- The Washington Times - Monday, November 17, 2008

House Speaker Nancy Pelosi and other senior Democrats will get their first progress report on the $700 billion bank bailout Congress approved last month at a private briefing Monday by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke.

A public hearing of the House Financial Services Committee with Mr. Paulson, senior banking regulators and bank industry lobbyists is set for Tuesday morning.

A number of lawmakers have complained that Mr. Paulson and the Treasury Department have radically changed the thrust of the program while Congress was in recess for the Nov. 4 election. Mr. Paulson originally sought the money to buy up “toxic” mortgage and other assets held by banks that he said were causing the nation’s credit markets to seize up.

But Mr. Paulson last week confirmed that the first $350 billion under the “Troubled Asset Relief Program,” or TARP, will be devoted almost exclusively to injecting capital directly into banks through the taxpayer-financed purchase of preferred stock. Dozens of banks, including virtually all of the nation’s largest lenders, have received bailout money so far through the program. Other financial firms, including American Express, have transformed themselves into bank holding companies solely for the purpose of qualifying for government money.

The authority to buy bank stock was included in the bailout legislation over Mr. Paulson’s initial objections. But some senior congressional Democrats say the Treasury has not attached enough conditions to the banks who get the TARP funds.

They say some banks have used the money to boost their capital or to acquire weaker competitors, not to make new loans or provide relief to homeowners facing foreclosure.

Congressional sources said the Bush administration has informed lawmakers that it will not be tapping the second $350 billion under the program before leaving office in January. Under the terms of the emergency legislation, Congress must approve the second wave of spending.

White House spokesman Tony Fratto declined to discuss the administration’s plans, saying the program decisions were being left to Mr. Paulson.

“He said he’s working to continue to design and develop programs, and when it’s the right time to use them Treasury will announce it. And if it then makes sense to go to Congress, he’ll recommend we request to draw down the second $350 billion,” Mr. Fratto said.