Bush warns of 'financial panic and recession'

George Bush spoke to the US yesterday in a primetime address to push forward his $700 billion rescue plans for the banking system - inviting presidential candidates Barack Obama and John McCain to the White House to help hammer out a deal.

As the White House pressures lawmakers to accept the proposals, the president explained to voters how the financial crisis had become so bad, the US government was forced to step in with its plan to buy mortgage-backed securities.

"This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America's overall economy," he said.

"The gears of the American financial system began grinding to a halt, with the situation becoming more precarious by the day."

He added: "The government's top economic experts warn that without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold.

"More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically... and ultimately, our country could experience a long and painful recession."

Mr Bush also told viewers he had invited presidential hopefuls McCain and Obama along with key US lawmakers for meetings on finding an agreement on the bail out package.

He concluded: "Together we shall show the world what kind of nation America is. A nation that tackles problems head on... and people of every background can work hard, develop their talents and realise their dreams."

Head of the US Federal Reserve told Congress yesterday, the US was facing its biggest challenge since the end of World War II.

"Global financial markets remain under extraordinary stress," he said.

"Action by Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy."

US lawmakers, however, are keen for certain conditions to be attached any rescue bill, with suggestions including a moratorium on repossessions, and ways for the US taxpayers to make an eventual profit from buying the stricken mortgage-backed securities.

There is also strong opposition to the plan.

On Tuesday, Senator Jim Bunning of Kentucky stated the proposed deal was "not the solution".

"It is financial socialism and it is un-American," he said.