President-elect Barack Obama on Monday asked President George W. Bush for his assistance in requesting the release of the second half of the $700 billion granted to the Troubled Asset Relief Program. President Bush has called for Congress to release the next $350 billion, according to a report Tuesday by the Wall Street Journal. The request comes a week before Obama is sworn into office, suggesting both leaders wish to have the last $350 placed in Treasury hands even before the new administration takes over. “In consultation with the business community and my top economic advisers, it is clear that the financial system, although improved from where it was in September, is still fragile,” Obama said Monday about his request of Bush, according to the Journal. “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 weakening of the financial system.” Treasury Department secretary Henry Paulson and interim assistant secretary Neel Kashkari have both publicly said the first $350 has been effectively allocated, with $189 billion of the $250 billion reserved for the capital purchase program already allotted as of Tuesday and “thousands” of applications still under review for the remainder, as well as other various infusions in American International Group (AIG), Citigroup Inc. (C) and the failing domestic auto makers. Lawmakers have consistently said they will not release the second half of TARP funds without some sort of language binding the Treasury to assist struggling everyday homeowners. House Financial Services Committee chairman Barney Frank, D-Mass., on Friday released proposed legislation to reform the TARP and increase program accountability. Under Frank’s proposed makeover of the TARP, the second half of the $700 billion funds will be “conditioned on the use of a minimum of $50 billion for foreclosure mitigation.” His language would require Paulson to develop a comprehensive plan to prevent and mitigate residential mortgage foreclosures by March 15, 2009. The required elements of the plan include a guarantee program for qualifying loan modifications under a systematic plan and bringing down the costs of Hope for Homeowner loans “either through coverage of fees, purchasing H4H mortgages to ensure affordable rates, or both.” The plan would also need to establish a program for loans to pay down second lien mortgages that are impeding a loan modification, grant servicer incentives and assistance to stimulate modifications, and include the purchase of whole loans for the purpose of modifying or refinancing them. Frank then on Monday released a statement of his approval to release the remaining funds for Obama’s incoming administration. “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,” he said. ” 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.” Speaker of the House Nancy Pelosi on Monday also endorsed releasing the rest of the TARP funds under Frank’s proposed legislation, which she said will make “significant changes” to the program and require strong oversight and transparency in the use of funds. In her statement, she mentioned the requirement within Frank’s proposal that at least part of the TARP funds be required to go to helping homeowners, saying overall the legislation will ensure the rest of the funds come “with clear and specific strings attached.” She urged Congress to vote on Frank’s legislation so that the rest of the TARP funds will go hand-in-hand with a reformed effort to aid struggling homeowners. “Millions of Americans have lost their jobs or face the prospect of foreclosure, and it is past time that we helped these families bolster their balance sheets,” she said. Fed vice chairman Donald Kohn spoke Tuesday before the Committee on Financial Services, stressing the need to stop preventable foreclosures and strengthen financial institutions with aid that may possibly “take the form of additional capital injections.” He acknowledged that a “continuing barrier” for financial institutions remains the troubled assets clogging balance sheets. “The presence of these assets significantly increases uncertainty about the underlying value of these institutions and may inhibit private investment and new lending,” he said, further suggesting the Treasury might supplement more capital injections going forward with troubled asset purchases or “insurance that would pay off under very adverse conditions.” “Each approach could build on the infrastructure that the Treasury developed when it was planning to purchase troubled assets directly,” he said. “Moreover…purchases that include residential mortgages could be combined with steps to restructure some mortgages as needed to avert preventable foreclosures.” Write to Diana Golobay at diana.golobay@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.