02/12/2009 05:12 am ET Updated May 25, 2011

Frank Willing To Take Obama's Word On Bailout Funds

Barney Frank is willing to take Barack Obama at his word.

Frank introduced legislation at the end of last week that would have tied a number of strings to the second $350 billion in financial-industry bailout funds. But on Monday, he told fellow Democrats in a closed-door meeting that he wouldn't push for passage of his bill if President-elect Obama would give "his word" that he would implement major portions of his legislation, according to a House Democratic aide.

The agreement would give Obama freedom to spend the TARP funds -- confined by whatever promises he makes to Congress -- and side-steps what could be a difficult fight in both the Senate and the House.

Following the whip meeting with Democrats, Frank's office released a statement saying that Frank "agree[s] that the money should be made available under the appropriate conditions. We should not allow our disappointment at the Bush administration's poor handling of the TARP program to prevent the Obama administration from using the funds in more appropriate ways."

Frank said his oversight bill "creates a framework" that would allow Congress to release the money to Obama.

"I hope the House will pass a bill this week that sets forth the conditions we believe are necessary to assure that the public gets the full benefit of these funds. It seems clear the Obama administration agrees with what we are setting forward, and I believe this creates a framework so that the release of these funds can go forward," he said.

Frank's oversight bill would restrict executive compensation, force CEOs who took taxpayer money to give up private planes, meet certain benchmarks, report on the use of the funds and be forbidden from using any bailout money for mergers or acquisitions.

The legislation will go before his Financial Services Committee Tuesday and is expected to go to the House floor on Tuesday.

The rest of Frank's bill pushed priorities that Democrats couldn't get included last time. Frank wanted at least $40 billion of the TARP cash to be spent on foreclosure relief -- and up to $100 billion unless the banks can show why that much wasn't needed.

Reaching an agreement with Obama, rather than forcing his hand with legislation, could circumvent a balance-of-powers conundrum Frank laid out on Friday. "The problem that we have is that in the legislative branch, it's easier to prevent people from doing bad things than make them do good things," he said. By coming to terms, he could get assurance that Obama would do those good things -- but at the same time would be giving up a measure of congressional authority.

"If they give us their absolute word that they will abide by the bill, that will be enough," Frank is quoted in Monday's CQToday as saying. "I'm willing to accept their word."

Frank's offer comes a few hours after Obama economic adviser Larry Summers sent a letter to congressional leaders asking for authority to spend the funds and promising rigorous oversight. It's doubtful the letter was a surprise to Democratic leaders and appears to have been coordinated with them. The letter offers to implement a number of efforts that coincide with Frank's bill, including restrictions on executive pay and efforts to stem foreclosures.