Business

SUMMERS EYES SHIFT FOR TARP

Barack Obama will focus more on helping consumers, local governments and businesses than banks as his administration deploys the second half of the $700 billion rescue fund, said Lawrence Summers, the president-elect’s top economic adviser.

“The focus isn’t going to be on the needs of banks; it’s going to be on the needs of the economy for credit,” Summers said yesterday on CBS’ “Face the Nation” program. Obama’s team will manage the Troubled Asset Relief Program “in a very different way,” he said.

Summers’ remarks indicate banks and their executives face tougher scrutiny in seeking money from the rescue after the Obama administration takes office tomorrow. The TARP may be redirected to address “housing to prevent foreclosures,” “automobile loans, consumer credits, small business, municipalities,” he said.

Treasury Secretary Henry Paulson committed most of the initial $350 billion of the TARP to capital injections in exchange for warrants and preferred equity. Summers said banks will be subject to more oversight in their use of the funds.

On Friday, Paulson advocated setting up a new government-run “bad bank” to soak up junk assets from struggling private institutions.

Treasury Secretary-nominee Timothy Geithner and his advisers will be “carefully” monitoring the Wall Street bonuses of banks that have participated in the TARP, Summers said.

“What’s not going to happen is the funds that could be supporting increased lending are going to be used to finance acquisitions that may serve a bank but don’t serve the country,” Summers said. He added that the results of TARP so far have been “unsatisfactory.”