Wall Street rebounded on Tuesday in spite of a worsening crisis of confidence in the global banking system, as leaders of the US Congress moved to try to salvage the Bush administration’s $700bn bail-out plan. A proposal to increase the ceiling for government insurance on bank deposits to $250,000 emerged as the best hope of swaying reluctant Republicans and Democrats who voted against the bill on Monday. The Senate agreed late Tuesday to vote on a revised bail-out measure on Wednesday night reports the Financial Times.

Meanwhile, the Securities and Exchange Commission issued guidance emphasising the flexibility companies have to depart from mark-to-market accounting in situations when markets are illiquid. The SEC move does not suspend mark-to-market rules, but goes some of the way to address criticism of the accounting regime that critics – including many conservative Republicans – say has fuelled a downward spiral in credit markets.

Democratic presidential candidate Barack Obama issued his strongest call yet for the rescue plan, while Republican John McCain also urged Congress to act. Both advocated increasing the deposit insurance ceiling.

Leaders of both parties in Congress promised legislation this week, and hoped a revised bill could be brought before the Senate as early as Wednesday night.

Hopes for an agreement helped the S&P 500 rise 5.3 per cent, recovering more than half its stunning 8.8 per cent decline suffered after Monday’s vote. The Dow Jones Industrial Average was up 4.7 per cent after a slide of 7 per cent on Monday.

Yet overnight interbank lending rates reached painfully high levels in the main currencies, with overnight dollar Libor leaping 4.3 percentage points to a seven-year high of 6.88 per cent.

Read it here: Banking’s crisis of confidence deepens