investment, consumption and the property market soon seize up. That means more unemployment, little growth in wages, falling house prices and general economic misery.
What's the answer?
The Paulson plan hopes to break the vicious cycle and restore confidence. The Chinese might lend our banks some more money, as might the Gulf states and the Russians. Existing shareholders might even be tempted to offer more funds. And governments can nationalise the sickliest cases.
What can go wrong?
The Paulson plan is not a no-cost option. It means a generation of taxpayers having to pay for the mistakes of a few of their fellow citizens. The US economy will grow more slowly, taxes will be higher, and the dollar may collapse. If the plan fails, history suggests it can take decades, or a big war, to restore an economy.
Register for free to continue reading
Registration is a free and easy way to support our truly independent journalism
By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists
Already have an account? sign in
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies