Frank wants second half of bailout released now

updated 6:50 p.m. ET Dec. 22, 2008

WASHINGTON - A key House Democrat is pushing to get the second half of the $700 billion rescue fund released next month, before President-elect Barack Obama is inaugurated, in part to help stimulate the economy.

Barney Frank, chairman of the House Financial Services Committee, said Monday he is preparing legislation to require that some of the money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates.

At the same time, commercial real estate developers and other companies are seeking their own share of the bailout pot.

Frank's bill would impose tighter restrictions on the second $350 billion of the bailout funds, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation. Many U.S. banks have received federal capital in an effort to stimulate lending.

"I don't want to wait until Obama," he said in a phone interview. "I think we can do it now."

The bailout funds, along with a stimulus package the Obama administration is expected to push early next year, would have "the impact that you need to get this economy back out of the dumps," Frank said.

A spokeswoman for Obama did not return a call for comment Monday.

Last week, President George W. Bush's administration used the final piece of the initial $350 billion to provide loans to automakers General Motors Corp. and Chrysler LLC. The Treasury Department has earmarked $250 billion to buy stock in banks, including Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., and provided $40 billion in capital to insurance giant American International Group Inc.

Economy in Turmoil Obama considers bailout for small business The Obama administration is considering using money from the $700 billion financial bailout fund to provide further assistance to the nation's struggling small businesses. A leaner GM zooms out of bankruptcy Consumers' mood sours in early July Trade gap narrows to 9-year low in May Tens of billions remain in bank bailout fund

Lawmakers have criticized Treasury for not using any of the initial $350 billion to prevent additional home foreclosures. Up to 2.25 million Americans could lose their homes to foreclosure this year, Federal Reserve chairman Ben Bernanke has warned.

Frank said his legislation would include a version of a plan, supported by Federal Deposit Insurance Corp. Chairman Sheila Bair, to spend $24 billion to give lenders financial incentives to modify more loans and help more borrowers keep their homes. Bair has estimated it could prevent 1.5 million foreclosures.

His proposal also would include a measure, under consideration by Treasury, to use government-controlled mortgage companies Fannie Mae and Freddie Mac to reduce mortgage rates to 4.5 percent or lower to stimulate more home buying.

Frank also wants to revamp the Hope for Homeowners program, which was launched Oct. 1. It was intended to let 400,000 troubled homeowners swap risky loans for conventional 30-year fixed-rate loans with lower rates. The early results have been disappointing, with only 312 applications so far, and officials are looking at ways to expand the program's use.

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