Seeking to reassure wary lawmakers, President-elect Barack Obama said Monday he will fundamentally change the way the second half of the $700 billion financial bailout fund is spent, focusing some of the relief on housing and small businesses.
Obama asked President George W. Bush to submit a request to Congress so that the remaining $350 billion would be available quickly after the inauguration next Tuesday. Bush agreed to do so.
"I think many of us have been disappointed with the lack of clarity, the absence of transparency," Obama told reporters after a meeting with Mexico's president, Felipe Calderon. He said some of the money should have been spent on helping people avoid foreclosure.
"It is clear that the financial system, although improved from where it was in September, is still frail," Obama said.
Separately, Larry Summers, Obama's choice for National Economic Council director, said the new president intends to broaden the goals of the remaining bailout package and impose tougher restrictions and oversight on how the money is spent.
Summers told House and Senate leaders in a letter from the transition team that the need to tap the second half of the $700 billion fund is "imminent and urgent."
The letter says Obama intends to use the Troubled Asset Relief Program to help community banks, small businesses, consumers and homeowners as well as large financial institutions. It says Obama intends to launch a "sweeping effort" to mitigate foreclosures.
"The president-elect also shares the frustration of the American people that we have seen too little effect from this rescue plan on jobs, incomes and the ability of responsible homeowners to stay in their homes," Summers wrote. "He believes the American people are right to be angry with the way this plan has been implemented."
Obama's request came as Democrats in the House of Representatives prepared to act on legislation that has some of the same aims laid out in Summers' letter.
Earlier Monday, Bush told reporters he would not make a request for the money form Congress unless Obama "specifically asked me to make it." Obama called Bush at 10:25 a.m. EST, after Bush's news conference ended, Obama transition officials said.
Bush's assertion that the decision to tap the money rests with Obama was an acknowledgment of what has been an extraordinary ceding of power to the incoming administration. Bush in recent weeks has let Obama be the driving force behind most recovery efforts.
Congress vote soon
A vote in Congress is likely soon, possibly this week, several senators said after a briefing from Summers Sunday on the Wall Street bailout, as well as on Obama's separate plan for roughly $800 billion more in spending and tax breaks to spur the economy.
At his news conference, Bush said, "I readily concede I chucked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression."
But he credited the program so far with improving the credit environment, saying that "lending is just beginning to pick up."
Congress approved the program in October, authorizing $700 billion to assist the financial industry.
The current administration has already committed the first $350 billion, using it to inject capital into banks and to bail out ailing financial companies considered too big to fail without further damage to the economy. A small portion of the money has gone to automakers General Motors Corp. and Chrysler LLC.
Lawmakers from both parties have criticized the administration's handling of the fund, in part because the financial institutions that have received the unconditional sums of money 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.