The U.S. government's $700 billion bailout fund can be used to purchase debt and equity from domestic auto makers, U.S. Treasury Secretary Timothy Geithner told congressional leaders this week.

In letters dated Wednesday to the chairmen of several key committees, Geithner said he and U.S. Federal Reserve Chairman Ben Bernanke have determined that the purchase of auto makers' debt is "necessary to promote financial market stability."

Moreover, Geithner said he and Bernanke have concluded the debt qualifies as a "troubled asset," making it eligible for purchase through the bailout fund. The fund was originally created as a way to cleanse bank balance sheets of risky mortgage-related assets that have constrained their lending ability.

Geithner said certain companies involved in the auto manufacturing sector already have asked the Treasury Dept. purchase debt obligations or equity. However, he declined to provide names or further details.

Treasury spokeswoman Jenni Engebretson did not immediately respond to a request for additional information.

The Treasury Dept. already has provided nearly $25 billion in loans to General Motors (GM), GMAC LLC, Chrysler LLC and Chrysler Financial, aiming to keep the struggling auto makers out of bankruptcy court. It also has provided $5 billion in aid to auto suppliers and received $5 billion in preferred stock from GMAC.

Still, Chrysler on Thursday filed for Chapter 11 bankruptcy protection after lenders rejected a deal to cut the company's debt and keep the Detroit icon out of court.

-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; meena.thiruvengadam@dowjones.com