NEW YORK (Reuters) - The U.S. financial system is stabilizing and the government does not plan to tap the remaining $410 billion of a financial rescue fund unless a further need arises, Treasury Secretary Henry Paulson told the Wall Street Journal in an interview published on Tuesday.
Paulson said he was unlikely to use the remains of the $700 billion bailout to launch substantial new programs, preferring to keep money in reserve for unforeseen emergencies and to preserve flexibility for the Obama administration.
“I’m going to do what we need to do to keep the system strong and to react the ways we need to react during the nine weeks I’m here, but I’m not going to be looking to start up new things unless they’re necessary or it’s just clear that they need to be done or <that they> make great sense,” the Journal quoted Paulson as saying.
“I want to preserve the firepower, the flexibility we have now and those that come after us will have.”
Paulson could be in for some tough questioning on Capitol Hill later Tuesday after saying last week he no longer planned to buy bad loans from banks and instead would use the congressionally approved bailout to inject capital directly into banks.
Citing comments he prepared for the testimony, the Journal said Paulson plans to say that after investing $250 billion in banks, the Treasury “didn’t have enough left to make a meaningful impact.”
He told the Journal that he is working with the Federal Reserve to develop a lending facility that would encourage investors to buy some of these assets.
Paulson, Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair are scheduled to testify before the U.S. House Financial Services Committee on the Troubled Asset Relief Program at 0930 EDT..
Separately, in an op-ed piece in the New York Times, Paulson wrote: “If we have learned anything throughout this year, we have learned that this financial crisis is unpredictable and difficult to counteract.
“We decided it was prudent to reserve our TARP money, maintaining not only our flexibility, but also that of the next administration.
Reporting by Christopher Kaufman