Acting at Barack Obama's behest, President George W. Bush on Monday asked Congress for the final $350 billion in the financial bailout fund, effectively ceding economic reins to the president-elect in an extraordinary display of transition teamwork.
Obama also sharply criticized Bush's handling of the money and promised radical changes.
Bush's move sets the stage for Obama to get swift access to the $350 billion and the opportunity to overhaul the much-criticized rescue package after taking office next Tuesday. Obama said that it would be "irresponsible ... to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system."
Congress, where the use of the money has met stiff bipartisan skepticism, has 15 days to vote to reject the request. Senate Majority Leader Harry Reid, D-Nev., was considering holding a vote on a resolution of disapproval as early as Thursday in hopes it would be defeated, thus making the funds available about a week after Obama inherits one of the worst financial crises in U.S. history.
"It is clear that the financial system, although improved from where it was in September, is still frail," Obama said, a few hours after seeking Bush's help in requesting the money.
Speaking on CBS' The Early Show, Sen. Chris Doddnecessary for Congress to approve spending the second half of the $700 billion federal rescue plan, saying that in order to win authorization of such additional spending, the government will have to do a much better job of accounting to the taxpayers for where money already spent has gone.
Dodd said that Mr. Obama had expressed to him his dissatisfaction with how TARP money has been administered so far and that he intends to "re-brand" the program.
"He's not happy with how mismanaged this program has been over the last several weeks," Dodd told CBS' The Early Show. "Money going to lenders without assurances [they] are actually going to lend, executive compensation not being limited, as it was promised it would be. So there need to be far more assurances about the accountability standards and how this is all going to work.
Dodd said he was encouraged by assurances during a two-hour meeting yesterday with Summers and feels "better this morning" about prospects for approval.
If Congress goes along, Obama would have a huge cache of bailout money at his disposal - and much more to come in the approximately $800 billion economic stimulus bill that Democratic congressional leaders promise to finish by mid-February. Congress also is racing to have ready for Obama a $35 billion health insurance program for children.
Obama acted quickly, sending prompt reassurances to congressional leaders that the money would aim to help free credit for small businesses and consumers and reduce the rising number of foreclosures. Separately, Larry Summers, Obama's choice for National Economic Council director, said the new president intends to also impose tougher restrictions and oversight on how the money is spent.
"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action," Obama said.
In a letter to congressional leaders, Summers said an Obama administration would "launch sweeping efforts to address the foreclosure crisis" and, in a bow to Republican critics of the plan, said it would seek to replace the government money with "private investments as quickly as possible."
Frank has introduced legislation that would require at least $40 billion of the money be used to reduce the number of foreclosures. His legislation also would set new conditions on institutions that receive the money, including limits on executive compensation. Frank's committee is holding a hearing on the program on Tuesday and the House is scheduled to vote on his legislation this week.
"We should not allow our disappointment at the Bush administration's poor handling of the TARP program to prevent the Obama administration from using the funds in more appropriate ways," Frank said in a statement Monday.
But other lawmakers were hardly supportive.
House Republican leader John Boehner of Ohio warned that it would be irresponsible to spend the money without a plan showing how the government would eventually extricate itself from underwriting the financial markets.
"I remain disappointed about the way TARP has been managed and how its resources have been spent over the last several months," he said. He added: "I will oppose the release of these taxpayer funds when the matter is considered on the House floor."
Even Democratic allies were wary.
Sen. Barbara Boxer, D-Calif., said Obama called her Monday morning to seek her support for the additional money.
"I told him that for me to vote for this a second time, I'm very, very hesitant to do it," she said. "I need to make sure that there's going to be transparency, that there's going to be help for housing."
At his news conference, Bush defended his handling of the first $350 billion.
"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," the president said.
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 with few strings attached 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.