What Obama Promised to Obtain Foreclosure Funds

Just a few days before Barack Obama is inaugurated as U.S. president, the Senate approved the issuance of the second $350 billion of the Troubled Asset Relief Program to finance his own foreclosure mitigation program. Despite legislators’ criticism of the way the first $350 billion was spent by George Bush’s Treasury Secretary Henry Paulson, they finally relented and gave Obama immediate access to the TARP fund.

What did Obama promise to obtain the funds?

1. Focus on Foreclosure Prevention
   Obama promised to spend up to $100 billion to avert further foreclosures. According to Larry Summers, appointed by Obama to head the National Economic Council, Obama’s administration will prevent foreclosures by reducing monthly payments for troubled but responsible borrowers, modifying bankruptcy laws and enhancing housing programs.
2. Monitoring of Fund Recipients
   In contrast to Paulson’s lack of accountability conditions before releasing the funds to financial institutions in 2008, Obama’s economic team promised to monitor how the funds are spent by recipient companies. Summers said the Treasury will demand the submission of quarterly reports providing details on lending activities and on actions that contribute to foreclosure mitigation.
3. Restriction on Acquisition of Financial Companies
   Paulson was severely criticized for investing most of the first $350 billion to boost the capital of financial institutions. With such sentiment in mind, Obama’s team promised to restrict corporate acquisition deals.
4. Limits on Executive Compensation
   Aware of public criticism of escalating executive pay, Obama’s team also promised to put limits on executive salaries in companies that receive federal assistance. Summers spelled out a provision that would restrict top executives from encashing their shares of stocks or other benefits above a certain threshold until their companies have repaid the government.

Pleased with these promises, the Senate voted 52 to 42 to provide Obama with access to the funds he asked to mitigate foreclosure.