Obama Asks Bush to Seek TARP Funds From Congress (Update3)
By Holly Rosenkrantz
bloomberg.com
Jan. 12 (Bloomberg) -- President-elect Barack Obama asked the Bush administration to notify Congress he plans to seek the remaining $350 billion in financial-rescue funds, White House spokeswoman Dana Perino said.
Obama, who takes office on Jan. 20, called President George W. Bush this morning about 20 minutes after Bush said in his final White House news conference that he was willing to act on the president-elect’s behalf if asked.
“President Bush agreed to the president-elect’s request,” Perino said. “We will continue our consultations with the president-elect’s transition team, and with Congress, on how best to proceed in accordance with the requirements of the statute.”
The request will trigger a 15-day period when Congress can vote to deny the release, and it comes as Obama’s aides draft plans for broadening the program beyond the Bush administration’s focus on buying stakes in banks. The changes, being coordinated with the Democratic majority in Congress, are likely to include a new initiative to stem mortgage foreclosures; some analysts also advocate removing assets from banks’ balance sheets and making further injections of capital into financial companies.
Lawmakers from both parties have criticized the Treasury for its shifting strategies for the $700 billion rescue fund, called the Troubled Asset Relief Program, which Congress passed in October.
House Democrats
House Financial Services Chairman Barney Frank, a Massachusetts Democrat, said Jan. 9 he is working with Obama’s team on changes House Democrats are seeking in exchange for agreeing to release the money, including allocating as much as $100 billion to stem foreclosures.
Larry Summers, Obama’s top economic adviser, sent a letter today to leaders of both parties in Congress detailing some of the measures the new administration wants to take to ensure oversight of TARP.
Obama will ask his Treasury Department to enact “strict and sensible conditions” on executive compensation until tax money is repaid, and direct more money to community banks and small businesses as well as individuals and homeowners, Summers wrote.
Summers promised the administration will give a full and public accounting of how the money is used, including repayments from financial institutions that get assistance.
Too Little Accountability
“President-elect Obama believes there has been too little transparency and accountability; too much upside for financial institutions and executives who acted irresponsibly without providing enough help for small business owners, families who are struggling to keep their jobs and make ends meet, and innocent homeowners,” the letter says.
Obama is directing his advisers to work with Congress on “smart aggressive policies” to cut the number of foreclosures and rework bankruptcy laws to revive the housing market, Summers says in the letter.
Frank, a Massachusetts Democrat, has said he will hold a hearing on the legislation tomorrow and plans to bring it to the House floor by Jan. 15.
Representative John Boehner of Ohio, the House Republican leader, and Representative Spencer Bachus, the top Republican on the House Financial Services Committee, have already signaled their opposition to releasing more money for the bailout.
Resistance in Congress
“In September, we were told that the financial system was shaky and that there were solvency issues; that’s no longer true,” Bachus of Alabama said in a Jan. 9 interview. Boehner said yesterday on CBS’s “Face the Nation” program that it would be “irresponsible” for Congress to release additional money.
The action on TARP came in a flurry of messages and phone calls between Obama’s team and the Bush administration.
At his news conference today, Bush said he hadn’t gotten a request from Obama. “I told him that if he felt he needed the $350 billion, I would ask for it,” Bush said.
The news conference ended at 10:04 a.m. and Perino said the call from Obama came at 10:25 a.m. The letter from Summers was released two hours later.
Bush’s request to Congress, on Obama’s behalf, “would be a report to Congress with a formal notification of intent to exercise the authority” and tap the remaining $350 billion, White House spokesman Tony Fratto said in response to an e-mail. Fratto said the timing was still being decided. The Bush administration and Obama’s transition team have been coordinating their steps as the government grapples with a recession.
Easing TARP Transition
The two managers of the TARP fund, Neel Kashkari and James Lambright, have agreed to Treasury Secretary-designate Timothy Geithner’s request that they stay for as long as two months to help ease the transition to the Obama administration, a person familiar with the matter said Jan. 10.
“We’ve had a very, very good dialogue during this transition,” departing Treasury Secretary Henry Paulson said in an interview on Bloomberg Television Jan. 9. “There’s a lot of work that’s been done, but the only thing that matters now is what the next administration is going to decide.”
Paulson allocated most of the first $350 billion of TARP for buying stakes in banks, with other distributions for propping up Citigroup Inc.,American International Group Inc. and automakers General Motors Corp. and Chrysler LLC.
The legislation Frank has proposed would require Obama to put in place a plan to limit mortgage foreclosures by April 1. The bill would also direct the Treasury to require lenders to report quarterly on how they are using the bailout money.
Paulson said in the Jan. 9 interview that he thought at least some of the rest of TARP should be used for further injections of capital into banks.
To contact the reporter on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net.
Last Updated: January 12, 2009 13:53 EST |
