House Democrats to Submit TARP Reform Bill on Friday Afternoon

House of Representatives Democrats will submit a bill to modify the terms detailed in the $700 billion Troubled Asset Relief Program to put additional constraints on how the U.S. Treasury disperses the second half of the funds.

Throughout the day, newswires have been reporting that the new bill, which will allow the Treasury to access to the second tranche of the funds, will require some minimum amount allotted to home foreclosure relief, funding to small U.S. banks, and aid to municipalities.

The bill also calls for quarterly disclosures of how firms will be spending the funds.

Earlier on Friday, the Washington Post said that incoming Treasury Secretary Timothy Geithner was working on an overhaul of the program to include some of the measures discussed by House Financial Services Committee Chairman Barney Frank.

However, much of the funding has already been promised to various institutions, with the Treasury having pledged billions to General Motors and its financing arm GMAC, which recently became a bank holding company.

U.S. Treasury Secretary Henry Paulson told Bloomberg Television that the root of the problem in the United States remains the housing sector. He defended his initial handling of the $350 billion of the TARP funds, saying that his actions were done to stabilize the financial system.

By Erik Kevin Franco and edited by Nancy Girgis
©CEP News Ltd. 2009