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Obama and Bush both want the $350 Billion Unspent Bailout Money, Where Will It Go?
Obama seeks remaining $350 billion in bailout funds
By Jeremy Pelofsky and Jeff Mason
WASHINGTON (Reuters) – President-elect Barack Obama on Monday sought the remaining $350 billion of federal financial bailout funds from Congress, pledging a major overhaul that would distribute the money more widely and impose tougher restrictions on recipient companies.
Obama said he asked President George W. Bush to make the request on his behalf so he could take office next week with the funds at the ready to deal with a "still fragile" financial system.
"I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or a weakening of the financial system," Obama told reporters.
Obama and his economic team agreed to new restrictions and changes to the program to address concerns by fellow Democrats, who control both houses in Congress and have been critical of the Bush administration's handling of the funds so far.
The $700 billion rescue program was approved last October to bolster the financial industry as it reeled under the stress of bad mortgage debts and several major institutions were threatened with collapse.
Treasury Secretary Henry Paulson initially sold the program as necessary to buy up troubled assets to free banks to resume lending. But he quickly shifted focus and the first $350 billion was used primarily to make direct investments in financial institutions to buttress their capital.
Many lawmakers have complained that some recipients of the funds continue to pay big executive bonuses and shareholder dividends while loans are still difficult to get.
"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action with respect to areas like housing," Obama said.
"My commitment is that we are going to fundamentally change some of the practices in using this next phase of the program. We're going to focus on housing foreclosures, we're going to focus on small businesses, we're going to focus on what's required to make sure that credit is flowing to consumers and businesses," the president-elect added.
Bush submitted the request to Congress Monday evening, which under the law for the bailout starts a 15-day clock for lawmakers to decide whether to block access to the remaining $350 billion.
A spokesman for Senate Majority Leader Harry Reid said the Senate could vote on the issue as early as Thursday. Democrats have not said when the House of Representatives would vote.
The 18-page request to Congress said the remaining funds would be used partly to help homeowners facing mortgage foreclosures as well as expand existing programs. But it did not offer specific details about how.
Top Senate and House Republicans quickly raised questions about the program.
"I would be hard-pressed to support additional funding for the TARP without sufficient assurances this money will not be wasted, misspent or simply used for more industry-specific bailouts," Senate Republican Leader Mitch McConnell said.
The Treasury has allocated in excess of the first $350 billion in funds from the Troubled Asset Relief Program, but it said on Monday it has disbursed only $265.3 billion so far.
AID FOR CONSUMERS, SMALL BANKS, MUNICIPALITIES
Both Obama and congressional Democrats have pressed for more of the money to go directly to consumers struggling with a wave of home foreclosures and have been pushing for stricter limits to be imposed on companies that receive aid.
Obama will direct his team to ensure that aid gets to smaller banks, businesses and municipalities, as well as helping Americans buy a car or get a college loan, Lawrence Summers, incoming director of the White House National Economic Council, said in a letter to congressional leaders.
"Those are changes the American people are demanding and those are the changes that President-elect Obama is committed to making happen," he said.
Summers said Obama, who takes office on January 20, would also commit to a fuller accounting of the $700 billion program, and place stricter limits on dividends issued by companies getting the aid and compensation paid to chief executives.
The changes Summers outlined closely mirrored changes sought in legislation introduced last week by House Financial Services Committee Chairman Barney Frank.
His bill would require money be spent to slow home foreclosures and to spell out steps to increase the transparency of the program.
"It seems clear that the Obama administration agrees with what we are setting forward and I believe this creates a framework so that the release of these funds can go forward," Frank said in a statement.
Still, the Massachusetts Democrat said he wants the requirements enshrined in law, adding the House would likely vote on his bill on Thursday. "Our motto is going to be 'Trust but verify,'" Frank told Bloomberg Television.
Some Senate Democrats have questioned whether Frank's bill could be passed quickly enough and said a letter of assurances from the incoming Obama administration might suffice.
