WASHINGTON — U.S. Treasury Secretary Henry Paulson said the federal government has an important role in the stability of financial markets, but added that he "never once" considered using taxpayer money to bail out Lehman Brothers Holdings Inc.

"It's important that regulators remain very vigilant, we're very vigilant," Paulson said at a briefing at the White House. "But we do not take lightly ever putting the taxpayers...on the line to support an institution."

Asked if that meant the government wouldn't step in to rescue ailing firms, Paulson said "Don't read it as 'no more,' read it as that it's important I think for us to maintain the stability and orderliness of our financial system."

"Moral hazard is something I don't take lightly," he added.

Lehman's collapse over the weekend and Bank of America Corp.'s agreement to purchase Merrill Lynch & Co. Inc. sent shudders through the U.S. financial system Monday. Investors' jitters were compounded by the woes of American International Group Inc.

According to reports, the Federal Reserve has hired Morgan Stanley to help it examine AIG's books and potentially negotiate a bridge loan of up to $40 billion for the battered insurer.

Amid questions of if and when the government would offer a lifeline to troubled financial institutions, Paulson said federal dollars aren't being used for a bridge loan for AIG.

"What is going on right now in New York has not got anything to do with any bridge loan from the government," Paulson said. "What is going on in New York is a private-sector effort, again, focused on dealing with an important issue that it's important that the financial system work on right now."

Paulson said the situation in March, when the government backed JPMorgan Chase & Co.'s purchase of Bear Stearns, was different from the current crisis.

"I never once considered once that it was appropriate to put taxpayer money on the line with resolving Lehman Brothers," he said.

But Paulson, who took part in weekend-long meetings in New York to address the crisis, suggested that he is still open to "additional steps."

"I'm committed to working with regulators here and abroad, as well as policymakers in Congress, to take additional necessary steps to maintain the stability and orderliness of our financial markets," he said, without specifying what those steps would be.

Striking a positive note amid the carnage on Wall Street, Paulson gave assurances that U.S. commercial banks are safe and sound, and the broad financial system still robust.

"The American people can remain confident in the soundness and the resilience of our financial system," he said.

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