Obama's holding the strings to Paulson's purse

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December 4, 2008

Obama Keeps His Distance From Treasury on TARP
Paulson Can't Ask Congress for Second Tranche of $350 Billion Unless He Knows Next Administration's Plans for the Money

CHICAGO --

As early as next week, Treasury Secretary Henry Paulson will decide whether to seek the second tranche of $350 billion in the Troubled Asset Relief Program (TARP) to help rescue the nation's financial sector. To access that money, Mr. Paulson must present to Congress not only his plan for the money, but also detailed plans from the next administration, which would spend the bulk of it.

Mr. Obama told reporters Wednesday he didn't need to deal with the issue yet. "Until Secretary Paulson indicates publicly that he's drawing down the second tranche, the second half of the TARP money, it would be speculation on my part to suggest that the first tranche of that money is going to be used up," Mr. Obama said.

Treasury officials have grown frustrated with the Obama transition team's unwillingness to engage in specifics. Mr. Paulson has to consult with the Obama team on any big moves, in particular on plans for how the next $350 billion should be used. While Treasury has been in frequent contact with the Obama team, there is uncertainty about what it wants to do with that next batch of money. Many within Treasury believe the next administration is trying to keep its distance in an effort not to be painted as endorsing any of the Bush administration's plans.

Obama is resisting overtures from the Bush Treasury Department to get more involved now in shaping how the rest of the rescue funds are spent.


David Axelrod, a senior Obama adviser, said that until Mr. Paulson commits to seeking the additional funds, any statements about its use would be presumptuous. Told that such a commitment could come next week, Mr. Axelrod shrugged, "Well, that's not this week."

Mr. Obama has been willing to make general statements about how he would handle TARP once he is in office. "One of my central principles...when I first examined the TARP proposal, was to insist that there was going to be strong oversight," he said. "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."


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