Obama Warns Democrats of Veto Over Bailout Funds

President George W. Bush, acting at Obama's request, formally notified Congress on Monday that Treasury wanted to use the funds, but Congress can vote to block the move.

President-elect Barack Obama speaks to reporters during his meeting with Mexico's President Felipe Calderon, not pictured, in Washington, Monday, Jan. 12, 2009. (AP Photo/Charles Dharapak)

(AP)

"It is clear that the financial system, although improved from where it was in September, is still fragile," the president-elect said Monday, making the case for use of the funds.

There was an element of political theater to the day's events. It is a foregone conclusion that Obama will be able to make use of the money as he tries to improve the economy. He could veto anti-bailout legislation if it came to that, and there are more than enough votes to uphold him.

"He said if for some reason it passed, he would veto it," Lieberman said.

But neither the president-elect nor fellow Democrats are eager to see that unfold, fearing it could damage Obama politically even before he takes the oath of office as the 44th president next Tuesday. "I don't think that's the way you start out a presidency," said Sen. Jay Rockefeller, D-W.Va.

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Several Democrats said they found Obama persuasive, but added that they would wait to see his formal commitments.

"I feel much better," said Sen. Claire McCaskill, D-Mo., noting the president-elect's commitment to rectify several elements of the existing program.

Levin said Obama promised his administration would do a better job of accounting for how the money was disbursed, would make sure none of it went to pay for stockholder dividends, would enforce restrictions on the pay of corporate executives and more. He also said the president-elect had pledged to honor the commitments the Bush administration had made to prop up the beleaguered domestic auto industry.

It is not clear how much of the money will go toward helping hard-pressed homeowners, but in the House, Democrats were drafting legislation that would dedicate a minimum of $40 billion to that effort.

"If we do not get the second $350 billion, I do not see any way that we can get substantial foreclosure relief," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. The housing measure is tentatively scheduled to come to a vote in the House on Thursday.