Crisis summary stuns leaders of Congress

It was a room full of people who rarely hold their tongues. But as Fed Chairman Ben Bernanke laid out the ramifications of the financial crisis before congressional leaders Thursday night, there was a stunned silence at first.

Bernanke and Treasury Secretary Henry Paulson had made an urgent and unusual evening visit to Capitol Hill and were gathered around a table in the offices of House Speaker Nancy Pelosi.

“When you listened to him describe it, you gulped,” said Sen. Charles Schumer, D-N.Y.

As Sen. Chris Dodd, D-Conn., chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on ABC's “Good Morning America,” congressional leaders were told “that we're literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”

Schumer added, “History was sort of hanging over it, like this was a moment.”

When Schumer described the meeting as “somber,” Dodd cut in. “Somber doesn't begin to justify the words,” he said. “We have never heard language like this.”

“What you heard last evening,” he added, “is one of those rare moments, certainly rare in my experience here, is Democrats and Republicans deciding we need to work together quickly.”

Although Schumer, Dodd and other participants declined to repeat precisely what they were told by Bernanke and Paulson, they said the two described the financial system as effectively bound in a knot being pulled tighter and tighter by the day.

“You have the credit lines in America, which are the lifeblood of the economy, frozen.” Schumer said. “That hasn't happened before. It's a brave new world. You are in uncharted territory, but the one thing you do know is you can't leave them frozen or the economy will just head south at a rapid rate.”

As he spoke, Schumer swooped his hand, to make the gesture of a plummeting bird. “You know we'd be lucky...” he said as his voice trailed off. “Well, I'll leave it at that.”

As officials at the Treasury Department raced Friday to draft legislative language for an ambitious plan for the government to buy billions of dollars of illiquid debt from ailing financial institutions, legislators on Capitol Hill planned to work through the weekend reviewing the proposal and making efforts to bring a package of measures to the floor of the House and Senate by the end of next week.

While Democrats initially said after Thursday's meeting that they planned to use the administration's proposal of a huge rescue effort to win support for an economic stimulus package, they pulled back slightly Friday morning, saying their top priority was to help put together the bailout package and stabilize the economy.

But it was clear they continued to examine ways to make clear that the government was stepping up not just to help the major financial firms but also to protect the interests of American taxpayers and families by safeguarding their pensions and college savings, and by preventing any further drying up of consumer credit.

The potential steps Congress can take include approving legislation to allow bankruptcy judges to modify the terms of primary mortgages – authority that the bankruptcy laws do not currently allow and that the banking industry has fought.