Democrats, who control both chambers, questioned whether there were sufficient protections for homeowners and taxpayers, but said they also recognised the need to act quickly.

With the House of Representatives and the Senate aiming to consider the legislation within days, aides for lawmakers from both parties were expected to huddle through the weekend on Capitol Hill to pore over the hastily drafted plan.

Aimed at shifting hard-to-trade mortgage-related debt off the balance sheets of US banks and other institutions and into a massive government portfolio, the plan would give the US Treasury Department extraordinary powers.

The government could acquire up to US$700 billion in mortgage-related assets from US-headquartered institutions, under the proposed programme. Details on precisely how the purchases would be executed were unclear.

The treasury secretary's decisions on the purchase programme could not be reviewed by any court, according to a copy of the department's draft legislation obtained by Reuters.

To accommodate the programme, the US government's debt limit would rise to US$11.315 trillion from US$10.615 trillion.

Treasury Secretary Henry Paulson 'is in effect becoming the dictator of the American financial system for a few months, subject to congressional oversight,' said Wall Street historian John Steele Gordon, author of a book about the national debt.

Since the crisis began more than a year ago, the Treasury and Federal Reserve have already put nearly US$1 trillion of taxpayer money on the line to help credit flows, while banks have suffered more than US$500 billion of write-downs and loan losses.

The crisis grew more acute this month with government takeovers of mortgage companies Fannie Mae and Freddie Mac; the bankruptcy of Lehman Brothers Holdings Inc; Bank of America Corp's shotgun agreement to buy Merrill Lynch & Co; and a bailout of insurer AIG . This all coming just six months after a government-backed rescue of investment bank Bear Stearns.

Congress weighs plan
Congressional Republicans generally praised the Bush plan and called for its swift enactment, while Democrats said it left key questions unanswered and needed work.

Democrats have said they might try to use the financial bailout legislation to reduce home foreclosures and put some limits on the pay of corporate chief executives.

'Main Street should not have to pay for the sins of Wall Street,' said Montana Democratic Sen Max Baucus, chairman of the tax-focused Senate Finance Committee.

Mr Baucus said the government should 'keep the burden of this bailout off taxpayers, mostly by making reasonable requirements of the companies asking for this emergency help.'

New York Democratic Sen Charles Schumer, chairman of Congress' Joint Economic Committee, said the plan had no visible protection for taxpayers or homeowners, but he emphasised that speed was essential.

'The aim is to get this on the president's desk by Friday,' Mr Schumer told a press conference in New York City.

Senate Republican Leader Mitch McConnell of Kentucky warned 'now is not the time for partisan plans or pet projects.'

President George W. Bush said he initially thought the government could deal with the trouble on Wall Street 'one issue at time,' but the problems were at risk of spreading and required bold action to save jobs and retirement accounts.

'I'm sure there are some of my friends out there saying, I thought this guy was a market guy; what happened to him?' Mr Bush said at the White House.

US authorities have now turned their focus to part of the underlying problem - the rising tide of bad mortgage debt choking the financial system.

Banks and other institutions bet heavily during the home price bubble on mortgage-backed bonds and other securities that have lost value as homeowners struggled to make their mortgage payments.

The bursting of the housing bubble makes it difficult now to value and trade these complex securities, which are clogging the inner workings of the financial system.

Treasury's purchase plan would at least help the market put a price on such broken assets, said Mr Jan Hatzius, chief US economist at Goldman Sachs, one of few major investment banks to survive this year's brutal Wall Street shakeout.

'Congress will want to add a lot of detail over the next few days so things could get pretty confusing,' Mr Hatzius said, noting it is not exactly clear how the plan would clarify banks' balance sheets or inject capital into them.

Asset managers needed
Under the draft legislation, Treasury could hire asset managers to handle the debt purchases, which could include residential or commercial mortgages and related instruments that were originated or issued on or before Sept 17, 2008.

The authority to purchase would end two years from date of enactment, but authority to hold the assets would continue.

Banking industry sources said the government would hold 'reverse auctions' in US$50 billion tranches to let banks bid their assets for government purchase, thereby encouraging the lowest cost to taxpayers. But that level of detail was not spelled out in the draft legislation.

A Treasury official said on Friday that hedge funds would not be eligible to offload troubled assets under the plan, but that was not explicit in the draft legislation.

The financial crisis has dominated the US presidential campaign this week with Republican Sen John McCain and Democratic Sen Barack Obama skirmishing over it, aware that after the Nov 4 election, one of them will inherit the problem in January. Both candidates said they were reviewing the plan.

Financial markets have shown approval so far of the Bush administration's latest efforts, but may be disappointed if Congress does not swiftly back the measures.

US stocks had their best day in six years on Thursday on talk of an aggressive plan. On Friday the Dow Jones industrial average rose 368 points, or about 3.4 per cent.

Crisis was spreading
The plan to buy back mortgage-related debt was just one of a series of measures unveiled in the last two days as the Treasury and Fed decided the frozen credit markets signaled a growing storm that would engulf the economy.

The Treasury said on Friday it would siphon up to US$50 billion from a fund established in the 1930s to conduct foreign exchange market intervention to backstop the rattled US money market mutual fund industry.

This long-safe corner of financial markets, home to some US$3.5 trillion of deposits, has increasingly appeared at risk of falling victim to the year-old credit crunch. Money market fund assets dropped by a record US$169.03 billion in the week ended Sept 17 as jittery investors pulled money out.

The US Securities and Exchange Commission got involved too, imposing on Friday a 10 trading-day ban on short sales of 799 financial stocks.

And the administration will step up a programme announced this month to directly buy mortgage-backed securities in the market, and said Fannie Mae and Freddie Mac would also increase their buying to try to get credit flowing. -- REUTERS

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