WASHINGTON - THE speaker of the US House of Representatives urged the Bush administration on Friday to ensure that some of the federal government's investments in banks be used to free up the flow of credit and not just be hoarded by those banks.

In a letter to Treasury Secretary Henry Paulson, Speaker Nancy Pelosi, a California Democrat, urged him 'to send a clear message to participating financial institutions about Congress' intent to relieve the credit crunch and get our economy moving again'.

Mrs Pelosi's concerns, she said, came following reports suggesting that financial institutions might hold the US$250 billion (S$370 billion) in federal funds 'for extended periods of time instead of using part of it to facilitate the flow of credit in our financial markets'.

The US$250 billion represents the first chunk of a US$700 billion fund the Treasury Department has from a newly enacted Wall Street bailout package passed by Congress and signed into law by President George W. Bush.

Mrs Pelosi said that if banks were to hold onto the federal funds for an extended period of time, that would run counter to Congress' intent in passing the legislation, which aims to get credit back into the pipeline to combat a deeper economic downturn that already has made it harder for consumers to get loans.

Nine of the largest US banks are slated to receive US$125 billion in capital infusions from Washington, as details are worked out on how the additional US$125 billion is dispensed.

The American Bankers Association on Friday asked Mr Paulson to clarify the purpose of the government's capital injection plan amid worries some banks fear being labelled as needing a bailout or of being subjected to unknown government requirements as part of the programme. -- REUTERS