Paulson, Bernanke brief lawmakers on bailout

Updates with start of meeting, Pelosi quotes)

WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke came to Capitol Hill on Monday to field questions from leading Democrats on how the $700 billion financial bailout bill is working.

"We have questions about the significant alterations that have been made in the implementation of the TARP," House of Representatives Speaker Nancy Pelosi told reporters before the meeting began. She was referring to the bailout law, which is known as TARP, or the Troubled Asset Relief Program.

The meeting, attended by Pelosi and other key House members, came as some Democrats were calling on the Bush administration to use money from the Wall Street bailout program to help ailing domestic auto manufacturers.

While Pelosi said Democrats had questions about the state of the auto industry, she deflected a reporter's question on whether General Motors and other domestic automakers could survive long without help. She said the state of the auto industry would be discussed in more detail at another meeting.

Pelosi said the meeting also would focus on the general state of the economy, financial markets and why the Bush administration has been opposing a broad new economic stimulus bill.

The administration is supposed to engage in close consultations with Congress on how the $700 billion, approved last month, is being spent.

Originally intended as a program to largely mop up bad debt related to the home mortgage crisis, Paulson last week redefined the program so that it focuses more direct capital injections into banks and consumer-related debt.

The Treasury is working on allocating the first $350 billion in taxpayer funds.

(Reporting by Richard Cowan and Donna Smith; Editing by Bill Trott)