Obama team retooling financial rescue plan

President-elect Barack Obama’s economic team is urgently overhauling the $700 billion financial rescue package to broaden its scope beyond Wall Street, The Washington Post reported on Friday.

Treasury Secretary nominee Timothy Geithner and other senior economic advisers are working to expand the program’s aid to municipalities, small businesses, homeowners and other consumers, the newspaper reported, citing sources familiar with the discussions.

The team is also planning to have the government take more stakes in financial companies, but those receiving federal aid would have to submit to greater restrictions on executive compensation than were imposed by the Bush administration.

So far, the Treasury has access to only half of the $700 billion fund Congress approved in October, and Democrats on Capitol Hill are preparing legislation that would set conditions on the release of the remainder.

Confronted with intense skepticism by lawmakers, Geithner has little chance of winning congressional approval for the second half without retooling the program, the Post reported, citing sources it did not identify.

Departing Treasury Secretary Henry Paulson said on Wednesday that Obama, who takes office on January 20, will decide how to spend the remaining half of the bailout cash.

The Obama team has not decided when Congress should be asked for the balance of the rescue funds, the Post said.

Several lawmakers said they are still angry over the program because having used $350 billion, it was largely unsuccessful in unfreezing lending markets, the report said.

Much of the work by Obama’s team has focused on establishing principles that would clearly define the program’s course and the conditions of government aid to financial companies, The Washington Post said.

One source told the newspaper that details of the overhaul may be laid out before Geithner’s confirmation hearing, which is likely to be held late next week.