Financial bailout plan being reworked

Confronted with intense skepticism on Capitol Hill over the $700-billion financial rescue program, Treasury secretary nominee Timothy F. Geithner and President-elect Barack Obama’s economic team are urgently overhauling the embattled initiative and broadening its scope well beyond Wall Street, sources familiar with the discussions said.

Geithner has been working night and day on the eighth floor of the transition team office in downtown Washington with Lawrence H. Summers and other senior economic advisors to hash out a new approach that would expand the program’s aid to municipalities, small businesses, homeowners and other consumers. With lawmakers stewing over how Bush administration officials spent the first $350 billion, Geithner has little chance of winning congressional approval for the second half without retooling the program, the sources added.

Much of the work by Obama’s team has focused on establishing principles that would clearly define the program’s course and the conditions of government aid to financial firms.

The group is devising plans that would use rescue funds to help homeowners avoid foreclosure and unclog the credit markets that finance loans to consumers, small businesses and municipalities. The team is also planning to have the government take more stakes in financial firms, but companies receiving federal aid would have to submit to greater restrictions on executive compensation than were imposed by the Bush administration.

Geithner is also considering creating a new bureau within the Treasury to manage the Troubled Asset Relief Program, or TARP, in an attempt to improve the program’s operations and oversight.