Stocks End Lower amid Bailout, Buffett News

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CNBC also reported that the Treasury has requested a $100 billion extension to borrow. These headlines were confirmed by the White House on Reuters. This follows Senator Schumer's earlier optimism that the Senate bill will pass tonight.

Congressional leaders were also considering changing an accounting rule known as "mark to market" that some lawmakers blame for the financial system's volatility, according to the Wall Street Journal. The legislation would back up the SEC, which Tuesday gave companies more leeway to figure out the value of assets for which there are no buyers.

The "mark-to-market" proposal has been met with some criticism on Wall Street. "In our view, the accounting is not the problem: it is reflecting an economic reality that asset values are falling. The real problem was overexposure to certain assets, poor risk management, misunderstood mispriced risks, and lots of leverage. We would prefer the financial statements reflect real economic volatility rather than a false sense of stability," wrote Credit Suisse analyst David Zion in a note Wednesday.

The move to increase deposit-insurance limits, which the White House has raised with industry players, received a boost Tuesday when presidential candidates Sens. John McCain and Barack Obama endorsed the idea. Both candidates planned to return to Washington Wednesday for the possible Senate vote. Sheila Bair, chairwoman of the FDIC, which oversees the program, said she would support temporarily raising the coverage.

Other possible additions to the rescue package: jobless benefits and homeowner tax breaks.

President Bush on signed into law Tuesday a mammoth spending bill to keep the government running until early March, 2009 that includes a $25 billion loan package for troubled automakers. The action came after the Senate over the weekend gave final congressional approval to the more than $630 billion spending bill that was was needed to finance defense, education, farm, health, foreign aid and other government programs after the current fiscal year expired on Sept. 30, according to a Reuters dispatch. The spending legislation allows a ban on offshore drilling to expire on Sept. 30. Democrats had hoped to extend the ban, but did not have the votes to overcome strong opposition from Republicans. Bush said the measures to lift the ban on offshore drilling "will allow us to reduce our dependence on foreign oil."

The bill sets aside $7.5 billion in taxpayer funds needed to guarantee $25 billion in low-interest loans to help General Motors (GM), Ford Motor (F), and Chrysler produce more fuel-efficient cars and trucks. U.S. automakers have said the taxpayer-backed loan package would give them access to capital at a time when credit markets are shut and they are being driven to invest in new technologies to meet tough new federal fuel economy standards.

Relief for the U.S. auto industry can't come too soon. Ford reported a September sales decline much worse than expected at 34% year-over-year. GM reported a far smaller sales decline of 16%. There was surprising weakness at other manufactureres: Toyota (-32%), Nissan (-37%), Honda (-24%), and Hyundai (-25%).

Investors regarded more gloomy economic news Wednesday. The U.S. ISM manufacturing index fell to 43.5 in September, from 49.9 the month before and well below the 49.8 expected by markets. New orders plunged to 38.8 from 48.3, while employment fell to 41.8 from 49.7 in August. New export orders edged down to 52.0 versus 57.0 previously. Prices paid declined to 53.5 from 77.0 in August, well below the 91.5 reading in June.

"The data are worse than expected and will add to recession fears in the market," wrote S&P senior economist Beth Ann Bovino Wednesday.