WASHINGTON, D.C.-Before a committee of senators from both parties, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke tried to explain how the financial markets toppled and why the $700 billion bailout plan would steady them.
"We need to enact this bill quickly and cleanly," said Paulson at the Senate Banking Committee hearing Tuesday morning, reiterating President Bush's call for immediate action.
But before he spoke, senators from both sides of the aisle expressed skepticism.
"The sense of urgency is palpable," said Sen. Evan Bayh (D-Ind.). "Yet we also have to focus on getting it right. Were there no private sector solutions available?"
Under the weight of phone calls from constituents, senators condemned irresponsibility on Wall Street and asked why taxpayers are being asked to pick up the pieces.
"The taxpayers need to understand in no uncertain terms why they're being asked to foot this bill," said Sen. Elizabeth Dole (R-N.C.).
Bernanke explained that the $700 billion bailout was not simply a taxpayer expenditure, but a purchase of assets. If the economy recovers, taxpayers will recover the bailout over time.
The legislation that the Bush administration is promoting would allow the government to buy bad mortgages and other troubled assets held by endangered banks and financial institutions. Getting those debts off their books, according to the plan, should bolster their balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan works, it should help lift a major weight off the sputtering economy.
Sen. Richard C. Shelby of Alabama, the panel's senior Republican, spoke bluntly. "I have long opposed government bailouts for individuals and corporate America alike," he said, seated a few feet away from Paulson and Bernanke. "We have been given no credible assurances that this plan will work. We could very well spend $700 billion, or a trillion, and not resolve the crisis."
Republicans said the sheer size of the bailout would cost each man, woman and child in the United States $2,300.
"This is not something I ever wanted to ask for, but this is better than the alternative," said Paulson.
"We don't want to go in and underwhelm the situation," Bernanke added.
Bernanke said if Congress does not take action on the plan, the unemployment rate would go up, foreclosures will rise, and the gross domestic product will retract. Credit is simply not available now, he said, which Paulson said affects every business in America.
"The taxpayer is already on the hook," Paulson said.
Securities and Exchange Commission Chairman Christopher Cox and Federal Housing Finance Agency Director James Lockhart also appeared before the committee.
As the administration's top economic officials updated Congress Tuesday about the rescue plan, financial markets appeared somewhat more upbeat, with stocks showing a partial rebound from a huge sell-off Monday.
The Senate hearing unfolded as Vice President Dick Cheney and Jim Nussle, the Bush administration's budget director, met privately with restive House Republicans. Some members of the GOP rank and file have expressed concerns about the bailout proposal, either because they view it as an unwarranted government intrusion into the financial markets, or because the $700 billion price tag gives them pause.
The Associated Press contributed to this report.