WASHINGTON, Jan 13 (Reuters) - The Federal Reserve's No. 2 official said on Tuesday the second half of the government's $700 billion financial bailout fund was "essential" to restore credit flows and he backed the idea of using money to reduce foreclosures and further bolster banks.
"Preventable foreclosures harm not only the affected borrowers and their communities but also, through their effects on the housing market, the broader economy and the financial system as well," Fed Vice Chairman Donald Kohn said in testimony prepared for delivery to a U.S. House of Representatives Committee. (Reporting by Mark Felsenthal; Writing by Tim Ahmann; Editing by James Dalgleish)