Obama Would Spend Bailout Funds on Housing Crisis

Senate Minority Leader Mitch McConnell, R-Ky., said Summers and Rahm "did not represent they are in favor of industrial policy."

President-elect Barack Obama listens as Vice President-elect Joe Biden and Sen. Lindsey Graham,...

President-elect Barack Obama listens as Vice President-elect Joe Biden and Sen. Lindsey Graham, R-S.C., not shown, talk about their recent trip to Afghanistan, Iraq, Kuwait and Pakistan, Wednesday, Jan. 14, 2009, at Obama's transition office in Washington. (AP Photo/Gerald Herbert)

(AP)

"We'd like to see something publicly stated with reference to that issue," he added.

In the House, Financial Services Committee Chairman Barney Frank, D-Mass., said Summers assured him that Obama would commit a significant portion of the bailout money to foreclosure relief.

The House on Thursday was scheduled to vote on Frank legislation that would place broad restrictions on the bailout program. One major provision would require that the new administration spend between $40 billion and $100 billion on reducing the number of foreclosures.

"I believe they would have done this anyway," Frank said after speaking to Summers on Wednesday.

Obama's transition office would not comment on discussions held with members of Congress.

The House bill has little chance of passing the Senate.

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Summers this week submitted a three-page letter to congressional leaders as part of Obama's request for the money that outlined the Obama economic team's goals. But several Republicans and Democrats said the letter was not specific enough and said they needed more information from the president-elect.

Congress built in a safeguard by requiring that after the first $350 billion of the bailout fund was spent, Congress could reject spending the second half. Obama has said he needs the additional money to help extend loans to small businesses, consumers, homeowners and local governments.

Lawmakers from both parties have complained that the Bush administration did not spend the money as it initially intended.

Paulson told legislators last year that the money would be used to buy toxic assets held by the banks in hopes that would help them make more loans. But the Treasury soon changed course and used the money to make direct infusions of capital into financial institutions with few strings attached. Lawmakers complained that the money has not appeared to loosen credit.