Paulson ignores pleas

Washington - US Treasury Secretary Henry Paulson on Tuesday ruled out using the $700bn financial bailout to shore up the battered economy, amid distress calls for help from the ailing auto industry.

The Troubled Asset Relief Program (TARP) authorised by Congress on October 3 "is not a panacea for all our economic difficulties," Paulson told a hearing of the House Financial Services Committee.

"The rescue package was not intended to be an economic stimulus or an economic recovery package; it was intended to shore up the foundation of our economy by stabilizing the financial system, and it is unrealistic to expect it to reverse the damage that had already been inflicted by the severity of the crisis," he said.

The Democratic-controlled Congress is pressuring President George W. Bush's Republican administration to use some of the funds to aid the faltering economy, particularly the embattled auto sector.

"The crisis in our financial system had already spilled over into our economy and hurt it. It will take a while to get lending going and repair our financial system, which is essential to an economic recovery," Paulson told lawmakers.

An economic recovery "won't happen as fast as any of us would like, but it will happen much, much faster than it would have had we not used the TARP to stabilise our system," Paulson said.

The chiefs of the "Big Three" US automakers were to plead for help from skeptical lawmakers in Senate on Tuesday.

Ford's president Alan Mulally told CNBC earlier that a failure at even one automaker would have widespread consequences.

"The industry is so interdependent," Mulally said. "We're nearly 10 percent of the US GDP, and if one of the automobile manufacturers gets into serious trouble, it has just tremendous implications for the entire industry."

But Paulson confirmed his comments in an interview Monday with The Wall Street Journal saying he preferred to leave the TARP funds for the incoming administration of president-elect Barack Obama, who takes office on January 20.

"If we have learned anything throughout this year we have learned that this financial crisis is unpredictable and difficult to counteract. So early last week, we concluded it was only prudent to reserve our TARP capacity, maintaining not only our flexibility, but that of the next administration," the Treasury chief said.

- AFP