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Obama weighs decision about bailout funds

Monday, January 12, 2009 , Posted by Linda at 10:35 AM

WASHINGTON (Reuters) – President-elect Barack Obama vowed to restructure a financial rescue plan to save more U.S. families from home foreclosures, as he considered on Sunday whether to seek additional funds from a $700 billion bailout program.

President-elect Barack Obama at a news conference in Chicago, December 7, 2008. Reuters – President-elect Barack Obama at a news conference in Chicago, December 7, 2008. (Jeff Haynes/Reuters)

Obama's aides have been in discussions with the White House over whether President George W. Bush should ask Congress for permission to use the remaining $350 billion of the funds, which are aimed at stabilizing the financial system.

The purpose of the request, which would be formally submitted by Bush, would be to have the funds in place soon after Obama takes office on January 20.

But it may prove difficult to get approval from Congress because the bailout program is unpopular with many lawmakers who feel too much of the money has already been given to Wall Street firms with few strings attached.

The legislators want some of the remaining money to be used instead to help struggling homeowners.

Massachusetts Sen. John Kerry, after leaving a meeting with other senators and some of Obama's top aides, said the president-elect was close to a decision on the bailout fund, known as the Troubled Asset Relief Program, or TARP.

"It's my understanding that the president-elect is going to make a judgment somewhere in the next hours," Kerry told reporters. "I think the president-elect will make known -- because he's the one who's going to be controlling that -- what he would like to see happen on that."

Top Obama aides Larry Summers and Jason Furman were holding closed-door meetings with Kerry and other senators to discuss, not only the bailout funds but also a proposed $775 billion stimulus package that Obama and the Democrats say is needed to pull the U.S. economy out of a deep slump.

A COLLABORATIVE EFFORT

Senate Democrats said the plan was undergoing changes from an original outline that called for setting aside 40 percent of the money for tax cuts. Much of the rest of the package would go toward public works projects such as road and school construction and social safety-net programs like unemployment insurance.

Some Democrats want to see more energy-related tax breaks and also questioned the structure of some of the tax cuts for families and businesses.

"There are significant changes already being put in place and being contemplated," Kerry said. "I think it's moving in the right direction and I think we're making a lot of progress."

He said he believed there would be changes to the proposed $1,000 tax cut for middle-class families and to the credits aimed at encouraging businesses to hire.

After facing some resistance from Democrats last week on some aspects of the package, Obama emphasized his staff was working closely with the Democratic-led Congress.

"We're going to have a collaborative, consultative process with Congress over the next few days," Obama said in an interview on ABC's "This Week." "We're not trying to jam anything down people's throats."

Government figures last week showed the U.S. unemployment rate surged in December to 7.2 percent, capping a year in which employers slashed 2.6 million jobs, the most since 1945.

Obama says passage of the stimulus plan by mid-February is crucial to avoiding further job losses.

The Obama team sees a reworking of the bailout program as another way to throw the economy a lifeline.

He emphasized in the ABC interview that he agreed with lawmakers' concerns about how the program had been managed.

"When you look at how we have handled the home foreclosure situation and whether we've done enough in terms of helping families ... we haven't done enough there," Obama said.

Congress must give its approval to unlock the rest of the TARP funds and lawmakers who have been skeptical about the program have said they may oppose that.

"Until there is a demonstrated need in our economy and a plan to address that need, I think it would be irresponsible for them to release that money," House Minority Leader John Boehner, an Ohio Republican, told CBS's "Face the Nation".

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