The Bush administration's $700 billion bailout to shore up the battered US financial system looks set to drag into next week as Washington lawmakers haggle over what taxpayers will get for rescuing Wall Street.
Stocks and the US dollar plummeted as emerging details of the plan left many players skeptical that the rescue, which would give powers to the US Treasury to buy up toxic mortgage-related debt from financial groups, would work.
A day after Wall Street's last two big investment banks, Goldman Sachs and Morgan Stanley, ended the swashbuckling era of American dealmaking by securing Federal Reserve approval to become commercial banks, all eyes shifted to Washington.
US lawmakers and Bush administration officials hammered out the details of a deal they hope will end the worst financial crisis since the Great Depression.
US Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke will begin an intensive two-day round of congressional hearings on Tuesday to hasten approval of the bailout legislation.
The crisis has spilled over into world markets, and the Group of Seven finance ministers and central bank governors promised "heightened close cooperation" to safeguard the international financial system.
Today's market doubts surfaced after the deal last night effectively scrapped the investment bank model synonymous with Wall Street, ensuring that Goldman Sachs Group Inc and Morgan Stanley will avoid the fate of rivals that either collapsed or were taken over in the brutal meltdown of recent weeks.
Morgan Stanley went a step further, striking a deal with Japan's largest bank, Mitsubishi UFJ Financial Group Inc, today to buy up to a 20 per cent stake in the prestigious 73-year-old investment bank, sending Morgan Stanley shares higher before they ended down.