WASHINGTON (Reuters) - President-elect Barack Obama vowed to restructure a financial rescue plan to save more U.S. families from home foreclosures, as he considered on Sunday whether to seek additional funds from a $700 billion bailout program.
Obama’s aides have been in discussions with the White House over whether President George W. Bush should ask Congress for permission to use the remaining $350 billion of the funds, which are aimed at stabilizing the financial system.
The purpose of the request, which would be formally submitted by Bush, would be to have the funds in place soon after Obama takes office on January 20.
But it may prove difficult to get approval from Congress because the bailout program is unpopular with many lawmakers who feel too much of the money has already been given to Wall Street firms that have continued to pay huge bonuses to executives.
The legislators want to some of the remaining money to be used instead to help struggling homeowners.
Massachusetts Sen. John Kerry, after leaving a meeting with other senators and some of Obama’s top aides, said the president-elect was close to a decision on the bailout fund, known as the Troubled Asset Relief Program, or TARP.
“It’s my understanding that the president-elect is going to make a judgment somewhere in the next hours,” Kerry told reporters. “I think the president elect will make known — because he’s the one who’s going to be controlling that — what he would like to see happen on that.”
Top Obama aides Larry Summers and Jason Furman were holding closed-door meetings with Kerry and other senators to discuss, not only the bailout funds but also a proposed $775 billion stimulus package that Obama and the Democrats say is needed to pull the U.S. economy out of a deep slump.
Obama said his staff was working closely with the Democratic-led Congress to draft the package of tax cuts, public works spending and funds to bolster social safety net programs like unemployment insurance.
“We’re going to have a collaborative, consultative process with Congress over the next few days,” Obama said in an interview on ABC’s “This Week.” “We’re not trying to jam anything down people’s throats.”
With the big spending plans will come inevitable budget deficits.
Nancy Pelosi, speaker of the House of Representatives, has suggested that lawmakers might have to increase taxes on the wealthy to cover that shortfall. That could be done by allowing the Bush administration’s tax cuts for the richest Americans to lapse in a year.
But Pelosi told CNN’s “Late Edition”: “I want a repeal of the tax cuts for the highest-income people in America. I don’t think we can wait until they expire. I think they need to be repealed — not in this legislation. That’s a subject for another day.”
Government figures last week showed the U.S. unemployment rate surged in December to 7.2 percent, capping a year in which employers slashed 2.6 million jobs, the most since 1945.
Obama wants passage of a stimulus plan by mid-February.
To try to persuade lawmakers he would do a better job of managing the bailout program, Obama has emphasized that he agreed with them that it needs to be overhauled.
“When you look at how we have handled the home foreclosure situation and whether we’ve done enough in terms of helping families ... we haven’t done enough there,” Obama said.
The TARP program has chiefly been used to give banks fresh capital so they can return to normal lending but Obama and his Democratic colleagues in Congress want more of that money to go directly to consumers.
Billions of dollars in these funds could go to prevent foreclosures, spur consumer borrowing and help local governments win loans under a plan from Democratic Rep. Barney Frank, chairman of the House Financial Services Committee.
Congress must give its approval to unlock the rest of TARP funds and lawmakers who have been skeptical about the program have said they may oppose that.
“Until there is a demonstrated need in our economy and a plan to address that need, I think it would be irresponsible for them to release that money,” House Minority Leader John Boehner, an Ohio Republican, told CBS’s “Face the Nation”.
Additional reporting by Jeremy Pelofsky and Susan Cornwell; Editing by David Wiessler and Chris Wilson