Bailout treated with caution | UK banks could benefit | US critics gloat | Gerard Baker | Message for Darling | Q&A - the bailout

10am (US Eastern) Barack Obama and John McCain expected in Washington to agree bipartisan bailout deal worth $700 billion to shore up the American financial market. Officials suggest that key obstacles have been cleared away, leaving Wall Street energised and the Dow Jones industrial average up 167.26 points.

Midday Nancy Pelosi, Democratic leader of the House of Representatives, informs the media that progress was being made while cross-party talks continued behind closed doors. She said President Bush’s agreement to limit pay for executives and giving taxpayers an equity stake was cause for optimism.

1pm After two hours of negotiations Democratic and Republican senators emerge from talks saying an agreement has been reached in principle. Senator Bob Bennett, a Republican, says: “I now expect that we will indeed have a plan that can pass the House, pass the Senate (and) be signed by the president.” The Dow Jones responds by moving to 302.02 points up on the day.

2pm Conservative rebels in the House of Representatives are reportedly offering an alternate solution to the financial crisis. The new proposal would see tax breaks and a government-backed insurance policy to shore up the toxic American mortgage market instead of exposing the US taxpayer to massive potential losses.

3pm Congressional aides say the tentative agreement reached so far only backs a tiny proportion of the bailout with a proposed $250 billion available to the banks immediately. The Dow Jones plummets – with 144.96 points wiped off the day’s high.

4pm In a small room in the West Wing of the White House an unprecedented meeting is being held between the President and the two men vying for his job. President Bush says: “All of us around the table . . . know we’ve got to get something done as quickly as possible.”

5pm Gordon Brown, offers his support for the rescue package: “We are doing everything in our power to ensure that there is stability,” the Prime Minister says in New York.

6pm The White House meeting ends acrimoniously with no agreement in place. Richard Shelby, the top Republican on the Senate Banking Committee, leaves the summit to say the previously announced agreement “is, obviously, no agreement.”

7pm The largest retail bank failure in American history is confirmed as federal regulators seize Washington Mutual and sell it’s mortgage book to JP Morgan. The bank had come to symbolise the excesses of the mortgage boom.

8pm The Democratic lead negotiator is becoming exasperated. “We were ready to make a deal,” Barney Frank says, as he marches back into the Rules Committee room on the second floor of the Senate to continue negotiations.

9pm After reports that John McCain had decided that the bailout was unacceptable in its existing form, his campaign team releases a statement: “The plan that has been put forth by the administration does not enjoy the confidence of the American people as it will not protect the taxpayers and will sacrifice Main Street in favour of Wall Street.”

10pm Henry Paulson, Treasury Secretary, rushes to Capitol Hill in a desperate bid to revive the deal – reports suggest that he had ended up on bended knee earlier as he urged an agreement. “I didn’t know you were Catholic,” Ms Pelosi replied. “It’s not me blowing this up, it’s the Republicans.”

10.30pm The desperate negotiations come to an end for the day – representatives of all sides agree that talks will continue on Friday but a deal appears no closer. Mr Obama says the delay is “pretty frustrating".

3am Asian markets open and promptly tumble at the prospect of a failed rescue package. The Nikkei 225 falls113 points in Japan and the Shanghai Stock Exchange follows suit.

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