Congressional leaders from both political parties on Wednesday expressed concern over former and current executives profiting from the $700 billion financial bailout program.
Recent news reports revealed executives from six institutions in the program are set to receive billions of dollars.
Senate Democratic Leader Harry Reid and House Speaker Nancy Pelosi urged the Treasury Department to impose strict limits on "golden parachute"-pay to executives of companies getting taxpayer money.
Such "lavish severance packages" for executives at banks being bailed out could weaken public support for the program, they wrote in a letter sent Wednesday.
House Republican Leader John Boehner of Ohio sent a similar letter "questioning Treasury's apparent decision to permit banks to use bailout money to pay bonuses to executives and acquire other banks."
"Mr. Secretary, funds made available under the economic rescue package should not be used to pay for bank acquisitions, raises, and executive bonuses," he wrote. "These are not the types of expenditures you described during your many discussions on Capitol Hill."
The $700 billion plan allows the Treasury to purchase bad mortgage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand.
Paulson also received a scorching missive from House Financial Services Committee Chairman Jerry Nadler of New York, who asked why banks aren't doing more lending after the financial rescue package.
"It is mystifying that the department is apparently doing nothing to ensure that the banks begin to ease the credit crisis by actually lending out the money," Nadler wrote.
"Without the banking system lending money to Americans to make this economy grow, we will most certainly fall into a deep depression," he added. "We can no longer wait and hope for the banks to do the right thing;we must mandate that they lend the money now."
The Treasury Department did not immediately return a phone call seeking comment.
Meanwhile, the Treasury and the Federal Deposit Insurance Corporation is working on a giant foreclosure prevention program that would provide up to $500 billion to $600 billion in government guarantees on home mortgages, FOX Business Network has learned.
The plan would require banks and other mortgage holders to restructure loans based on a homeowner's ability to pay to lower monthly payments for a "time out" period. The plan is designed to protect homeowners during the economic slowdown.
FOX News' Chad Pergram and Trish Turner contributed to this report.