President-elect Barack Obama asked Democratic   senators Tuesday not to stand in the way of an additional $350   billion in bailout funds, calling the money essential to helping   the ailing economy.

Obama made his pitch at the Capitol, where he attended the   Democratic senators’ closed-door luncheon as part of his stepped up   campaign to have economic tools at the ready shortly after he   assumes office next week.

Lawmakers who emerged from the session said the president-elect   pledged to correct what they believe were shortcomings in the way   the Bush administration handled the first $350 billion of the   Troubled Asset Relief Program, also known as TARP. They said he   would veto any attempt to block his own administration’s use of the   funds.

“He said TARP is necessary,” said Sen. Charles Schumer,   D-N.Y., after emerging from the luncheon. “Nobody wants to do it,   it’s hardly a thing that anyone would pick as the first thing that   we’d want to do. But you have to do TARP.”

A week shy of taking office, Obama is putting his persuasion   skills to a high-stakes test with Congress as he seeks to put his   emerging administration in control of more than $1 trillion in   economic stimulus and financial bailout money.

Obama’s transition team is ready to dispatch top aides to meet   with Senate Republicans this week in anticipation of a possible   vote Thursday on whether to release $350 billion from the embattled   rescue fund for the financial sector.

In the House, Financial Services Committee Chairman Barney   Frank, D-Mass., said the speedy release of the next $350 billion   was necessary to help stem the rising tide of foreclosures, which   was one of the original purposes of the bailout legislation.

“If we do not get the second $350 billion, I do not see any way   that we can get substantial foreclosure relief,” Frank said.

But Rep. Spencer Bachus of Alabama, the committee’s ranking   Republican, questioned whether the money was necessary.

The fund is becoming “a grab-bag where people can just reach in   and get taxpayer money,” he said.

Frank was presiding over a hearing on the bailout program in   advance of legislation that would place tough new restrictions on   recipients of the money and require spending to reduce mortgage   foreclosures.

Frank’s bill is scheduled to reach the floor of the House on   Wednesday, with a vote set for Thursday. At the Treasury   Department, officials were putting in place tools to measure   whether banks that receive funds from the financial rescue program   are increasing lending.

On Monday, President George W. Bush, at Obama’s request, asked   Congress for access to the remaining billions in the bailout fund.   The request reached Congress as lawmakers and Obama also were   assembling a spending and tax-cutting stimulus package of $800   billion, or possibly more.

If he succeeds, Obama would have more than $1.1 trillion at his   disposal to tackle sinking employment and clogged credit within   weeks of assuming the presidency.

“It is clear that the financial system, although improved from   where it was in September, is still fragile,” Obama said Monday in   making the case for the additional bailout funds.

In London, Federal Reserve Chairman Ben Bernanke said Tuesday   that Obama’s stimulus package could provide a “significant boost”   to the sinking economy. But he warned in a speech prepared for the   London School of Economics that such a recovery won’t last unless   other steps are taken to stabilize the shaky financial system.

Although Bernanke has previously endorsed the notion for a fresh   round of government stimulus to lift the country out of recession,   it marked the first time the Fed chief has referenced the roughly   $800 billion recovery plan now being worked on by Obama.

In Congress, key tax provisions in the stimulus package remained   in flux, with Obama’s call for a break for companies that create   new jobs described by Democratic officials as all but dead. Several   Democrats prefer to use the funds to make sure upper middle class   families are not ensnared by the alternative minimum tax.

Democrats are more favorably inclined toward Obama’s proposal   for a tax break for lower-paid individuals and couples, of up to   $500 and $1,000. Democratic congressional aides also said the idea   of an extra Supplemental Security Income payment was gaining   traction on Capitol Hill.

Democratic lawmakers hope to have an economic stimulus bill   ready for Obama’s signature by mid-February, although officials   indicated that numerous provisions are unsettled.

On the bailout fund, Bush’s notification set a 15-day deadline   for Congress to disapprove of the request or it will be released to   the Obama administration. Lawmakers have complained that the   Treasury Department’s use of the original $350 billion has been   muddled and misleading, that recipients of the funds have faced   little accountability and that the program has done nothing to   reduce home foreclosures.

If both chambers refuse to release the money, it would be up to   Obama to issue a veto – a dramatic first act by a new president -   in hopes that Congress would not override him.

Larry Summers, Obama’s top economic adviser, delivered a   three-page letter to congressional leaders Monday outlining the   transition team’s goals for the bailout fund. But several lawmakers   from both parties said the Obama team would have to provide more   information.

“That’s a broad-scope type of letter,” said Sen. Ben Nelson, a   moderate Democrat from Nebraska. “What we really need is something   with more details so we can truly make those decisions about how   the money is going to be spent.”