Paulson, Bernanke Stand Their Ground

Updated from 2:46 p.m. EST

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke defended their shifting bailout strategy to Congress Tuesday, resisting calls to use remaining funds to aid homeowners and automakers before the Obama administration takes charge in January.

Paulson told the House Financial Services Committee that buying rotten assets -- the original intent of the $700 billion bailout effort that was scrapped last week -- would have required a "massive commitment" the government just couldn't make. The remaining $350 billion of the initial authorization "simply isn't enough firepower," he said.

So far, the Treasury Department has pledged $250 billion for banks from the Troubled Asset Relief Program, or TARP, and has agreed to devote $40 billion to troubled insurer American International Group (AIG Quote) -- its first slice of funds going to a company other than a bank. That leaves just $60 billion available from Congress' first bailout installment of $350 billion.

While Paulson and Bernanke are opposed to using funds to help the troubled U.S. automakers and homeowners who are at risk of foreclosure, Congress seems intent on passing some type of package in its lame-duck session. General Motors (GM Quote) warned that it will go under unless it gets government help. Its Detroit peers Ford (F Quote) and Chrysler are in troubled waters as well.

There are calls from several quarters to do something to help stabilize the housing and labor markets, as foreclosures and unemployment continue to rise. As with any debate in Washington, the issue is drenched in conflicting ideologies and opinions about how to most effectively repair the economy.