NEW YORK (CNNMoney.com) -- Stocks slumped Tuesday, as the heated debate in Congress on the proposed $700 billion bank bailout dampened hopes that the government would take faster action to mitigate the credit market crisis.

After the close, Goldman Sachs said Warren Buffett's Berkshire Hathaway will invest at least $5 billion in the company through a preferred stock purchase. Goldman shares jumped 8% in extended-hours trading.
The Dow Jones industrial average (INDU) lost 162 points, or 1.5%. The Nasdaq composite (COMP) fell 1.2% and the Standard & Poor's 500 (SPX) index fell 1.6%.
In the wake of the worst financial crisis in years, economic officials and lawmakers are meeting on Capitol Hill this week in an attempt to hammer out an historic $700 billion bank rescue plan that would get bad mortgage bets off bank balance sheets and ultimately loosen up the credit markets.
The move is seen as critical for the stability of the financial sector as the 15-month-old credit crisis stretches on.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee Tuesday that fast action is needed to stop a bigger financial meltdown.
Although Congress is expected to announce a deal by the end of the week, some lawmakers Tuesday questioned the size and scope of the current plan - and whether more provisions are needed to protect taxpayers. The House Financial Services Committee holds testimony Wednesday. ""The equity and the credit markets are reflecting the uncertainty of whether this will go through,"" said John Davidson, president and CEO at PartnerRe Asset Management.
Stocks surged at the end of last week as news of the plan spread. But the intensity of the debate this week surprised some investors who were looking for a quick resolution.
""The euphoria last week was predicated on a belief that something would get done,"" Davidson said. ""Right now, the worry is that it won't.""
Stocks rose in the morning as the hearing got underway, slipped in the afternoon as the debate heated up, rallied again, and then sold off near the close.
A sell-off in oil, gold and other safe-haven commodities caused investors to bail out of the underlying stocks. And General Motors continued to slump on worries about its cash position.
On Monday, the Dow fell 373 points as investors worried about the bailout plan and a jump in the price of oil - which saw its biggest one-day dollar gain ever. It was the fourth consecutive session in which the Dow ended the session with a change of at least 350 points in either direction, demonstrating the extreme volatility of markets.