North Dakota Sen. Kent Conrad, D-N.D., sent Treasury Secretary Hank Paulson a letter Thursday, telling him that he disapproves of the way the $700 billion bailout package is being doled out to financial firms.

When Congress approved the bailout in early October, the idea behind it was to buy up toxic assets held by financial firms in order to thaw out freezing credit markets. Instead, Conrad said the money is being "inappropriately" spent on things such as lavish conferences, employee bonuses and corporate takeovers of healthy financial firms.

"In particular, the accounts of AIG's spending on lavish employee rewards, travel and retreats are outrageous," Conrad wrote in his letter. "It is critical for Treasury and the Federal Reserve to clarify which institution has primary responsibility for making sure AIG is taking appropriate actions."

Conrad, the chairman of the Senate Budget Committee who played a key role in drafting the financial rescue plan, admitted that Congress should have put more limitations on the bailout, which was passed after a whirlwind weekend of negotiations and a potential financial meltdown on the horizon.

"Knowing what we know now, I think it would have been better to have more restrictions on Paulson's ability to determine how the money is used," Conrad said, adding that more should be done to help the struggling housing sector.

Conrad and Rep. Earl Pomeroy, D-N.D., voted for the bailout package, which passed Congress in early October. Sen. Byron Dorgan, D-N.D., did not vote for the bailout package, citing flimsy regulatory powers to oversee where the bailout money would go.

University of North Dakota economist David Flynn called the treasury department's handling of the bailout "a real hatchet job."

"They didn't sell this program appropriately," Flynn said. "They're not instilling confidence in the financial markets and they're not instilling confidence in the consumers. You're not getting the tangible outcomes."

Flynn said Conrad is right to be critical of Paulson, adding that the Treasury does need flexibility in the way it distributes money but should also have more oversight.

Conrad said he still supports the idea behind the bailout package, adding that his disagreement stems from Paulson's decision.

The Treasury has spent less than $350 billion of the bailout so far, Conrad said. Paulson also will have to justify to Congress why his department should get the remaining $350 billion before he's allowed to spend it.

"Clearly the rescue package helped, but now when the auto industry crisis hit, that again has frozen up the credit markets," Conrad said. "The credit markets are absolutely critical to recovery."

Conrad, like Dorgan, said he would not support a proposed $25 billion bailout to the nation's three largest automakers unless it had strong regulations and guidelines to follow.

Pomeroy has said he would need more details about such a proposal before supporting one.

(Reach reporter Brian Duggan at 223-8482 or brian.duggan@bismarcktribune.com.)