WASHINGTON — A day after the Obama administration unveiled its plans for spending the second $350 billion of Troubled Asset Relief Program funds, lawmakers said the money would not be enough.
Treasury will need $300 billion "to $500 billion more in a follow to Tarp to deal with what is happening in the financial sector," Senate Budget Committee Chairman Kent Conrad, D-N.D., told reporters after a hearing Wednesday.
Sen. Lamar Alexander, R-Tenn., accused Treasury Secretary Tim Geithner of underestimating the problem and said it was best to request additional funds now.
"Wouldn't it be wiser and bolder and better just to come out and say, … 'We've got a big problem; they need $2 trillion more with bad assets … so we are going to need more money, and we are going to ask for it now,' " Sen. Alexander said.
Mr. Geithner pledged to provide more details on the administration's plan if and when he decides to request more funds.
"It's better to do more sooner rather than to stretch it out, but I want to be very careful not come to you and ask for more resources and authority until we have as careful and compelling a case as possible," he said.
Of the $700 billion authorized for the financial sector's rescue, the Treasury Department has already allocated $387.5 billion, leaving only $312 billion. Of the remaining funds, Mr. Geithner said Tuesday that the administration would use $50 billion for a foreclosure mitigation plan to be announced in two weeks. He has also said it could provide as much as $80 billion more — in addition to $20 billion already allocated — to expand the Federal Reserve Board's Term Asset-Backed Securities Loan Facility.
With the remaining $182 billion, the Treasury has said it plans to inject more capital into banks and form a public/private "bad bank." Mr. Geithner has not provided details on how much the department plans to spend on those programs.
Sen. Conrad said the Treasury clearly needs more money, and he advised Mr. Geithner to make the request during the budget process. "I want to give you fair heads up that … it is incumbent that you very soon help us understand if additional funds are going to be needed and in what amount," Sen. Conrad said.
Senators prodded the secretary many times for more specifics, but Mr. Geithner did not provide any.
"The reviews of your performance from yesterday are in, and they are not good," said Sen. Jeff Sessions of Alabama, the lead Republican on the Budget Committee. "You've had more than a month to develop your proposal, but much of what we've heard is an outline short on details."
Mr. Geithner defended the holes in the plan by saying it was better to have some ideas out there, even if they were broad.
"We are going to do this carefully so we don't put ourselves in a position again where we are laying out details ahead of the care and substance to get it right, which requires quick departures and changes in strategy," he said.
Administration officials continued to hash out their plans Wednesday. Mr. Geithner, along with Housing and Urban Development Secretary Shaun Donovan, met in the afternoon with bankers and community groups. The Treasury is scheduled to hold meetings today with regulators, servicers, and bankers on the plan.
The administration is weighing several options regarding foreclosures, including giving servicers more incentives to rework loans and offering a government guarantee if lenders agree to engage in systematic modifications.
House Financial Services Committee Chairman Barney Frank called for banks to freeze foreclosures while the administration finalizes its plan. (See related story.)
The Office of Thrift Supervision became the first regulator on Wednesday to endorse that idea, saying thrifts should suspend foreclosures on owner-occupied homes until a mitigation program is announced.
"We want our institutions to be very cognizant of what's going to be a meaningful loan modification program that's currently close to development, and we didn't want them to foreclose on borrowers who could very well be helped under the new program," Scott Polakoff, the agency's deputy director and chief operating officer, said in an interview.