On Capitol Hill the Bush finance team got an earful over their decision to use the $700 billion in the Troubled Asset Relief Program (TARP) to inject billions into banks, instead of buying bad mortgage-backed assets, a centerpiece of the original bailout plan.
"Indeed it was a very important part of the effort to get votes for this bill, that we would do mortgage foreclosure reduction," said Democratic Representative Rep. Barney Frank.
Treasury Secretary Paulson responded that he thought the most important goal was easing the credit crunch and getting banks lending again.
Paulson said Tuesday, "The intent of the TARP when we came here was to stabilize the system to prevent a collapse. That's what we talked about. We talked about the financial system."
Committee Chairman Barney Frank pointed out portions of the bill that specifically state that the money was to be used to help write down troubled mortgages.
"The bill couldn't have been clearer," he told Bernanke and Paulson.
Paulson replied that priorities had changed saying, "when the facts changed and the circumstances changed, we changed the strategy. We didn't implement a flawed strategy. We implemented a strategy that worked."
Clearly, lawmakers remained frustrated.
"The fact that you Mr. Paulson took it upon yourself to absolutely ignore the authorityand the direction this congress had given you just amazes me," said Representative Maxine Waters of Los Angeles.
"I hear your frustration. More needs to be done and we're going to keep working on it," Paulson said.
Of Paulson's comments, San Mateo Congresswoman Jackie Speier who sits on the House Banking Committee thought, "Well he spoke like a man who is out of a job in a couple of months and doesn't much care what we think."
Speier favors a plan to use $24 billion of the $700 billion to buy up troubled mortgages, a plan she believes will stabilize the housing market.
"That will stabilize your home and my home, all of which have started to decline in value because the homes in the surrounding areas are being foreclosed on," said Speier.
Federal Deposit Insurance Corporation Chair Sheila Bair outlined the $24 billion plan to the House Committee Tuesday afternoon.
She says it could help save 1.5 million families from losing their homes due to foreclosure.
