WASHINGTON – Congressional Democrats on Sunday began to set their own terms for a plan to rescue the nation’s financial institutions, including greater legislative oversight of the Treasury Department, more direct assistance for homeowners and limits on the pay of top executives whose firms seek help.

The Democrats’ demands came as Treasury Secretary Henry Paulson blanketed the Sunday talk shows to promote the Bush administration’s $700 billion bailout package, emphasizing that it was needed not just for Wall Street, but for all Americans. He urged Congress to move swiftly to approve a “clean” rescue plan without tacking on extra programs.

“I hate the fact that we have to do it, but it’s better than the alternative,” Paulson said on “Fox News Sunday.” “This is a humbling, humbling time for the United States of America.”

Paulson was working Sunday night to press House leaders to strike an agreement on the bailout bill by early this morning, according to three sources familiar with the matter. No deal with the Senate appeared close Sunday night.

In yet another indication of how quickly events are moving, the Federal Reserve announced late Sunday that it had granted a request by Goldman Sachs and Morgan Stanley, the country’s last two major independent investment banks, to change their status to bank holding companies.

The change will allow the two institutions to open commercial banking subsidiaries, greatly bolstering the resources of both institutions. It also means that there are no remaining stand-alone investment banks and that they will be subject to a broad and intensive set of government oversight rules that apply to regular banks.

Also Sunday, The Wall Street Journal reported on its Web site that Seattle-based Washington Mutual was continuing talks with potential buyers amid mounting pressure from federal regulators.

The administration, which has been scrambling to deal with all the tumult, announced late Sunday that it was modifying a program announced just two days ago to try to bolster the teetering $3 trillion money-market mutual fund industry.

On Friday, the government said it would use a $50 billion Treasury fund to provide government guarantees for money-market mutual fund accounts. However, in a significant revision announced late Sunday, the Treasury Department said it would only guarantee funds that were in the accounts as of last Friday, indicating that money deposited after that date would not be guaranteed.

The guarantees had been put in place to stem a wave of withdrawals from mutual fund accounts that had been sparked largely by panicked institutional investors.

But the banking industry had complained that the new guarantees ran the risk of sparking withdrawals by their savings depositors who might decide to transfer their bank deposits, which are government-insured, to money-market mutual funds, which often pay more in interest than bank savings accounts but up until Friday had not enjoyed any government guarantees.

In another change, Treasury said that funds deposited in tax-exempt money-market mutual funds as of last Friday also would be covered.

In the past two weeks, the government has taken over the country’s two biggest mortgage companies, Fannie Mae and Freddie Mac, and its biggest insurance company, American International Group Inc., and stood by while the nation’s fourth-largest investment bank, Lehman Brothers, declared bankruptcy and another investment giant, Merrill Lynch, sold itself to Bank of America.

Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to deal with the root of all the troubles, billions of dollars of bad mortgage debt sitting on the books of major financial companies.

Despite intense pressure to pass a rescue measure quickly, some lawmakers said they did not want to be rushed into approving extraordinary new powers for the Treasury secretary and the federal government without consideration of the consequences.

“We need to offer some assurance to the American taxpayer that Congress is watching, one of the things that got us into this mess was the lack of accountability and the lack of oversight that was occurring, and I don’t think we want to repeat those mistakes with a program of this magnitude,” said Sen. Christopher Dodd, D-Conn., and chairman of the banking committee.

Rep. Barney Frank, the chairman of the House Financial Services Committee, put forward the Democrats’ proposed changes to the administration’s plan. They would give the Treasury secretary the authority to set “appropriate standards” for compensation of senior executives whose companies sell troubled assets to the government. Under a “claw-back” provision, the secretary would have the power to force companies to recoup prior payments to executives of companies involved in the program. And Democrats would give authority for the Government Accountability Office, an investigative arm of Congress, to audit and oversee the program.

Several Democratic senators are intensely interested in reviving a provision that was knocked out of the foreclosure prevention legislation last summer, to grant bankruptcy judges the authority to modify the terms of primary mortgages.

Financial companies were already lobbying intensely to broaden the plan. Paulson said he hoped the government would recoup much of the cost of buying distressed mortgage-related assets. But he did not rule out that the initial cost of the bailout could rise beyond $700 billion.

The Associated Press and The Washington Post contributed to this report. REACTION FROM ASIA

Early signs indicate that investors in Asia are reacting positively to the developments in Washington. Shares in Tokyo and South Korea rallied more than 2 percent in early trading this morning.