US Treasury Secretary Henry Paulson and Federal Reserve Chairman, Ben Bernanke have waged a stout defense of their management of the 700 billion dollar Troubled Asset Relief Program, or TARP, to bail out ailing financial institutions.
They said the unpredictable nature of the current financial crisis meant it was necessary to ensure that financial bailout money was not diverted to other use.
On Tuesday, Paulson testified before the House Banking Committee in Washington. He said focusing the bailout program on infusing billions into banks...to pump capital and bolster lending... is a faster way to stabilize the financial system instead of simply buying rotten assets as was originally proposed.
He said it's crucial that the administration be nimble in assessing changing conditions and adapt the bailout strategy accordingly.
Paulson is opposed to dipping into the government's financial bailout fund for a rescue package for the three major automakers, no matter how badly they need the help.
Auto executives, backed by leading Democrats, insist they need another 25 billion US dollars in emergency bridge loans.
This is in addition to the 25 billion dollars already approved and being administered by the Energy Department.
Henry Paulson, US Treasury Secretary, said, "I don't see this as the purpose of the TARP. Congress passed legislation that dealt with the financial system stability and again, there are other ways. You also appropriated money for the auto industry and the Department of Energy bill and another alternative may be to modify that."
Bernanke meanwhile, said that going forward the ability of Treasury to use the bailout program for capital injections will be critical in restoring confidence and in promoting the return of functioning credit markets.
Ben Bernanke, Federal Reserve Chairman, said, "There are some signs that credit markets, while still quite strained, are improving. The ongoing capital injections under the TARP are continuing to bring stability to the banking system and have reduced some of the pressure on banks to deleverage two critical first steps toward restarting flows of new credit."
So far, the Treasury Department has pledged 250 billion US dollars for banks and has agreed to devote 40 billion dollars to troubled insurer American International Group.
That leaves 60 billion available from Congress' first bailout instalment of 350 billion US dollars.
(CCTV November 19, 2008)