Meanwhile, Wall Street marked a new turning point in its financial meltdown as the Federal Reserve granted permission for the last two major investment banks -- Goldman Sachs and Morgan Stanley -- to become bank holding companies in order to stay in business.
The Fed announced late Sunday that it had approved the request, which will allow Goldman and Morgan Stanley to create commercial banks that can take deposits, bolstering the resources of both institutions but also sharply increasing government regulation over their activities.As lawmakers sorted through the administration's sweeping financial rescue plan, Senate banking committee chief Christopher Dodd voiced confidence in the actions of Treasury Secretary Henry Paulson, saying that "we've got the right man" to deal with the continuing financial sector reshaping, which has seen long-standing titans of Wall Street crumble under bad mortgage bets.
But his counterpart in the House, Rep. Barney Frank, said Paulson "is being entirely unreasonable" to expect that Congress will pass a bill right away without examining the proposal thoroughly and providing for certain additions Democrats view as essential, such as limiting pay for executives of the troubled companies in need of the bailout.
"We want to limit those as a condition for giving them aid," Frank, D-Mass., told ABC's "Good Morning America," according to the AP. "If Secretary Paulson would agree to that, we could move quickly."Paulson took to the the Sunday morning talk shows to urge lawmakers to come together quickly to approve his proposal to raise the national debt ceiling in order to buy up to $700 billion in soured assets, mostly mortgage-related, in an attempt to shore up confidence and return liquidity to the financial sector.
"I hate the fact that we have to do it, but it's better than the alternative. ... This is a humbling, humbling time for the United States of America," Paulson said on Fox News.
The proposal, presented Saturday, would give Treasury officials unfettered authority to buy mortgage debt, taking it off the books of struggling financial institutions world wide, and then reselling it when the market recovers. The Treasury Department would submit semiannual reports to Congress.
Lawmakers who were briefed on the dire situation Thursday seem to be in agreement that urgent action is needed, but while some Republicans balked at the size and scope of the proposal, some Democrats argued that they wanted an aid package to include relief for homeowners facing foreclosure.
"We don't have any choice but to act," Dodd, D- Conn., said on ABC. "But you've got to deal with that problem of foreclosures or this problem persists."
Over the weekend, Frank said the grim Treasury briefings suggested that without rapid action, there was a possibility that Americans would not be able to get car or home loans in the near future.
Speaking on CBS's "Face the Nation," Sen. Richard Shelby, R-Ala., agreed that the package should include relief for homeowners, but warned against too much government involvement in the private sector. CEO compensation should still be set by corporate boards, he said.
"We've been down this road before, through the thrift bailout. [It] cost the American taxpayer billions of dollars," Shelby said. "This is the mother of all bailouts and we don't see the end in it yet."
Additionally, Paulson announced that the U.S. is working with other countries on terms that would cover foreign-owned banks that hold the same toxic securities impacting American entities.
"The American people don't care who owns the financial institution," he said on ABC. "If the financial institution in this country has problems, it'll have the same impact whether it's U.S. - or foreign-owned."
British Prime Minister Gordon Brown said he would travel to New York on Wednesday to discuss what he called the "first crisis of the global economy." Facing a political challenge from the conservative rival party, Brown expressed frustration that Britain "was paying a price" for problems started in the United States.
Estimates put the worst-case $700 billion expenditure on par with what the country has spent thus far in direct costs on the Iraq war, amounting to more than $2,000 for every American citizen, according to the New York Times.
That's on top of the $85 billion for the rescue of insurance giant AIG and $200 billion for mortgage companies Fannie Mae and Freddie Mac.
One of the results of the increased debt and deficit will be further damage to the already weak dollar, according to some currency analysts.
"As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, according to Bloomberg News.
While Democrats seemed resolved to the bailout, some Republicans voiced clear horror over the extent of the government intervention in the private sector. "The free market for all intents and purposes is dead in America," said Sen. Jim Bunning, R-Ken.
At the end of his four network tour of the Sunday morning talk shows, Paulson again called on lawmakers to resist tacking too many provisions on to the bill.
"We want this to be clean and we want this to be quick and it's urgent that we get this done," he said.