U.S. Congress examines market bailout plan

By Kevin Drawbaugh and Richard Cowan

WASHINGTON (Reuters) - The Bush Administration sent a $700 billion (382 billion pounds) plan for a U.S. government bailout of bad mortgage debt to Congress on Saturday, seeking extraordinary authority as it tackles the worst financial crisis since the Great Depression.

Democratic lawmakers, who control both houses of Congress, said they hoped to approve the bailout quickly but wanted changes such as more oversight, limits on executive pay at participating firms, and assistance for homeowners.

U.S. Treasury Secretary Henry Paulson would have extraordinary powers over the massive warchest and his decisions would not be reviewed by any court, according to a copy of the draft legislation obtained by Reuters.

The government could acquire up to $700 billion in home and commercial mortgages and related assets from U.S.-headquartered banks and other institutions over the next two years. Precisely how the purchases would be executed was unclear.

To allow for the bailout, the U.S. government's debt limit would rise to $11.315 trillion from $10.615 trillion.

The bailout plan follows a wrenching week that transformed Wall Street with Lehman Brothers' failure, the agreed sale of Merrill Lynch & Co and a government takeover of ailing insurer AIG.

The debt plan was hatched amid grave concerns that other major banks could collapse and that credit markets were close to freezing, threatening the functioning of the U.S. economy.

Showing more deals may still be in the works, Morgan Stanley's board was scheduled to meet on Saturday to consider a possible takeover by Wachovia Bank or selling a bigger stake to China Investment Corp., according to sources familiar with the situation.