Amid criticism that his plan does not adequately address economic stresses on consumers, U.S. Treasury Secretary Henry Paulson is changing direction for the allocation of last month's $700 billion bailout.

Nov. 12 (Bloomberg) -- U.S. Secretary Henry Paulson plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets.

"Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards,'' Paulson said today in a speech at the Treasury in Washington. "This is creating a heavy burden on the American people and reducing the number of jobs in our economy.''

Paulson's remarks are an acknowledgement that the centerpiece of the $700 billion bailout request to lawmakers was ill-conceived. Neel Kashkari, the Treasury official who heads the rescue program, told legislators last month that officials shifted to buying stakes in banks because it was a faster way revive capital markets and the economy.

"I will never apologize for changing a strategy or an approach if the facts change,'' Paulson said.

Treasury and Federal Reserve officials are exploring a new "facility'' to bolster the market for securities backed by assets, Paulson said, adding later that the program would be "significant in size.'' Officials are considering using a portion of the bailout money to "encourage private investors to come back to this troubled market,'' he said.

He could run into trouble implementing the decision though:

Lawmakers, who could reject Treasury requests for the remaining $350 billion, are pushing for aid to automakers including General Motors Corp. Paulson is resisting.

Automakers "are a key part of our manufacturing industry and manufacturing is critical,'' Paulson said in response to a question after his prepared remarks. "We need a solution, but the solution has got to be one that leads to viability.''

But here's the most interesting part:

Paulson said he has no timeline for notifying Congress of his intent to use the remaining [Troubled Asset Relief Program] funds, and reiterated that he's "comfortable'' that $700 billion is "what we need'' to stabilize the financial system.

Anyone agree that October's bailout attempt will be enough to stabilize the financial system?

Via Bloomberg