WASHINGTON — Democrats and Republicans squared off Tuesday over whether the incoming Obama administration should be given the remaining $350 billion in Troubled Asset Relief Program funds.
House Financial Services Committee Chairman Barney Frank said he had introduced legislation placing conditions on the money so that lawmakers could have an alternative to vote for over a bill blocking the release of the funds.
"It is important that at least the House of Representatives be able to express its views on this before a resolution of disapproval comes up," the Massachusetts Democrat said. "We believe that if these conditions are met, that will make [Tarp] a very useful thing. We will pass a resolution … and get a commitment from the president of the united states that he will abide by it."
Rep. Frank warned Democrats thinking of voting against the release of the funds that they would be harming their own priorities. "If we do not get the second $350 billion, I do not believe we get substantial foreclosure relief," he said.
But Republicans said Congress was in danger of throwing good money after bad.
"The second tranche is the continuation of the bailout policy I believe has done little good," said Rep. Ed Royce, R-Calif.
Rep. Spencer Bachus, the lead Republican on the panel, argued that lawmakers had not had enough time to digest Rep. Frank's bill and that Mr. Obama's request for more Tarp money is too vague. He urged Rep. Frank to delay a vote on the bill.
"We have been given very few specifics about how this money is to be spent and yet we are being asked to vote as early as tomorrow on a 75-page bill introduced three days ago," Rep. Bachus said. "We need to do what's right, not what's popular."
Rep. Frank introduced a bill Friday that the House plans to begin debating today that would earmark at least $40 billion of the Tarp to foreclosure relief and add stronger accountability for banks that receive government money.
But Rep. Frank said it is unlikely his bill will become law. Instead, he and others said it will send a signal to the Obama administration on how Congress would like to spend the remaining Tarp funds.
Unless Congress succeeds in passing legislation to intervene, the rest of the funds automatically would be released 15 days after the president's request.
"We know that ultimately this bill might not become law, but it's forceful to the incoming administration in sending a message," said Rep. Paul Kanjorski, the No. 2 Democrat on the panel.
Congress is also expected to vote separately soon on legislation that would block release of the money. Observers said they remain unclear on whether there are enough votes for such a measure to pass. Even if it does, however, the president could veto such a bill, allowing the funds to be given to the Treasury.
During the hearing, both Donald Kohn, the vice chairman of the Federal Reserve Board, and John Bovenzi the deputy to the chairman and chief operating officer of the Federal Deposit Insurance Corp., pressed for the Treasury to use Tarp funds to provide incentives to entice private capital to match injections from the government.
"It is important for the [Capital Purchase Program] to be implemented in a manner that encourages and rewards private capital investments to be made alongside Tarp capital," Mr. Bovenzi said. "Private capital investments serve as a powerful vote of confidence in the viability of a financial institution over the long term, and that viability is enhanced by programs that match private funds."
Both also back foreclosure prevention.