"Obama Preserves Political Capital for Stimulus Plan"

Wall Street Journal:

Barack Obama's transition team is resisting Bush administration overtures to coordinate more on the financial-sector rescue, convinced that neither the lame-duck President George W. Bush nor the president-elect has the clout to win a smooth congressional release of more bailout funds.

With the first $350 billion of the bailout money nearly allocated, transition aides are pressing Treasury officials to convene a bipartisan meeting on Capitol Hill this week. Obama aides say the Treasury needs to sound out congressional leaders and rank-and-file lawmakers on what information they need to release the second, $350 billion tranche from the government's Troubled Asset Relief Program, or TARP.

Senior transition officials said they would attend the meeting, but they made clear they would neither lead it nor lobby for approval of the funds. Their focus is on passing a separate, half-trillion dollar stimulus program that Mr. Obama said Sunday would be the largest infrastructure program since the Eisenhower administration's construction of the interstate highway system.

"If the Administration believes the second half of the TARP needs to be triggered, we've made it clear to them that we would do everything possible to ensure Congress gives it full consideration," said Obama transition spokeswoman Stephanie Cutter. "But until they make that decision, all parties involved are in a holding pattern."

How both sides manage the transition could be vital for the economy and financial markets, which sank in the days after Mr. Obama's election on fears of a prolonged handover. Mindful of the disastrous presidential transition between the administrations of Herbert Hoover and Franklin D. Roosevelt -- during which an already bad economy worsened -- both the Obama and Bush camps have strained to be cooperative.

But tension is growing: Treasury officials believe Obama aides are being short-sighted in their refusal to offer more policy and lobbying assistance, while the transition team sees an administration looking to be rescued from its own miscues.

A request for more TARP money now would come amid growing lawmaker criticism of Treasury's implementation of its rescue program -- including Treasury Secretary Henry Paulson's decisions to forgo buying bad loans from distressed banks in favor of making equity injections in those institutions, and to not place stronger conditions on banks that receive government funds.

The existing bailout legislation does fast-track release of the next $350 billion of TARP money; Congress would have to pass new legislation to block the funding after a request is made. The president could then veto the blocking bill and force opponents to muster a two-thirds majority to override that veto.

But officials with the Treasury and the transition agree that the spectacle of even a failed effort to block the money could send financial markets into an uproar. One transition official said he was told Mr. Bush could expect only a handful of Republican votes -- perhaps five -- in his favor.

The different approaches became apparent the Friday after Thanksgiving when, according to people familiar with the matter, members of the Federal Reserve, Treasury and four Obama transition aides overseeing economic issues talked by phone about ways to help homeowners in danger of foreclosure.

Treasury staff wanted to brief the Obama team on the various proposals the Fed and Treasury were discussing and to gauge their level of interest in doing something to help homeowners, these people said. If Treasury and the Fed were going to embark on a plan to help stabilize the housing market, they wanted the next administration to agree with their approach.
Economic Recovery

In this week's Democratic Radio Address, President-elect Barack Obama laid out key pieces of his economic recovery plan. Read the text of the address in which he outlines five specific components of the plan.

Mr. Obama had been stressing for weeks his desire to increase assistance to homeowners as the program moves forward, a point he reiterated Sunday, first on NBC television's Meet the Press, then to reporters as he introduced his choice for secretary of the Veterans Administration, retired Army Gen. Eric Shinseki.

"I'm disappointed that we haven't seen quicker movement on this issue by the administration," Mr. Obama said on Meet the Press, adding later, "If it's not done during the transition, it will be done by me."

For more than an hour on the conference call, the people familiar with the situation said, Treasury and Fed staff outlined the three main ideas under discussion: A modification of the proposal being pushed by Federal Deposit Insurance Corp. Chairman Sheila Bair; a plan to help bring down interest rates; and a proposal championed by the Fed to buy distressed mortgages.

When they had finished outlining the proposals, Treasury staff asked the Obama aides for their impressions. The aides demurred, refusing to endorse any of the ideas. When asked what they would like to see or how they envisioned a foreclosure mitigation program working, they were noncommittal, according to people familiar with the matter.

A person familiar with the call said the Obama aides were vague about their thoughts. Obama aides said even before the call was convened, the administration had been warned that Mr. Obama saw the call as a chance for Treasury to brief the transition and that Obama aides weren't there to offer their opinions or express transition policy. The aides on the call weren't of sufficient rank to have made the policy decisions Treasury is demanding, the aides said.

With such disputes bursting into public, both camps on Sunday said they are moving forward cooperatively.

"We continue to brief the transition as we would be expected to," said Michele Davis, a Treasury spokeswoman.

Mr. Paulson has indicated he wants to consult with the Obama team on any big moves, especially a draw down of the next $350 billion. Mr. Paulson doesn't want to commit funds to a program if the new administration might later undo the effort. Getting a buy-in from the Obama team could also help Mr. Paulson navigate the process of getting the second half of the rescue fund, since an Obama-endorsed plan would be more saleable to Democrats in Congress.

Lawmakers expect Treasury to include a plan to help home homeowners avoid foreclosure as part of any request for additional rescue funds. But Treasury would like the Obama team to endorse whatever idea it pitches to Congress, since it would fall to an Obama administration to implement such a program. Treasury is also open to considering an Obama-crafted foreclosure mitigation plan.

Barack Obama