Critics are complaining that the administration is not being tough enough on the banks who are receiving the assistance, that the original centerpiece of the program - government purchases of troubled assets - has been left to languish and that homeowners struggling with mortgage foreclosures are not getting the help they need to stay in their homes.
And in addition to all of those complaints, the administration is having to contend with a number of industries, led by auto companies, who contend that they deserve a share of the rescue funds.
President-elect Obama, when he met with President Bush at the White House on Monday, urged Bush to support aid for struggling automakers and Democrats in Congress have begun drafting legislation that would give General Motors, Ford and Chrysler access to $25 billion of the rescue funds.
The Bush administration has already committed $250 billion of the money for the purchase of bank stock, giving financial institutions an infusion of cash that the government hopes they will use to resume more normal lending operations and address the most severe credit crisis in decades. On Monday, the administration announced that it was allocating another $40 billion as an investment in troubled insurance giant American International Group.
Those decisions leave only $60 billion left to allocate of the first $350 billion in funds approved by Congress and that is before any money has been spent to buy troubled assets, which originally had been the administration's chief reason for requesting the bailout program, which Congress approved on Oct. 3.
The government on Tuesday sought to address another of the complaints of critics, that not enough is being done to help Americans deal with record levels of mortgage defaults.
The Federal Housing Finance Agency, which seized control of Fannie Mae and Freddie Mac in September, announced a plan designed to speed up the process for renegotiating hundreds of thousands of delinquent loans held by the two mortgage giants.
Officials hope the new approach, which goes into effect Dec. 15., will become a model for loan servicing companies, which collect mortgage payments and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.
The plan could have tremendous importance because Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. Government officials, however, did not have an estimate of how many people would qualify for the new program.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Borrowers would get help in several ways: The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.
While lenders have beefed up their efforts to aid borrowers over the past year, their earlier efforts have not kept up with the worst housing recession in decades. The new approach was also attacked by critics for not going far enough.
"Instead of a massive foreclosure-prevention program, we wait for a homeowner to be in a failing position before doing anything, which often is too late," said John Taylor, president and CEO of the National Community Reinvestment Coalition.
Senate Banking Committee Chairman Christopher Dodd, who has scheduled hearings for Thursday on the overall rescue program, called the loan modification program a "constructive step forward" but he said it should not be a substitute for a program being pushed by Sheila Bair, head of the Federal Deposit Insurance Corp., which would use part of the $700 billion to provide government guarantees for mortgages that are modified to lower payments, thus providing an incentive for banks to rework the loans.
Bair also criticized the effort as falling short and urged adoption of her program for mortgage guarantees.
"As we lend and invest hundreds of billions of dollars to help institutions suffering leveraged losses from defaulting mortgages, we must also devote some of that money to fixing the front-end problem - too many unaffordable home loans," she said in a statement.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
The new initiative announced Tuesday followed announcements from several major banks that they plan to do more.
Citigroup said late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.
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