WASHINGTON -- Treasury Secretary Henry Paulson on Friday defended his handling of the $700 billion financial rescue program, saying it has made real progress toward achieving financial stability.
Paulson said the administration made the correct calls on major decisions in operating the program, even though he and other officials sometimes had to operate with imperfect information that was frequently changing.
Paulson's remarks came hours after the government reached an agreement to provide billions of dollars in additional support to Bank of America Corp., and a day after Congress turned back an effort to block release of the second half of the bailout pot.
The rescue program has come under heavy criticism from lawmakers unhappy that the administration provided billions of dollars to banks to shore up their finances, but did not impose enough restrictions to insure they would increase their lending and combat what could be the worst financial crisis since the 1930s.
Many lawmakers are pushing the administration of President-elect Barack Obama to devote more of the money to halting a tidal wave of mortgage foreclosures, and to impose more restrictions on the compensation of top executives working at the banks receiving the money. The incoming administration has pledged to revamp the rescue program to meet congressional objections.
Paulson did not disagree with the new restrictions being sought for the rescue funds, although he contended they mirrored many things the Bush administration already was doing. He said he could understand why the public would be upset with so much money being committed even as the economy remains in turmoil.
"The severe economic downturn, the stresses in the capital markets, have been unsettling to Americans and rightfully so," he told reporters at the Treasury Department.
While it's clear Americans wanted the government's rescue efforts to fix the economy's problems more quickly, Paulson said the spending was having a beneficial impact.
"I will assure you that the (rescue program) has been absolutely essential to financial stability, and financial stability is essential to everything that everyone wants to see happen economically," Paulson said.
The rescue program had made "real progress," he said, but conceded there were "plenty of challenges" remaining in the effort to stabilize the economy.
"I have always said that stability is our first priority, then recovery, then repair," Paulson said.
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