WASHINGTON, Jan 12 (Reuters) - President-elect Barack Obama said on Monday he had requested access to the remaining $350 billion of the $700 billion financial industry bailout package so he would have "ammunition" if the U.S. financial system weakens further.
Obama, who takes office next Tuesday, said his White House would focus the rescue funds on housing foreclosures and small businesses, representing a fundamental change from President George W. Bush's use of the first half of the money.
"It is clear that the financial system, although improved from where it was in September, is still fragile," Obama told reporters, when explaining why he had sought the second half of the bailout package now.
"I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or a weakening of the financial system."
Obama, a Democrat, earlier on Monday asked Bush, a Republican, to seek access to the funds from Congress. Obama said he shared the concern of Congressional leaders about how the first half of the package had been spent.
"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent, and the failure to take bold action with respect to areas like housing," he told reporters, speaking after a meeting with Mexican President Felipe Calderon.
"My commitment is that we are going to fundamentally change some of the practices in using this next phase of the program. We're going to focus on housing foreclosures, we're going to focus on small businesses, we're going to focus on what's required to make sure that credit is flowing to consumers and businesses," he said.
The massive bailout was approved last October to bolster the financial industry and unfreeze credit as the sector reeled under the stress of toxic mortgage-related assets.
(Reporting by Jeff Mason, Editing by Frances Kerry) U.S. Magistrate Judge Ronald Ellis in Manhattan today said Madoff, charged last month with running a $50 billion Ponzi scheme, may continue to live under house arrest in his apartment on Manhattans Upper East Side. Ellis imposed new conditions, ordering Madoff to compile an inventory of all items in his home and barring him from transferring property.
Because the government has failed to meet its legal burden, the motion is denied, Ellis wrote in a 22-page ruling. The government has failed to articulate any flaw in the current conditions of release Madoff is now scheduled to appear in court Feb. 11 for an evidentiary hearing. If indicted before then, hell come before another judge to answer the charges, and prosecutors may ask again for him to be jailed. Madoff faces as much as 20 years in prison and a $5 million fine if convicted.
Elliss ruling came a week after prosecutors sought to jail Madoff because he mailed items including a diamond bracelet and watches to relatives in violation of a court- ordered asset freeze in a lawsuit by the Securities and Exchange Commission. Madoffs defense lawyer, Ira Sorkin, said his client didnt know the order from the SEC lawsuit applied to personal items Madoff, 70, was arrested on Dec. 11 and charged with using billions of dollars from new investors to pay off older ones. He told authorities that investors may have lost $50 billion, prosecutors said. With prosecutors consent, he was released on bail and restricted to his Manhattan home, under guard and subject to electronic monitoring. He surrendered his passport.
In another development, the trustee for Madoffs investment firm, Bernard L. Madoff Investment Securities LLC, won approval to issue subpoenas as part of a broad probe of the firms assets and conduct. U.S. Bankruptcy Judge Burton Lifland in Manhattan approved the request.
Irving Picard, the trustee appointed by Securities Investor Protection Corp., is working to collect as much cash as possible for the creditors of the trading firm.
Separately, an evidentiary hearing scheduled for today was postponed last week, giving prosecutors a month more to indict Madoff. In his Jan. 9 postponement request, Assistant U.S. Attorney Marc Litt said prosecutors and Sorkin have had discussions with respect to a possible disposition of Madoffs case. The parties plan to continue those discussions, Litt said.
Jewelry Mailed On Jan. 5, prosecutors said Madoff violated a court order in the SEC case and obstructed justice by mailing Cartier and Tiffany watches, a ring, a diamond necklace and other jewelry in an effort to dissipate his assets. They said his violation of the order indicated he might flee the country. The property was worth more than $1 million, they said.
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