Paulson wants rest of bailout released
Treasury Secretary Henry M. Paulson said Friday that Congress will need to release the last half of the $700-billion rescue fund because the first $350 billion had been committed.
Paulson said the use of the rescue fund to provide loans to the auto industry along with all the other rescue efforts for the financial system meant that the administration has now basically allocated the first half of the largest government bailout program in history.
He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. had the resources to address a significant market event if one should occur before Congress approves the use of the second half of the fund.
But it was important for Congress to release the money “to support financial market stability,” Paulson said in a statement.
Paulson said he would be consulting with congressional leadership and President-elect Barack Obama’s economic team to determine how to proceed.
Under terms of the $700-billion rescue fund that Congress approved Oct. 3, when the administration determines the second $350 billion is needed, it must submit a report to Congress detailing how it plans to use those funds.
The money automatically will become available unless both houses of Congress pass legislation blocking the funds within 15 days of receiving the administration’s report. The request is expected to generate significant debate on Capitol Hill, with key Democrats vowing to block the release of more money unless the administration includes greater efforts to help homeowners threatened with foreclosure.
House Financial Services Committee Chairman Barney Frank (D-Mass.) has said the administration must allocate some of the new money for borrowers facing foreclosure and impose more conditions to make sure banks use their funds to increase lending.
“They’re not going to get the [money] unless they get very serious about the foreclosure modifications and showing us how we’re going to get some lending out of the banks,” Frank said this month.
Treasury officials said Friday that no decision had been made on when the request for the second $350 billion would be sent to Congress. They said Paulson was consulting on the matter with congressional leaders and members of Obama’s transition team.