- The Washington Times - Saturday, January 10, 2009

House Financial Services Committee Chairman Barney Frank Friday laid out a series of conditions he will demand before the Treasury Department can spend the second half of the $700 billion Wall Street bailout fund that Congress approved in October.

Reflecting widespread unhappiness on Capitol Hill over how the Bush administration disbursed the first $350 billion under the Troubled Asset Relief Plan, or TARP, Mr. Frank said he would insist that at least $40 billion be set aside to aid homeowners facing foreclosure and that there be tighter limits on executive pay and acquisitions by the banks and financial institutions receiving TARP money.

“We are Reaganites, we intend to trust but verify,” the Massachusetts Democrat said.

Under the law setting up the bailout fund, Congress has the right to veto spending the second half of the TARP money. Treasury officials say that have spent about $266 billion of the original fund, and with pledges and other commitments they are close to using up the first $350 billion.

House Democratic Majority Leader Steny H. Hoyer, Maryland Democrat, said he hoped to have a bailout bill ready for a floor vote by the end of next week, whether Mr. Frank’s committee has time to mark up the bill or not. He said the tight schedule was needed because it was not clear how soon President Bush or President-elect Barack Obama may come to Congress for additional funds.

The bailout fund, designed to prevent what Treasury Secretary Henry M. Paulson Jr. said was an imminent implosion of the nation’s credit markets, has come under fire from both parties almost from the day it was implemented.

Critics say Mr. Paulson and Treasury have drastically altered the plan that was sold to Congress, largely abandoning plans to buy up “toxic” mortgages and other assets on the books of the nation’s banks. Instead, TARP money has been used to buy stock in dozens of large and mid-sized banks in hopes of spurring them to make new loans. Mr. Bush also dipped into the TARP kitty last month to provide more than $14 billion in emergency aid to two of the Big Three automakers after Congress refused to act.

Democrats say hardly any of the bailout money has gone to struggling homeowners. They also complain that the Treasury has provided too little information on how it is handing out the money and tracking what TARP beneficiaries do with the taxpayer aid.

Many conservative Republicans opposed the idea of a government bailout of private lenders on principle, and they say they now oppose giving the administration the second $350 billion under any circumstances. House Minority Whip Eric Cantor, Virginia Republican, pressed Mr. Hoyer to allow an amendment to the Frank bill that would deny Treasury the second $350 billion altogether.

Alabama Rep. Spencer Bachus, ranking Republican on the House Financial Services Committee, reluctantly supported the original bailout bill in October and has signaled he is leaning against approving the second $350 billion.

An oversight commission set up by Congress to monitor the TARP issued a report Friday that found “significant gaps” in Treasury’s monitoring of the program, and agreed with Mr. Frank that almost no money had gone to help homeowners.

In addition to money specifically earmarked for foreclosure relief, Mr. Frank’s outline would limit the ability of banks to acquire other banks with TARP money. There also would be new constraints on executive salaries at companies that accept TARP money - constraints that would apply retroactively to banks that already have accepted money from the bailout fund.

The Financial Services Roundtable, which includes 100 of the country’s biggest financial firms, said it welcomed efforts to boost mortgage lending through the TARP program but balked at the idea of applying the executive-pay restrictions retroactively to companies that already have accepted taxpayer funds.

Mr. Frank said of the banks’ complaints: “If they don’t like it, they can give the money back.”

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