Bernanke, Paulson To Testify Before House Panel About Bailout Tuesday

Washington, D.C. (AHN) - Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson are scheduled to testify before the House Financial Services Committee on Tuesday about the implementation of the government's $700 billion financial bailout. The hearing comes less than a week after Paulson announced that he was shifting the focus of the bailout from purchasing bad mortgages to investing in banks.

Paulson said in a speech last Wednesday, "As credit markets froze in mid-September, the Administration asked Congress for broad tools and flexibility to rescue the financial system. We asked for $700 billion to purchase troubled assets from financial institutions. At the time, we believed that would be the most effective means of getting credit flowing again."

He said that as lawmakers and the administration debated the bailout for two weeks, market conditions worsened and by the time the bill was passed on Oct. 3 "it was clear to him" that buying up toxic mortgages would "take time to implement and would not be sufficient given the severity of the problem." He said he plans to instead buy capital and shore up banks.

Paulson's testimony on Tuesday comes a day after he met with House Speaker Nancy Pelosi (D-CA) and other House Democratic leaders about the progress of the bailout. Pelosi issued a statement after the meeting saying, Democrats "made clear" to the two officials that "immediate action" should be taken to stop home foreclosures, and that "further delay in implementing" the bailout, called the Emergency Economic Stabilization Act (EESA), is "unacceptable."