WASHINGTON – As Treasury Secretary Hank Paulson lamented that the country's current financial crisis was an embarrassment, the White House dispatched Vice President Dick Cheney to Capitol Hill Tuesday morning to help shore up support for the financial bailout of Wall Street.
Cheney and Jim Nussle, the Bush administration's budget director, met privately with House Republicans. Some members of the GOP rank and file have expressed concerns about the bail-out 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.
House conservatives are seething about the "big government" approach that they say President Bush is taking in the financial crisis. They don't like how much power it cedes to the Treasury or the price tag.
"[Cheney] is going to walk into a firing squad. I hope he brought his hunting rifle," an aide to one House conservative told FOX News.
Elsewhere in Congress, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson urged Congress to quickly pass a $700 billion financial bailout, warning that letting problems persist would have dire consequences for the national economy.
Paulson added that it was "imperative" that Congress pass the bailout this week.
"We all recognize the gravity of the situation," said Sen. Chris Dodd, D-Conn., presiding over a congressional hearing on the crisis and the administration's proposed remedy. He said the "economic maelstrom" was caused by a combination of "private greed and public regulatory neglect."
Republican Sen. Jim Bunning of Kentucky also rebuked the Paulson plan.
"I know there are problems in markets ... and I share a lot of same concerns," Bunning said. But the Paulson plan will spend 700 billion taxpayer dollars to prop up and clean up balance sheets of Wall Street. This massive bailout is not a solution, it is a financial socialism, it's un-American."
Dodd and other key lawmakers have been in private negotiations with the administration since the weekend on legislation designed to allow the government to buy bad debts held by banks and other financial institutions. Key details remain unresolved, although the Democratic-controlled Congress is expected to vote in the next several days on a far-reaching measure.
"I understand speed is important," he said. "But I am far more interested in whether or not we get this right. There is no second act to this."
Dodd spoke as Paulson, Bernanke and other top officials listened from a few feet away, ready to publicly plead for swift action.
Meanwhile, the Republican Study Committee has crafted some possible "fixes" to the plan drawn up over the weekend by Paulson.
Among them are a "pay-to-play fee" for institutions involved in the bailout; an on-budget item in annual appropriations bills and an exit strategy so companies won't pin their losses on the Treasury.
The RSC issued a top 10 list late Monday of problems they see with the $700 billion plan aimed to add liquidity to the market so that investment firms don't
Among the problems cited were the additional burden on the national debt, the failure to penalize shareholders and debt holders who "should bear the risk of loss" and the socialization of the formerly free-market system.
"In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee. Shelby called the emerging plan "neither workable nor comprehensive."
In prepared remarks, Paulson said the administration's proposal is the "single most effective thing we can do to help homeowners, the American people and stimulate our economy."
Bernanke said in his prepared remarks that action by lawmakers "is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy."
So far this year, 11 federally insured banks and thrifts have failed, compared with three last year. The country's largest thrift, Washington Mutual Inc., is faltering.
President Bush was in New York, his speech before the United National General assembly crafted to offer assurances to world leaders that the U.S. government has its financial problem under control.
He said he is confident that Congress will pass the necessary legislation to deal with the problem and said he has assured other leaders that the financial package is "a robust plan to deal with serious problems." He said there are ideas about how to change it, but that there is a desire to get a package done quickly.
The plan would enable the government to buy bad mortgages and other troubled assets held by endangered banks and financial institutions. Getting those debts off their books 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.
Congressional leaders and the administration are haggling over details of the rescue plan, including Democrats' demand that executives at failing financial firms that receive the government help can't get "golden parachutes" on their way out the door.
The administration is balking at another key Democratic demand: allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.
The U.S. has taken extraordinary measures in recent weeks to prevent a financial calamity, which would have devastating implications for the broader economy. It has, among other things, taken control of mortgage giants Fannie Mae and Freddie Mac, provided an $85 billion emergency loan to insurance colossus American International Group Inc. and temporarily banned short selling of hundreds of financial stocks.
Bernanke and Paulson defended their unprecedented steps — many just in the past few weeks — to stem the crisis. Even so, Bernanke said that "global financial markets remain under extraordinary stress."
In promoting the massive rescue plan, Paulson said the piecemeal approach the government has taken so far was necessary but insufficient.
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil," the Treasury chief said. The root cause goes back to the rotten debts held by financial institutions, which are choking off the flow of lending, a crucial ingredient to the economy's health.
Wall Street has been dramatically reshaped amid all the fallout. The Fed agreed to let Goldman Sachs and Morgan Stanley — the country's last two investment banks — become bank holding companies so that they can take deposits, like a commercial bank, in a bid to survive. Merrill Lynch agreed to be bought by Bank of America. Lehman Brothers sought bankruptcy protection, and Bear Stearns was taken over by JPMorgan Chase.
Congressional aides said the House could act on a bill Wednesday or Thursday, with the Senate following soon thereafter.
"We have gotten closer," Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman, said late Monday. "We're not there yet."
Frank said he and Paulson had agreed to create a congressional oversight board as part of the bailout and to require that the government come up with a plan to avoid foreclosures on any mortgages it acquires in the rescue. A government official with knowledge of the talks confirmed the administration backs those provisions.
FOX News' Chad Pergram and The Associated Press contributed to this report.