Congress Awaits $350 Billion TARP Request from Bush Administration

The mortgage crisis is still in full swing, but will the Bush administration request the remaining $350 billion in TARP funds? If so, he may have a battle from both sides of the aisle. Democrats have specific earmarks in mind and the Republicans are still having remorse for passing TARP at all.

Senate Majority Leader Harry Reid (D-NV), speaking from the Senate floor set expectations for a lame duck Congress--auto industry relief and awaiting a TARP request from the White House.

TARP, passed by the legislature in October, approved $700 billion to bailout a crumbling financial system. A system that was, purportedly in a credit crisis and needed government assistance in unclogging interbank lending and credit markets from toxic mortgage assets. However, the first $350 billion has been redirected to stabilizing large bank balance sheets. This still leaves billions in troubled assets on bank balance sheets and millions of borrowers still headed to foreclosure.

These are precisely the scenarios that are likely to cause a battle for the remaining $350 billion in TARP funds. Democrats are mounting a case for more focus on the individual borrowers. However, even they are in conflict on the right approach.

Some, like Senate Banking Committee Chairman Christopher Dodd (D-CT) are in firm support of FDIC Chairman Sheila Bair's loan modification program. While another contingent of Democrats is falling away from that approach on the heels of OCC reports that 53 percent of mortgage loan modifications redefault within 6 months. This group is now potentially looking towards job creation as unemployment rates soar to nearly 7 percent.

Meanwhile, Republicans are likely to resist the request as well. Many Republicans still feel they were pushed into a TARP proposal that deeply divided the party, but seemed to be an urgent crisis. These feelings and concerns that the funds were used quite differently from originally proposed triggered a letter from House Republicans asking for more TARP details from the Bush administration and US Treasury SecretaryPaulson before they would consider any request.

For now, the Bush administration seems to be pursuing a position that would leave the remaining funds for President-elect Obama's administration. And with a contentious automaker bailout on the agenda there may not be interest in staging two intensely political battles at once.