WASHINGTON, Dec 4 (Reuters) - The U.S. Treasury Department is considering new steps to strengthen bank capital and measures to lessen home foreclosures under a $700 billion financial rescue program, a senior official said on Thursday.
"We continue to look at additional capital strategies, and as we do so, we will assess the impact of the first capital program," said Neel Kashkari, the Treasury Department official charged with administering the Troubled Assets Relief Program.
"We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications," he said in prepared remarks prepared to a Senate subcommittee hearing in Chicago. Kashkari, however, provided no details on what further steps the Treasury might consider.
Kashkari said the administration wants to "maintain flexibility and firepower" for this administration and the next one as it thinks about new uses of funds under the program.
The Bush administration has been under pressure from U.S. lawmakers to use the fund to help stem a mounting tide of home foreclosures, with many endorsing a plan from the Federal Deposit Insurance Corp that Treasury Secretary Henry Paulson has said would be a misuse of financial rescue funds.
In testimony prepared for the same panel, a senior FDIC official, urged more aggressive government action to help strapped homeowners avoid defaulting on their mortgages.
"A major acceleration in loan modifications is essential if we are to stem the growing flood of foreclosures," said Michael Krimminger, an adviser to FDIC Chairman Sheila Bair.
Under the FDIC proposal, the government would seek to encourage lenders to modify loans by offering to share the cost of any defaults. The FDIC has said its proposal could prevent about 1.5 million foreclosures.
"The stakes are too high to rely exclusively on industry commitments to apply more streamlined loan modification protocols," Krimminger said.
So far, the Treasury has tapped the congressionally approved financial rescue fund primarily to inject capital into U.S. banks. Krimminger said supplying funding to financial institutions will not be enough by itself to restore lending and stabilize housing and financial markets.
"If we are to achieve stability in our credit and financial markets we cannot simply provide funds to market participants," he said. "We must address the root cause of the financial crisis -- too many unaffordable mortgages creating too many delinquencies and foreclosures." (Reporting by Mark Felsenthal and John Poirier; Editing by Neil Stempleman)