WASHINGTON – President-elect Barack Obama would spend the remaining $350 billion of a financial bailout fund on expanded lending and reduced foreclosures and would not use the money to help other industries, lawmakers said Wednesday after discussions with Obama emissaries.
The Senate was set to vote Thursday on whether to release the money. Lawmakers insisted that Obama advisers put their assurances in writing before the vote.
Seeking to secure votes from wary members of both parties, Obama aides fanned out across the Capitol on Wednesday. Their lobbying effort culminated in a closed door meeting between Senate Republicans and top Obama economic adviser Larry Summers and incoming White House chief of staff, Rahm Emanuel.
The private guarantees went further than what Obama's team has been willing to discuss publicly about his plans for the second half of the $700 billion Troubled Asset Relief Program.
Obama has asked Congress for the money and has been trying to overcome misgivings from lawmakers over how the Bush administration spent the first half of the fund.
Democrats were growing increasingly optimistic that the Senate would agree to release the money to the new administration. And even reluctant Republicans praised Obama's outreach.
"These folks have much more credibility already than Secretary Paulson," Sen. Jim DeMint, R-S.C., said, referring to the Bush administration's treasury secretary, Henry Paulson.
Still, Republicans demanded that the incoming Obama administration put in writing details of the conditions and goals for the money.
"There is a real concern that it's one thing to say it in the privacy of that room; it's another thing entirely to put something on the record," said Sen. John Thune, R-S.D.
While the criticism of the Bush administration's handling of the bailout has been bipartisan, Republicans were especially opposed to using the bailout funds to help out nonfinancial sector industries. Money from the fund has been used to assist insurance giant American International Group Inc. and automakers General Motors Corp. and Chrysler LLC.
Senate Minority Leader Mitch McConnell, R-Ky., said Summers and Rahm "did not represent they are in favor of industrial policy."
"We'd like to see something publicly stated with reference to that issue," he added.
In the House, Financial Services Committee Chairman Barney Frank, D-Mass., said Summers assured him that Obama would commit a significant portion of the bailout money to foreclosure relief.
The House on Thursday was scheduled to vote on Frank legislation that would place broad restrictions on the bailout program. One major provision would require that the new administration spend between $40 billion and $100 billion on reducing the number of foreclosures.
"I believe they would have done this anyway," Frank said after speaking to Summers on Wednesday.
Obama's transition office would not comment on discussions held with members of Congress.
The House bill has little chance of passing the Senate.
Summers this week submitted a three-page letter to congressional leaders as part of Obama's request for the money that outlined the Obama economic team's goals. But several Republicans and Democrats said the letter was not specific enough and said they needed more information from the president-elect.
Congress built in a safeguard by requiring that after the first $350 billion of the bailout fund was spent, Congress could reject spending the second half. Obama has said he needs the additional money to help extend loans to small businesses, consumers, homeowners and local governments.
Lawmakers from both parties have complained that the Bush administration did not spend the money as it initially intended.
Paulson told legislators last year that the money would be used to buy toxic assets held by the banks in hopes that would help them make more loans. But the Treasury soon changed course and used the money to make direct infusions of capital into financial institutions with few strings attached. Lawmakers complained that the money has not appeared to loosen credit.
"It is critical we provide a real road map on how this funding will be spent," said Rep. Jim McGovern, D-Mass.
Republicans argued that Frank's bill was a futile effort.
"That we would just go ahead with the bill that everyone acknowledges is not going to become law as cover for us to then release the $350 billion is just plain wrong," said Rep. David Dreier, R-Calif.