Obama vows better control of $350 billion bailout cash

By Kevin Drawbaugh and John Poirier

WASHINGTON (Reuters) - U.S. President-elect Barack Obama promised on Tuesday stricter control over a financial rescue package, winning over some sceptical lawmakers who had threatened to block release of $350 billion (£242 billion) that regulators said the economy urgently needed.

In the first big test of how he will work with Congress and tackle dissent from within his own Democratic party, Obama told Democrats that he shared their concerns about lax oversight of the bailout fund that was approved last year.

"He made a strong economic case and he answered every element of frustration that senators have about how" the first half of the $700 billion fund was spent, Sen. Joe Lieberman said after attending a lunch meeting with Obama.

"He deserves to get what he wants here," said Lieberman, a Connecticut independent who works with Democrats.

Senate Majority Leader Harry Reid said he thought he could muster the necessary votes in the Senate to approve the measure, but many lawmakers from both parties have called for tougher regulations on how the government doles out the money and what companies receiving the cash must do.

Obama -- who takes over from President George W. Bush on January 20 -- promised Democrats that there would be greater accountability under his administration, but it was not clear whether he had quelled all the opposition.

If enough lawmakers vote against releasing the funds, Obama may face the awkward situation of having to quickly wield his veto power to push through an unpopular policy. A vote could come as early as Thursday.

Many members of Congress are unhappy with the handling of the first $350 billion of the bailout fund, which was hastily approved shortly after the financial crisis intensified following the failure in September of Lehman Brothers.