Dec. 4 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said he opposes giving the Bush administration the second half of the $700 billion financial rescue plan, joining Republicans upset with how it is being managed.

“I would be a very hard person to convince that this crowd deserves to have their hands on the next $350 billion,” Dodd, a Connecticut Democrat, told reporters today in Washington after a hearing on whether automakers should get government aid. “I am through with giving this crowd money to play with.”

Dodd, who is trying to forge a compromise in Congress that would give automakers assistance, also criticized the Federal Reserve for not sending a representative to the hearing. He wrote Fed Chairman Ben S. Bernanke yesterday asking what’s preventing him from lending to the companies, an idea rejected this week by at least two central bank officials.

House Financial Services Committee Chairman Barney Frank also faulted the Treasury for ignoring the “clear congressional intent” of the Troubled Asset Relief Program to reduce home foreclosures. He said Paulson may be blocked from accessing the money. Under the terms of the law, lawmakers have 15 days to reject a request for TARP funds.

“At the very least, he’d have to agree that some of that money was going to be used for foreclosure relief,” Frank, a Massachusetts Democrat, told reporters after a speech at a Consumer Federation of America conference in Washington.

Republican Opposition

Frank and Dodd echoed House Republicans, who yesterday sent a letter to Paulson and Bernanke saying they oppose releasing any more TARP money without more clarity over past spending. Paulson, who has committed all but $20 billion of the first half of the funds, is also under fire for abandoning the original TARP plan to buy toxic mortgage assets.

“The government has burned through nearly $350 billion” of funds and “is pledging trillions of dollars more through other programs, yet little is understood about how these investments are contributing to the nation’s economic recovery,” said the letter by House Minority Leader John Boehner and 11 other Republicans.

The rising opposition comes as Congress debates how to help General Motors Corp. and Chrysler LLC. House Speaker Nancy Pelosi favors using TARP funds, something Paulson opposes. In his letter to Bernanke yesterday, Dodd asked whether the Fed might be able to lend financial assistance to the car companies, something officials are unwilling to do.

Fed Opposed

Richmond Fed Bank President Jeffrey Lacker and St. Louis Fed President James Bullard said this week that legislators, not the central bank, should come up with a solution.

“Congress will have to decide how they want to play this,” Bullard said in a Dec. 2 Bloomberg Television interview.

Fed officials have an aversion to extending the too-big-to- fail doctrine beyond financial institutions. The premise of the central bank’s $85 billion rescue of American International Group Inc. in September was that the insurer’s failure posed a threat to the system through its role in the derivatives market.

Other obstacles involved in lending to carmakers might be finding large pools of collateral for the Fed to loan against. Officials are also unlikely to grant bank holding company status to auto-firm subsidiaries as a potential conduit for aid to the parent. Transactions between banks and affiliates are strictly regulated by the Fed.

Paulson has repeatedly said he hasn’t decided whether he will ask for the remaining funds with less than two months left in the Bush administration. Most of the money has gone to injecting capital into financial firms in exchange for preferred shares and warrants. He also pledged $20 billion into a Fed facility to boost consumer credit.

“We have no timeline for drawing down the next tranche,” Paulson said at a Nov 25 press conference. “When the time is right, we’ll avail ourselves of the congressional process.”

To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net

Last Updated: December 4, 2008 18:09 EST