A committee overseeing the $700 million US banking bailout today criticised the financial rescue plan for not doing enough to prevent ordinary Americans from losing their homes.

A report by the four-member congressional committee said that the Troubled Asset Relief Programme (TARP) designed by Henry Paulson, the US Treasury Secretary, did not have a proper strategy for stabilising the financial markets and needed to make clearer its plans.

Mr Paulson has already spent $335 billion of the $700 billion allocated to the TARP.

It is not known whether he will apply for the remainder of the cash before President George W Bush's term in office ends next month, particularly given that senators have expressed reluctance to allow him any more cash under the current terms of the rescue plan.

Today's report said: "Households that are struggling with debts — mortgages, student loans, credit cards, car loans, payday loans and other credit devices — are at the centre of the current crisis ... For Treasury’s disbursements to be effective in the context of the broader economic downward spiral, Treasury must have a strategy that addresses this underlying problem."

Mr Paulson had already been criticised for abandoning his original plan to use the cash to buy toxic assets, such as securitised mortgages from the banks, and instead to use the TARP to provide capital directly to the banks.

The committee is one of four layers of TARP oversight. The programme is also overseen by an inspector general, a committee headed by Ben Bernanke, the Federal Reserve chairman, and the Government Accountability Office.

Elizabeth Warren, the committee's chairman and a Harvard law professor, is due to testify to the House of Representatives' Financial Services Committee today.

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