WASHINGTON — U.S. congressional leaders are seeking to make the biggest financial rescue since the Great Depression easier for voters to stomach by proposing curbs on bankers' salaries and insurances that financial institutions ultimately cover any losses incurred by taxpayers.

Marathon talks in Washington ended Sunday with a compromise between Democrats and Republicans that would make as much as $700-billion (U.S.) available for Treasury Secretary Henry Paulson to purge Wall Street of the toxic assets sucking the life out of credit markets around the world.

The agreement was announced as the credit crisis claimed two big European banks, a reminder of how the negotiations in Washington had import globally.

Governments in Belgium, the Netherlands and Luxembourg agreed to inject €11.2-billion into Fortis to save the banking and insurance company. In Britain, the government said it would nationalize mortgage lender Bradford & Bingley.

Back in Washington, the 110-page legislation completed Sunday is a dramatic evolution from the three-page proposal Mr. Paulson presented congressional leaders a week earlier.

Arguing that time was of the essence, Mr. Paulson, a former investment banker, had wanted virtually unfettered power to spend the $700-billion as he and his officials saw fit.

Facing a voter backlash over what had the look of a bailout for the millionaire bankers, politicians in the Senate and the House of Representatives set conditions on the money the administration said it needed to reverse the credit crisis, including an oversight committee that will include the chairman of the Federal Reserve.

“It is a huge improvement over what Mr. Paulson proposed a week ago,” said Jeffrey Frankel, an economics professor at Harvard University who served in former president Bill Clinton's White House. “It has switched me from being opposed to the legislation to being in favour of the legislation.”

Asian markets reacted to the deal approvingly this morning, with both the Japanese and Singapore indexes opening higher.

While lawmakers and the White House differed over mechanics, they united around the need for a massive government salvage operation after the Treasury's takeover of mortgage giants Fannie Mae and Freddie Mac and the Fed's takeover of insurer American International Group Inc. failed to restore confidence in global credit markets.

The cost of borrowing short-term cash remains stuck at record levels because financial institutions are hoarding cash, unsure they will get it back if they lend it to a bank that is overexposed to the mortgage-backed assets at the heart of the credit crisis.

Major central banks, including the Bank of Canada, have been flushing money markets with tens of billions of dollars in recent weeks to ensure lenders can balance their accounts.

The risk is that the banks that are facing a credit squeeze start to charge more for consumer and business lending, exacerbating the weakest U.S. growth since the 2001 recession. Most economists, including Mr. Frankel, a member of the committee that officially dates U.S. business cycles, say the U.S. economy already is contracting.

“This isn't about a bailout of Wall Street, it's a buy-in, so that we can turn our economy around.” Speaker of the House Nancy Pelosi, a Democrat, said Sunday.

“This is about Main Street,” Judd Gregg, a Republican senator from New Hampshire, told reporters. “This is about the fabric of American life.”

Lawmakers in the House could vote as early as Monday on a package that would give Mr. Paulson $250-billion immediately to begin a fund that would remove bad assets from banks' balance sheets. Mr. Paulson would have to go back to Congress to get the rest of the $700-billion.

The legislation also would:

bar companies that participate in the program from deducting the salary they pay executives above $500,000 (U.S.);

establish an oversight board that, aside from the Fed chairman, would include the head of the Securities and Exchange Commission, the director of the Federal Home Finance Agency and the secretary of housing and urban development;

allow the Treasury to take an ownership stake in companies that use the program;

grant the president authority to recoup losses from the financial industry if the salvage effort results in net losses to taxpayers five years after the plan is enacted.

If the House passes the legislation Monday , the Senate would take up the bill on Wednesday, Senate Majority Leader Harry Reid said Sunday. Provided party leaders can avoid rebellion, the proposal could be law by the end of the week.

“Assuming this holds, it's pretty extraordinary that in 10 days you have gotten bipartisan agreement on a 12-figure bailout package,” said Daniel Drezner, a political science professor at Tufts University and a former economist at the Treasury Department.

There are still questions.

It remains unclear how Mr. Paulson will set a price for the distressed assets he intends to remove from banks' balance sheets, and whether that will be enough to lower the cost of credit.

One of the reasons he proposed $700-billion was to show investors he had all the money he needed to clean up the entire mess. The smaller initial allocation, and the requirement to go back to Congress to get the rest of it, could cause some investors to doubt the plan, Mr. Drezner said.

There's also a risk that the curbs on executive pay will cause talented bankers to flee the industry just when their skill is most needed.

Still, many analysts and investors said the proposal stands a decent chance of ending weeks of financial turmoil.

“It's going to help,” said David Baskin, president of Toronto-based Baskin Financial Services Inc., which manages client assets of about $400-million. “It pumps cash into the system. People will believe banks aren't going to be defaulting based on the value of their assets.”