Nov. 11 (Bloomberg) -- The focus of the U.S. government's $700 billion Troubled Asset Relief Program, designed to buy toxic investments from lenders, is shifting to bolstering their capital, according to Bank of America Corp. analysts.

``Direct injection of capital appears the preferred route for government support in financial markets,'' New York-based analyst Jeffrey Rosenberg wrote in a note to clients published yesterday. The move away from buying toxic assets ``may acknowledge the difficulties of implementing an asset purchase program as to the critical determination of price.''

Assistant Treasury Secretary Neel Kashkari, who is overseeing the bailout, gave an update on the progress of the program, known as TARP, yesterday at a conference in New York. The program was approved by lawmakers after a deepening credit crisis roiled stock markets worldwide.

Kashkari's update ``was notable for its lack of focus or details around the asset purchase programs,'' Rosenberg wrote in the report.

Doubts over the Treasury's plans to buy bad debts are reflected in the ABX AAA 07-1 Index, which measures the price of mortgage-backed securities, Bank of America said. The index, which rallied 10 points when TARP was announced, now is lower than it was before the program was put in place, Rosenberg said.

American International Group Inc., once the world's biggest insurer, yesterday said it lost a record $24.5 billion in the third quarter and that it would benefit from a $150 billion rescue package. The Treasury has set aside $250 billion to buy preferred shares in financial companies under its Capital Purchase Program in an effort to stimulate lending.

PNC Financial Services Group Inc. agreed to buy Cleveland- based National City Corp. on Oct. 24 after getting $7.7 billion from the government, prompting lawmakers to demand banks not use taxpayer money to fund acquisitions. Year-end bonus payments at nine banks that received $125 billion from the U.S. are being investigated by House Oversight and Government Reform Committee Chairman Henry Waxman and New York Attorney General Andrew Cuomo.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

Last Updated: November 11, 2008 05:54 EST