Political partisanship has taken precedence over financial welfare as American lawmakers battled it out in Congress over the Bush administration's controversial $700-billion bailout plan for the beleaguered US financial institutions.  (See: Bush administration announces $500-billion bailout package)

In spite of the country's seniormost finance executives urging for quick Congressional support, the House is yet to agree on a rescue package. Despite a dramatic day of negotiations on Capitol Hill that seemed to promise a deal, leaders broke off talks Thursday night with no agreement and with plans to reconvene this morning, without House Republicans. (See: Bernanke implores Congressional support as $700-billion package faces opposition and Paulson for immediate approval of $700-billion package)

It was the Republicans' surprise championing of a competing plan late yesterday that derailed a carefully crafted compromise previously taking shape. Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them.

"There is no disagreement that something substantial must be done," President Bush said today morning at a brief White House appearance. "The legislative process is sometimes not very pretty, but we are going to get a package passed. We will rise to the occasion, Republicans and Democrats will come together and pass a substantial rescue plan."

The political infighting happened even as Washington Mutual (WaMu) Inc., one of the country's largest banks, collapsed under the weight of its bad bets on the mortgage market. The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion. (See: Federal Reserve seizes WaMu; auctions it to JPMorgan for $1.9 billion)

As if that wasn't enough bad news, the US Commerce Department reported today that the spring rebound the economy enjoyed earlier wasn't as healthy as first thought. The gross domestic product, or GDP, increased at a 2.8 per cent annual rate in the April-June period, not as good as the 3.3 per cent growth rate first reported a month ago.

Financial markets had shot up midday Thursday when leading lawmakers from both parties announced they had reached an agreement in principle after nearly a week of talks on the Bush administration's plan aimed at restoring chaotic financial markets and easing an escalating credit crunch.