Obama aides press Senate to allow bailout money

By Richard Cowan

WASHINGTON (Reuters) - Aides to President-elect Barack Obama tried to shore up support among Senate Republicans on Wednesday for releasing $350 billion in Wall Street bailout funds, as a leading Democrat in the House of Representatives predicted that Congress was unlikely to stand in the way.

Senate Democratic leaders were working to defeat a Republican measure to block release of the money amid deep public distrust over how the first $350 billion of a $700 billion bailout was handled by the Treasury Department.

Obama will be sworn in as president on Tuesday and if the second batch of money is released by Congress, his administration would oversee how it would be spent.

Obama's designated White House chief of staff, Rahm Emanuel, and top economic adviser, Lawrence Summers, briefed Senate Republicans. Their leader, Mitch McConnell of Kentucky, said he was seeking assurances that taxpayers would be protected if the money is released.

Meanwhile, House Democratic Leader Steny Hoyer said chances were "very small" that Congress would stand in the way of spending the money. He noted that both Obama and President George W. Bush backed the idea, making it difficult for Congress to block it.

The House will wait to see what the Senate decides before scheduling its own vote on the measure.

In a related issue, the House this week was expected to pass legislation tightening the rules on the Wall Street bailout, known as the Troubled Asset Relief Program, or TARP.

While making the program more transparent, the legislation also would refocus where the next batch of money is spent -- away from government investments in troubled banks and toward reductions in home foreclosures and aid for cash-strapped towns and cities suffering during the economic recession.

The fate of the bill was less certain in the Senate.

Hoyer said that even if the bill, written by House Financial Services Committee Chairman Barney Frank, of Massachusetts, is not enacted into law, its provisions likely would be enforced by the Obama administration.

"In the event it doesn't pass, the (Obama) administration is very likely to indicate it intends to follow the provisions relatively closely," said Hoyer, of Maryland.

Sen. James Inhofe, an Oklahoma Republican who opposes releasing the next $350 billion, noted the difficulty he and his colleagues face because of the large majorities that would be needed in the House and Senate to challenge Obama.

"I do think in that respect, it's a fait accompli," Inhofe said. But he said lawmakers should ensure there is better oversight of the use of the money.

(Additional reporting by Jeremy Pelofsky and Patrick Rucker; Editing by Doina Chiacu)