An Obama administration official said that many, if not all, of the reforms could be done administratively rather than needing new legislation and that they will move quickly to implement them once they take office.
Bush asks Congress for final $350B from bailout
By JIM KUHNHENN
WASHINGTON – Acting at Barack Obama's behest, President George W. Bush on Monday asked Congress for the final $350 billion in the financial bailout fund, effectively ceding economic reins to the president-elect in an extraordinary display of transition teamwork. Obama also sharply criticized Bush's handling of the money and promised radical changes.
Bush's move sets the stage for Obama to get swift access to the $350 billion and the opportunity to overhaul the much-criticized rescue package after taking office next Tuesday. Obama said that it would be "irresponsible ... to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system."
Congress, where the use of the money has met stiff bipartisan skepticism, has 15 days to vote to reject the request. Senate Majority Leader Harry Reid, D-Nev., was considering holding a vote on a resolution of disapproval as early as Thursday in hopes it would be defeated, thus making the funds available about a week after Obama inherits one of the worst financial crises in U.S. history.
"It is clear that the financial system, although improved from where it was in September, is still frail," Obama said, a few hours after seeking Bush's help in requesting the money.
Several officials said the president-elect intends to visit the Capitol on Tuesday to attend a weekly closed-door meeting of Senate Democrats. The meetings often vary widely in topics to be discussed, although it seemed likely Obama would make the case for the bailout funds if the subject came up.
Separately, a Republican official said Obama was dispatching top aides to meet with the Senate GOP rank and file as early as Wednesday to try to win as many GOP votes as possible.
The officials spoke on condition of anonymity, saying they were not authorized to discuss the events.
If Congress goes along, Obama would have a huge cache of bailout money at his disposal — and much more to come in the approximately $800 billion economic stimulus bill that Democratic congressional leaders promise to finish by mid-February.
Congress also is racing to have ready for Obama a $35 billion health insurance program for children.
Obama acted quickly, sending prompt reassurances to congressional leaders that the money would aim to help free credit for small businesses and consumers and reduce the rising number of foreclosures. Separately, Larry Summers, Obama's choice for National Economic Council director, said the new president intends to also impose tougher restrictions and oversight on how the money is spent.
"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action," Obama said.
In a letter to congressional leaders, Summers said an Obama administration would "launch sweeping efforts to address the foreclosure crisis" and, in a bow to Republican critics of the plan, said it would seek to replace the government money with "private investments as quickly as possible."
Obama and the Bush administration had been negotiating for days on how and when to seek access to the second half of the Troubled Asset Relief Program. His economic team also has been working with congressional Democrats, in particular House Financial Services Chairman Barney Frank, D-Mass.
Frank has introduced legislation that would require at least $40 billion of the money be used to reduce the number of foreclosures. His legislation also would set new conditions on institutions that receive the money, including limits on executive compensation. Frank's committee is holding a hearing on the program on Tuesday and the House is scheduled to vote on his legislation this week.
"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," Frank said in a statement Monday.
But other lawmakers were hardly supportive.
House Republican leader John Boehner of Ohio warned that it would be irresponsible to spend the money without a plan showing how the government would eventually extricate itself from underwriting the financial markets.
"I remain disappointed about the way TARP has been managed and how its resources have been spent over the last several months," he said. He added: "I will oppose the release of these taxpayer funds when the matter is considered on the House floor."
Even Democratic allies have been wary.
Sen. Barbara Boxer, D-Calif., said she told Obama Monday morning that she had been hesitant, but liked the changes he was proposing.
"I'm leaning in favor after speaking with him," she said. "I mean I have to hear what he says."
At his news conference Monday, Bush defended his handling of the first $350 billion.
"I readily concede I chucked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression," the president said.
But he credited the program so far with improving the credit environment, saying that "lending is just beginning to pick up."
Congress approved the program in October, authorizing $700 billion to assist the financial industry.
The current administration has already committed the first $350 billion, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy. A small portion of the money has gone to automakers General Motors Corp., and Chrysler LLC.
