WASHINGTON - US administration officials and lawmakers held urgent negotiations Saturday on an unprecedented 700-billion-dollar plan to rescue the financial sector from the worst crisis since the Great Depression.

 

The plan, sent to Congress late Friday by President George W. Bush's administration, would give Treasury Secretary Henry Paulson sweeping authority over the next two years to buy as much as 700 billion dollars of tainted mortgage-related assets to stem the grave financial crisis, according to a draft of the proposal.

 

"This is a big package because it was a big problem," Bush told reporters Saturday.

 

Speaking after after a week of upheaval in financial markets, Bush defended the proposed bailout and said the government would eventually make back the rescue money.

 

"I will tell our citizens and continue to remind them that the risk of doing nothing far outweighs the risk of the package," Bush said.

 

"And that over time, we're going to get a lot of the money back," he said.

 

The US president said he was initially reluctant to pursue a massive government intervention but changed his mind as the scale of the crisis became clear.

 

"My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became. And so I decided to act and act boldly."

 

He said his administration would work with lawmakers "to get a bill done quickly."

 

The president underscored the urgency of the bailout, which congressional and administration officials -- including Paulson -- planned to hammer out through the weekend.

 

"The government needed to send a clear signal that we understood the instability can ripple throughout and affect the working people and the average family, and we weren't going to let that happen," Bush said.

 

Democratic leaders of Congress signaled they were ready for prompt action but voiced concern about safeguards for taxpayers and vulnerable homeowners.

 

"This is a good foundation of a plan that can stabilize markets quickly," said Senator Charles Schumer of New York.

 

"But it includes no visible protection for taxpayers or homeowners. We look forward to talking to Treasury to see what, if anything, they have in mind in these two areas," Schumer said in a statement.

 

Negotiations on the proposed bailout could be complicated by a tight presidential election race and as Democrats battle to bolster their narrow majority in Congress.

 

The White House bailout plan allows for an increase in the public debt limit, to 11.3 trillion dollars, and grants the Treasury secretary powers to buy, sell and hold residential and commercial mortgages as well as securities based on those mortgages, according to the draft proposal posted on The New York Times' website.

 

The extraordinary authority would expire in two years but would permit the government to hold the assets purchased for as long as the Treasury Department deems it necessary.

 

The rescue calls for the purchase of assets only from US-based firms and grants the Treasury Department legal immunity from any lawsuits as part of the bailout proposal.

 

It remained unclear how the government would manage the assets it buys. But Paulson would have authority to turn to private financial institutions to carry out the operation or create other bodies to purchase mortgage assets and issue debt.

 

The rescue package follows an escalating 14-month-old credit crunch stemming from a meltdown in US home prices after a frenzied boom fueled by easy credit.

 

Despite the details of the bailout released Saturday, uncertainty remained about precisely how the rescue plan would work.

 

Analyst Mary Ann Hurley at DA Davidson & Co. called the plan the "mother of all bailouts" and said it seemed to "establish a toxic debt dumpster to purge the banks of bad debt."

 

"The trillion dollar question (is) how will the government price the toxic debt?" she added. "Will the banks and financial institutions still have to suffer severe losses?"

 

Senate Banking Committee chairman Chris Dodd said earlier lawmakers were shocked into uncharacteristic silence when they were briefed on the catastrophic potential of the meltdown by Paulson and Federal Reserve chief Ben Bernanke on Thursday.

 

"There was dead silence in the room for five to 10 seconds, the oxygen went out of the room, people were stunned by what they heard," Dodd told CNN.

 

Senior Democrats admitted there was little option but to go along with the biggest government bid to buy up bad debts and rescue blitzed financial firms in decades.