Dire warnings fail to sway senators on big bailout

WASHINGTON (AP) -- Refusing to be pushed, Republicans and Democrats alike rebuffed dire warnings Tuesday from the government's top economic officials of recession, layoffs and foreclosed homes if Congress doesn't quickly approve the administration's emergency $700 billion financial bailout plan.

 

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Congressional leaders still predicted passage -- with significant changes -- but Wall Street's nerves were hardly soothed. The Dow Jones industrials sank 161 points and now are off more than 500 this week after initially surging on the bailout announcement last week.

 

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"I share the outrage that people have," Paulson said. "It's embarrassing to look at this. I think it's embarrassing to the United States of America. There is a lot of blame to go around."

 

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In public and in private meetings, both Democrats and Republicans said big changes are needed, presaging a difficult road ahead for the measure.

 

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Getting the action right is key, Dodd said: "There is no second act to this." He later spoke disparagingly of the administration's proposal. "What they have sent us is not acceptable," he told reporters.

 

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"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."

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

That would be a "grave mistake," and would fail to give the markets the confidence they needed to rebound, Paulson responded.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who is leading talks with Paulson on the plan, also called phasing in the bailout "highly unlikely."

Paulson was asked repeatedly why taxpayers should accept the burdens of a bailout.

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In contrast, if banks use existing "mark-to-market" rules that require them to value the holdings at what similar securities have recently sold for -- in some cases pennies on the dollar -- it could make the whole bailout futile because it would hurt many banks' balance sheets, causing some to fail. "This creates something of a vicious circle," he said.

Associated Press Writers Julie Hirschfeld Davis and Martin Crutsinger contributed to this report