The Senate voted Thursday to give President-elect Barack Obama $350 billion for a second economic rescue package, but resistance remains in the House.
Mindful of this, a top Obama adviser promised in a letter to Congress Thursday that the process for spending the money from the Troubled Assets Relief Program (TARP) will be reformed.
“No substantial new investments will be made under this program unless President elect Obama has reviewed the recommendation and agreed that it should proceed,” said Larry Summers, Mr. Obama’s nominee to chair the National Economic Council inside the White House.
Mr. Summers’ proposed reforms would bring transparency to the process of giving federal funds to ailing financial institutions, limit compensation for executives at such firms, and place restrictions on firms that receive bailouts.
“With these safeguards, it should be possible to improve the effectiveness of our financial stabilization efforts,” Mr. Summers wrote.
One of the main reasons that lawmakers and taxpayers have grown increasingly angry over the handling of the first $350 billion is that the Bush administration did not make public who they gave the money to, how much they gave them, and other such basic details.
Under Mr. Obama’s plan, “for each investment, the Treasury will make public the amount of assistance provided, the value of the investment, the quantity and strike price of warrants received, and the schedule of required payments to the government.”
The Obama administration will also require that “healthy banks without major capital shortfalls will increase lending above baseline levels,” and mandate “that executive compensation above a specified threshold amount be paid in restricted stock or similar form that cannot be liquidated or sold until the government has been repaid.”