Legislator says Obama to spend $40-$100B to cut foreclosures

WASHINGTON -- President-elect Barack Obama would devote $40 billion to $100 billion from the financial sector bailout fund to reduce foreclosures, a top Democrat said Wednesday.

House Financial Services Committee Chairman Barney Frank said Obama's top economic adviser, Larry Summers, assured him that Obama would devote such money to help homeowners avoid defaulting on their mortgages.

Frank, D-Mass., said Obama's economic team also agreed with other conditions and goals that Frank has written into legislation now under debate in the House. The legislation includes limits on what financial institutions can do with bailout money and restrictions on executive pay and sets aside money for foreclosure mitigation.

"I believe they would have done this anyway," Frank said after speaking to Summers on Wednesday. Obama officials had no immediate response.

Such a commitment is the most specific glimpse at what Obama would do with the remaining $350 billion of the Troubled Asset Relief Program. Obama has asked Congress to release those funds, and the Senate could vote on that request as early as Thursday.

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.

Summers was in the Capitol Wednesday meeting with lawmakers.

Congress built in a safeguard by requiring that after the first $350 billion 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.

Republicans generally opposed the $700 billion bailout program when Congress first voted for it in October. With Democrats holding a stronger majority in the House and Senate, even more Republicans were voicing opposition to spending the money.

In the House, lawmakers began debate on Frank's legislation Wednesday. A vote was expected Thursday. It would then go to the Senate, where it has little chance of passing.