Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke went before the Senate Banking Committee
to defend the Bush administration's bailout plan in a spirited debate. The two faced strong criticism from both Democrats and Republicans who argued that the program needed more restrictions.
Sen. Richard Shelby of Alabama, the top Republican on the committee, said the government's previous efforts to save mortgage giants Fannie Mae and Freddie Mac, as well Bear Stearns, show the limitations on attempts to fix markets.
"You can't assure us this will work because you thought the other plans would work," Shelby said.
Sen. Jim Bunning, a conservative Republican from Kentucky, said that he could not support the proposal.
"It will not help struggling homeowners pay their mortgages. It will not bring a halt to the slide in home prices," Bunning said. "This massive bailout is not a solution. It's financial socialism and it's un-American."
Lawmakers were also concerned about the program's risk to taxpayers. But Bernanke stressed that most or even all of what the government spends to buy the assets would be recovered when the assets are eventually sold. Drafts of counterproposals emerged
from both chambers, led by Chris Dodd, D-Conn., in the Senate and Barney Frank, D-Mass., in the House. They want the government to get an equity stake in the companies it helps; more assistance for those at risk of foreclosure; more oversight of the program; and curbs on compensation of executives of participating companies.
There was also some good news. After the market close, Goldman Sachs announced that it will raise capital by selling $5 billion of preferred stock
to Warren Buffett's Berkshire Hathaway. NEXT: Wednesday, Sept. 24 - Closer to a deal