Paulson May Ask Congress For Rest of Bailout Fund

US Treasury Secretary Henry Paulson is weighing whether to ask Congress for the remaining $350 billion of the financial bailout fund, with White House aides approaching President-elect Barack Obama's transition team about the idea, an Obama aide said Wednesday.

CNBC.com Henry Paulson

"They reached out to us a couple of days ago," the Obama aide said, noting that during the transition, the administration has been keeping the Obama team informed about their decisions though it is "not a joint effort policywise."

"Our advice to them was to immediately start consulting the Hill leadership," said the aide who spoke on condition of anonymity.

A Treasury spokeswoman was not immediately available for comment.

U.S. House Republican leaders have already struck a tone of resistance, sending a letter to Paulson and Federal Reserve Chairman Ben Bernanke Wednesday demanding more information about the $700-billion Troubled Asset Relief Program (TARP) before the rest of the money is released.

"It is our strongly held view that before any such request is made, the American people need satisfactory answers to a number of important questions," said House Minority Leader John Boehner and other leading Republicans, in a letter obtained by Reuters.

The lawmakers said they want greater transparency for upcoming loans under the TARP and an "exit strategy" for the U.S. role in private business.

The letter comes a day after the investigative arm of the U.S. Congress criticized the Treasury Department's handling of the $700 billion program and urged the Bush administration to get it into better shape.

The Government Accountability Office said Treasury has yet to address a number critical issues, including how it will ensure that the program is achieving its intended goals.

Under the TARP, $250 billion has been committed for direct capital injections into U.S. banks in a bid to revive sluggish credit markets and restore confidence in the banking system.

Another $100 billion has been largely consumed by efforts to prop up insurer American International Group and Citigroup , as well as support the Federal Reserve's efforts to free up lending to consumers.

Some lawmakers have accused banks of hoarding the money, instead of lending it out, and have urged Treasury to make it clear that government funds must be used for loans and not to buy healthy banks or pay higher dividends.

Obama said during a news conference in Chicago Wednesday that the GAO report had highlighted some areas where the implementation of the TARP could be improved.

"We're seeing some areas where we can be doing better in making sure that this money is not going to CEO compensation, that it's protecting taxpayers and that the taxpayers are going to get their money back, that it's effective in shoring up our financial markets," Obama said.

Obama also said policymakers have to start a serious effort to prevent foreclosures, which is at the root of the financial crisis.

Under the bill that funded the bailout, the final $350 billion could be released if the president requested it in writing.

To block it, Congress must pass a joint resolution to disapprove the $350 billion.

If no resolution passes, the next installment of $350 billion would be released 15 days after the president's request.

Lawmakers have balked at what some have called Paulson's bait-and-switch in how he sold the bailout bill to Congress.

The White House in September sent Congress a three-page demand for $700 billion in emergency funding with few strings attached, saying the money would be used mainly to finance Treasury Department purchases of distressed mortgage-backed securities that were clogging international credit markets.

Paulson has said the program's emphasis has changed to buying stock in banks and assisting consumers.

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