Markets fall as fears grow over bailout plan

(CNN) -- Markets in the U.S., Europe and Asia fell Tuesday as uncertainty grew in the U.S. over a $700 billion financial rescue plan.

The U.S. Senate Banking Committee met Tuesday, as regulators attempted to hammer out the details of the plan, with an announcement expected by the end of the week.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke said immediate action was necessary, but some senators questioned the size and scope of the current plan and whether more provisions were needed to be added to protect taxpayers.

Many lawmakers on the left and the right are asking how they can justify risking $700 billion of the taxpayers' money to help out Wall Street when many Americans are hurting economically.

And conservatives, in particular, object to the large departure from free-market principles.

In New York, the Dow Jones industrials and the S&P dropped 1.5 percent while the Nasdaq was down about 1.1 percent.

London's FTSE index and Paris' CAC 40 closed about 1.9 percent down, while Frankfurt's DAX fell by just over half a percent. Watch Henry Paulson address the Senate Banking Committee's bailout hearing »

In Asia, Hong Kong shares led the region's declines, with the blue-chip Hang Seng Index losing 3.9 percent to 18,872.85 points after two sessions of solid gains.

In China, the benchmark Shanghai Composite Index declined 1.56 percent to 2,201.51. Benchmarks in Australia and Singapore also were down sharply.

The falls follow losses Monday on Wall Street. The Dow slid 373 points -- 3.3 percent -- as investors worried about the bailout plan and oil prices.

Crude prices ended the day below $107 a barrel Tuesday amid the same uncertainty over the economic bailout plan.

On Monday, U.S. President George W. Bush urged Congress to put his financial rescue plan into action, without adding "unrelated provisions" or "provisions that would undermine the effectiveness of the plan."

Bush's economic team sent Congress the rescue package over the weekend, after a crisis in the markets led to the collapse of Lehman Brothers, a Bank of America buyout of Merrill Lynch, and the government rescue of AIG, the biggest insurance company in the U.S.

Paulson was in talks Tuesday with Democrats about their proposal that the government be able to purchase equity in faltering companies as part of the plan, so taxpayers could benefit from future profits.

The administration is balking at another key Democratic demand: Allowing judges to rewrite bankrupt homeowners' mortgages so they could avoid foreclosure.

Analysts say the proposals being debated are the centerpiece of what would be the most sweeping economic intervention by the government since the Great Depression.

Meanwhile, French President Nicolas Sarkozy is calling for those responsible for the crisis to be punished.

In a speech in New York on Monday night he said: "Today millions of people around the world are fearful of losing their nest eggs, their apartments, their savings in banks.

"We must provide them with clear answers. Who is responsible for this disaster. That those responsible will be held accountable and punished and that we government leaders will assume our responsibilities.

"If we don't speak clearly, we won't create a stable world," Sarkozy said at a dinner where he was awarded the Elie Wiesel Foundation's Humanitarian Award.

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