The US economy could grind to a halt if Congress refuses to back its $700bn (£480bn) financial rescue plan, the administration warned yesterday as it stepped up efforts to win round doubting members of President George W. Bush’s own Republican party.

At the first congressional hearing on the plan to authorise the administration to buy banks’ toxic assets, Ben Bernanke, Federal Reserve chairman, and Hank Paulson, Treasury secretary, faced scepticism from Congress over the details of the plan.

However, giving evidence to the Senate banking committee, Mr Bernanke warned that markets were “under extraordinary stress” and “action by Congress is urgently required to stabilise the situation”.

Paulson added that the plan would “avoid a series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses both small and large and the very health of our economy”.

Financial Times