Bush requests bank bailout funds

President Bush on Monday formally asked Congress for the second half of the $700 billion Wall Street bailout package at the behest of President-elect Barack Obama as Democratic lawmakers said they have more faith in the incoming administration to spend the money wisely.

The move came as Mr. Obama’s top economic adviser, Lawrence H. Summers, seeking to overcome deep skepticism on Capitol Hill, promised new aid to homeowners and tighter controls on banks if Congress approves use of the remaining $350 billion from the Treasury Department’s Troubled Asset Relief Program, or TARP.

“We should not allow our disappointment at the Bush administration’s poor handling of the TARP program to prevent the Obama administration from using the funds in more appropriate ways,” said House Financial Service Committee Chairman Barney Frank, Massachusetts Democrat.

Echoing complaints from both parties on Capitol Hill, Mr. Obama said TARP’s deals must be more transparent in the future and must focus more on helping smaller banks and homeowners, not just the nation’s financial giants.

“I think many of us have been disappointed with the lack of clarity, the absence of transparency” in the program, Mr. Obama said after a luncheon meeting with Mexican President Felipe Calderon.

But with the Treasury on pace to exhaust the first $350 billion approved under the program, Mr. Obama made it clear that more bailout money would be needed.

“It is clear that the financial system, although improved from where it was in September, is still frail,” he said.

Under the emergency Wall Street rescue enacted in October, Congress can vote to block the second $350 billion payout within 15 days after the White House requests it. The president can veto the congressional action, requiring a two-thirds vote in the Senate and House to block the new spending. Despite deep misgivings over the TARP so far, Democrats on Capitol Hill are desperate to avoid a veto fight with Mr. Obama just days after he takes office next week.

In a move coordinated with congressional Democrats over the weekend, Mr. Summers, Mr. Obama’s choice to head the National Economic Council, outlined a series of policies and principles that the Obama administration will use for future TARP bailout deals.

“The president-elect shares the frustration of the American people that we have seen too little effect from this rescue plan on jobs, income and the ability of responsible homeowners to stay in their homes,” Mr. Summers wrote in a letter to the Republican and Democratic leaders of both houses. “He believes the American people are right to be angry with the way this plan has been implemented.”

In addition to the lack of direct aid for homeowners, TARP critics say, the bailout has been inconsistently administered by Treasury Secretary Henry M. Paulson Jr. and has not sparked the surge of new lending anticipated from the banks and other financial institutions getting taxpayer aid. A congressional oversight board last week said there was virtually no tracking of how the TARP money was being used.

Mr. Summers said in his letter that Mr. Obama and Treasury Secretary-designate Timothy F. Geithner would pursue “aggressive policies” to aid homeowners facing foreclosure and would include tougher reporting requirements and oversight of banks if the new TARP money is approved.

But the letter stopped short of Mr. Frank’s explicit call for at least $40 billion in TARP money targeted for homeowners and did not endorse congressional efforts to impose retroactive executive pay restraints on banks and financial firms that have already accepted bailout money. The incoming Obama administration would limit but not ban altogether the use of TARP money by banks to buy other banks, a practice widely criticized on Capitol Hill.

Mr. Frank said he planned to push ahead with a bill in the House this week mandating a number of strict conditions for future bailout deals, which could come to a vote on the floor as early as Wednesday.

Sen. Christopher J. Dodd, Connecticut Democrat and chairman of the Senate Banking, Housing and Urban Affairs Committee, said Congress “would have trouble passing this bill” if the administration had not signaled changes in how the bailout fund was run. But he also said it was likely that a promise of good intentions from Mr. Obama and his team may be enough to satisfy unhappy lawmakers.

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