The $700-billion plan approved by Congress authorized the Treasury to spend half that amount immediately, with additional requirements for releasing the rest.
On Wednesday, Paulson offered no specifics about how he planned to spend the second half of the funds -- suggesting that those decisions would fall to the incoming Obama administration. Senior Democrats on Capitol Hill, however, were clear about where they thought the remaining money should go.
"Obama should tell Paulson, 'Thank you, but you should ask for the money and use a substantial portion for mortgage foreclosure reduction,' " said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
Schumer said he might seek new conditions on how the $350 billion is spent, such as reducing foreclosures and inducing banks to lend.
"If the economy needs it, Congress is going to approve it," Schumer said of the final installment. "But we might approve it with certain provisos."
Paulson's effective scrapping of the mortgage securities buying plan that he sold so passionately only months ago is just one example of the recasting of emergency measures that Washington has witnessed in recent days.
On Monday, Treasury and the Federal Reserve overhauled their aid package to insurance giant American International Group Inc. In September, they gave AIG an $85-billion line of credit to help it liquidate over the next two years, and less than a month later added $37.8 billion to the package.
But with those moves proving inadequate -- the company reported a $24.5-billion loss Monday -- the bailout was retooled and the price tag boosted to $150 billion.
In addition, the Federal Reserve Bank of New York announced it was delaying a plan to help stabilize money market funds by buying up to $540 billion of their short-term debt. The plan, announced last month, was intended to help the funds handle the crush of nervous investors seeking to get their money out.
Lawmakers were reluctant to criticize Paulson, noting the importance of his task to help right the economy.
"The initial reaction that a lot of us had on the Hill was 'How can we do something like this so fast?' We took a lot of heat in standing up and saying, 'Wait a minute,' " said Rep. Eric Cantor (R-Va.), who helped lead GOP opposition to the original bailout bill before voting for a revised version.
"I'm very hopeful he has put together a team that knows what it's doing and can get us out of the mess we're in as quickly as possible."
--
peter.gosselin@latimes.com
jim.puzzanghera@latimes.com
