A Blue View

New Short Sale Program To Pay Underwater Homeowners

NY Times:

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Living & Dead Presidents Advice Barack On The Consumer Financial Protection Agency

Funny or Die's Presidential Reunion from Will Ferrell

Maddow Exposes More GOP Hypocrisy On Stimulus & Climate Change

Brown Helps Tip The Scales: Senate Jobs Bill Passes With Bipartisan Support

Wash Post:

Aided by a handful of Republicans, Senate Democratic leaders on Monday kept alive a $15 billion job-creation measure and are poised to pass the measure later this week.

Five Republicans, including new Sen. Scott P. Brown (Mass.), joined 57 Democrats in voting to break a filibuster of the jobs bill, after a suspenseful buildup in which members of both parties wondered whether Senate Majority Leader Harry M. Reid (D-Nev.) could cobble together enough support to clear the legislative hurdle.

The bipartisan result marked a breakthrough for Democrats, who have been frustrated since President Obama came to office by their inability to attract much Republican support for their agenda. The vote was also a vindication for Reid, who is grappling with a tough reelection race in Nevada and faced questions in Washington over whether he mishandled the jobs issue.

"I hope this is the beginning of a new day in the Senate," Reid said after the vote.

Reid lost the public support of several Republicans after discarding an $85 billion jobs package negotiated by Sens. Max Baucus (D-Mont.) and Charles E. Grassley (R-Iowa) in favor of a narrower bill favored by liberals. GOP leaders complained that Reid had spurned a bipartisan deal that had been negotiated in good faith.

Republicans Christopher Bond (Mo.), Susan Collins (Maine), Olympia J. Snowe (Maine) and George V. Voinovich (Ohio) joined Brown in breaking ranks to back the bill. Sen. Ben Nelson (Neb.) was the only Democrat to vote against the measure, which advanced, 62 to 30.

The bill's centerpiece is a $13 billion program allowing companies to avoid paying Social Security taxes for the remainder of 2010 on new hires who have been unemployed for at least 60 days. Employers would also receive a $1,000 tax credit for each new worker who stays on the job for at least a year. Democrats tout the plan as a simple way to create tens of thousands of new jobs, though some experts dismiss it as too narrow to make a significant dent in the nation's unemployment rate.

The jobs bill also includes a one-year reauthorization of the Highway Trust Fund, a provision allowing companies to write off equipment purchases as business expenses, and an expansion of the Build America Bonds program, which helps state and local governments finance infrastructure projects.

Brown, who pulled off a stunning political feat last month by capturing the seat of the late Sen. Edward M. Kennedy (D) and gave Republicans the 41 votes to block most Democratic initiatives, announced his intention to support the measure minutes before Monday's vote. He said he "came to Washington to be an independent voice, to put politics aside. . . . This Senate jobs bill is not perfect. I wish the tax cuts were deeper and broader, but I will vote for it because it contains measures that will help put people back to work."

Senate Votes Today On Scaled-Down Jobs Bill

Wash Post:

Democrats' renewed focus on bolstering the economy faces a key test Monday, with the Senate expected to hold a procedural vote on what Majority Leader Harry M. Reid (D-Nev.) hopes will be the first of several job-creation bills.

The chamber will vote on whether to proceed with a $15 billion measure that includes a one-year Social Security tax break for companies hiring new employees who have been out of work for at least 60 days. The package also would reauthorize the Highway Trust Fund, allow companies to write off equipment purchases, and expand Build America Bonds, which help state and local governments fund infrastructure projects.

But the measure does not include a host of other provisions from an $85 billion bipartisan package negotiated by Sens. Max Baucus (D-Mont.) and Charles E. Grassley (R-Iowa). Reid's decision to discard that bill in favor of a smaller version has cost him the public support of several Republicans, casting doubt on whether Democrats will garner the 60 votes necessary to proceed Monday.

"We're pretty close," Reid said Friday during a television appearance in Nevada, adding that he thought "fat cats" would have benefited too much from the larger Baucus-Grassley bill.

As of Sunday, no Republicans had declared intentions to vote to proceed on the slimmer bill. Under normal circumstances, Democrats would need at least one GOP vote to reach a filibuster-proof majority. With Sen. Frank Lautenberg (D-N.J.) absent after receiving a diagnosis of cancer last week, his party will need to lure at least two Republicans on Monday in order to set up a vote on final passage later this week.

