WASHINGTON (AP) - President Bush readied a prime time speech to the nation and Treasury Secretary Henry Paulson accepted a major change in legislation for a $700 billion bailout of the financial industry on Wednesday as the administration scrambled to prevent further deterioration in the economy.
Republican officials said that Paulson had bowed to demands from critics in both parties to limit the pay packages of executives whose companies benefit from the proposed bailout. They spoke on condition of anonymity because Paulson's decision had not been formally announced.
White House officials said Bush's 9 p.m. EST speech would dwell on the financial crisis.
Press secretary Dana Perino said the president wants to tell the American people how the crisis affects them and help them understand the depth of the problem.
The developments came as the administration sought to overcome obstacles in Congress to speedy enactment of an unprecedented government bailout of the beleaguered financial industry.
Federal Reserve Chairman Ben Bernanke told Congress on Tuesday that failure to act quickly could trigger deepening in the credit crisis that would lead to a recession, with rising unemployment and increased home foreclosures.
Appearing before lawmakers for the second day in a row, he added on Wednesday that global financial markets are under "extraordinary stress."
Paulson, who with Bernanke heard withering criticism of the bailout plan on Tuesday, met for the second consecutive day with House Republicans, some of whom have announced their opposition to any federal bailout of the private financial markets that form the backbone of American capitalism.
Other Republicans appear to be more open to legislation, according to congressional and administration officials, although on different terms than the White House proposed last weekend.
Majority Democrats have also criticized the administration's legislation, demanding major changes. At the same time, they have stressed they stand ready to work with the White House to head off an economic catastrophe.
House Speaker Nancy Pelosi met with administration officials to discuss the legislation, and told reporters later, "we're moving in a productive direction." She declined to discuss specifics.
Amid speculation that votes on any legislation could slip into next week, she said, "We'll finish it when it's ready. I'd rather it be sooner rather than later."
Numerous Democrats have said privately in recent days they are wary of voting for the administration's proposed legislation without significant Republican support.
But so far, there was little evidence of support within the GOP rank and file.
"It's a tough sell to most of our members," said Rep. Tom Davis, R-Virginia, after a closed-door meeting with Paulson and Bernanke. "It's a terrible plan, but I haven't heard anything better."
Compounding the administraiton's challenge, Republicans and Democrats both say Bush has lost credibility, particularly in cases where he argues there will be dire consequences if Congress doesn't act.
"They sold the war, they sold the stimulus package and some other things. It's the 'wolf at the door' " argument, Davis said.
The presidential campaign added yet another layer of complexity.
Some Democrats expressed concern that they would side with an unpopular Presidnet Bush, only to have Republican presidential candidate John McCain oppose the measure and try to ride his opposition to victory over Barack Obama.
So far, neither McCain nor Obama has indicated how they would vote on the measure.
Paulson has been negotiating for days with Democrats over the details of the legislation, and while his acceptance of some limitation on so-called "Golden Parachutes" for departing executives removed one obstacle, others remained.
Democrats have called for greater protection for taxpayers, possibly by requiring that the government receive partial ownership — and a share of future profits — of companies that accept help through the proposed bailout.
Additionally, they want to allow bankruptcy judges to rewrite mortgages to ease the burden on consumers who are facing foreclosure.
Another demand, for provisions that give Congress greater authority over the bailout, have already been accepted in principle.
For their part, some Republicans have called for a suspension of the capital gains tax to free money for investment.
Even some of the supporters of the bailout sounded less than enthusiastic.
"It's not my job to just echo people being mad. I'm going to choose the bad choice over the catastrophic choice," said Sen. Lindsey Graham, R-S.C.
Speaking to South Carolina reporters, he added, "We don't have the luxury of kicking this can down the road like we did with immigration or Social Security and dealing with it another day hoping somebody braver than us will come along and have courage that we can't muster to deal with immigration or social security. This is on our watch."
Reflecting the urgency, Bush scrapped plans to fly from New York, where he addressed the Uninted Nations General Assembly earlier in the week, to a political fundraiser in Florida.
Perino said the speech would last only about 14 minutes or so.