Treasury Secretary Henry Paulson on Tuesday said because the current financial crisis is so unpredictable, it was necessary to ensure that financial bailout money was not allocated for other uses. In testimony prepared for delivery to the U.S. House Financial Services Committee, Paulson said the $700-billion Troubled Asset Relief Program (TARP), was intended to help the failing financial system. He also added that other efforts were under way to help homeowners avoid preventable foreclosures. “While I understand the interest in spending TARP resources on other approaches, the efforts already under way will do more to prevent foreclosures than might have been achieved through very large purchases of mortgage-related securities through the TARP,” he said. In his Congressional hearing, Paulson is set to face tough questions over the decision to use TARP funds for recapitalizing financial institutions instead of buying bad or so-called toxic assets as was originally proposed. He said that by the time Congress had approved the funds, the financial crisis had gone global and become so severe that “an asset purchase program would not be effective enough, quickly enough.” Paulson said the financial bailout was not intended as a stimulus package. The program “was intended to shore up the foundation of our economy by stabilizing the financial system, and it is unrealistic to expect it to reverse the damage that had already been inflicted by the severity of the crisis,” he said.
