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Archive for Wednesday, February 11, 2009

Senate, Fed, Treasury attack crisis

February 11, 2009

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— On a single day filled with staggering sums, the Obama administration, Federal Reserve and Senate attacked the deepening economic crisis Tuesday with actions that could throw as much as $3 trillion more in government and private funds into the fight against frozen credit markets and rising joblessness.

“It’s gone deep. It’s gotten worse,” President Barack Obama said of the recession at a campaign-style appearance in Fort Myers, Fla., where unemployment has reached double digits. “The situation we face could not be more serious.”

If any more emphasis were needed, Wall Street investors sent stocks plunging, objecting that new rescue details from the government were too sparse. The Dow Jones industrials dropped 382 points.

The president spoke shortly after Senate passage of an

$838 billion emergency economic stimulus bill cleared the way for talks with the House on a final compromise. In a display of urgency, White House chief of staff Rahm Emanuel traveled to the Capitol for meetings that stretched into the night with Democratic leaders as well as moderate senators whose views — and votes — will be key to any deal.

Separately, Treasury Secretary Timothy Geithner outlined plans for spending much of the $350 billion in financial bailout money recently cleared by Congress, and the Federal Reserve announced it would commit up to $1 trillion to make loans more widely available to consumers.

Taken together, the events marked at least a political watershed if not an economic turning point — the day the three-week old administration and its congressional allies assumed full control of the struggle against the worst economic crisis since the Great Depression.

The vote was 61-37 in the Senate to pass the stimulus, with moderate Republican Sens. Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania joining Democrats in support.

Even before the vote, Majority Leader Harry Reid and House Speaker Nancy Pelosi met with Obama at the White House to go over the task ahead.

The Democratic leaders have long pledged to have legislation on Obama’s desk by mid-month, and some Democrats said there was an informal target of today for agreement on a bill that would likely wind up in the range of $800 billion.

The political urgency bumped up against other obstacles, though.

The House measure includes roughly $70 billion more spending than the Senate’s, but it lacks Senate-approved tax breaks totaling more than $100 billion for new car buyers, home purchasers and upper middle income families.

In a further obstacle, Collins and other Senate moderates — in both parties — signaled they will work to hold the cost of the final bill below $800 billion. That’s less than the $820 billion in spending and tax cuts combined in the bill that cleared the House as well as the $838 billion legislation the Senate wrote.

Additionally, Obama has campaigned particularly energetically to include funds for school construction in the bill. At the insistence of Collins, the Senate measure omitted money for that purpose, and it wasn’t clear whether she had eased her position on the presidential priority.

Whatever the cost of the final bill, it will add to the deficit, and that created another little-mentioned dilemma for the administration and Democrats.

Future spending bills on domestic programs or tax cuts will probably have a far more difficult time gaining the support necessary to pass without offsetting spending cuts or tax increases that would hold the deficit level.

Comments

jmadison 5 years, 10 months ago

The fleecing of the American taxpayer continues. Implicit in this massive infusion of newly printed money is inflation for years to come which will tax all Americans in the form of ever increasing prices for all goods and services. It was the combination of greedy bankers, greedy real estate speculators, and a compliant government that created the current mess. The government is an unlikely source for fixing the current mess that it helped produce.

Godot 5 years, 10 months ago

Wow, look at this. And CNBC was in the tank for Obama during the campaign!Geithner's Flop, Obama's FaultDennis Kneale Timothy Geithner's debut performance as the new Treasury secretary got him booed offstage yesterday by Wall Street traders. Not for what he said but for all the things he needed to say—and didn't. Geithner's performance review--a plunge in the Dow that deepened as he spoke and ended down 382 points or almost 5%–may prompt some pundits to question his longevity in the new job. It's one thing to "screw up" on your taxes (that phrase is the Obama Administration's preferred incantation of Harry S. Truman's "The buck stops here"). Screwing up on message is unforgivable, especially in service of a President who prides himself as the next Great Communicator. Yet it is President Obama himself, not Tim Geithner, who deserves the blame for the skittish sell-off yesterday. The president has mistaken hastiness for urgency, setting arbitrary and unrealistically early deadlines for completing an $800 billion-plus stimulus plan and tightening up Worse, the O-man brandished frightful hyperbole to try to bash Republicans into passing the stim-pack with no questions asked. He told us we face an economic "catastrophe" if government, the "only" answer, doesn't act NOW! Only 12 percent of the bloated bill would go to real infrastructure, and the biggest portion of spending wouldn’t occur until 2010 and beyond. Yet we can’t endure a few more weeks of dickering? Gimme a break, Bama.Thus the Tim Geithner Show had to go on, even if the new Treasury man wasn’t ready to perform because much of his program isn’t yet figured out. So he couldn’t tell Wall Street what it wanted to know.Above all else: How the feds would quarantine the mortgage-backed derivatives debacle that Wall Street itself created. Geithner had nothing beyond a vague mention of a public-private effort that would start at $500 billion, a fraction of what’s needed.A mention of suspending the mark-to-market rules would have been great. “Geity” gave 'em bupkis. (M2M requires banks to write down huge charges on junky assets now as if they had to sell everything today, even if they can hold those assets for years and then sell when prices are higher.) Tax-loss carry-forwards would have been a good theme to hear, too, but we got zilch. A plan for housing foreclosures wasn't ready, either.One reason all those details weren’t ready is that, as The New York Times reported yesterday, Geithner himself has had to wage an internecine struggle against business-bashers in the Obama White House who were pushing far more punitive measures for Wall Street.http://www.cnbc.com/id/29140185Continued below

Godot 5 years, 10 months ago

continued from above:That cuts to the real problem with President Obama, a Washington rookie who still campaigns at Town Hall meetings as if he hadn’t yet been elected. His lack of business experience shows up in painfully stark relief. Inciting class warfare, he assails a Wall Street bonus system he clearly doesn’t understand. He depicts creators of wealth and lenders to business as feckless financiers who foisted this crisis upon the rest of us. He fails to blame anyone else—not Congress for inflating the Fannie-Freddie bubble, not homeowners for speculating and buying pricey houses beyond their means.And now, chagrined by the drubbing the stock markets gave his new Treasury secretary on Tuesday, the President says Wall Street is being bratty and demands an “easy way out.” In his flawlessly calculated campaign for office, Obama showed a secure, centered patience and self-assurance. Now that he is President, the becalmed prophet has turned impatient and petulant. Wall Street—and your retirement accounts and stock portfolios—is all the worse for it.http://www.cnbc.com/id/29140185

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