The Treasury’s Troubled Asset Relief Program will play a big role in strengthening the financial system, restoring credit flow, and can be used to “avoid preventable foreclosures,” Federal Reserve Board vice chairman Donald L. Kohn told Congress yesterday.

“Regarding the future, the remaining TARP funds will play an essential role in further strengthening the financial system and restoring normal credit flows. An important use of these funds will be to step up efforts to avoid preventable foreclosures,” Kohn testified before the House Financial Services Committee, according to prepared text released by the Fed. “Preventable foreclosures harm not only the affected borrowers and their communities but also, through their effects on the housing market, the broader economy and the financial system as well.  Although a number of efforts are underway to address the problem of preventable foreclosures, more needs to be done.”

Kohn added that TARP funds could be used to “support programs to help restart key credit markets” and strengthen financial institutions.

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