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VOL. 124 | NO. 8 | Tuesday, January 13, 2009

Obama Will Broaden Bailout Spending

By STEVEN R. HURST | Associated Press Writer

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WASHINGTON (AP) - President-elect Barack Obama's top economic adviser told congressional leaders Monday that the incoming president would broaden goals for using the remaining $350 billion financial bailout and insure transparency and oversight.

Larry Summers, Obama's designated National Economic Council chief, wrote House and Senate leaders that the need for the second half of the $700 billion fund was "imminent and urgent.

Summers' letter lays out how Obama intends to use the remainder of the Troubled Asset Relief Program to help community banks, small businesses, consumers and homeowners in addition to the massive sums that have already gone to threatened large financial organizations. He also specified that Obama wants to launch a "sweeping effort" to mitigate home mortgage foreclosures.

"I think many of us have been disappointed with the lack of clarity, the absence of transparency," Obama told reporters after a meeting with Mexico's president, Felipe Calderon. He said some of the money should have been spent on helping people avoid foreclosure.

"It is clear that the financial system, although improved from where it was in September, is still frail," Obama said.

Obama on Monday asked President George W. Bush to seek the remaining bailout money so the new administration would have it available soon after inauguration of Jan. 20.

Summers' letter included tacit acknowledgment of bipartisan congressional dissatisfaction with the manner in which the Bush administration has administered the first half of the funds.

"The president-elect also shares the frustration of the American people that we have seen too little effect from this rescue plan on jobs, incomes, and the ability of responsible homeowners to stay in their homes," Summers wrote. "He believes the American people are right to be angry with the way this plan has been implemented."

Senate Banking Committee Chairman Christopher Dodd, a Democrat said the Obama team said a fuller accounting of the money already spent was needed as well, said Senate Banking Committee Chairman Christopher Dodd, a Democrat.

Summers sought to win over Senate Democrats even as the Republican leader of the House, John Boehner, warned that any effort to release the additional money would be a tough sell.

The request was likely to force a vote within days on whether to block the funding, but the deck is stacked in favor of Bush and Obama winning release of the remaining $350 billion. Congress can pass a resolution disapproving the request, but the White House could veto the resolution; then, just one-third of either chamber would be needed to uphold the veto and win release of the money. Senate leaders would prefer to win a majority vote, Dodd said.

The unpopular bailout has featured unconditional infusions of money into financial institutions that have done little to account for it.

Treasury Secretary Henry Paulson originally promised the money would be used to buy up toxic mortgage-related securities whose falling values have clogged credit markets and brought many financial institutions to the brink of failure.

Work continued through the weekend on Obama's economic recovery plan, which features aid to cash-strapped state governments, tax cuts for most workers and working couples, a huge spending package blending old-fashioned public works projects with aid to the poor and unemployed, and a variety of other initiatives.

Obama, meanwhile, said on Sunday he was prepared for immediate involvement in Mideast diplomacy toward a solution to the Israeli-Palestinian conflict but once again refused to show his hand about specifics that would lead him to success where his predecessors have failed for more than a half-century.

Pressed on his silence about the raging war in the Gaza Strip, Obama quickly reverted to his contention that there can be only one president speaking for the United States on foreign policy issues, a position that has caused some to claim the incoming chief executive was being callous in the face of Palestinian suffering in the Israeli offensive to cripple the Hamas organization.

"I think that players in the region understand the compromises that are going to need to be made. But the politics of it are hard," Obama said in an ABC television interview broadcast Sunday. "And the reason it's so important for the United States to be engaged and involved immediately, not waiting until the end of their term, is because working through the politics of this requires a third party that everybody has confidence, wants to see a fair and just outcome."

The incoming leader, who has been receiving daily national security briefings since his election in November, also acknowledged that his campaign pledge to close the prison at Guantanamo Bay will be more of a challenge than he anticipated. Many of those held at the military site are suspected terrorists or potential witnesses in cases against them.

"It is more difficult than I think a lot of people realize – and we are going to get it done – but part of the challenge that you have is that you have a bunch of folks that have been detained, many of whom may be very dangerous who have not been put on trial or have not gone through some adjudication," he said.

During his meeting with Calderon, Obama said his administration would begin work immediately to build upon the relationship between the U.S. and Mexico. The incoming American president traditionally meets with his Mexican counterpart before taking office.

Over a lunch of tortilla soup, the two leaders discussed such topics as the North American Free Trade Agreement, border security, immigration and crime.

Obama said the message he brought to the meeting is that his administration will be ready on day one to build a stronger relationship with Mexico. He said existing relations have been strong, but he believes they can be stronger.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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