Jan. 9 (Bloomberg) -- House Financial Services Committee Chairman Barney Frank today proposed legislation setting terms for releasing the remaining $350 billion of financial-rescue funds, seeking as much as $100 billion to stem foreclosures.

Frank’s measure, reflecting lawmakers’ criticism over how the first half of the $700 billion rescue fund was used by President George W. Bush, would require President-elect Barack Obama’s Treasury Department to develop a foreclosure-prevention plan by March 15 and put it in place by April 1.

“I’m very pleased that the Obama administration understands that there is such unhappiness in the country and in Congress with the way in which the Bush administration administered the first $350 billion that we have to be very specific about what we expect,” Frank said today at a news conference in Washington.

Frank, a Massachusetts Democrat, and other congressional leaders have criticized the Treasury Department, which is administering the funds, for failing to set conditions before distributing the $350 billion allocated when Congress approved the rescue plan. Lawmakers, whose approval is needed to release the remaining funds, say Treasury should have required recipients to use it for consumer loans and foreclosure prevention.

Treasury Secretary Henry Paulson’s handling of the initial allocation, including “the refusal, inexplicable to me, to use any of the money for foreclosure relief when it was explicitly mandated,” was disappointing, Frank said.

Working With Obama

Frank said he is working with Obama’s team on changes House Democrats are seeking in exchange for agreeing to release the money. He plans hold a hearing on the legislation Jan. 13 and move it to the House floor by Jan. 15.

Congress must be notified before Treasury gets access to the remaining money and lawmakers have 15 days after notification to block the funds. The funds haven’t been requested, Frank said.

Representative Spencer Bachus, the top Republican on the House Financial Services Committee, said there’s a consensus building among the panel’s Republicans to oppose any new request because additional funds are unnecessary.

“In September, we were told that the financial system was shaky and that there were solvency issues, that’s no longer true,” Bachus of Alabama said today in an interview. “There’s a broad agreement that we’ve stabilized the credit markets and our financial institutions.”

Quarterly Reports

Under Frank’s proposal, Treasury would require banks to report at least quarterly on how they are using the money and prevent bonus payments to their 25 most highly paid employees, according to an outline of the measure.

The bill affirms Treasury authority to help auto manufacturers under the Troubled Asset Relief Program and allows the agency to improve consumer lending, possibly by buying asset- backed securities directly or through the Federal Reserve. It also clarifies the Treasury’s authority to support issuers of municipal securities for new issuance or re-marketing of existing auction-rate securities.

Frank’s proposal also requires Treasury to develop a program outside of TARP to spur home buying, including by making more affordable mortgage rates available to qualified buyers.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net;

Last Updated: January 9, 2009 17:20 EST