Obama Seeks Rest of Bailout

Video

Bush Holds Final News Conference

At his final news conference Monday, President George W. Bush repeated his long-standing call for creation of a Palestinian state, discussed democracy in Iraq and commented on the struggling economy.

» LAUNCH VIDEO PLAYER

However, lawmakers reserved the power to block release of the second half of the TARP money. A resolution to do just that has already been filed in the House; Republicans in the Senate were poised to file one today, according to a senior Republican aide.

Under the TARP law, the resolution cannot be amended or filibustered, and it needs only a majority of votes in both chambers to pass. While the House is likely to approve the resolution, Jim Manley, spokesman for Senate Majority Leader Harry M. Reid (D-Nev.), said Senate leaders were optimistic that they could defeat the resolution in the Senate, allowing the funds to flow.

"We're still unsure of where the votes are, but we're working hard on that right now," Manley said.

The Obama team had been pressing the Bush administration to issue a formal notice to Congress that the second half of the bailout money would be needed. Bush agreed yesterday after receiving a call from Obama.

Speaking to reporters after meeting with Mexican President Felipe Calderón, Obama said he, like many senators who voted to create TARP, has been "disappointed" with the program. But he said the financial system remains "fragile, and I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system."

He added: "My commitment is that we are going to fundamentally change some of the practices in using this next phase of the program."

Over the weekend, key Democratic senators requested a written statement of Obama's intentions. Yesterday's letter from Summers provided a response.

In it, Summers described the need for the money as "imminent and urgent," and said that Obama would dedicate a portion of the funds to a "sweeping effort" to stem the skyrocketing rate of foreclosures, as lawmakers had originally intended.

Summers did not say how those homeowners would be helped, however, nor did he offer details of the other new programs that he and other Obama advisers have been developing behind closed doors in their downtown Washington office. Much of their plan is not expected to be unveiled until after Obama takes office next Tuesday.

Summers did say that Obama plans to impose strict limits on executive compensation at firms that accept TARP funds, ban dividend payments beyond a penny a share, and prevent the money from being used to buy back stock or acquire other companies. But these terms would apply only to companies that got "exceptional assistance" from the government; it was unclear what restrictions, if any, would apply to the vast majority of companies participating in the program.

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, is pressing a measure that would go much further. His bill, which could be voted on in the House as soon as Thursday, would change the TARP law to limit executive salaries at all firms that take federal aid, including those that have already received funds. It would also require Obama to spend at least $40 billion to help distressed homeowners.

Though Obama and his team have said they agree with those goals, Frank said in a statement yesterday that he intends nonetheless to seek legislation "that sets forth the conditions we believe are necessary to assure that the public gets the full benefit of these funds."

Key Senate Democrats seemed more inclined to trust Obama. Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, indicated in a statement that he was satisfied with Summers's letter, calling it "an important first step" toward "a sharp course correction."

Sen. Barbara Boxer (D-Calif.) also suggested she was willing to give the president-elect the benefit of the doubt. After receiving a call from Obama yesterday, Boxer said she is now more comfortable that her demands for mortgage relief and greater transparency would be met.

"I was leaning 'no,' and now I'm leaning 'yes,' " Boxer said.

Staff writer Paul Kane contributed to this report.