Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson are expected to provide greater insights into the shift when they testify Tuesday before the House Financial Services Committee.

Mr Paulson, who is overseeing the bailout program for the Bush administration, changed course and announced last week that the government would not use any of the money to buy rotten mortgages and other bad assets from banks. That had been the centerpiece of the plan when Mr Paulson and Mr Bernanke originally pitched it to lawmakers.

'Our assessment ... is that this is not the most effective way' to use the bailout money, Mr Paulson said.

Instead, Mr Paulson said the department would focus on rolling out a capital injection program to pour US$250 billion into banks in return for partial ownership stakes in them.

It would also search for new ways to boost the availability of auto loans, student loans and credit cards, which have become harder to get due to the credit crisis, he said.

Specifically, the department, along with the Federal Reserve, are exploring using some of the bailout money to bankroll a new loan facility. The aim: helping companies that issue credit cards, make student loans and finance car purchases.

The idea behind the capital injection program is for banks to use the money to rebuild reserves and lend more freely to customers.

However, banks do have the leeway to use the money for other things, such as buying other banks or paying dividends to investors. That has touched a nerve with some lawmakers.

Locked up lending is a prime reason why the United States is suffering through the worst financial crisis since the Great Depression of the 1930s. All the fallout from the housing, credit and financial crises have badly hurt the economy, which is almost certainly in recession, analysts say.

In an interview published on Tuesday in The Washington Post, Mr Paulson said he was also working on a proposal that would allow the government to take over a wide range of financial institutions - not just banks - that are in danger of collapse.

The administration, however, has remained opposed to using some of the bailout money to help troubled US automakers or to provide guarantees for mortgages at risk of falling into foreclosure, another huge source of distress for the economy.

Rep Barney Frank of Massachusetts, chairman of the panel, has been tapped by House Speaker Nancy Pelosi to draft an aid package for Detroit. The auto companies are seeking US$25 billion for emergency loans.

In a break with the administration stance, Ms Sheila Bair, chairman of the Federal Deposit Insurance Corp., who also will testify on Tuesday, recently proposed using US$24 billion of the bailout money to help some American households avoid foreclosure.

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

Congressional officials said Paulson indicated he is unlikely to tap the remaining US$350 billion before the administration leaves office on Jan 20. That would mean the incoming Obama administration would decide whether and how the money should be spent. The congressional officials spoke on condition of anonymity, saying they were not authorised to disclose the developments.

On Monday, Citigroup, widely seen as the sickest Wall Street bank after posting four consecutive quarterly losses, announced it will make some of the most severe cuts in the history of US business - 53,000 jobs - as it tries to slash costs and get back to basics before it's too late.

The cuts, which will leave Citi about 20 per cent smaller, are the latest step in a stunning remaking of the American banking landscape since the financial meltdown, an upheaval that has included the demise of storied investment houses and the conversion of others into commercial banks.

Citigroup CEO Vikram Pandit met with employees on Monday and laid out the bank's strategy in stark terms: 'We are a bank. What does a bank do? A bank takes deposits and puts them to work by investing and making loans.'

Challenger, Gray & Christmas Inc., which has tracked downsizing since 1993, said Citi's cuts are the second-most on record. IBM announced in July it was cutting 60,000.

At its peak in 2007, Citi had 375,000 employees.

About half the cuts are expected to come from selling off parts of the business. The bank has already said it would sell Citi Global Services and its German retail banking businesses, and it plans to unload more, a spokesman said. The rest of the cuts are expected to come from layoffs and attrition.

The government invested US$25 billion in Citigroup as part of the financial rescue package.

As investors digested that news, financial stocks had a bad day.

Citigroup stock fell 63 cents, or more than 6 per cent, to $8.89. The Dow Jones industrials, nearing their lowest close since the financial meltdown began in Sept, lost nearly 224 points to close at 8,273.58. -- AP