WASHINGTON (AP) – President Bush warned Tuesday that failing to pass a financial rescue plan would bring severe consequences to the U.S. economy. “Congress must act,” he declared in an appeal that both presidential candidates echoed.

Republican John McCain and Democrat Barack Obama separately urged Congress to redouble efforts to get a deal through and both proposed increasing federal deposit insurance to $250,000, as a key part of it.

In brief remarks at the White House, Bush warned that, “if our nation continues on this course, the economic damage will be painful and lasting.”

He said his administration would work with congressional leaders to get the defeated $700 billion relief package back on track. The House voted 228-205 Monday against the bill designed to stabilize a reeling financial system. That triggered the biggest one-day sell-off on Wall Street since the 2001 attacks, as the Dow Jones industrial plummeted by 778 points. Both McCain and Obama called on lawmakers in their parties to stay at work until an acceptable plan is assembled.

Bush noted that the maximum $700 billion in the proposed bailout was huge, but was dwarfed by the $1 trillion in lost wealth that resulted from Monday’s stock-market plunge.

“Because the government would be purchasing troubled assets and selling them once the market recovers,” he said, “it is likely that many of the assets would go up in value over time. Ultimately, we expect that much – if not all – of the tax dollars we invest will be paid back.”

The rescue package and the nation’s faltering economy was also Topic A on the presidential campaign trail as both Republican McCain and Democrat Obama addressed the subject. Both called for raising federal deposit assurance on deposits, savings accounts and bank certificates of deposit from the present $100,000 to $250,000.

“The first thing I would do is say, ‘Let’s not call it a bailout. Let’s call it a rescue,” McCain told CNN. The Arizona Republican said that “Americans are frightened right now” and it is the job of political leaders to give them both an immediate solution and a longer-term approach to the problem.

McCain announced a brief suspension of his campaign last week to return to Washington and become involved in negotiations on the bailout but would not say whether he was contemplating that again. “I will do whatever is necessary” to help, he said.

Top congressional and White House officials were stunned when the House rejected the massive rescue plan, and a host of lawmakers said Tuesday they thought Congress should persevere in its attempt to find a political consensus.

Obama issued a statement Tuesday saying lawmakers should not start from scratch as they weigh their next move.

The Illinois senator said that significantly increasing federal deposit insurance would help small businesses and make the U.S. banking system more secure as well as restore public confidence in the nation’s financial system.

In his comments from the Diplomatic Reception Room of the White House, Bush pointed to Monday’s drop in the Dow Jones industrials.

“The dramatic drop in the stock market that we saw yesterday will have a direct impact on retirement accounts, pension funds and personal savings of millions of our citizens,” he said. “And if our nation continues on this course, the economic damage will be painful and lasting.”

He said he was disappointed by Monday’s House vote but that “this is not the end of the legislative process.”

“I recognize this is a difficult vote for members of Congress,” Bush said. “And I understand that. But the reality is we are in an urgent situation and the consequences will grow worse each day if we do not act.”

He said this was a critical moment for the U.S. economy. “And we need legislation that decisively addresses the troubled assets now clogging the financial system, helps lenders resume the flow of credit to consumers and businesses, and allows the American economy to get moving again.”

Earlier, House Majority Leader Steny Hoyer, D-Md., said “doing nothing is not an option” as lawmakers scrambled to structure a new bailout proposal that would attract reluctant lawmakers and still soothe the unnerved financial markets.

With the House not scheduled to meet again until Thursday, congressional leaders and administration officials promptly sought to assess what types of changes could win over enough votes to guarantee success.

Obama said Tuesday that lawmakers should not start from scratch as they weigh their next move.

The bill’s failure came despite furious personal lobbying by Bush and support from House leaders of both parties. But the legislation was highly unpopular with the public, ideological groups on the left and the right organized against it, and Bush no longer wielded the influence to leverage tough votes. Even pressure in favor of the bill from some of the biggest special interests in Washington, including the U.S. Chamber of Commerce and the National Association of Realtors, could not sway enough votes.

The legislation the administration promoted would have allowed the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believed it would have helped lift a major weight off the already sputtering national economy.

Treasury Secretary Henry Paulson emerged after the vote and warned of a credit crunch that would affect American businesses and said families would find it harder to get student loans and car loans.

“We need to work as quickly as possible,” he said gravely. “We need to get something done.”