By Ronald D. Orol for MarketWatch -- House Republicans clashed with Democrats on Tuesday over whether Congress should release the second half of a $700 billion bank bailout bill and if it is approved what conditions should be attached to it.
"We're seeing this transform into a grab bag, to get taxpayer money," said House Financial Services Committee ranking member Spencer Bachus, R-Ala., at a hearing to examine the use of the funds.
House Financial Services Committee Chairman Barney Frank, D-Mass., expects that legislation he is seeking to attach to the release of the funds would be considered late Wednesday or Thursday. The Senate is expected to consider the legislation on Thursday.
The bill would put restrictions on executive compensation, while imposing new monitoring requirements on banks and participating automotive companies. The measure would also require $50 billion in bank bailout funds to be used in a program to help troubled homeowners modify mortgages to avoid foreclosure.
Lawmakers don't have long to consider the Frank bill. Under the bank bailout statute, the notification on Monday by the White House that the President-elect was requesting the release of the second half of the bailout funds set a time clock in motion.
Lawmakers that want to oppose the allocation of the new funds have to veto the release of the funds by Jan. 27, 15 days from the White House's notification. If Congress doesn't act to block the capital by Jan. 27, the $350 billion is then automatically allocated to Treasury. And if Frank's bill had not passed by that time, the money would be released with none of the proposed conditions.
Already two GOP lawmakers, Reps. Virginia Foxx, R-N.C., and Randy Neugebauer, R-Texas, have introduced veto legislation.
Frank said failure to approve the release of the second traunch of the bailout bill hurts chances for foreclosure relief. "If we do not get the second $350 billion, I do not see how we can get substantial foreclosure relief, "Frank said.
The measure would require Treasury use $50 billion of the $350 billion fund to modify mortgages and help individuals avoid foreclosure. Treasury is instructed to produce a plan by March 15 and funds must begin to be committed by April 1.
But a number of GOP lawmakers said they were worried that providing an additional $350 billion to the Treasury Department as part of a financial rescue plan would raise the federal deficit.
Already House GOP Minority Leader John Boehner, R-Ohio, has said he opposes the legislation. Rep. Ed Royce, R-Calif., said the U.S. businesses are becoming needy on government funds in a dangerous way. "We are becoming increasingly depending on our government," Royce said.
Bachus indicated that perhaps the first half of the bank bailout funds has accomplished the program's goal of stabilizing the markets. He noted that outgoing Treasury Secretary Henry Paulson has assured congressional republicans that the purpose of the bank bailout legislation, which was to stabilize the markets, has been accomplished.
Not enough time, complain lawmakers
The statute is putting pressure on lawmakers to decide whether they will support the Frank bill. However, Frank on Friday said it may not be necessary to pass his legislation if incoming Treasury Secretary Timothy Geithner commits to him that he will employ the conditions in the draft bill. Senate lawmakers also have expressed concerns about whether they will agree to release the $350 billion in funds.
However, many Republicans said they were frustrated with the amount of time Democrat leaders have given them to consider the Frank bill. A number of GOP lawmakers said they were frustrated that Frank did not allow the committee a chance to introduce their own amendments to the legislation. Lawmakers will be permitted to add provisions to the bill when it is considered on the House floor.
"It is highly ironic that today's legislation looks at oversight of the funds, but at the same time Congress is moving away from those principals by failing to let us make amendments to the bill," said Michele Bachmann, R-N.M.
Other lawmakers said they hoped Geithner and the Obama administration will consider additional provisions to the bill.
Rep. Brad Sherman, D-Calif., said he hoped Geithner will consider a series of provisions he is offering, including a measure that would require homeowners receiving help to give Treasury a share of any profit they earn when they eventually sell their home.
Sherman also sought additional restrictions on General Motors Corp. and Chrysler, which are also receiving $17.4 billion in bank bailout funds. The Frank measure prohibits paying bonuses to the 25 most highly compensated employees. It also requires divestment of private aircrafts or leases.
"I think the existing program is insufficient," Sherman said.
Many Democrats supported the Frank bill, arguing that it will help homeowners struggling with mortgages avoid foreclosure. "I support what you [Frank] are doing," said Rep. Al Green, Texas. "This bill addresses foreclosure relief. The foreclosure crisis has not gone away, it has been exacerbated by our failure to act."
Ronald D. Orol is a MarketWatch reporter, based in Washington.
