Edgy investors sweat through government bailout debate

— -- Nail-biting returned to financial markets Wednesday as investors nervously watched legislators debate what kind of federal bailout is needed and what form it might take.

Nail-biting returned to financial markets Wednesday as investors nervously watched legislators debate what kind of federal bailout is needed and what form it might take.

Most corners of the financial markets reflected rising skittishness as investors wondered how long it will take before the financial system gets help. Much of the optimism sparked last week on the anticipation and announcement of the plan has evaporated as the deliberations rage on in Washington.

While stocks and bonds are still performing better than they were last week after the collapse of Lehman Bros., much of the improved psychology is slipping away, as seen in:

•Stocks. The Dow Jones industrial average declined 29 points to 10,825, a significant move, considering more than half the market's gain following the announcement of the plan to fight the crisis is gone. The Dow rose 779 points in two days as details of the plan unfolded last Thursday and Friday, but has since fallen 563 points as Congress debated the plan. "People feel like the plan is going to get delayed … that's the wrong medicine," says Doug Sandler of Riverfront Investment Group.

•Bonds. Investors in the bond markets are getting more jittery again, too. The three-month Treasury bill, a favorite investment among the risk-averse, jumped for the third day in a row and drove the discount rate down to 0.49% from 0.78% Tuesday. Rates banks lend to each other rose as did rates paid by companies, more signs of nervousness. "All this consternation with Congress is making people more edgy," says Marilyn Cohen, president of Envision Capital. "Everybody is getting wigged out."

•Gold. Concern about possible delays in the bailout package sent some investors headed back into another traditional haven: gold. The price of an ounce of gold gained $3.50 to $889. Gold is getting an extra boost because of concern that even if a bailout is approved, inflation will pick up and erode the value of the dollar.