In his bluntest assessment to date, Senate Banking Committee Chairman Chris Dodd on Tuesday rejected handing the Bush administration a $700 billion blank check to bail out Wall Street.

"The administration needs to know that what they've sent to us is not acceptable," Dodd said after his committee spent more than five hours grilling the Bush administration's top economic advisers on their proposal to use taxpayer funds to purchase bad debt from financial service institutions.

Sen. Richard Shelby, the ranking Republican member of the committee, told reporters after the hearing that Congress must examine alternatives to the Bush proposal before acting.

"The proposals on the table, I have a lot of concern about -- $700 billion is a lot of money to me and to taxpayers," he said.

Still, Dodd said most lawmakers understand the gravity of the situation and are willing to work as quickly as possible toward a carefully designed and thoughtful solution.

"It is extremely important that we work together on this and come up with something that will work," he said.

In conversations over the last three days with 60 to 70 of his colleagues, Dodd said there seems to be a consensus around the need for substantial modifications to the bare-bones proposal that Treasury Secretary Henry Paulson presented to them over the weekend.

In particular, lawmakers want strong oversight, clear protections for taxpayer money that would be allocated

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to the purchase of bad mortgages or mortgage securities from financial firms, and an aggressive program to help homeowners facing foreclosure. And, the plan must include some effort to limit "golden parachutes" for executives at companies aided by the bailout.

Paulson and Federal Reserve Chairman Ben Bernanke spent most of the five-hour hearing defending the need for Congress to swiftly approve their $700 billion bailout plan, even as they acknowledged that they don't know how they will structure the purchase of these bad assets or even determine how much they are worth.

Bernanke warned the panel they risk a recession with higher unemployment and more home foreclosures unless they act on the Bush administration's $700 billion plan to bail out the financial industry.

"The financial markets are quite fragile," Bernanke said. "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP [Gross Domestic Product] will contract, that the economy will just not be able to recover in a normal, healthy way."

That fragility was on display Tuesday on Wall Street, where the major indexes all finished more than 1 percent lower as investors worried about the future of the bailout. The Dow Jones industrial average closed down 161.52 at 10,854.17; the Nasdaq was down 25.65 to 2,153.33 and the Standard and Poor's 500 closed at 1,188.22, down 18.87.

Late in the day Tuesday, Goldman Sachs said Warren Buffett's Berkshire Hathaway Inc. would invest $5 billion through a preferred stock purchase, and could also buy $5 billion in common stock at $115 a share within the next five years.

Goldman Sachs and Morgan Stanley are the only two big-name investment firms still standing following the past months of financial upheaval, which last week brought Lehman Brothers into bankruptcy protection and Merrill Lynch into a forced sale to Bank of America.

Paulson said Congress must act quickly to "avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy."

But, committee member after committee member voiced deep reservations about a plan that they saw variously described as "hastily concocted" and "financial socialism." The proposal, they complained would give massive new authority to the treasury secretary with no oversight and no guarantee of success.

More worrisome was that the plan appears to bail out greedy Wall Street investment bankers whose reckless actions have put the nation's financial system on the brink of failure. Meanwhile, nothing was added to assist homeowners struggling to pay their mortgages.

The sharpest criticism came from Republicans.

"This massive bailout is not the solution, it is financial socialism, and it is un-American," said Sen. Jim Bunning, R-Ky., who argued that it would simply "prop up and clean up" the balance sheets on Wall Street without stabilizing housing prices or helping struggling homeowners pay their mortgages.

Sen. Mel Martinez, R-Fla., said he would not be "stampeded into rubber stamping" Paulson's proposal. In particular, he questioned why taxpayers would not be given some equity in companies that unload their bad debt on the federal government. If those financial institutions rebound, taxpayers should share in the profits.

Paulson said that the proposed "troubled asset relief program" has be to designed for immediate implementation and be sufficiently large to have maximum impact in restoring market confidence.

"The ultimate taxpayer protection will be the market stability provided as we remove the troubled assets from our financial system," he said. "I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets unable to fund everyday needs and economic expansion."

Paulson and Bernanke were asked repeatedly for more details about how they planned to purchase bad debt from financial institutions and what alternatives had been considered. The two said that experts would be hired to develop a variety of methods to purchase assets from financial institutions.