Senator seeks halt to second half of Wall St rescue

WASHINGTON (Reuters) - A senator on Monday said he will introduce a bill to stop the release of $350 billion in the second round of funding for a massive Wall Street bailout program.

Vermont Sen. Bernie Sanders, an independent who usually votes with the Democrats, voted against the $700 billion program approved by Congress in October and enacted by President George W. Bush to stabilize the financial system.

Sanders, a democratic socialist in a nation where that is rare, criticized how the Bush administration is spending initial funding already released.

"I have very serious concerns as to how the Bush administration is spending the first $350 billion they were provided. The second $350 billion tranche must not be spent in the same way," he said in a statement.

The White House in September sent Congress a three-page demand for $700 billion in emergency funding with few strings attached, saying the money would be used mainly to finance Treasury Department purchases of distressed mortgage-backed securities that are clogging up international credit markets.

But no such securities have been purchased and Treasury Secretary Henry Paulson has said the program's emphasis has changed to buying stock in banks and assisting consumers.

"The administration's plans as to how the money should be spent appear to be changing on a daily basis," Sanders said.

"Meanwhile, they are operating in secrecy, ignoring the oversight provisions of the legislation and, with dubious legality, are changing long-established rules by providing huge tax breaks for the banking industry," he said.

Under the bill that funded the bailout, the final $350 billion could be released if the president requested it in writing. To block it, Congress must pass a joint resolution, likely on an expedited basis, to disapprove the $350 billion.

If no resolution passes, the next installment of $350 billion would be released 15 days after the president's request.

(Reporting by Kevin Drawbaugh; Editing by Bill Trott)