Treasury Secretary nominee Tim Geithner is working with President-elect Barack Obama’s economic team to overhaul the government’s $700 billion Troubled Asset Relief Program, FOX Business has confirmed.

Obama’s team hopes to broaden the scope of the bailout to include aid to municipalities, small business owners and homeowners. This overhaul comes amid scathing reports, released from a Congressional panel on how the financial rescue bill has been handled.

Geithner, along with former Treasury Secretary Lawrence Summers, has been working on ways to use the remaining $350 billion to help homeowners stay out of foreclosure and unfreeze credit markets to help consumers and small business secure loans.

Geithner, who currently heads the Federal Reserve Bank of New York, is reportedly considering establishing a bureau within the Treasury Department to manage TARP.

The Bush-administration’s handling of TARP has come under fire for the lack of consistency. This morning, the Congressional Oversight Panel released a report criticizing the Treasury for not ensuring the money is used to stabilize the mortgage market, a leading catalyst of the current economic crisis.

The Department used a significant portion of the first half of the fund to purchase minority stakes in financial institutions.

The panel reported that it still doesn’t know how banks are using taxpayers’ money and that it lacks knowledge of a coherent plan from Paulson and his team.

House Financial Services Committee Chairman Barney Frank (D-Mass.) submitted a bill that modifies the oversight of  the second half of the TARP fund distribution early Friday morning.

See Congressman Frank's bill below.

The bill would require quarterly public reporting of how the funds are being distributed and requires participating institutions to reach an agreement with its primary regulator about how the funds are to be used. 

Under the proposal, $40 to $100 billion of the $350 billion must be used for loan modifications and makes the increase in deposit insurance coverage to $250,000 permanent. 

“The legislation will strengthen accountability, close loopholes, increase transparency, and require Treasury to take significant steps on foreclosure mitigation," the Massachusetts representative said in a statement.

Frank has scheduled a Jan. 13 hearing on TARP’s future.

House Speaker Nancy Pelosi, D-Calif, office says the House will vote on the Frank’s bill next week. However, Sen. Chris Dodd (D-Conn.), the Chairman of the Senate Finance Committee, said that the Senate does not expect to take up this legislation.

Frank Introduces TARP Reform and Accountability Legislation