Top Senators Skeptical Of Bailout Plan

Despite Dire Warnings From Fed Chair, Sen. Dodd Says $700 Billion Plan "Not Acceptable"

(CBS/ AP) 
Across the Capitol complex, Vice President Dick Cheney and Jim Nussle, the administration's budget director, met privately with restive House Republicans, some of whom emerged from the session un-persuaded.

"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."

Still, prospects for legislation seemed strong, with lawmakers eager to adjourn this week or next for the elections.

Differences include 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 balked at another key Democratic demand: allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.

Paulson, seated next to Bernanke at the committee hearing, objected strongly when Sen. Chuck Schumer, D-N.Y., asked if $150 billion might be enough to get the program started, with a promise of more to come.

Paulson said that would be a "grave mistake," and would fail to give the markets the confidence they need to rebound.

Paulson repeatedly fielded questions from committee members asking why taxpayers should accept the burdens of a bailout.

"You worry about taxpayers being on the hook?" he replied at one point. "Guess what - they're already on the hook." Paulson suggested that the fallout from the credit crisis would hit everyone's pocketbook unless forceful action was taken. Moreover, a flawed and outdated regulatory system, which didn't catch abuses, needed to be overhauled, he said.

Despite the unresolved issues, President Bush predicted the Democratic-controlled Congress would soon pass a "a robust plan to deal with serious problems." He spoke before the United Nations General Assembly.

In his testimony before the Banking Committee, Paulson told senators 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 unhappiness, criticism of the plan and - in the case of some conservative Republicans - outright opposition.

"This massive bailout is not a solution. It is financial socialism and it's un-American," said Sen. Jim Bunning, R-Ky.

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.