Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke faced bipartisan skepticism as they pushed for quick congressional approval of the administration's $700 billion Wall Street rescue plan.
The two received virtually no unconditional pledges of support at a packed Senate Banking Committee hearing, the first public airing of the plan that the Bush administration crafted last week to contain massive debt and assets problems that threaten to send the U.S. and global economies into a sharp decline. Mr. Paulson told lawmakers it was imperative the package be approved in the next few days to prevent an even more carnage on Wall Street.
But lawmakers made clear they would seek changes to the bare-bones Treasury plan, on such items as oversight and limiting pay for financial executives in firms that benefit from the bailout.
"Speed is important, but I'm far more interested in whether or not we get this right," said committee Chairman Christopher Dodd, Connecticut Democrat. "There is no second act to this. There is no alternative idea out there with resources available if this does not work."
Many Republicans were equally skeptical, arguing the blueprint ceded massive authority to the Treasury Department without any guarantee that it would deliver relief to either Wall Street or Main Street.
"What troubles me most is that we have been given no credible assurances that this plan will work," said Alabama Sen. Richard C. Shelby, ranking Republican on the panel. "We could very well spend $700 billion and not resolve the crisis."
Sen. Jim Bunning, Kentucky Republican, echoed an argument made by many conservative House Republicans, who object to the idea of the taxpayers bailing out private companies.
"This massive bailout is not the solution. It is financial socialism and it is un-American," Mr. Bunninng said.
But with Congress set to adjourn in the next few days, both Mr. Paulson and Mr. Bernanke insisted that time was running out.
"The financial markets are in quite fragile condition and I think that, absent a plan, they will get worse," the Fed chairman warned.
The plan in essence would have the Treasury Department up to $700 billion to buy huge numbers of troubled securities backed by home mortgages now on the books of banks and other financial institutions. The collapsing values of those securities have led to repeated federal bailouts of giant U.S. financial firms in recent months and the refusal of shell shocked banks to make new corporate, home, car and other loans.
Mr. Paulson said he "welcomed" congressional oversight of the bailout effort, but strongly resisted two ideas that have been gaining momentum on Capitol Hill: that lawmakers approve a smaller first "tranche" of money to start the program and that the government buy warrants or shares in the financial firms being bailed out, so that taxpayers would profit if the share prices of the rescued banks rise in the future.
The Treasury secretary said that "punitive" measures like the equity stake idea would undercut the purpose of the bailout by limiting the number of troubled banks that would join the program.
"We need a broad-based group of banks and savings and loans to participate," Mr. Paulson said. Forcing banks to give up shares in order to participate "would make this ineffective."
Sen. Jack Reed, Rhode Island Democrat, argued that demanding a right to buy shares in assisted banks would allow taxpayers to profit down the road if the rescue package works. Lenders who did not want federal help could elect not to participate, he said.
"Right now the price of admission is zero," he said.
Mr. Bernanke conceded that the government will be hard-pressed to accurately price the value of the mortgage-based securities it will be taking off the hands of private lenders. Because there is effectively no market in the securities, Mr. Paulson and Mr. Bernanke said it was impossible to estimate how much of the $700 billion would be needed to purchase the assets, or what the ultimate tab for taxpayers will be.
Mr. Bernanke, who said his e-mail box was overflowing with messages from auction specialists and asset workout experts hoping to help administer the federal program, at one point compared the pricing of the securities the Treasury to the inexact science of pricing art masterpieces.
"It's like an auction at Sotheby's," he said. "Nobody knows what the art is worth until it is sold, and then everybody knows."
He said the government's plan was prevent the dumping of the securities at "fire-sale prices" that would only ravage further the balance sheets of banks, businesses and homeowners. The government could hold onto the bad securities until the market settled down and the housing and credit markets recovered.
While defending the administration's proposal, Mr. Paulson, a former Wall Street titan himself as chief executive officer of Goldman Sachs, repeatedly expressed his personal distaste at having to defend a massive government intervention in the markets. He called the lending abuses and regulatory failures "an embarrassment to the United States of America."
"I'm frustrated," he said. "The taxpayer is already on the hook and is going to suffer the consequences if things don't work the way they should. And so the best protection for the taxpayer is to have this work."