* Focus turns to Senate negotiations
* Talks seen continuing into early next week
Congressional negotiations to end a U.S. fiscal crisis that has gripped Washington and spooked financial markets hung by a thread on Saturday after they broke down in the House of Representatives and were in preliminary stages in the Senate.
Senate Majority Leader Harry Reid, a Democrat, laid down tough markers not long after he held an initial session with Senate Republican leader Mitch McConnell, leaving some doubt over whether the two men can reach an agreement to end a partial government shutdown now in its 12th day.
"We need to have compromise but we are not going to do that until the government reopens and we pay our bills," Reid warned.
Immediately after his news conference, Reid and other Senate Democratic leaders rushed to the White House for meetings with President Barack Obama.
Lawmakers are scrambling to put hundreds of thousands of federal employees back to work after their failure to fund the government resulted in a partial shutdown on Oct. 1. They also are staring down a Thursday deadline, when the Treasury Department has warned the United States could default on its debt for the first time in history unless the nation's borrowing limit is raised by then.
Mindful of the debt limit deadline, Reid told reporters he would like to cut a deal "now."
"When I say 'now,' I mean in the next 48 hours," he said.
Senator Dick Durbin, the second-ranking Democrat, said the goal is to reach a bipartisan deal in the Senate before financial markets reopen on Monday.
But the road to a deal appeared difficult, as Reid dismissed Republican Senator Susan Collins' plan to extend the U.S. debt limit until Jan. 31 and to fund the government for another six months. That plan had given some moderate lawmakers hopes for a quick deal, but Democrats said it was saddled with too many objectionable add-ons.
The "preliminary" Reid-McConnell negotiations - at 9 a.m. Saturday in Reid's office - were launched one day after Obama rejected a proposal by House Republicans for a short-term increase in the debt limit to Nov. 22.
Democrats warned that such a small increase in borrowing authority would simply lead to another round of bitter confrontations in Congress and could choke off consumer confidence just as the Christmas buying season would be getting underway.
The flurry of action in the Senate came as House Speaker John Boehner informed his fellow Republicans in a private meeting that the White House had rejected its proposals and there likely would be no more ideas delivered to Obama now that attention was shifting to Senate negotiations.
McConnell maintained a low profile in the Capitol, mostly shunning questions. "We had a good meeting" was all he would say to questions shouted by reporters in a second-floor hallway of the Senate.
While some senators were hopeful now that Reid and McConnell were negotiating, no clear path to a deal was evident.
"Senator Reid and Senator McConnell are talking to each other for the first time and that's good," Republican Senator Roy Blunt said.
Even if senators craft a proposal to end the government shutdown and raise the debt ceiling, at least some Republican support will be needed to pass it in the House. That support is far from guaranteed, especially if the Senate deal does not include any new attacks on Obama's health care reform law.
With every passing day, according to opinion polls, Americans' patience has worn thin with Republicans' tactics that led to the government shutdown, enhancing prospects of a deal.
As Senate leaders tried to craft a deal, many House members headed to their home districts, having been informed that there would be no votes before Monday evening.
"I was optimistic yesterday morning," David French, the chief lobbyist for the National Retail Federation, told Reuters on Saturday. "I'm a little less optimistic today and so are folks I've talked to" on Capitol Hill.
Companies and trade associations have been stepping up their efforts on Capitol Hill as the debt ceiling deadline approaches.
Retailers are particularly concerned about going into a holiday season with debt ceiling jitters hanging over the economy.
Beyond that, French said: "They're concerned about Washington. They're concerned about the level of dysfunction. Our members do not like lurching from crisis to crisis without hope of a resolution."