Oversight panel questions Treasury on bailout plan

WASHINGTON — A congressional panel reviewing the government's $700 billion rescue package for the financial sector questioned the Bush administration's spending of bailout funds and challenged its reluctance to use the money to reduce foreclosures.

In a report made public Wednesday, the Congressional Oversight Panel for Economic Stabilization spelled out 10 pointed queries to the Treasury Department and questioned whether its shifting remedies constitute a strategic response to the financial crisis. The review represents the latest critical assessments of the Troubled Asset Relief Program, the massive federal intervention into the nation's financial system.

The report comes as Democrats, including President-elect Barack Obama, insist that instead of simply injecting money into banks, the government must use the funds to halt rising foreclosures. Federal Reserve Chairman Ben Bernanke has predicted that foreclosures this year will reach about 2.25 million.

"In the macroeconomic sense, foreclosure reduction is an essential part of getting us out of the problem we're in," House Financial Services Committee Chairman Barney Frank, D-Mass., said Wednesday. "The refusal so far to use the money to that purpose has been I think a violation of the intent and undermines the ability to get the votes in this Congress to do things in the future."

Frank made his comment as he opened a hearing on the bailout.

The 37-page oversight report offers no specific conclusions, but the questions suggest sharp disagreements with Treasury Secretary Henry Paulson's stewardship of the program and echo some of the criticism raised in a Government Accountability Office audit of the program last week.

"The American people need to understand Treasury's conception of the problems in the economy and its comprehensive strategy to address those problems," the report said.

The tough reviews also come as the Bush administration is considering whether to seek access to the second half of the $700 billion fund. All but $15 billion of the first $350 billion has been allocated in the two months the program has been in place.

Neel Kashkari, director of the Treasury office that oversees the bailout program, told lawmakers at the hearing that Paulson has made no determination about whether to request tapping the remaining money. He said the Treasury department is keeping Obama's economic team abreast of developments.

He defended the work of the program in the face of tough questions from lawmakers.