WASHINGTON – Treasury Secretary Henry Paulson said Sunday that the nation's still-frozen credit markets are very fragile and Congress must move quickly to pass a $700 billion bailout package for financial firms.
Paulson said Sunday that the nation's outdated regulatory system for financial market must be overhauled but the first job is to get the most sweeping rescue package since the Great Depression passed by Congress in coming days.
"The credit markets are still very fragile right now and frozen," Paulson said in an interview on NBC's Meet the Press. "We need to deal with this and deal with it quickly."
President Bush, saying he decided to "act, and act boldly," has sent a request to Congress for up to $700 billion to let the federal government to buy up bad mortgages in a move to stem a widespread economic meltdown.
Bush pledged Saturday to work with Congress to quickly pass the rescue package. And he deflected conservative criticism that the government is taking an overbearing approach to stabilizing the financial markets.
"My first instinct was to let the market work," Bush said. But after being briefed by experts on the scope of the problem, he said he realized a "robust and strong" bailout was needed.
“It is a big package because it was a big problem,” Bush said. “The risk of doing nothing far outweighed the risk of the package."
The legislation is part of the largest financial bailout since the Great Depression. Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.
The legislation, a copy of which was obtained by FOX News, grants Treasury Secretary Henry Paulson broad powers to fund or buy mortgage assets from any U.S.-based financial institution. The legislation limits the secretary's buying power to $700 billion, and states that the Treasury's temporary powers would be suspended within two years.
It also would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion — making room for the massive rescue. Under the proposal, any decisions made by the Treasury would not be subject to a lawsuit.
Administration officials and members of Congress were to negotiate throughout the weekend. The White House and congressional leaders hoped the developing legislation could pass as early as next week.
There was some consternation on Capitol Hill Saturday about a lack of depth in the proposal, though. Lawmakers wondered if it would go far enough.
"This is a good foundation of a plan that can stabilize markets quickly. But it includes no visible protection for taxpayers or homeowners. We look forward to talking to Treasury to see what, if anything, they have in mind in these two areas," Democratic New York Sen. Chuck Schumer, chairman of the Joint Economic Committee, said in a statement.
However, even some House conservatives were ready to concede that the package would likely pass through.
Members of the Republican Study Committee, the most conservative bloc in the House, met in a conference call Saturday to discuss the fiscal crisis legislation. Attempting to put up a fight despite the odds, the group plans to put together an alternative financial crisis plan, perhaps as early as Monday, that would call for deep spending cuts and be aimed at helping struggling Americans with energy and mortgages.
Democrats, too, are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures. They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
House Speaker Nancy Pelosi released a statement saying Congress would work hand-in-hand with the administration on this, but suggesting Democrats would seek the other provisions.
"We will strengthen the proposal by ensuring that the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms, and establishing fast-track authority for the Congress to act on responsible regulatory reform," she said.
"We will also seek to protect lower- and middle-income Americans, who need to be protected from the fallout of the ongoing Wall Street crisis, by enacting an economic recovery package that creates jobs and returns growth to our economy."
Asked about the chances of adding such items, Bush sidestepped the question, saying only that now was not the time for political posturing. "The cleaner the better," he said about legislation he hopes Congress sends back to him at the White House.
Signaling what could erupt into a brutal fight with Democrats over add-on spending, House Minority Leader John Boehner said "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."
If passed by Congress, the plan would give the treasury secretary broad power to buy and sell the toxic mortgage-related assets without any additional involvement by lawmakers. The proposal, however, would require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that.
In a briefing to lawmakers Friday, Paulson and Federal Reserve Chairman Ben Bernanke painted a grave picture of an economy on the edge of a major recession and telling them that action was urgent and imperative.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the conference call.
"You give them good cash; they give you the worst of the worst," Sherman said. A critic of the plan, he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping it.
Paulson said the new troubled-asset relief program must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
FOX News' Chad Pergram and The Associated Press contributed to this report.