WASHINGTON — The head of the government's $700 billion financial rescue program said Thursday that the effort has made the nation's financial system more stable.

Neel Kashkari, the assistant treasury secretary in charge of the bailout program, said the program had made remarkable progress since it was passed by Congress on Oct. 3.

Kashkari called the financial system "fundamentally more stable" than when the legislation was passed, and says the rescue program helped to stop more financial institutions from failing.

"The most important evidence that our strategy is working is that we have stemmed a series of financial institutional failures," Kashkari said in remarks at the Brookings Institution.

The Treasury Department earlier Thursday sent Congress its latest update on the bailout program. The report showed that the government has disbursed $266.9 billion so far, including $187.5 billion provided to banks in an effort to get them to resume more normal lending and $19.4 billion for the auto industry.

Critics contend the Bush administration has failed to impose enough conditions on the money it has provided to banks to ensure that the financial institutions are using the new resources to boost lending.

In his remarks, Kashkari said that as confidence starts to improve, Treasury expects to see financial institutions step up their lending. Treasury also is working on ways to keep better track of whether banks are boosting their lending after receiving the financial assistance.

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"The increased lending that is vital to our economy will not materialize as fast as any of us would like, but it will happen much faster as a result of deploying resources" from the rescue program, Kashkari said.

The government has purchased stock in 214 banks in 41 states and Puerto Rico, with Treasury staff and officials at the bank regulatory agencies working to review thousands of pending requests for assistance, he said.

"Our work will not let up until the last application has been reviewed and processed," Kashkari said. Those reviews would take place "over the next few months" with the help of a staff of 90 _ most of whom are career employees and not political appointees _ working for the financial rescue program, he added.

Treasury Secretary Henry Paulson said last month that with the decision to provide support to the auto industry, the government had committed the first $350 billion of the bailout fund. He said Congress should authorize release of the second $350 billion.

But House Financial Services Committee Chairman Barney Frank, D-Mass., said in a memo to House members on Wednesday that he believed the second $350 billion should be governed by a set of principles he was proposing that seek to address congressional unhappiness with how the Bush administration had operated the program.

Frank said he would seek congressional passage of legislation that would impose new conditions, including substantial efforts to reduce mortgage foreclosures and a better method to track whether banks are using the money they receive to boost lending.

Frank said in the memo, a copy of which was obtained by The Associated Press, that he was putting forward his proposal "because there has been widespread unhappiness with the failure of this administration to use any of the first $350 billion for mitigation of foreclosures and because money given to banks under this program flowed with virtually no strings attached."

In Treasury's latest reporting update, it said it had closed $65.4 billion in transactions since the last report on Dec. 2.

The support for the auto industry included $10.4 billion to General Motors Corp., $4 billion for Chrysler Holding LLC and $5 billion for GMAC LLC, the financing arm for General Motors.

Besides the program to buy preferred stock in banks and the auto support program, Treasury provided $20 billion to Citigroup Inc. on Dec. 31, and $40 billion to American International Group Inc. on Nov. 25 to keep the insurance giant from collapsing.

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AP Business Writer Alan Zibel contributed to this report.