Minority Leader Mitch McConnell (R-Ky.) said on "Fox News Sunday" that Republicans "may well" support the jobs bill, though that doesn't necessarily mean the GOP will help Democrats on Monday's procedural vote.

The Right In Cartoons

The Wall St Journal Acknowledges The Stimulus Worked & Is One Of The Reasons We're Doing Better Than Europe

I wonder how many Republicans read the Wall St Journal ;) and whether this will have any effect on their rhetoric between now and November. INHMB (I'm not holding my breathe)

Amid the cacophonous economic debate echoing in Washington, what's most striking are two numbers: 5.7% and 0.4%.

Those are the economic-growth rates in the latest quarter for the U.S. and Europe, respectively. The difference is so strikingly in America's favor that it warrants a little more attention, both because of what it says about the current state of affairs and for the lessons it might offer policy makers.

The gap between American and European growth can be attributed partly to economic cycles and partly to some artificial expansion in that big U.S. growth figure for the last quarter of 2009. But the disparity also suggests that, amid all the scrambling and stumbling, at least a few things were done right in the American response to the economic crisis of the past two years, and a few things less right in Europe.

Marking the first anniversary of President Obama's controversial stimulus, WSJ's Gerald Seib discusses how the package, along with interest-rate moves and a shoring-up of bank balance sheets has allowed the U.S. to outstrip European economic growth.

Such questions haven't been explored much in this weeks' economic debate in Washington, which has been a fairly sterile shouting match over whether the stimulus package signed into law by President Barack Obama precisely a year ago has accomplished much.

That question won't be settled this week, or by November's elections. But it's safe to assume that the stimulus package hasn't been as useful as the White House claims, or as useless as Republicans assert.

More intriguing is the question of how the whole combination of forces the U.S. brought to bear is working out, and why the picture looks so different right now on the other side of the Atlantic.

Last April, Mr. Obama went to Britain for a summit of leading economic nations, amid much skepticism among European leaders about the value of economic-stimulus measures, doubts about the wisdom of the bank "stress test" the U.S. was planning, and a degree of confidence that Europe's regulatory system was better at preventing and controlling problems.

Now, the picture looks scarier in Europe than in the U.S., as banking problems merge with national debt troubles.

More Aid To Homeowners In 5 Hardest Hit States Coming

Wash Post:

President Obama will announce a plan Friday to direct $1.5 billion in taxpayer money to five state housing finance agencies to help them develop new programs for addressing the housing crisis in their communities, according to a senior administration official.

The five states -- California, Nevada, Arizona, Michigan and Florida -- have been among the hardest hit by the housing crisis and have seen home values decline more than 20 percent. The initiative will be financed through the government's Troubled Assets Relief Program (TARP).

Obama is scheduled to make the announcement in Nevada on Friday morning alongside Senate Majority Leader Harry M. Reid (D-Nev.), who faces a tough reelection battle this year.

Confronting the foreclosure issue is a key part of the White House effort to convince Americans that the president is fighting for them during one of the worst economic downturns in generations.

White House officials stressed Thursday night that the new initiative is just one of many efforts that the administration has launched to help homeowners stay in their homes. They said the money should spark innovative and effective programs in the affected states to speed relief to homeowners. The officials spoke on condition of anonymity because the plan had not yet been announced.

In discussing the plan, officials acknowledged the growing challenge that unemployment and falling home prices have posed to mortgage relief efforts. The administration's marquee foreclosure-prevention program, known as Making Home Affordable, which was unveiled a year ago but has struggled to gain traction. Through January, nearly 1 million borrowers had their mortgage payments lowered under the program, but most still must prove they qualify for the mortgage aid and were at risk of losing the help.

GOP Stimulus Hypocrisy: The Chart The GOP Doesn't Want You To See

The GOP's argument that the Stimulus bill hasn't worked because unemployment is still high is like saying seat belts don't work when a car with 4 people going 90 miles an hour hits a tree and one of them dies. Sure, it would have been better if everyone survived but to say the belts didn't work is only plausible and makes sense in the bizarro world of Washington where lies, if repeated often enough and are unchecked by a lazy media, become truth. 

How then, do you think the GOP will spin this chart?

 

For more, see Based On The Data, The Stimulus Is Working

Based On The Data, The Stimulus Is Working

David Leonhardt (also see this chart):

Imagine if, one year ago, Congress had passed a stimulus bill that really worked.

Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now.

If that had happened, what would the economy look like today?

