The Senate voted Thursday to release the second $350 billion in Troubled Asset Relief Program funding after receiving further assurances from President-elect Obama that his administration would devote at least $50 billion for foreclosure relief, provide greater transparency for the program, and restrain executive pay and dividends for firms participating in the program.
"Let's trust Barack Obama," Majority Leader Harry Reid, D-Nev., implored his colleagues prior to the vote.
The chamber voted 52-42 against a resolution that would have blocked the release of the funds. With the vote, the Obama team is assured of getting the funds regardless how the House votes next week on its disapproval resolution.
The key factor was that Obama personally lobbied fellow Democrats. He argued the funds would be needed to help stabilize the economy and give his administration a fresh start after the Bush Treasury Department received low marks from both sides of the aisle for its handling of the first $350 billion.
"You aren't going to get a plaque or a medal for doing this," said Senate Banking Committee Chairman Christopher Dodd, D-Conn., noting how politically unpopular the program has become for lawmakers who have bailout fatigue.
With wariness still lingering in the chamber, Obama economic adviser Lawrence Summers sent another letter to Reid Thursday further detailing how the Obama administration will spend the funds, including a $50 billion to $100 billion program for anti-foreclosure programs.
"We will implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners, while also reforming our bankruptcy laws and strengthening existing housing initiatives," Summers wrote.
Under the new terms, banks currently receiving TARP funds will have to implement mortgage foreclosure programs.
Other conditions include better reporting and a requirement that information is quickly posted on the Treasury's Web site, including the quantity and strike price of stock warrants received by firms participating in the program and the schedule of required payments to the government.
Other major conditions stipulate that banks may not use the funds to purchase other banks and that firms get approval of their regulator before paying out any dividends.
Senate Republicans were concerned over further loans to domestic automakers and their lending units, which have received $15.4 billion so far through TARP. Summers wrote that automakers would receive additional funding "in the context of a comprehensive restructuring designed to achieve long-term viability."
Even with the letter, it took a personal touch to sway Democrats.
Sen. Tom Harkin, D-Iowa, noted he had three phone calls with Vice President-elect Biden late Wednesday trying to get assurances the funds would not just sit in the coffers of big banks. "We know where the buck stops," Harkin said.
Sen. Jim Webb, D-Va., said it took a personal call from Obama to convince him. "I have received concrete guarantees from president-elect," Webb said.
The outreach worked with Senate Minority Whip Jon Kyl, who said he would vote against the resolution with reservations.
Still, many Republicans said they could not go along with continuing the program, arguing that the economy has stabilized since last fall and that spending more money would be fiscally irresponsible.
"The fact is it didn't work... we have not seen a loosening of the credit market," said Sen. Saxby Chambliss, R-Ga.