"I am very skeptical of this proposal and extremely frustrated that we find ourselves in this position," said Republican Sen. Elizabeth Dole of North Carolina. She also said the failure of mortgage giants Fannie Mae and Freddie Mac, which required their own rescue plan earlier this month, was a major culprit for the economic meltdown.
"It is infuriating," Dole said of the situation.
The government's plan is to buy debts from financial institutions so they can be in a better position to raise capital and lend people loans.
"We asked for broad-based authorities to use a series of market-based approaches. We'll be dealing with different approaches in different situations," Paulson said.
Democratic Sen. Charles Schumer of New York, said Paulson told Congress "that our American economy's arteries, our financial system, is clogged and if we don't act the patient will surely suffer a heart attack -- maybe next week, maybe in six months, but it will happen."
A group of Democratic and Republican lawmakers are considering adding provisions to the legislation that would limit the use of taxpayer funds for multimillion dollar golden parachutes or bonuses for the executives of Wall Street firms who get rescued by the Treasury and enact authority to allow bankruptcy judges to reduce mortgage payments for borrowers facing foreclosure.
Paulson told the committee that when it comes to obscenely large CEO bonuses, "I share your frustration, I feel your frustration." But he argued that this issue should be dealt with separately from the emergency legislation.
Paulson testified alongside Federal Reserve Chairman Ben Bernanke and other officials, including Securities and Exchange Commission Chairman Chris Cox.
Bernanke also pressed Congress to act quickly.
"Global financial markets remain under extraordinary stress," Bernanke said. "Action by the Congress is required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and our economy."
President Bush, speaking at the United Nations General Assembly in New York before the markets opened, expressed confidence that Congress would agree on a bailout plan and left open the possibility of accepting amendments now being proposed by Democrats.
Bush characterized the administration's bailout plan as "bold" measures to deal with a severe problem.
He expressed optimism about the bailout legislation passing swiftly on Capitol Hill.
"I am confident we will act in the urgent timeline needed," Bush said.
Earlier the president had released a written statement saying that world leaders are questioning him about the economic turmoil "wondering whether or not the United States has the right plan to deal with this economic crisis."
"I've assured them that the plan laid out by Secretary Paulson is a robust plan to deal with a serious problem," Bush wrote, "and I've assured them as well, having spoken to the leaders of Congress from both political parties, there is the desire to get something done quickly."
Congress is hoping to have a vote on the legislation by Friday.