Focusing the 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 original plan, Paulson said.

Buying those toxic debts would have required a "massive commitment" of the bailout money, Paulson said in testimony before the House Financial Services Committee. As economic and financial conditions quickly worsened, it became clear that the first installment of the money -- US$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 strategy accordingly, the Treasury chief said. "If we have learned anything throughout this year, we have 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 US$700 billion to buy bad assets from banks. That had been the focus of the plan Paulson and Bernanke originally pitched to lawmakers.

"There is no playbook for responding to turmoil we have never faced," Paulson said. "We adjusted our strategy to reflect the facts of a severe market crisis."

However, Rep. Barney Frank, the committee's chairman, worried the administration was sending confusing signals to taxpayers and Wall Street investors, and said he has "serious concerns about the improvised and ad hoc nature" of Treasury's implementation of the program.

"We all understand that when conditions on the ground change, policymakers must be agile enough to adjust to those changed circumstances," the Massachusetts Democrat said. "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."

Going forward, the ability of Treasury to use the bailout program for capital injections and to take other steps to stabilize the financial system -- including any actions needed to prevent the disorderly failure of a major financial institution -- "will be critical for restoring confidence and promoting the return of credit markets to more normal functioning," Bernanke told the panel.

Paulson said the department will focus on rolling out a capital injection program to pour US$250 billion into banks in return for partial ownership stakes in them. Treasury on Monday confirmed that it supplied US$33.56 billion to 21 banks in a second round of payments. That followed the initial US$125 billion allocated to nine of the country's largest banks, and brought the total earmarked payments to US$158.56 billion.

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