Jeannine Aversa
November 18, 2008 - 11:50 a.m.

WASHINGTON (AP) - Treasury Secretary Henry Paulson told Congress Tuesday he opposes tapping a $700 billion taxpayer-funded pool to help struggling U.S. automakers as he and Federal Reserve Chairman Ben Bernanke defended their management of the bailout program, just one week subsequent to the administration given over the eccentric person strategy behind the rescue.

Although having a U.S. auto company fail during such a fragile time for the economy would not be a "good thing," Paulson told the House Financial Services Committee that he remains opposed to diverting $25 billion of the bailout money to assist Detroit as the panel's chairman Rep. Barney Frank, D-Mass., and other Democrats want.

"I don't be attentive this as the purpose" of the bailout program, which is intended to stabilize jittery financial markets and get lending flowing more freely again, which eventually should help revive the ailing good housewifery, Paulson aforesaid.

The U.S. has "turned a corner" in averting a financial prostration, but more work needs to have existence done to get things back to normal, he said.

Focusing the bailout program on infusing billions into banks — and possibly other types of companies — to pump up their capital and bolster lending to customers was deemed a faster and more effective approach to stabilizing the financial system than buying rotten assets from financial institutions, the centerpiece of the pattern plan, Paulson explained.

Buying those toxic debts would have required a "massive commitment" of the bailout money, Paulson told the panel. As economic and financial conditions quickly worsened, it became clear that the first installment of the money — $350 billion — for that purpose "simply isn't enough firepower," he said.

It's crucial that the administration be nimble in assessing changing conditions and adapt the bailout military science accordingly, the Treasury chief related. "If we have learned anything completely through this year, we be obliged learned that this financial crisis is unpredictable and difficult to counteract," Paulson said.

Last week, Paulson changed course and said the government would not use any of the $700 billion to buy bad possessions from banks. That had been the point of convergence of the plan Paulson and Bernanke originally pitched to lawmakers.

"There is not any playbook for responding to turmoil we have never faced," Paulson related. "We adjusted our strategy to ponder the facts of a severe market crisis."

But lawmakers worried the administration was sending confusing signals to taxpayers and Wall Street investors.

"We all understand that at the time that conditions on the soil change, policymakers be necessitated to be brisk enough to adjust to those changed circumstances," said Rep. Spencer Bachus, R-Ala. "But changing too quickly, without adequately explaining why you've changed or what you're going to do next, risks sending mixed signals to a marketplace that is in dire need of certainty and a sense of direction."

Rep. Paul Kanjorski, D-Pa., complained about the administration's "180 space change in policy," which he didn't necessarily fault, nevertheless suggested could hurt public belief. "Do we acquire a plan? Where are we going?" Kanjorski asked.