Obama promises changes in use of bailout billions

WASHINGTON — Seeking to reassure wary lawmakers, President-elect Barack Obama said Monday he will fundamentally change the way the second half of the $700 billion financial bailout fund is spent, focusing some of the relief on housing and small businesses.

Obama asked President George W. Bush to submit a request to Congress so that the remaining $350 billion would be available quickly after the inauguration next Tuesday. Bush agreed to do so.

"I think many of us have been disappointed with the lack of clarity, the absence of transparency," Obama told reporters after a meeting with Mexico's president, Felipe Calderon. He said some of the money should have been spent on helping people avoid foreclosure.

"It is clear that the financial system, although improved from where it was in September, is still frail," Obama said.

Separately, Larry Summers, Obama's choice for National Economic Council director, said the new president intends to broaden the goals of the remaining bailout package and impose tougher restrictions and oversight on how the money is spent.

Summers told House and Senate leaders in a letter from the transition team that the need to tap the second half of the $700 billion fund is "imminent and urgent."

The letter says Obama intends to use the Troubled Asset Relief Program to help community banks, small businesses, consumers and homeowners as well as large financial institutions. It says Obama intends to launch a "sweeping effort" to mitigate foreclosures.

"The president-elect also shares the frustration of the American people that we have seen too little effect from this rescue plan on jobs, incomes and the ability of responsible homeowners to stay in their homes," Summers wrote. "He believes the American people are right to be angry with the way this plan has been implemented."

Obama's request came as Democrats in the House of Representatives prepared to act on legislation that has some of the same aims laid out in Summers' letter.

Earlier Monday, Bush told reporters he would not make a request for the money form Congress unless Obama "specifically asked me to make it." Obama called Bush at 10:25 a.m. EST, after Bush's news conference ended, Obama transition officials said.

Bush's assertion that the decision to tap the money rests with Obama was an acknowledgment of what has been an extraordinary ceding of power to the incoming administration. Bush in recent weeks has let Obama be the driving force behind most recovery efforts.