House gives symbolic thumbs-down on TARP cash

WASHINGTON (Reuters) - In a symbolic gesture of dissatisfaction with the government’s attempts to stabilize the financial system, the U.S. House of Representatives voted 270-155 on Thursday against releasing a second allotment of $350 billion to the Troubled Asset Relief Program, or TARP.

The money will be released, nonetheless, because the Senate last week voted not to block the funds. That vote deprived the House’s decision of any legal weight since the funds could only be blocked by a vote of both chambers of Congress.

“The Senate has already killed this ... Why are we still voting on it? Because there is a degree of anger in the American public,” said Massachusetts Democratic Rep. Barney Frank. “We are here today because of that anger.”

The TARP is a $700-billion financial rescue program launched by the Bush administration in October amid a credit market crisis and used mainly to buy shares in troubled banks, such as Bank of America Corp and Citigroup.

Steered by former Treasury Secretary Henry Paulson, TARP money also went to support insurer American International Group Inc and automakers General Motors and Chrysler LLC.

Lawmakers from both parties have complained about the handling of the TARP under Paulson, saying for instance that recipients of aid have not pumped it back into sluggish credit markets and that distressed homeowners have not been helped.

With more than half of the program’s money committed, the new Obama administration is taking over midstream, with a chance to reshape it using the funds approved last week by the Senate.

Frank supported releasing the funds, like the majority in the Senate. But most House members voted against spending more on the program by approving an anti-TARP funding resolution sponsored by North Carolina Republican Rep. Virginia Foxx.

“The administration of this program has failed in its most basic goal of granting more credit for deserving families and businesses,” said Rep. Roy Blunt in a statement.

“The second half of these funds will ultimately be used. I hope that it is used for the program’s original intent and not as an unaccountable handout,” said the Missouri Republican.

Some congressional Democrats, including Frank, argued that the Bush administration’s errors with TARP should not prevent President Barack Obama from having a chance to do better.

“President Obama has learned from President Bush’s mistakes in administering these funds,” said House Democratic Leader Steny Hoyer of Maryland, who supported releasing the funds.

“Votes like these are never easy -- but they can make the difference between a finite economic downturn and an historic economic collapse,” Hoyer said.

Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn