Washington Refusing to be pushed, Republicans and Democrats alike rebuffed dire warnings Tuesday from the government's top economic officials of recession, layoffs and foreclosed homes if Congress doesn't quickly approve the administration's emergency $700 billion financial bailout plan.
Congressional leaders still predicted passage - with significant changes - but Wall Street's nerves were hardly soothed. The Dow Jones industrials sank 161 points and now are off more than 500 this week after initially surging on the bailout announcement last week.
Deepening market trouble was just one piece of the economic havoc that Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told senators would ensue if Congress lags in acting on the administration's proposal to rescue tottering financial institutions.
"I share the outrage that people have," Paulson said. "It's embarrassing to look at this. I think it's embarrassing to the United States of America. There is a lot of blame to go around."
But without the bailout plan, Paulson and Bernanke sketched out a dire scenario for senators at a contentious daylong hearing: Neither businesses nor consumers would be able to borrow money, and the world's largest economy would grind to a virtual halt.
In public and in private meetings, both Democrats and Republicans said big changes are needed, presaging a difficult road ahead for the measure.
The legislation the administration is promoting would allow the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies' 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 national economy that is already sputtering.
One Wall Street firm got a boost Tuesday with word that Warren Buffett's Berkshire Hathaway Inc. is investing at least $5 billion in Goldman Sachs. It was a huge vote of confidence for one of the survivors of the credit crisis that felled two of its investment banking peers.
The news sent shares of Goldman Sachs and stock index futures soaring in electronic trading, after the Dow Jones suffered declines.
Democrats were determined to wrest concessions from the administration on domestic spending and middle-class economic aid. And they said Republicans had to share in the politically tricky task of pushing through a financial bailout six weeks before the elections at a time when millions of everyday Americans are economically strapped.
Separately, law enforcement officials said the FBI had begun investigating four institutions whose collapse helped trigger the financial crisis.
The FBI is looking at potential fraud by mortgage giants Fannie Mae and Freddie Mac, Lehman Brothers Holdings Inc. and insurer American International Group Inc., said two officials, speaking on condition of anonymity because of the sensitivity of the investigations. The inquiries, still in preliminary stages, will focus on the financial institutions and the people who ran them, one senior law enforcement official said.