* US Congress fails to find agreement on $700 bln plan
* Biggest US bank failure ever adds to uncertainty
* Money markets tight but relatively stable
By Kevin Plumberg
HONG KONG, Sept 26 (Reuters) - Asian stocks and the U.S.
dollar fell while Treasuries rose on Friday after a $700
billion plan meant to save the financial system stalled and
Washington Mutual Inc collapsed in the biggest ever U.S. bank
failure.
JPMorgan Chase & Co <JPM.N> bought certain Washington
Mutual Inc <WM.N> assets for $1.9 billion after the largest
U.S. savings and loan was closed overnight by a U.S. regulator.
[]
The deal, the latest in the last few weeks that have shaken
up the financial sector, showed how unstable the bank industry
is and why stakes in agreement on the bailout plan are so high.
The U.S. dollar weakened against the yen and Swiss franc,
two currencies associated with stability, as a bipartisan deal
to get what is called the Troubled Assets Relief Program may
have to wait for the weekend.
"We'd have to pinpoint dollar weakness on the TARP plan and
overnight there has been no progress on that. In fact it seems
to be getting bogged down," said Jan Lambregts, head of Asia
research with Rabobank Global Financial Markets in Hong Kong.
"The Congress doesn't really want the plan -- no one really
wants the plan -- but the alternative is too bad to
contemplate."
The dollar was down 0.5 percent against the yen at 105.93
yen <JPY=> and off 0.5 percent against the Swiss franc at
1.0842 francs <CHF=>.
The euro was up 0.3 percent to $1.4653 <EUR=>, about two
cents away from a one-month high hit on Monday.
BONDS UP, STOCKS DOWN
U.S. Treasury debt prices rose, with the most prominent
gains in long-maturity bonds. The 10-year note <US10YT=RR> rose
11/32 in prices, pushing down the yield to 3.82 percent from
3.84 percent late in New York.
The yield on the 3-month bill slipped two basis points to
0.75 percent <US3MT=RR> as investors continued to pile into the
very short-end of the market in search of liquidity and safety.
Money markets have stabilised somewhat but lending between
banks remained sluggish and confidence somewhat low. The spread
of 3-month eurodollar rates over 3-month U.S. Treasury bill
yields, also known as the TED spread <TED>, widened a bit from
late Thursday to 275 basis points, but is lower on the week.
The spread is used as a gauge of risk aversion and
tightness in short-term lending.
Equity markets reflected little conviction ahead of further
developments in Washington.
Japan's Nikkei share average <> was down 0.2 percent
and has traded in a very narrow range this week.
The MSCI index of Asia-Pacific stocks outside of Japan
<.MIAPJ0000PUS> was down 1 percent though volatility has come
way down compared with the last four weeks when stress in money
markets and shockwaves in the financial sector caused investors
to bail out of equities.
South Korea's KOSPI index <> was down 1.5 percent, led
by shares of consumer gadget giant Samsung Electronics
<005930.KS>.
The JPMorgan purchase of WaMu assets cleared away some of
the risk that a failing bank could drag other down with it but
bickering over the financial bailout in Washington only
worsened a sense of dread about the economic outlook.
"What's really required at the moment is U.S. Congress to
step forward and show united front on the bailout plan. That's
really where the uncertainty is at the moment, that's really
what will give markets a catalyst for turnaround," said Savanth
Sebastian, equities economist with Commonwealth Securities in
Sydney.
Gold <XAU=> edged up 0.2 percent to $877.10 an ounce, but
it remained around $30 below a seven-week high hit on Tuesday.
(Editing by Lincoln Feast)
