WASHINGTON — Treasury Secretary Henry Paulson said Monday that the administration is looking for more ways to tap a $700 billion financial rescue program and will consult with Congress and the incoming Obama administration.
Paulson said the program has distributed $150 billion out of the $250 billion earmarked to buy stock in banks as a way to boost their resources so they can lend more. The administration also is looking at other ways to utilize the rescue package, including alternatives for providing capital to financial institutions.
Paulson spoke just hours after the National Bureau of Economic Research announced that the U.S. economy has been in a recession since December 2007.
"While we are making progress, the journey ahead will continue to be a difficult one," Paulson said in a speech to business executives in Washington. "But I have confidence that we are pursuing the right strategy to stabilize the financial system and support the flow of credit into our economy."
Even though President George W. Bush will be leaving office on Jan. 20, Paulson said the current administration was working to develop new programs in consultation with Congress and the incoming administration of President-elect Barack Obama.
"We are actively engaged in developing additional programs to strengthen our financial system so that lending flows into our economy," Paulson said. "When these programs are ready for implementation, we will discuss them with the Congress and the next administration."
Paulson's comments appeared aimed at addressing concerns raised last month when he indicated in conversations with members of Congress that the administration probably would not tap the second $350 billion in the $700 billion rescue program, leaving those resources for the incoming administration.
Reports of that decision unnerved investors who worried that the administration might not be aggressive enough in dealing with the current crisis, leaving a gap until the new administration took over.
In his remarks Monday, Paulson did not provide specifics on what type of programs the administration had under consideration other than to say that it was looking at ways to boost capital into financial institutions.
He also said the administration was continuing to examine ways to halt a surge of mortgage foreclosures, which have now hit record levels, but he stopped short of dropping his opposition to using the rescue fund for a program being pushed by Federal Deposit Insurance Corp. Chairman Sheila Bair. The FDIC plan would use the rescue fund to help guarantee mortgages that have been reworked to lower monthly payments as a way of helping more people stay in their homes.
In response to a question about the FDIC proposal, Paulson said he felt an "awesome responsibility" to use the rescue program correctly by making sure that homeowners who really needed help were the ones getting the assistance.
Asked about the NBER panel's decision that the U.S. fell into a recession in December 2007, Paulson said that he didn't think that decision was going to be "big news" to Americans who have been dealing with the slowdown for some time.
He said that a year ago, the administration could see that the economy was slowing significantly and that officials had moved very quickly to respond to the challenges, an apparent reference to the $168 billion economic stimulus plan that Paulson helped push through Congress last February.