Fed Backs Obama's Bailout Request

In particular, he said that the program, which was announced in November and is to begin operating in February, could be expanded to include lending for office buildings, shopping centers, hotels and such by supporting "commercial mortgage-backed securities."

Moreover, "the bulk" of the remaining TARP rescue funds would be used to invest in banks and other financial institutions, perhaps with government aid offered to match investments from the private sector -- a "market test," as Kohn put it, helping to ensure that the institutions getting money are sound. Bernanke has been interested in some sort of private-sector matching scheme for months.

Both Bernanke and Kohn said some of the rescue would go to help prevent home foreclosures, a particular concern of congressional Democrats. One way to do that would be similar to a strategy designed by the Federal Deposit Insurance Corp. to pay mortgage servicers to modify loans and offer to share in losses if the loans default. Another would be for the Treasury to buy loans in default, then modify the mortgages to fit existing government housing programs.

The Fed leaders each made a vigorous plea for the rescue money. "The rationale for public investment in the financial industry is not any special regard for managers, workers or investors in that industry over others," Kohn said, "but rather the need to prevent a further deterioration in financial conditions that would destroy jobs and incomes in all industries and regions."

Many Senate Republicans, meanwhile, continued to insist that Obama's team has provided too few details about how they would use the money. Many said they are seeking a written statement detailing Obama's intentions that goes beyond the three-page letter submitted to congressional leaders Monday by Obama economic adviser Lawrence H. Summers.

Summers's letter laid out five principles for how the Obama administration would use the funds, such as "Use Our Full Arsenal of Tools to Get Credit Flowing Again to Families and Business." Sen. John Cornyn (R-Tex.), a member of the Senate GOP leadership, described the Summers letter as "full of generalities and vagaries."

"Members need to know how the Obama administration is going to carry out this bill -- and we need to know not just statements of principle, but what they are willing to bind themselves morally to do," said Brad Sherman (D-Calif.).

Obama is making personal calls to Democrats and Republicans to urge them to release the money, and Democratic leaders were confident that he would prevail on a matter he told them he considers the "first vote" of his administration.

Sen. Joseph I. Lieberman (I-Conn.), a supporter of Sen. John McCain's GOP presidential campaign, said after yesterday's lunch with Obama that he fully supports the president-elect's request for the money.

As he put it: "What's the basis for voting against it? Because you're mad at Hank Paulson? That doesn't make any sense."

Staff writers Lori Montgomery and Paul Kane contributed to this report.