WASHINGTON (Reuters) - The incoming Obama administration sought from Congress the remaining $350 billion of the $700 billion financial industry bailout, promising more Americans would benefit directly and stricter limits would be imposed on companies getting government help.
The pledges sought to address reservations by President-elect Barack Obama’s fellow Democrats, who control both houses in Congress and have been critical of the Bush administration’s handling of the funds so far. They have been reluctant to release the second half of the bailout package without those conditions.
Earlier on Monday, Obama asked President George W. Bush to seek access to the remaining half of the financial bailout and Bush, who leaves office in eight days, agreed to do so, the White House said.
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, Obama’s 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 told House and Senate Democratic and Republican leaders in the letter.
Summers said Obama 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 massive bailout was approved last October to bolster the financial industry as it reeled under the stress of toxic mortgage-related assets and credit dried up, delivering a huge punch to the overall economy.
The request for the release of the funds was made now because Obama wants to “hit the ground running on day one,” an Obama official said.
To get access to the remaining $350 billion, the president must tell lawmakers he intends to tap the funds and Congress would have 15 days to consider the disbursement.
“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,” White House spokeswoman Dana Perino said.
The Troubled Asset Relief Program, or TARP, has chiefly been used to give banks fresh capital so they can return to normal lending.
But Obama and congressional Democrats want 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 the companies who receive the aid.
The letter from Summers closely mirrors legislation introduced last week by House Financial Services Committee Chairman Barney Frank, which was designed to add limits on how the money could be used as well as greater accounting for it.
Some Senate Democrats have questioned whether that measure could be passed quickly enough and said a letter of assurances from the incoming Obama administration might suffice if it addressed foreclosure mitigation, bank lending practices, executive compensation and accountability standards.
The Obama official said that many, if not all, the reforms could be done administratively rather than needing new legislation and that they will move quickly to implement them once they take office on January 20.
Additional reporting by Tabassum Zakaria, Ross Colvin and Kevin Drawbaugh, Editing by Frances Kerry