The architects of the Bush administration's massive $700 billion bailout for financial firms went to Capitol Hill today to urge lawmakers to act quickly and pass the bill "cleanly" or risk a recession.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee that failing to pass the administration's big-money bailout for the financial industry would stifle consumer spending, bring more home foreclosures and cause job loss.
However, Democratic and Republican lawmakers expressed outrage that the administration wants them to sign off on what amounts to the cost of two Iraq wars with less than a week of debate.
"What they have sent us is not acceptable," said Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee after the hearing, which lasted almost five hours.
His counterpart, Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee said of the administration's proposed $700 billion bailout plan, "We have got to look at some alternatives."
Paulson told lawmakers Tuesday that his plan to buy up ill-liquid assets from banks and other financial firms "is the single most effective thing we can do to help homeowners, the American people, and stimulate our economy."
He urged Congress to "enact this bill quickly and cleanly, and avoid slowing it down with other provisions that are unrelated or don't have broad support."
He warned that Wall Street's economic situation is so perilous that "if that situation were to persist, it would threaten all parts of our economy."
The markets have gyrated wildly in recent days, first zooming higher and then pulling back Monday when traders became concerned that the bailout would be too expensive and possibly not solve the crisis. Wall Street steadied in early trading Tuesday.
During the hearing, many lawmakers agreed that Congress needed to act quickly but argued they must provide the relevant oversight to make sure taxpayers are protected in case the administration's massive plan fails.
During the hearing, Dodd signaled that the lawmakers understood the need to move quickly on the legislation but expressed reservations with the administration's plan.
"We all recognize the gravity of the situation," said Dodd, who went on to blame a combination of "private greed and public regulatory neglect" for the country's economic crisis.
"I understand speed is important, but I'm far more interested in whether or not we get this right," he said. "There is no second act to this. There is no alternative idea out there with resources available if this does not work."
Despite Paulson's plea for urgency, many lawmakers, including Republicans, expressed unease with the Bush administration's gigantic bailout plan.
"I have long opposed government bailouts for individuals and corporate America alike," Shelby said during the committee's hearing. "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."
"That amounts to $2,300 from every U.S. citizen," said Republican Sen. Mike Enzi of Wyoming. "That money will be handed out to the banks that put us into this mess to begin with."
"This massive bailout is not a solution. It is financial socialism and it's un-American," said Republican Sen. Jim Bunning of Kentucky.