Democrats won a key concession from the White House on the financial bailout plan Wednesday and sought to drastically slash the $700 billion size of the rescue as President Bush readied a prime-time speech in a push to persuade resistant lawmakers to back his proposal to stave off a deepening economic crisis.

Treasury Secretary Henry Paulson agreed to demands from critics in both parties to limit the pay packages of Wall Street executives whose companies would benefit from the proposed bailout.

“The American people are angry about executive compensation and rightfully so,” Paulson told the House Financial Services Committee. “We must find a way to address this in the legislation without undermining the effectiveness of the program.”

The issue has been a much-debated point in the struggle to win congressional approval of the historic rescue of the financial industry, though the “golden parachute” money involved would be relatively insignificant compared with the huge sums being talked about.

At the same time, Democrats were asking the Bush administration to dramatically cut the size of the rescue and then come back to Congress later if they need more.

Under that plan, which was still emerging, Congress would approve a fraction of what Bush is asking for — perhaps $150 billion or $200 billion — to allow the government to begin rescuing tottering financial companies.

House Speaker Nancy Pelosi, D-Calif., has privately suggested the idea to Paulson, according to officials who spoke on condition of anonymity because the negotiations are private.

Sen. Chuck Schumer, D-N.Y., pressed Paulson on the idea Tuesday and was told it would be a “grave mistake.”

The heart of the unprecedented plan, dramatically unveiled less than a week ago, involves the government buying up sour assets of tottering financial firms to keep them from going under and to stave off a potentially severe recession and the accompanying lost jobs and further home foreclosures.

Away from Washington, debate over the bailout became embroiled in presidential politics as Republican presidential nominee John McCain said he was returning to the capital and was asking Democratic rival Barack Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown.

Obama said the debate should go ahead.

McCain said the Bush administration’s plan seemed headed for defeat and a bipartisan solution was urgently needed.

“I do not believe that the plan on the table will pass as it currently stands, and we are running out of time,” he said.

Obama said the two campaigns’ staffs were working on a statement the candidates might make, spelling out major points they believe the rescue legislation must include.

Bush, who says the massive government intervention is needed to stave off economic catastrophe, planned to talk to the American people Wednesday night about how the crisis affects them, said White House press secretary Dana Perino.

Wall Street, down sharply the previous two days, basically marked time, waiting for the next shoe to drop. The Dow Jones industrials declined 29 points.

The crisis is hardly limited to the United States. Federal Reserve Chairman Ben Bernanke, who warned senators on Tuesday that they must act or face recession, was back on Capitol Hill Wednesday saying that global financial markets are under “extraordinary stress.”

Lawmakers in both parties have strenuously objected to the plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on help for beleaguered homeowners.

Paulson, who with Bernanke heard hours of withering criticism at a hearing on Tuesday, met for the second day with House Republicans, some of whom have announced their opposition to any federal bailout of the private financial markets that form the backbone of American capitalism.

Other Republicans appear to be more open to legislation, according to congressional and administration officials, although on different terms than the White House has proposed.

Still, most majority Democrats and minority Republicans say something must be done — and will be soon.

Pelosi met with administration officials and then told reporters, “We’re moving in a productive direction.” She declined to discuss specifics.

She has insisted Republican lawmakers must stand up for their own president’s proposal, but they appear anything but eager to do so.

“It’s a tough sell to most of our members,” said Rep. Tom Davis, R-Va., after a closed-door meeting with Paulson and Bernanke. “It’s a terrible plan, but I haven’t heard anything better.”

Compounding the administration’s challenge, Republicans and Democrats both say Bush has lost credibility, particularly in cases where he argues there will be dire consequences if Congress doesn’t act.

“They sold the war, they sold the stimulus package and some other things. It’s the ’wolf at the door”’ argument, Davis said.

Democrats also have called for greater protection for taxpayers, possibly by requiring that the government receive partial ownership — and a share of future profits — of companies that accept help through the proposed bailout.

Additionally, they want to allow bankruptcy judges to rewrite mortgages to ease the burden on consumers who are facing foreclosure.

Speaking to reporters Wednesday, Obama said the provision was a priority, but one that he’d be willing to sacrifice in the interest of a bipartisan deal.

He said he told Pelosi and Sen. Harry Reid, D-Nev., the majority leader, that the measure “is probably something that we shouldn’t try to do in this piece of legislation.”

Another demand, for provisions that give Congress greater authority over the bailout, have already been accepted in principle.

For their part, some Republicans have called for a suspension of the capital gains tax to free money for investment.