___
Associated Press Writers Julie Hirschfeld Davis and Erica Werner contributed to this report.
By Jeremy Pelofsky and Jeff Mason
WASHINGTON (Reuters) – President-elect Barack Obama on Monday sought the remaining $350 billion of federal financial bailout funds from Congress, pledging a major overhaul that would distribute the money more widely and impose tougher restrictions on recipient companies.
Obama said he asked President George W. Bush to make the request on his behalf so he could take office next week with the funds at the ready to deal with a "still fragile" financial system.
"I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or a weakening of the financial system," Obama told reporters.
Obama and his economic team agreed to new restrictions and changes to the program to address concerns by fellow Democrats, who control both houses in Congress and have been critical of the Bush administration's handling of the funds so far.
The $700 billion rescue program was approved last October to bolster the financial industry as it reeled under the stress of bad mortgage debts and several major institutions were threatened with collapse.
Treasury Secretary Henry Paulson initially sold the program as necessary to buy up troubled assets to free banks to resume lending. But he quickly shifted focus and the first $350 billion was used primarily to make direct investments in financial institutions to buttress their capital.
Many lawmakers have complained that some recipients of the funds continue to pay big executive bonuses and shareholder dividends while loans are still difficult to get.
"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action with respect to areas like housing," Obama said.
"My commitment is that we are going to fundamentally change some of the practices in using this next phase of the program. We're going to focus on housing foreclosures, we're going to focus on small businesses, we're going to focus on what's required to make sure that credit is flowing to consumers and businesses," the president-elect added.
Bush submitted the request to Congress Monday evening, which under the law for the bailout starts a 15-day clock for lawmakers to decide whether to block access to the remaining $350 billion.
A spokesman for Senate Majority Leader Harry Reid said the Senate could vote on the issue as early as Thursday. Democrats have not said when the House of Representatives would vote.
The 18-page request to Congress said the remaining funds would be used partly to help homeowners facing mortgage foreclosures as well as expand existing programs. But it did not offer specific details about how.
Top Senate and House Republicans quickly raised questions about the program.
"I would be hard-pressed to support additional funding for the TARP without sufficient assurances this money will not be wasted, misspent or simply used for more industry-specific bailouts," Senate Republican Leader Mitch McConnell said.
The Treasury has allocated in excess of the first $350 billion in funds from the Troubled Asset Relief Program, but it said on Monday it has disbursed only $265.3 billion so far.
AID FOR CONSUMERS, SMALL BANKS, MUNICIPALITIES
Both Obama and congressional Democrats have pressed for more of the money to go directly to consumers struggling with a wave of home foreclosures and have been pushing for stricter limits to be imposed on companies that receive aid.
Obama will direct his team to ensure that aid gets to smaller banks, businesses and municipalities, as well as helping Americans buy a car or get a college loan, Lawrence Summers, incoming director of the White House National Economic Council, said in a letter to congressional leaders.
"Those are changes the American people are demanding and those are the changes that President-elect Obama is committed to making happen," he said.
Summers said Obama, who takes office on January 20, would also commit to a fuller accounting of the $700 billion program, and place stricter limits on dividends issued by companies getting the aid and compensation paid to chief executives.
The changes Summers outlined closely mirrored changes sought in legislation introduced last week by House Financial Services Committee Chairman Barney Frank.
His bill would require money be spent to slow home foreclosures and to spell out steps to increase the transparency of the program.
"It seems clear that the Obama administration agrees with what we are setting forward and I believe this creates a framework so that the release of these funds can go forward," Frank said in a statement.
Still, the Massachusetts Democrat said he wants the requirements enshrined in law, adding the House would likely vote on his bill on Thursday. "Our motto is going to be 'Trust but verify,'" Frank told Bloomberg Television.
Some Senate Democrats have questioned whether Frank's bill could be passed quickly enough and said a letter of assurances from the incoming Obama administration might suffice.
An Obama administration official said that many, if not all, of the reforms could be done administratively rather than needing new legislation and that they will move quickly to implement them once they take office.
