Bush OKs Obama's request for $350-billion balance of bailout fund
Congress now has 15 days to block the money or it will be automatically released. Obama official says reducing home foreclosures will be a key purpose for the second half of the fund.
Reporting from Washington — President Bush today agreed to a request from President-elect Barack Obama to notify Congress to access the second half of the $700-billion financial bailout fund, starting a 15-day period in which lawmakers must act to block the money before it is automatically released.
In a letter to congressional leaders, one of Obama's top economic advisors told lawmakers "the need is imminent and urgent" for the remaining $350 billion of the Troubled Asset Relief Program, or TARP.
But acting to ease anger in Congress about problems with how the Treasury Department spent the first half of the bailout fund, Lawrence Summers, who Obama has chosen to head the National Economic Council, promised in the three-page letter that the new administration would "act both quickly and wisely." He also outlined changes Obama plans to make in using the second part of the fund, including more transparency in how the money is spent and "a sweeping effort" to reduce home foreclosures.
"He believes the American people are right to be angry with the way this plan has been implemented," Summers wrote to House Speaker Nancy Pelosi (D-Calif.), House Minority Leader John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.). "We cannot allow the failures of the past to prevent us from doing what we must to secure America's future."
Democrats and Republicans in Congress have been upset with the lack of transparency in how Treasury Secretary Henry Paulson has used the first half of the bailout money. Many lawmakers also are upset that Paulson did not use the money to buy toxic mortgage-backed securities, as he had initially indicated he would.
Instead, Paulson used flexibility in the legislation to pump most of the money into banks in exchange for equity stakes in hopes of loosening the credit crunch. But banks largely have not lent the money. Some key congressional Democrats also are unhappy that Paulson has not used any of the money to help homeowners facing foreclosure.
Summers said that Obama has directed his Cabinet designees and choices for White House staff to work with Congress to "implement aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners." Obama officials also want to change bankruptcy laws and strengthen government programs designed to address the foreclosure crisis.
