Bush warns of economic challenges

President George W Bush has warned the US economy continues to face "serious challenges" after signing a $700bn (£394bn) financial sector rescue plan.

The controversial package is aimed at buying up the Wall Street's bad debts in an effort to ease the credit crunch which is crippling the US economy.

The president said it would take "time and determined effort to get through this difficult period".

The US House of Representatives passed the bill by 263 votes to 171 on Friday.

It was the second vote in a week, following the shock rejection of an earlier version of the deal on Monday.

The House adopted the new version of the Emergency Economic Stabilization Act after the Senate added about $100bn (£57bn) in new tax breaks to win Republican votes.

Job losses

The complex process of auctions to buy up the problem assets will be overseen by the US Treasury and is not expected to take place for at least a month.

Despite the adoption of the bill, share prices in New York ended Friday down, as government figures showed US job losses at a five-year high.

Mr Bush welcomed the approval of the bill, which he said was "essential to helping America's economy weather the financial crisis".

The president acknowledged that there were concerns about the government's role in the deal and its cost.

He said he believed in intervention only when it was necessary but that "in this situation, action is clearly necessary".

"Ultimately the cost to taxpayers will be far less than the initial outlay," he said.

Fearing a backlash from furious voters in November's looming congressional elections, politicians were hugely divided on the unpopular bill during the House debate.

Some who had voted "No" on Monday said they were switching because of the improvements to the bill, but many of them still expressed serious reservations.

Others maintained their opposition, saying the bill was still a bail-out benefiting mainly Wall Street.

'Outrage'

Both candidates for the US presidential election in November have welcomed the deal but neither were enthusiastic about the details.

Speaking in Arizona, Republican candidate John McCain said the deal "isn't perfect and it's an outrage that it is even necessary".

But he said the US had to stop damage to its economy caused by "corrupt and incompetent practices on Wall Street and in Washington".

Mr McCain said the deal was a temporary solution and it should not take a crisis for Congress to reach bi-partisan accord.

Democratic candidate Barack Obama said it was important that the Bush administration used the new powers granted by the deal wisely.

"We still have a health care system that's broken, we're still overly reliant on oil from the Middle East and so we've still got these structural problems," he said, on the campaign trail in Pennsylvania.

"The fundamentals of the economy aren't sound and we're going to have to do a lot of work moving forward."

BBC Washington correspondent Rachel Harvey says the focus now shifts back to the US Treasury, which is tasked with using the billions of dollars of taxpayers' money to try to unclog the financial system.

After all the political wrangling to get this plan passed, the question now is whether it will actually work, she says.

US Treasury Secretary Henry Paulson has vowed speedy action to get the rescue package up and operating.

BBC North America business correspondent Greg Wood says it will be several months before anyone can tell whether the plan is working.