Senate Releases $350 Billion in Bailout Funds to Obama

The Senate narrowly approved President-elect Barack Obama's request for $350 billion in remaining financial bailout money on Thursday, effectively handing the president-elect his first legislative victory before he even takes office.

The vote averts a politically awkward showdown between Obama and Democratic leaders in Congress. Obama had warned that he would have vetoed legislation blocking access to the second half of the $700 billion financial rescue funding known as the Troubled Assets Relief Program, or TARP. The government has already spent the first half.

Both houses debated Obama's call to release another $350 billion from the package, but the Senate vote mattered most because only one chamber needed to clear the funding and the Senate was Obama's best bet. Despite bipartisan anger over the Bush administration's handling of the program to date, Democratic allies of the incoming president prevailed on a vote of 52-42 that will permit the release of funds within days of Obama's inauguration.

The vote followed a commitment by Obama to use as much as $100 billion of the money to help homeowners facing foreclosure.

Obama's team lobbied senators hard for the funding. He and Vice President-elect Joe Biden, with economic adviser Lawrence Summers and incoming White House Chief of Staff Rahm Emanuel, have burned up the phones and the roads with calls and visits to members of Congress to ask for every possible vote.

A letter to congressional leadership also promised more stringent assurances of accountability and transparency in the use of taxpayer funds moving forward. The letter states that $50 billion to $100 billion will be committed to a sweeping effort aimed at stemming the tide of foreclosures, with a requirement that banks getting TARP funds must participate.

Sen. Jim Webb, D-Va., said Obama had called him and guaranteed him that oversight would be strong and executive compensation would be limited. Sen. Claire McCaskill, D-Mo., a staunch Obama ally, said the letter and a personal call from her friend helped.

She's giving the incoming administration "the benefit of the doubt," for now, because, "If they don't do what they say they are going to do, then they know that will be a boat load of political capital out the window."

Not everyone was sold. Sen. Jim Inhofe, R-Okla., warned of harsh future judgment: "It's probably going to be one of the most egregious votes in the history of this institution."

Throughout the vote, the Senate's Democratic Whip, Illinois Sen. Dick Durbin, worked his sheet of possible votes, at times conferring Majority Leader Harry Reid, D-Nev., and corralling senators.

Biden was able to cast his last vote in his decades-long Senate career on the measure, as did Secretary of State-Designate Hillary Clinton, still the junior senator from New York. And for his very first vote, newly-minted Sen. Roland Burris, D-Ill., voted to give Obama, whose seat he assumed, the TARP funds.

The 44th president-to-be was at his transition office across town from the Capitol -- and President Bush relegated to the role of virtual onlooker -- as events played out at the dawn of a new Democratic era in government. Obama has called for swift and bold action to confront an economic debacle unrivaled since the Great Depression.

"I'm gratified that a majority of the U.S. Senate, both Democrats and Republicans, voted today to give me the authority to implement the rest of the financial rescue plan in a new and responsible way," Obama said in a written statement after the vote. "I know this wasn't an easy vote because of the frustration so many of us share about how the first half of this plan was implemented. ... Now my pledge is to change the way this plan is implemented."

House Democrats also unveiled an $825 billion economic recovery bill Thursday, unprecedented in its scale and reach, that would provide an enormous infusion of public spending in hopes of kick-starting the sagging economy.

Democrats hold expanded majorities in both houses as the result of last fall's elections, and enactment of the stimulus measure is scarcely in doubt.

At the same time, lawmakers made clear they will not hesitate to substitute their own priorities for Obama's.

The president-elect's call for a business tax credit for each new job created was jettisoned by Democrats who questioned its value and preferred to use the money elsewhere. They agreed to Obama's separate proposal for a tax cut of $500 per worker and $1,000 per working couple. The documents made public did not say whether the money would come in the form of a one-time check or an adjustment in paycheck withholding.

The measure does not include money to help middle- to upper-income taxpayers ensnared in the alternative minimum tax, which was originally designed to prevent the extremely wealthy from avoiding payment of taxes but now threatens more than 20 million tax filers.

Several officials said the Senate was likely to include that provision in its version of the bill, a step that could push the overall total close to $900 billion.

Money for the financial bailout was a tougher sell by far.

Several newly elected Democrats campaigned as opponents of the program, which was launched last fall with an initial $350 billion, and lawmakers in both parties have expressed unhappiness with the Bush administration's management of the effort.

Obama lobbied Democrats in private earlier in the week not to stand in the way of release of the remaining $350 billion, and a top aide followed up with a written commitment to Reid.

In search of Republican support, Summers also said that apart from a commitment to help the Big 3 automakers survive, the new administration did not intend to intervene financially in individual industries outside the financial sector.

The stimulus measure, meanwhile, encompassed a bewildering array of programs, from money to make broadband available in rural areas to support for scientific, biomedical and climate change research.

It also proposed an increase in Pell Grants for college students of $500, and would forgive repayment of a $7,500 tax credit that Congress passed last year as a loan for first-time homeowners.

Another $50 million would be spent "to put people to work making monument and memorial repairs at cemeteries for American heroes," according to an information sheet distributed by Democrats.

The summary claimed "unprecedented accountability" and said the bill would include no earmarks, the pet projects that lawmakers are fond of promoting.

In addition, Democrats said all announcements of contract and grant competition would be posted on a Web site to be created by the new administration.

FOX News' Trish Turner and The Associated Press contributed to this report.