The Democratic presidential candidate Barack Obama urged Congress to get back to work today and renegotiate a massive Wall Street bailout package.

The White House hopeful also suggested raising the limit on bank deposits guaranteed by the Federal Government to $250,000 from its current level of $100,000, to help shore up confidence in the financial sector.

In a shock move yesterday, the House of Representatives rejected the $700 billion bailout painstakingly hammered out over the past few days by party leaders and Bush Administration officials allowing the government to buy up bad debt to get the credit market moving again.

The vote prompted one of the worst stock plunges in Wall Street history and left officials scrambling for a way to salvage the deal before the crunch claims more big-name victims and infects the wider economy.

The crisis has become a major issue in the presidential contest after John McCain, the Republican nominee, formally "suspended" campaigning last week to get involved in the details of the bailout. Both candidates are claiming credit for some of the amendments made to it.

In a written statement today, Mr Obama said that if Congress could not get behind a rescue deal it "would be catastrophic for our economy and our families".

He added: "At this moment, when the jobs, retirement savings, and economic security of all Americans hang in the balance, it is imperative that all of us - Democrats and Republicans alike - come together to meet this crisis."

Obama said he did not think starting from scratch with a new Bill would succeed. But he said the deposit insurance proposal might be a way of drawing more interest toward the bill, with lawmakers who rejected it saying the plan does little beyond cleaning up Wall Street’s mess.

"I will be talking to leaders and members of Congress later today to offer this idea and urge them to act without delay to pass a rescue plan," he said.

Meanwhile, stunned congressional leaders and White House officials scrambled to structure a new bailout proposal that would attract reluctant lawmakers and still soothe the unnerved financial markets.

"Doing nothing is not an option,” Steny Hoyer, the Democratic leader in the House, said.

With the House not scheduled to sit again until Thursday, one option is to try to push the legislation through the Senate, which could sent it back to the House, possibly attached to another Bill.

But it is far from clear that those Congressmen and women who rejected the Bill yesterday can be persuaded to change their minds given that many face re-election in only five weeks time and US taxpayers remain sceptical.

“I cannot with good conscience put Nevada’s taxpayers on the hook for the foolish excesses of Wall Street,” said Representative Dean Heller, a Republican. "Congress should pass legislation that protects the taxpayer, assists with bad assets and allows the market to correct itself."

Meanwhile Hank Paulson, the Treasury Secretary and former banker who led the drive for the bailout, gave warning that the credit crunch would affect American businesses and said families would find it harder to get student loans and car loans.

"We need to work as quickly as possible,” he said. "We need to get something done.”

Times Recommends

• 'New York has lost its edge'
• Copenhagen will fail – and quite right too
• More than 17,000 new underwater species found