The US plan to create a $700bn financial rescue fund encountered widespread discontent in Congress on Tuesday as Ben Bernanke suggested that the government should buy toxic mortgage assets at more than their current distressed prices.

The Federal Reserve chairman said that if the Treasury buys assets at a price “close to the hold-to-maturity price” rather than current “firesale” price there would be “substantial benefits”. Banks would be able to mark their portfolios to the new higher prices rather than the current firesale prices. Mr Bernanke said taxpayers would still be reasonably safe as the government would pay less than the cash flow value of the securities. In effect, he argued that there could be a win-win solution for both taxpayers and banks.