The Bush administration urgently pressed Congress in public and private Tuesday to move quickly on a $700 billion bailout of the financial industry as Democratic and Republican lawmakers vented their anger over a crisis that pushed the nation's economy to the brink.
Stocks rose in the opening hour as Treasury Secretary Henry Paulson went before the Senate Banking Committee to say that quick passage of the administration's plan is "the single most effective thing we can do to help homeowners, the American people and stimulate our economy."
But even before Paulson could speak, lawmakers expressed their unhappiness.
"We all recognize the gravity of the situation," said Sen. Chris Dodd, D-Conn., the committee's chairman. He said a combination of "private greed and public regulatory neglect" had produced an "economic maelstrom."
Sen. Richard C. Shelby of Alabama, the panel's senior Republican, was even more blunt. "I have long opposed government bailouts for individuals and corporate American alike," he said. Seated a few feet away from Paulson and Ben Bernanke, the chairman of the Federal reserve, he added, "We have been given no credible assurances that this plan will work. We could very well send $700 billion, or a trillion, and not resolve the crisis."
Dodd and other key Democrats have been in private negotiations with the administration since the weekend on legislation designed to allow the government to buy bad debts held by banks and other financial institutions. Key details remain unresolved, although the Democratic-controlled Congress is expected to vote in the next several days on a far-reaching measure.
The hearing unfolded as Vice President Dick Cheney and Jim Nussle, the Bush administration's budget director, met privately with House Republicans. Some members of the GOP rank and file have expressed concerns about the bailout proposal, either because they view it as an unwarranted government intrusion into the financial markets, or because the $700 billion price tag gives them pause.
"Just because God created the world in seven days doesn't mean we have to pass this bill in seven days," said Rep. Joe Barton, R-Texas.
Added Rep. Darrell Issa, R-Calif., "I am emphatically against it."
Despite the bipartisan unhappiness, the prospects for legislation seemed strong.
Differences remained, though, including a demand from many Democrats and some Republicans to strip executives at failing financial firms of lucrative "golden parachutes" on their way out the door.
The administration is balking at another key Democratic demand: allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.
The administration's plan is designed to let the government buy bad mortgages and other troubled assets held by endangered banks and financial institutions. Getting those debts off their books should bolster their balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan works, it should help lift a major weight off the sputtering economy.
Buttressing Paulson's comments, Bernanke said in his prepared remarks that action by lawmakers "is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy."
So far this year, a dozen federally insured banks and thrifts have failed, compared with three last year. The country's largest thrift, Washington Mutual Inc., is faltering.
President Bush was in New York, his speech before the United National General assembly crafted to offer assurances to world leaders that the U.S. government has its financial problem under control.
He said he is confident that Congress will pass the necessary legislation to deal with the problem and said he has assured other leaders that the financial package is "a robust plan to deal with serious problems." He said there are ideas about how to change it, but that there is a desire to get a package done quickly.
The U.S. has taken extraordinary measures in recent weeks to prevent a financial calamity, which would have devastating implications for the broader economy. It has, among other things, taken control of mortgage giants Fannie Mae and Freddie Mac, provided an $85 billion emergency loan to insurance colossus American International Group Inc. and temporarily banned short selling of hundreds of financial stocks.
Bernanke and Paulson defended their unprecedented steps - many just in the past few weeks - to stem the crisis. Even so, Bernanke said that "global financial markets remain under extraordinary stress."
In promoting the massive rescue plan, Paulson said the piecemeal approach the government has taken so far was necessary but insufficient.
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil," the Treasury chief said. The root cause goes back to the rotten debts held by financial institutions, which are choking off the flow of lending, a crucial ingredient to the economy's health.
Wall Street has been dramatically reshaped amid all the fallout. The Fed agreed to let Goldman Sachs and Morgan Stanley - the country's last two investment banks - become bank holding companies so that they can take deposits, like a commercial bank, in a bid to survive. Merrill Lynch agreed to be bought by Bank of America. Lehman Brothers sought bankruptcy protection, and Bear Stearns was taken over by JPMorgan Chase.