Quick bailout action urged, Senate pushes back

By John Poirier and Glenn Somerville

WASHINGTON (Reuters) - Top U.S. officials pressed Congress on Tuesday to swiftly erect a $700 billion bulwark against the worst financial crisis since the Great Depression but hit opposition from senators who cautioned against a rush to judgment.

"What they have sent us is not acceptable," said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat.

U.S. Treasury Secretary Henry Paulson last week called for the creation of a massive government war chest to take illiquid assets off the books of banks and other firms in the hope of unclogging credit markets choking on mortgage-related debt.

Republicans also criticized the plan, with Sen. Richard Shelby of Alabama pledging not to "rubber-stamp" the proposal.

The tough talk came after a nearly five-hour hearing at which lawmakers demanded that Paulson and Federal Reserve Chairman Ben Bernanke spell out more details about what would be an unprecedented market intervention.

While key senators indicated they planned to carefully examined the Treasury plan and make modification, House of Representatives Speaker Nancy Pelosi, who has vowed to move quickly, said progress was being made.

"We are moving forward," the California Democrat said.

In a rare nod to concerns that had been expressed primarily by Democrats, President George W. Bush said there were many ideas that deserved to be heard on how to structure a taxpayer-funded program to buy up distressed assets from financial firms.

But he told other world leaders at the United Nations that he expected swift action.

"I'm confident we will act in the urgent time frame required," Bush said.

CONGRESS TOLD ECONOMY AT RISK

Paulson and Bernanke both stressed the need to move urgently to prevent financial market distress from widening and taking down the entire U.S. economy.

"I feel a great urgency. I believe it's got to be done this week or before you leave," Paulson told members of the Senate Banking Committee, who are scrambling to get legislation together before their hoped-for adjournment at week's end.

Stock markets worldwide plunged early last week after Lehman Brothers Holdings Inc LEH.N, the parent of a major U.S. investment bank, declared bankruptcy. While news of a massive bailout of the financial system gave stocks a big lift at the end of last week, major indexes have fallen sharply this week on renewed worries about the plan. Near the close of the regular U.S. stock trading session on Tuesday, all three major indexes were down 1 percent or more.

"Financial markets are in a quite fragile condition and I think absent a plan, they will certainly get worse," Bernanke said.