President George W. Bush agreed to ask Congress on Monday to release the remaining $350 billion in financial sector rescue funds after receiving a request to do so from President-elect Barack Obama, the White House said.
Congress would have 15 days to reject the request.
The request would give Obama not only the opportunity to get access to the money, but also to change its goals and conditions. The Bush administration's handling of the first $350 billion has come under widespread criticism in Congress and from watchdog organizations.
Obama had signaled that he was eager to use the money to help reduce the number of mortgage foreclosures and that he wanted to place greater restrictions on institutions that receive the funds. The move comes as Democrats in the House of Representatives are preparing to act on legislation that had some of the same intentions.
A vote in Congress is likely soon, possibly this week, several senators predicted after a briefing from Obama economic adviser Larry Summers on the Wall Street bailout, as well as on Obama's separate plan for roughly $800 billion in spending and tax breaks to spur the economy.
"I feel better this morning, and I am told the Obama team will be giving us these specifics" on precisely how the additional money would be disbursed, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said Monday, after talks with Summers.
President George W. Bush would request the additional money for the Troubled Asset Relief Program but the incoming administration would sell the plan by laying out a series of changes in how the program is run. More of the money would go directly to relieve homeowners threatened with foreclosure, Dodd had said Sunday. He said at that time that a fuller accounting of the money already spent is needed as well, Dodd 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 tough sell.
A request would force a vote within days on whether to block the funding, but the deck is stacked in favor of Bush and Obama winning release of the remaining $350 billion. 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.
The idea is to make the money available to the new administration shortly after Obama takes office Jan. 20. The unpopular bailout has featured unconditional infusions of money into financial institutions that have done little to account for it.
Treasury Secretary Henry Paulson originally promised the money would be used to buy up toxic mortgage-related securities whose falling values have clogged credit markets and brought many financial institutions to the brink of failure.
Senate Majority Leader Harry Reid said that Bush and Obama officials were 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."
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."
"These assurances have to be forthcoming, if they're not, we're going to have trouble passing this," he said Monday on CBS's "The Early Show." Dodd said that it is of paramount importance that federal policymakers "put a tourniquet on the 9,000 foreclosures that are occurring every day in this country."
Work continued through the weekend on Obama's economic recovery plan, which features aid to cash-strapped state governments, $500 to $1,000 tax cuts for most workers and working couples, 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.
Meanwhile, transition officials were resisting efforts to use the economic recovery bill to address the alternative minimum tax, which has affected more and more middle-income families.