Henry Paulson, the US Treasury Secretary, and Ben Bernanke, the Chairman of the Federal Reserve, battled yesterday to convince America’s congressional leaders to approve President Bush’s planned $700 billion (£377 billion) Wall Street bailout swiftly, despite the huge cost to taxpayers.

Mr Paulson and Mr Bernanke, joint architects of the rescue plan, united in an effort to overcome mounting opposition to the scheme on Capitol Hill and avert further financial turmoil.

Amid wrangling over the plan to buy up the toxic bad debts poisoning the US financial system, the stakes were raised last night as John McCain, the Republican presidential candidate, was urged to take the “nuclear option” of opposing the bailout.Senior Republicans joined some of Mr McCain’s advisers in telling him that voters’ anger over the cost of the rescue could make opposing it a “game-changing” move that might win him the White House.

Nervousness over the congressional verdict on the bailout sparked another turbulent day for stock markets. In London the FTSE 100 index shed 100.1 points to close at 5,136.1, taking its losses in the year to date to more than 20 per cent. In New York the Dow Jones industrial average fell 161.50 points to close at 10,854.20.

At a highly charged session of the Senate Banking Committee, Mr Bernanke told Congress that it risked a serious recession if it failed to implement the bailout. “Action by Congress is urgently required to stabilise the situation and avert what could otherwise be very serious consequences for our financial markets and our economy,” he said.

The strength of opposition was emphasised by attacks from both Christopher Dodd, Democrat chairman of the committee, and Richard Shelby, its leading Republican. Senator Dodd said the plan was stunning and unprecedented in its scope and lack of detail. He said: “What they have sent us is not acceptable.” Senator Shelby said: “We have been given no credible assurances that this plan will work. We could very well spend $700 billion, or a trillion, and not resolve the crisis.”

There were calls from Senator Charles Schumer, Democrat chairman of the Joint Economic Committee, to agree to a rescue package worth $150 billion and force Mr Paulson to return for more later, if needed. Others demanded onerous concessions, such as powers to curb executive pay for banks benefiting from the plan. Mr Bernanke said such measures would condemn the scheme to failure: “We cannot impose punitive measures on the institutions that chose to sell assets. That would eliminate or strongly reduce participation.”

Mr Bernanke and Mr Paulson said that a reverse-auction system to price the assets bought would ensure value for money. Mr Bernanke insisted the the plan would “restore confidence and liquidity to financial markets and help the economy recover without an unreasonable fiscal burden on taxpayers”.

Mr McCain’s verdict could play a critical role. He is concerned that seeking to block the bailout would open him to charges of irresponsibly wrecking a plan to save the US economy. But some aides say opposing the scheme would distinguish him from Mr Bush and send a populist message.

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