NEW YORK (CNNMoney.com) - Stocks rallied Tuesday afternoon as investors scooped up shares battered in the bloodletting that followed Congress' failure to pass a $700 billion bank rescue plan.

The Dow Jones industrial average added 485 points, about 4.7 percent, recovering some of the record 777 points lost the day before. It was the third-biggest one-day point advance for the indicator in its history.

The Standard & Poor's 500 index rose 5 percent and the Nasdaq composite gained about 5.3 percent.

Stock gains accelerated late in the day after the FDIC chairwoman said she'll seek to boost the limit on protected bank deposits. Such a move would give individuals more protection amid the financial crisis. The inclusion of such a provision in the $700 billion bailout plan might also mollify critics who think the plan is too focused on Wall Street, versus Main Street.
–By CNNMoney.com's Alexandra Twin

From CNN's Paul Courson

WASHINGTON (CNN) - The man who bankrolled most of the "free benefits" that Alaska Sen. Ted Stevens is on trial for allegedly trying to hide took the stand Tuesday, acknowledging his close friendship with the lawmaker even while serving as the government's star witness against him.

Wearing a gray sport coat, Bill Allen did not look toward the defense table as he took the stand. Asked whether he knew Stevens, he said, "Yes, he's right over there," pointing to the expressionless senator.

During his testimony, Allen acknowledged trading Stevens a new Land Rover vehicle he had paid about $44,000 for in exchange for Stevens' 1964 1/2 Mustang plus $5,000.

Asked if he thought it was a fair trade, Allen said, "not really," but testified he entered into the agreement "because I liked Ted.

ISLAMABAD, Pakistan (CNN) - The leader of Pakistan's Taliban, Baitullah Mehsud, is dead from kidney failure, sources tell CNN.

An unnamed Islamabad-based source with connections within the Mehsud tribe in South Waziristan told CNN that Mehsud died around 1 a.m. Wednesday. Military officials in the field also told CNN that Mehsud had died.

Geo Television of Pakistan and other local station reported his death, too. But some reports also had the Taliban denying Mehsud's death.

The Pakistan government blamed Mehsud for the December 27, 2007, assassination of former Prime Minister Benazir Bhutto. Mehsud had denied any involvement.
–From CNN's Zein Basravi

NEW YORK (CNNMoney.com) - The federal agency that guarantees bank deposits is asking Congress for temporary authority to raise the limit on the amount of money it insures for individual bank accounts.

Federal Deposit Insurance Corp. Chairman Shelia Bair put out a statement late Tuesday afternoon asking that Congress allow her agency to increase the $100,000 limit per account that has been in place since 1980.

She did not say what she thinks the new limit should be. FDIC spokesman Andrew Gray said simply, "We'll leave that to Congress." Earlier Tuesday, both presidential nominees - Barack Obama, D-Illinois, and John McCain, R-Arizona - backed increasing the maximum to $250,000.

WASHINGTON (CNN) - Several Democratic House members compiling an alternative to the financial bailout measure defeated Monday said they were pressured to act too quickly.

"The whole bill has been fueled by fear, and hinged on haste," said Lloyd Doggett of Texas at a news conference Tuesday.

"I think every single member of Congress understands the urgency of this matter and we all want to resolve it, but ladies and gents let me be clear, just because we have an urgent situation doesn't mean we don't have to be deliberative," added Elijah Cummings of Maryland.

WASHINGTON (CNN) - The Federal Deposit Insurance Corporation wants a temporary increase in its $100,000 insurance cap, FDIC chairwoman Sheila Bair said Tuesday.

"Unfortunately, there is an increasing crisis of confidence that is feeding unnecessary fear in the marketplace," Bair said. "To address this crisis of confidence, I do believe that it would be helpful for the FDIC to have the temporary ability to raise deposit insurance limits."

WASHINGTON (CNN) - Giving Treasury Secretary Henry Paulson unlimited control over $700 billion to bail out the financial sector is unacceptable, a Democratic congressman said Tuesday, arguing that the Bush administration already has "substantial power" to develop solutions.

"I have very little confidence in Mr. Paulson," Rep. Peter DeFazio, D-Oregon, said at a news conference with several other House members, who want Wall Street, not taxpayers, to bear the burden of the bailout.

He said the crisis can be resolved with market discipline and regulatory functions, which would open up lending opportunities for banks and other institutions.

ISLAMABAD, Pakistan (CNN) - The leader of Pakistan's Taliban, Baitullah Mehsud, is dead from kidney failure, sources tell CNN.

An unnamed Islamabad-based source with connections within the Mehsud tribe in South Waziristan told CNN that Mehsud died around 1 a.m. Wednesday. Military officials in the field confirmed to CNN that Mehsud had died.

Earlier reports said the leader of the Taliban in Pakistan was ill and was expected to die within a day. He is said to have succumbed to kidney failure and was believed to be around 34 years old.

The Pakistan government blamed Mehsud for the December 27, 2007, assassination of former Prime Minister Benazir Bhutto.
–From CNN's Zein Basravi

WASHINGTON (CNN) - The man who bankrolled most of the "free benefits" that Alaska Sen. Ted Stevens is on trial for allegedly trying to hide took the stand Tuesday.

Bill Allen, an Alaska oil industry kingpin, is the state's star witness against the senator. Stevens, the Senate's longest-serving Republican, has pleaded not guilty to a seven-count indictment for filing false statements on mandatory financial disclosure forms.

Prosecutors say the annual forms should have included hundreds of thousands of dollars in gifts from Allen, who founded the Veco Corporation - an oil field contractor and Alaska's biggest employer. The firm was not known for residential construction, but a series of former workers have testified Allen and top aides directly asked them to work on the Stevens family chalet in the ski town of Girdwood outside Anchorage.

–From CNN's Paul Courson

WASHINGTON (CNN) - The servers hosting the Web sites of the House of Representatives and its members have been overwhelmed with millions of e-mails in the past few days, forcing administrators to implement the "digital version of a traffic cop" to handle the overload - for the first time ever.

"This is unprecedented," said Jeff Ventura, communications director for the House's chief administrator.

The tidal waves of e-mails and page views began over the weekend after negotiators announced Sunday that a deal had been reached on legislation to enact a $700 billion bailout of the country's financial system. Legislators said the public could view the agreement at financialservices.house.gov.

"In a short period of time, lots of Web users were rushing to the digital doorway to get a copy of this thing," Ventura told CNN in a phone interview. That resulted in many of them getting a message saying, in effect, "this page does not appear."