Senate to Vote Tomorrow on Releasing TARP Funds (Update1)

Jan. 14 (Bloomberg) -- The U.S. Senate will vote tomorrow on whether to block the release of the second half of the $700 billion financial-bailout plan, Majority Leader Harry Reid said.

The chamber will vote on a resolution to bar use of the funds introduced by Louisiana Republican David Vitter. Reid, a Nevada Democrat, said yesterday he was “confident” the Senate wouldn’t stand in the way of using the $350 billion from the Troubled Asset Relief Program sought by President George W. Bush on President-elect Barack Obama’s behalf.

Lawmakers in both parties want more of the funds to be used to help homeowners at risk of defaulting on their mortgages. The House tonight is debating legislation that would require Obama’s Treasury Department to set up a foreclosure-relief program and require participating banks to report how they use the money.

Earlier today, Senate Republicans demanded assurances from Obama that the second half of the bank-bailout fund, approved last year, will be used for financial institutions and not for aid to automakers or other industries. Republicans are faulting the Bush administration for using $13.4 billion of the funds to aid Detroit automakers General Motors Corp. and Chrysler LLC.

Under the rescue legislation, unless Congress passes a resolution turning down Bush’s Jan. 12 request for the funds within 15 days, the Treasury Department could use the money. The president then could veto the resolution.

Private Meeting

Vitter said officials from Obama’s incoming administration told Republicans in a private meeting today the government will use the money for the banks.

Senate Republican Leader Mitch McConnell, a Kentucky Republican, also suggested that those assurances were made during a meeting today at the Capitol with Rahm Emanuel, Obama’s appointed chief of staff, and Larry Summers, the president- elect’s top economic adviser.

“They certainly did not represent that they are in favor of industrial policy,” McConnell said. Even so, he said senators want a strong, public statement.

McConnell said he isn’t prepared to say how he will vote on the resolution disapproving release of the funds, and Vitter said he will vote for the resolution. He and other senators said it isn’t clear that the meeting today with Obama officials changed any minds.

“They weren’t successful; they weren’t unsuccessful,” said Senator John Cornyn, a Texas Republican.

Senator Olympia Snowe, a Maine Republican, said she is leaning toward supporting the use of TARP funds after talking with Emanuel.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said yesterday the Senate won’t have time to take up the bill being debated by the House today.

To contact the reporters on this story: Brian Faler in Washington at bfaler@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: Laurie Asseo at lasseo1@bloomberg.net