President-elect Barack Obama asked President Bush today to request the release of the second $350 billion in federal bailout funds so he would have "ammunition" if the country's fragile economy weakened further.
The White House said that Bush has agreed to request the money.
Obama, speaking after a meeting with Mexican President Felipe Calderon, said it would be "irresponsible" to enter the White House without having asked Bush to request the funds. He called the cash "potential ammunition" in case the economy worsened.
The incoming president also signaled that he intends to "fundamentally change some of the practices" in the bailout program. Referring to how the first $350 billion of bailout cash was allocated, Obama said, "Many of us have been disappointed with the absence of clarity, the failure to track how the money's been spent."
Obama and Bush have teamed up to get the money released. Bush has agreed to request the funding, and Obama will lobby for it by arguing that he will "rebrand" the program and make better use of the money.
In a letter to congressional leaders, Obama's top economic adviser Larry Summers called the need for the second round of funds from the Troubled Asset Relief Program is "imminent and urgent."
In his letter, Summers said the money would be used for a "sweeping effort" to save homeowners threatened with foreclosure, and make the money available to small banks and businesses along with corporate giants.
"I have talked to the president-elect about this subject," Bush said at his farewell news conference today.
"I told him if he needed the $350 billion on my watch, I'd be willing to ask for it.. if he felt like it needed to happen on my watch," Bush said.
A short time later, Obama asked Bush to make the request official.
"This morning, President-elect Obama asked President Bush to formally notify Congress, on his behalf, of his intent to exercise the authority... to access the last tranche of $350 billion in funding for Treasury programs addressing the financial crisis," White House spokeswoman Dana Perino said. "President Bush agreed to the President-elect's request."
The team tactic is one of several steps Obama is taking this week to prepare the way for his own administration, which officially begins next week.
In other signs that Team Obama is about to take over, his Cabinet members, including State Department-designate Hillary Clinton, will start trooping to Capitol Hill for confirmation hearings this week. Obama is expected to name a replacement for commerce secretary. And the president-elect has narrowed the selection of a White House dog to a labradoodle and a Portuguese water dog.
The economy, however, looms over all else.
Sen. Christopher Dodd, D-Conn., who chairs the Senate Banking Committee, warned on "Good Morning America" today that a new wave of mortgage defaults may be on the horizon, putting as many as 8 million homes in jeopardy.
Obama is still putting together the details of his estimated $775 billion economic rescue plan. But in addition to that bonanza, he wants Congress to release $350 billion remaining from the $700 billion it already approved last fall.
Congress is hesitant, claiming the Bush administration handed the money to mega banks without any conditions, without any means to determine how the money is spent and with little of it going to help beleaguered homeowners avoid bankruptcy.
Summers assured Democratic senators late last week that the incoming administration would ensure that more of the money is used to help homeowners and promised better accounting of the cash.
A vote on the Troubled Assets Relief Program request could come as early as this week, in time for Obama to begin spending it when he takes office next Tuesday.
"My colleagues in the Senate will not vote for any additional funds unless they're assured by the Obama administration that these provisions will be a part of it," Dodd told "GMA."
Obama to 'Rebrand' TARP
And Obama has promised Congress he will do just that.
"Barack Obama ... has said he is going to rebrand this entirely and demand accountability," Dodd said.
Democrats and Republicans have been angered over the Bush administration's inability to detail how the first $350 billion of the TARP has been spent and how little of it went to help homeowners avoid bankruptcy.
"It's disgraceful. We're losing 9,000 homes a day in this country," Dodd told "GMA." "And the anticipation is, beginning in January, with some of these new mortgages that have been created earlier coming due, you may have as many as 8 million homes in this country being adversely affected."
"It's obviously been totally mismanaged by the Bush administration," he said.
Dodd said that bankruptcies affect more than just homeowners who can't pay the mortgage. "If your neighbor is in foreclosure, the value of your home will decline between 1 percent and 5 percent the very day that foreclosure occurs," he said.
The Bush administration defended its efforts to help homeowners on "GMA" today.
Housing and Urban Development Secretary Steve Preston said, "The first thing that needed to be done was to make sure that the financial system was solid because that's the system through which mortgages come."
Congress tried to provide some relief by creating the Hope for Homeowners program, intended to help 400,000 homeowners, but so far the program has attracted only 370 applications.
"This is a very small program right now in the context of a much bigger response," Preston said. "And whereas I think it's an important program and it can be tweaked to make it more effective, and Congress is listening hard on how to do that."
He also said that HUD and the Federal Housing Authority has arranged refinancing for 500,000 people.
"I think the government response has been massive and responsible," Preston said.