Vote on bailout funds in works

WASHINGTON – Senate Democratic leaders said a vote could come as early as this week on providing a second $350 billion for the financial industry, after assurances Sunday by President-elect Barack Obama and one of his top economic advisers that the money would be better monitored and spent.

The Bush administration and the incoming Obama team have undertaken a tag-team effort to obtain the money from reluctant lawmakers, to have it waiting for Obama when he’s sworn in Jan. 20.

President Bush would request the additional money for the Troubled Asset Relief Program, or TARP, but the incoming administration would allocate it. Obama’s economic adviser, Larry Summers, briefed lawmakers Sunday on the bailout and on the incoming administration’s plan for roughly $800 billion in spending and tax breaks to spur the economy.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., said Sunday that lawmakers were assured there would be fuller accounting of the money spent on the bailout. Banks and other financial institutions have received billions from the government with few rules, and most won’t say where the money has gone.

Obama, in a taped interview aired Sunday on ABC’s “This Week,” promised to see that more money goes directly to distressed homeowners. “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,” he said.

“Larry Summers made a very strong argument for why it’s important and critical for the overall recovery,” said Sen. John Kerry, D-Mass. “And I think that’s an argument that most senators understand.”

Summers sought to win over Senate Democrats even as the GOP leader of the House, John Boehner of Ohio, warned that any effort to release the additional money would “be a pretty tough sell.” Boehner appeared on CBS’ “Face The Nation.”

A formal request to spend the second half of the $700 billion bailout would force a vote within days on whether to block the funding, but the deck is stacked in of favor release of the money. Congress can pass a resolution disapproving the request, but the White House could veto the resolution; then, just one-third of either chamber would be needed to uphold the veto and win release of the money.

Senate leaders would prefer to win a majority vote, Dodd said.

The unpopular bailout has featured unconditional infusions of money into financial institutions that have done little to reveal what they’ve done with it.

Treasury Secretary Henry Paulson originally promised the money would be used to buy up toxic mortgage-related securities whose falling values have clogged up credit markets and brought many financial institutions to the brink of failure.

Senate Majority Leader Harry Reid indicated Sunday that Bush and Obama officials are near agreement on submitting notice to Congress about using the remaining $350 billion.

“We’re waiting to hear from President Bush and or President-elect Obama as to what, if anything, they’re going to do,” said Reid, D-Nev., “and that’s occurring as we speak.”

“The likelihood is that we’ll have some kind of vote on that somewhere in the course of the week,” Kerry said.

But to prevail, Obama and his team must soothe senators who feel burned by the way the Bush administration has used the TARP.

“The (incoming) administration … is going to fundamentally alter how this is being managed,” Dodd said. “The concept is still very sound and solid and it is needed. But it’s not going to pass around here unless there’s a strong commitment to foreclosure mitigation.”

Dodd said lawmakers were demanding other conditions, such as more concrete steps to limit executive compensation and make recipients of the funds be more accountable.

The Congressional Oversight Panel raised detailed questions last week about how banks are spending the first $350 billion, how the money will combat the rising tide of home foreclosures and Treasury’s overall strategy for the rescue. In instance after instance, the panel said, the Treasury Department did not offer adequate responses.

Obama, on ABC, said he has asked his economic team to develop a set of principles to ensure more openness about how the money is spent. Under consideration by Obama aides and congressional Democrats are proposals to limit executive pay at institutions that receive the money and to force such institutions to get rid of any private aircraft they may own or lease.

Work continued through the weekend on Obama’s economic recovery plan, which features aid to cash-strapped state governments, $500-$1,000 tax cuts for most workers and working couples, and a huge spending package blending old-fashioned public works projects with aid to the poor and unemployed and a variety of other initiatives.

Advocates for using tax cuts to promote alternative energy won concessions and the Obama team promised to make a $3,000 job creation tax credit – which has attracted considerable criticism – more workable.