By John Poirier and Glenn Somerville
WASHINGTON (Reuters) - Top U.S. officials pressed Congress on Tuesday to act swiftly to erect a $700 billion bulwark against the worst financial crisis since the Great Depression, warning delay would put the economy at risk.
In a rare nod to concerns among Democrats on Capitol Hill, President George W. Bush said there were many ideas that deserved to be heard on how to structure a taxpayer-funded program to buy up distressed assets from financial firms.
Treasury Secretary Henry Paulson last week called for the creation of a massive government war chest to take illiquid assets off the books of banks and other firms in the hope of unclogging credit markets choking on mortgage-related debt.
"I feel a great urgency. I believe it's got to be done this week or before you leave," Paulson told members of the Senate Banking Committee, who are scrambling to get legislation together before their hoped-for adjournment at week's end.
Committee leaders, though, said it would be a mistake to rush through legislation to create such a sweeping program.
Democratic Sen. Christopher Dodd of Connecticut, who chairs the committee, said Treasury's proposal "is not acceptable" in its current form and the committee's top Republican, Alabama Sen. Richard Shelby, pledged no "rubber stamp" for the proposal.
Federal Reserve Chairman Ben Bernanke warned of the high economic cost of delay.
"Financial markets are in a quite fragile condition and I think absent a plan, they will certainly get worse," Bernanke told the panel during a nearly five-hour hearing.
Stock markets worldwide plunged early last week after Lehman Brothers Holdings Inc
LEGISLATIVE GIVE AND TAKE
Vice President Dick Cheney went to Capitol Hill to urge Republican members of the House of Representatives to pass bailout legislation quickly, a sign of the administration's worry about risks posed by shaky markets.
Bush told other world leaders at the United Nations he understood the need for swift action.
"I'm confident we will act in the urgent time frame required," the president said.
After a series of emergency actions aimed at bolstering individual financial firms weighed down by a rising tide of U.S. home loan defaults, U.S. authorities say they must now try to save the system as a whole.
Lawmakers have vowed to move without delay and are scrambling to get a bill together by week's end. But they also are insisting on changes to the proposal that the Treasury Department sent to Capitol Hill over the weekend.
Democrats, who control both chambers of Congress, want more taxpayer protections, help for home owners facing foreclosure, limits on compensation for executives of firms offloading bad assets and greater oversight of the program, which would give the Treasury secretary nearly unfettered powers.
Paulson, who was the chairman and CEO of Goldman Sachs before becoming Treasury secretary, indicated he was open to calls for outside oversight.
"We need to have transparency here. We clearly need protections. There has to be oversight and we're going to work with you on that," Paulson said, but added: "We can't get slowed down to the point we can't do the job."
However, he rejected the idea of the government claiming equity stakes as a condition for companies being able to submit their bad assets to the government as a means of protecting taxpayers from the program's high cost.
"If we have companies grant equity stakes, grant options, that would render this ineffective" because it would discourage companies from participating, he said.
CONGRESSIONAL CRITICS
Both Paulson and Bernanke stressed that the final cost of the program was likely to be much lower than its initial $700 billion price tag, since the government would be able to hold the assets until markets recovered.
While many members of Congress have said they agree a bailout must be put in place quickly, not everyone was enamored of the Treasury's lightly sketched proposal.
Sen. Shelby said the plan "only codifies Treasury's ad hoc approach" to long-festering issues that have beset financial markets. He said he feared it would waste taxpayers' money.
But Paulson said the economy was under threat.
"We saw market turmoil reach a new level last week, and spill over into the rest of the economy," he said. "We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil."
(Additional reporting by Mark Felsenthal, Patrick Rucker, David Lawder and Tom Ferraro)