Bush asks Congress for final $350B from bailout
By JIM KUHNHENN
WASHINGTON – Acting at Barack Obama's behest, President George W. Bush on Monday asked Congress for the final $350 billion in the financial bailout fund, effectively ceding economic reins to the president-elect in an extraordinary display of transition teamwork. Obama also sharply criticized Bush's handling of the money and promised radical changes.
Bush's move sets the stage for Obama to get swift access to the $350 billion and the opportunity to overhaul the much-criticized rescue package after taking office next Tuesday. Obama said that it would be "irresponsible ... to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system."
Congress, where the use of the money has met stiff bipartisan skepticism, has 15 days to vote to reject the request. Senate Majority Leader Harry Reid, D-Nev., was considering holding a vote on a resolution of disapproval as early as Thursday in hopes it would be defeated, thus making the funds available about a week after Obama inherits one of the worst financial crises in U.S. history.
"It is clear that the financial system, although improved from where it was in September, is still frail," Obama said, a few hours after seeking Bush's help in requesting the money.
Several officials said the president-elect intends to visit the Capitol on Tuesday to attend a weekly closed-door meeting of Senate Democrats. The meetings often vary widely in topics to be discussed, although it seemed likely Obama would make the case for the bailout funds if the subject came up.
Separately, a Republican official said Obama was dispatching top aides to meet with the Senate GOP rank and file as early as Wednesday to try to win as many GOP votes as possible.
The officials spoke on condition of anonymity, saying they were not authorized to discuss the events.
If Congress goes along, Obama would have a huge cache of bailout money at his disposal — and much more to come in the approximately $800 billion economic stimulus bill that Democratic congressional leaders promise to finish by mid-February.
Congress also is racing to have ready for Obama a $35 billion health insurance program for children.
Obama acted quickly, sending prompt reassurances to congressional leaders that the money would aim to help free credit for small businesses and consumers and reduce the rising number of foreclosures. Separately, Larry Summers, Obama's choice for National Economic Council director, said the new president intends to also impose tougher restrictions and oversight on how the money is spent.
"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action," Obama said.
In a letter to congressional leaders, Summers said an Obama administration would "launch sweeping efforts to address the foreclosure crisis" and, in a bow to Republican critics of the plan, said it would seek to replace the government money with "private investments as quickly as possible."
Obama and the Bush administration had been negotiating for days on how and when to seek access to the second half of the Troubled Asset Relief Program. His economic team also has been working with congressional Democrats, in particular House Financial Services Chairman Barney Frank, D-Mass.
Frank has introduced legislation that would require at least $40 billion of the money be used to reduce the number of foreclosures. His legislation also would set new conditions on institutions that receive the money, including limits on executive compensation. Frank's committee is holding a hearing on the program on Tuesday and the House is scheduled to vote on his legislation this week.
"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," Frank said in a statement Monday.
But other lawmakers were hardly supportive.
House Republican leader John Boehner of Ohio warned that it would be irresponsible to spend the money without a plan showing how the government would eventually extricate itself from underwriting the financial markets.
"I remain disappointed about the way TARP has been managed and how its resources have been spent over the last several months," he said. He added: "I will oppose the release of these taxpayer funds when the matter is considered on the House floor."
Even Democratic allies have been wary.
Sen. Barbara Boxer, D-Calif., said she told Obama Monday morning that she had been hesitant, but liked the changes he was proposing.
"I'm leaning in favor after speaking with him," she said. "I mean I have to hear what he says."
At his news conference Monday, Bush defended his handling of the first $350 billion.
"I readily concede I chucked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression," the president said.
But he credited the program so far with improving the credit environment, saying that "lending is just beginning to pick up."
Congress approved the program in October, authorizing $700 billion to assist the financial industry.
The current administration has already committed the first $350 billion, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy. A small portion of the money has gone to automakers General Motors Corp., and Chrysler LLC.
___
Associated Press Writers Julie Hirschfeld Davis and Erica Werner contributed to this report.
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