Sept. 23 (Bloomberg) -- Members of President George W. Bush's own party are voicing their opposition to his financial rescue plan even as Democratic leaders narrow their differences with the administration.

Congressional leaders said the $700 billion measure is needed to calm market turmoil and they hope to complete talks and pass the measure as soon as this week. Treasury Secretary Henry Paulson agreed with Democratic demands that Congress can create an oversight structure, House Financial Services Committee Chairman Barney Frank said.

Federal Reserve Chairman Ben S. Bernanke, in testimony prepared for delivery today to the Senate Banking Committee, warned lawmakers today that failure to pass the rescue plan to take over troubled assets from financial firms may have ``very serious consequences for our financial markets and for our economy.''

Accord between Democrats and the Bush administration came as Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee, said the proposal is ``neither workable nor comprehensive, despite its enormous price tag.'' Another Republican senator, Jim DeMint of South Carolina, said Paulson's plan ``could make matters worse by socializing an entire sector of the U.S. economy.''

House Republicans

Leaders of the Republican Study Committee, a group of more than 100 self-described conservative House members, have also criticized the administration's response to the crisis, with Texas Representative Jeb Hensarling calling it ``bailout mania.'' Vice President Dick Cheney is meeting with members of the group this morning, White House spokesman Tony Fratto said.

Members of both parties are rallying around one proposed change to the Treasury plan: limiting the compensation of executives in companies that take part in the government program to buy troubled assets.

Florida Senator Mel Martinez, a former member of President Bush's Cabinet, said Republicans and Democrats alike support ``some element'' of such a restriction.

Republican presidential candidate John McCain also endorsed the idea of limiting pay for executives of rescued firms, saying taxpayers shouldn't foot the bill for ``golden parachutes'' for officers of companies that have crumbled in the financial crisis.

McCain's Position

``The senior executives of any firm that is bailed out by Treasury should not be making more than the highest-paid government official,'' McCain said while campaigning in Scranton, Pennsylvania. The president, who makes $400,000 a year, is the highest-paid person in the federal government.

Paulson has opposed pay limits, saying ``punitive'' terms would only discourage companies from selling their debt to the Treasury.

Alternatives drafted by Frank and Senate Banking Committee Chairman Christopher Dodd would give the Treasury secretary the power to prevent payment of bonuses if executives took excessive risk or if they were predicated on earnings targets that weren't met.

The House proposal would ban severance pay for executives as long as the government held an equity stake in the company.

``If we have bought your assets or we've bought into you, no golden parachutes while we are the owner,'' Frank said.

Democratic Support

Democratic leaders support letting Treasury use the debt- purchasing authority while Congress writes oversight rules, Frank said in a Bloomberg Television interview yesterday.

The Bush administration is seeking to buy as much as $700 billion in devalued assets from financial firms to prevent a lending freeze. The proposal, sent to Congress on Sept. 20, would prevent courts from reviewing the Treasury's actions while raising the nation's debt ceiling.

Bush will touch on the crisis and the impact on the global economy in his address today at the opening session of the United Nations General Assembly in New York, according to an administration preview of the speech. Speaking to reporters before his address, he said he has assured world leaders that the U.S. will act quickly to stem the crisis in its financial markets.

Many lawmakers of both parties have said quick action is necessary to avoid a nationwide freeze in lending.

``We are convinced that inaction could be disastrous,'' said Utah Republican Robert Bennett.

Some of the Democratic proposals met opposition from industry groups. The Mortgage Bankers Association said it would oppose a provision to empower bankruptcy judges to ease terms of mortgages owed by bankrupt homeowners.

Bankruptcy Provision

The bankruptcy provision is ``one of the things that we'll see how hard they fight,'' Frank said. ``It's something we care about.''

Last night Frank withdrew his earlier assertion that Paulson had agreed that the U.S. will get equity in companies that receive government aid.

``I overstated'' the level of agreement on equity, Frank said. Still, he said, ``we've gotten closer to where we think it ought to be.''

While Democratic leaders worked to forge a consensus with the Bush administration, some rank-and-file party lawmakers said the Treasury was asking too much for Congress to approve such a large rescue plan with so little time to review its details.

At a closed-door meeting of all House Democrats last night, Frank faced questions from lawmakers who said afterwards that they are concerned about the short time frame offered to them to sign on to the rescue plan, as well as the extensive powers Paulson is requesting.

`Papal Authorities'

``Paulson cannot be given the powers he asked for,'' said Representative Anna Eshoo, a California Democrat and one of House Speaker Nancy Pelosi's closest confidantes in the House. ``This is omnipotence. We're talking papal authorities here.''

Representative Gene Green, a Texas Democrat, said the meeting was ``tense,'' with many lawmakers expressing anxiety over having to digest the far-reaching proposal and move it through Congress in just a few days.

``Nobody's happy to have something laid on their lap that is this major, in this short an amount of time,'' Green said. Nevertheless, he said, lawmakers are fully aware of the gravity of the impact of no action on financial markets and many are likely to eventually support it.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.netAlison Vekshin in Washington at avekshin@bloomberg.net.

Last Updated: September 23, 2008 09:51 EDT