After a weekend of frenzied negotiations, Hank Paulson, the Treasury secretary, and Nancy Pelosi, the Democratic House speaker, announced early on Sunday a tentative agreement authorising the government to buy up to $700bn of troubled assets from financial institutions.
The deal envisages historic restrictions on executive pay for banks participating in the programme and opens the door for the government to take equity warrants in those institutions.
It came after a warning from Warren Buffett, the billionaire investor, who spoke in person to key legislators and warned them of “the biggest financial meltdown in American history” if they failed to act. Both Republicans and Democrats tried to claim credit for defending the interests of taxpayers and ordinary Americans amid public outrage at the prospect of spending $700bn to bail out Wall Street.