"It's only three pages of outline. It gives him dictatorial power with no supervision," Carter said.
Carter told the audience the $700 billion bailout figure amounts to "$10,000 for every family in America."
"I believe that the proposal put forth by Mr. Paulson is extremely faulty," Carter said.
Before a sold-out crowd of enthusiastic supporters and guests, Carter and wife Rosalynn Carter outlined Carter Center initiatives and answered questions at their annual town hall meeting.
Kicking off their "Conversations at The Carter Center" program series, the Carters also talked about the presidential campaign and problems associated with emerging democracies.
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.
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.