UPDATE 1-U.S. House bill proposes trust for TARP holdings

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WASHINGTON, Sept 17 (Reuters) - The top Republican on the U.S. House of Representatives' Financial Services Committee on Thursday introduced legislation to set up a trust to manage the government's investments under the Troubled Asset Relief Program, or TARP.

Rep. Spencer Bachus of Alabama was joined by 10 other legislators in the bipartisan bill that proposes setting up a trust to manage all TARP investments in which the government's interest exceeds 15 percent.

The TARP is a program of the U.S. government to purchase assets and equity from financial institutions to strengthen its financial sector. It is one of the largest component of the government's measures in 2008 to address the subprime mortgage crisis.

The bill proposes that three independent and professional trustees manage the trust on taxpayers' behalf and specifies they would be required to divest the assets by Dec. 24, 2011.

In the course of pumping money into banks and auto companies using TARP funds, the government has acquired significant ownership interests in some companies and that makes many lawmakers uneasy about the extent of government involvement in the economy.

"We have a duty to ensure the government's investment in companies is temporary and the return for taxpayers is appropriate," Bachus said, adding that it was important that the trustees be independent so there could be no possibility of political interference in the companies' operations. (Reporting by Glenn Somerville, Editing by Kenneth Barry)