Senate Votes To Release Bailout Funds To Obama
Friday, January 16, 2009
The Senate voted yesterday to release the second half of the Treasury's hugely unpopular initiative to stabilize the fragile U.S. financial system, granting President-elect Barack Obama virtually unfettered authority to spend $350 billion to revive sluggish credit markets and help millions of homeowners avoid foreclosure.
Within hours, the Treasury Department announced it would tap those funds to launch a dramatic new bailout of Bank of America that involves investing billions more in the company and guaranteeing $118 billion in troubled assets. [See story, page D1.]
With the financial crisis threatening anew to further depress the economy, the Democratic Congress was moving rapidly to give Obama the tools he has requested to try to ease the effects of a recession that many economists predict will be the deepest, longest and most dangerous since the Great Depression. Before yesterday's Senate vote, House leaders unveiled an $825 billion package of tax cuts and new spending directed at Obama's goal of saving or creating more than three million jobs over the next two years. [See story on page A9.]
Top Obama officials say both initiatives are critical to turning the economy around: The spending package seeks to stimulate spending by showering cash on consumers, local governments and businesses. The bailout program, meanwhile, attempts to forestall trouble in the financial system, where risky lending practices helped spark the recession in the first place.
In an interview with Washington Post reporters and editors, Obama stressed the "rickety nature" of the financial system.
"We can't just spend our way out of the problem. At some point credit has to flow effectively," he said. He added that "banks now are fully caught up in a downward spiral where they have now affected the real economy, the real economy is now affecting their balance sheets. And so we're going to have to intelligently and strategically infuse some additional capital into the financial system."
Obama praised lawmakers for their quick response to the crisis and thanked senators for helping him score an important victory in the first test of his administration's ability to forge consensus. The Senate voted 52 to 42 to defeat a resolution that would have blocked the second installment of the $700 billion financial rescue program, guaranteeing that the money will flow to the Treasury soon after Obama takes office Tuesday.
The House may vote on a similar measure next week, but its defeat in the Senate makes that effort largely symbolic.
Obama acknowledged that it "wasn't an easy vote" for many senators "because of the frustration so many of us share" over how the Bush administration managed the first half of the rescue fund, known as the Troubled Asset Relief Program, or TARP.
"Restoring the economy requires that we maintain the flow of credit to families and businesses," Obama said in a statement. "So I'm gratified that a majority of the U.S. Senate, both Democrats and Republicans, voted today to give me the authority to implement the rest of the financial rescue plan in a new and responsible way."
Lawmakers, pressured by the Bush administration to approve the rescue in October amid warnings of an imminent global financial meltdown, have been furious about the program's implementation -- along with many of their constituents. By one count, Sen. Sam Brownback (R-Kan.) said his office had received 44 calls in favor of the program and 2,000 calls against. "Kansans were hot and mad and upset and strongly opposed," he said during yesterday's debate.