Obama requests TARP bailout funds

January 12, 2009 7:39:47 PM PST
President-elect Barack Obama has called for the second half of the $700 billion bailout, promising fundamental changes in the way the next $350 billion will be handed out.

Obama interrupted his meeting with Mexico's president Monday morning to announce his plans to redirect the second half of the $700 billion bailout.

"We're going to focus on housing and foreclosures, we're going to focus on small businesses, we're going to focus on what's required to make sure credit is flowing to consumers and businesses," Obama said.

The vast majority of the first $350 billion in the Troubled Asset Relief Program (TARP) went to financial institutions, banks, brokerage houses and the automobile industry.

"Credit spreads are beginning to shrink lending is just beginning to pick up the actions we have taken I believe have helped thaw the credit markets which is the first step to recovery," President Bush said.

Monday morning Bush defended the way his administration handled the first $350 billion.

"I think it shows that he really doesn't understand what's going on," Walnut Creek Congresswoman Ellen Tauscher said.

Tauscher wants more TARP money to help refinance adjustable rate mortgages.

"In the next six months there's almost $1 trillion of those that are going to start flipping way up into the stratosphere of interest rates; we have to get people into fixed rate loans we have to have a way to do it," Tauscher said.

Congress has the power to put strings on the next $350 billion and Monday Speaker of the House Nancy Pelosi promised "at a minimum the legislation will require $40 billion from the TARP for initiatives to keep families in their homes."

Tauscher says she pushed for that $40 billion, but she also describes $1 trillion worth of adjustable loans that will be "flipping into the stratosphere" in the next six months. The $40 billion will not solve the problem, but it will be a start.

"Well it's more than we spent before considering we didn't spend any of the TARP money on it," Tauscher said.

Tauscher is also working on getting TARP money for California's roads and bridges. But the state's continuing budget battle could hold up those federal dollars.