WASHINGTON — Treasury Secretary Henry M. Paulson told unhappy congressional Democrats on Tuesday that, barring a new catastrophe, the Bush administration intended to stand pat on its existing effort to stabilize financial markets -- and leave the next stage of economic recovery to the new administration.
Having committed about half of the existing $700-billion rescue fund to ease Wall Street's credit crunch, Paulson said he had no plans to spend the rest, even on the root cause of the crisis -- soaring mortgage foreclosures.
"The prudent course, at this time, is to conserve the remaining funds available from the [rescue program], providing flexibility for this and the next administration," Paulson told frustrated lawmakers during a contentious hearing before the House Financial Services Committee.
During Paulson's testimony, committee members, at times raising their voices, complained that the administration was willing to spend money on big banks and insurers but not on ordinary Americans.
"I hope that you understand the pain and the suffering of so many homeowners in this country that are losing their homes," said Rep. Nydia M. Velazquez (D-N.Y.).
"It's just not enough to say to the banks, 'Here is the money and by the way, I trust you.' Because they are not lending!"
Calls grew Tuesday for a substantial economic stimulus package to be enacted once Barack Obama becomes president. A group of chief executives said such spending should total at least $300 billion and focus on infrastructure projects.
During the House hearing, panel Chairman Barney Frank (D-Mass.), although acknowledging that Paulson had shown results in the financial crisis, berated him for not using his existing legal authority to stem the tide of foreclosures.
"When the program was passed, very explicit language was included to provide for mortgage foreclosure diminution as one of the purposes," Frank said, waving excerpts from the bill passed Oct. 3. "The bill couldn't have been clearer."
Frank and Velazquez expressed support for a plan by Federal Deposit Insurance Corp. Chairwoman Sheila C. Bair to speed refinancings of troubled mortgages.
"We need to prevent unnecessary foreclosures, and we need to modify loans at a much faster pace," Bair, a Republican, told the committee. "We all know there is no single solution or magic bullet, but as foreclosures escalate, we're clearly falling behind the curve."