Well, it would look almost exactly as it does now. Because those nice descriptions of the stimulus that I just gave aren’t hypothetical. They are descriptions of the actual bill.

Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.

Yet I’m guessing you don’t think of the stimulus bill as a big success. You’ve read columns (by me, for example) complaining that it should have spent money more quickly. Or you’ve heard about the phantom ZIP code scandal: the fact that a government Web site mistakenly reported money being spent in nonexistent ZIP codes.

And many of the criticisms are valid. The program has had its flaws. But the attention they have received is wildly disproportionate to their importance. To hark back to another big government program, it’s almost as if the lasting image of the lunar space program was Apollo 6, an unmanned 1968 mission that had engine problems, and not Apollo 11, the moon landing.

The reasons for the stimulus’s middling popularity aren’t a mystery. The unemployment rate remains near 10 percent, and many families are struggling. Saying that things could have been even worse doesn’t exactly inspire. Liberals don’t like the stimulus because they wish it were bigger. Republicans don’t like it because it’s a Democratic program. The Obama administration hurt the bill’s popularity by making too rosy an economic forecast upon taking office.

Moreover, the introduction of the most visible parts of the program — spending on roads, buildings and the like — has been a bit sluggish. Aid to states, unemployment benefits and some tax provisions have been more successful and account for far more of the bill. But their successes are not obvious.

Even if the conventional wisdom is understandable, however, it has consequences. Because the economy is still a long way from being healthy, members of Congress are now debating another, smaller stimulus bill. (They’re calling it a “jobs bill,” seeing stimulus as a dirty word.) The logical thing to do would be to examine what worked and what didn’t in last year’s bill.

But that’s not what is happening. Instead, the debate is largely disconnected from the huge stimulus experiment we just ran. Why? As Senator Scott Brown of Massachusetts, the newest member of Congress, said, in a nice summary of the misperceptions, the stimulus might have saved some jobs, but it “didn’t create one new job.”

The case against the stimulus revolves around the idea that the economy would be no worse off without it. As a Wall Street Journal opinion piece put it last year, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” In a touch of unintended irony, two of article’s three authors were listed as working at a research institution named for Herbert Hoover.

Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics are misguided — above and beyond those complicated, independent economic analyses.

The first is the basic narrative that the data offer. Pick just about any area of the economy and you come across the stimulus bill’s footprints.<Continue reading.>

GOP Stimulus Hypocrisy: The Videos

A new one from the DNCC:

And if you haven't seen it, check out:

GOP Obstructionism On Tape: Maddow Shows Again & Again How GOP Rejects Their Own Ideas When Obama Agrees To Them

Partisanship In Washington Blocks Solutions To Long Term, "Hard" Problems. Exhibit A: The Debt.

NY Times:

After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected, hastened by a deep recession that cost trillions of dollars in lost tax revenues and higher spending for safety-net programs.

Yet rarely has the political system seemed more polarized and less able to solve big problems that involve trust, tough choices and little short-term gain. The main urgency for both parties seems to be about pinning blame on the other, before November’s elections, for deficits now averaging $1 trillion a year, the largest since World War II relative to the size of the economy ...

“I used to think it would take a global financial crisis to get both parties to the table, but we just had one,” said G. William Hoagland, who was a fiscal policy adviser to Senate Republican leaders and a witness to past bipartisan budget summits. “These days I wonder if this country is even governable.”

Sensing political advantage, Republicans are resisting President Obama’s call for a bipartisan commission to cut the debt, although recent studies have implicated the tax cuts and spending policies of the years after 2000 when they controlled Congress and the White House. Even seven Republican senators who had co-sponsored a bill to create a commission nonetheless voted against it recently.

The president is not giving up. On Thursday, administration officials say, he will sign an executive order establishing the 18-member National Commission on Fiscal Responsibility and Reform. He also will name as co-chairmen Alan K. Simpson, a former Republican Senate leader from Wyoming, and Erskine Bowles, a moderate Democrat from North Carolina who, as President Bill Clinton’s White House chief of staff, brokered a 1997 balanced budget agreement with Congressional Republicans.

“There isn’t a single sitting member of Congress — not one — that doesn’t know exactly where we’re headed,” Mr. Simpson said in a telephone interview Tuesday just before word of his role got out. “And to use the politics of fear and division and hate on each other — we are at a point right now where it doesn’t make a damn whether you’re a Democrat or a Republican if you’ve forgotten you’re an American.”

While he criticized some liberal Democrats’ refusal to reduce entitlement benefits, