Paulson accused of 'bait-and-switch'

WASHINGTON, Nov. 18 (UPI) -- U.S. Rep. Gary Ackerman, D-N.Y., accused Treasury Secretary Henry Paulson of a "bait-and-switch scheme" by changing plans for stabilizing the economy.

When Paulson asked Congress for the authority to act to stabilize the economy, he said part of the $700 billion package would be used to buy up "ill-liquid" assets but more recently he said he had abandoned that strategy in favor of injecting funds into banks.

During a hearing Tuesday of the U.S. House of Representatives Committee on Financial Services, Ackerman said Paulson appears to be "flying a $700 billion plane by the seat of your pants."

Ackerman said the government's "bait-and-switch scheme" was second only to the Iraq war.

Paulson took issue with the characterization, saying that in the two weeks it took Congress to approve the Treasury's authority to act, the situation worsened markedly, forcing a change in direction.

"We certainly did not anticipate everything that happened," Paulson said. "We did anticipate the need for broadened authority. We went to the heart of the problem, the financial system and capitalization. We used a strategy that would work more effectively."

Earlier, Paulson explained the key to the situation is "to keep lending going."

"I believe our actions to stabilize (the Federal National Mortgage Association) and (the Federal Home Loan Mortgage Corporation) … have been critical," he said. "More needs to be done and we're going to keep working on it."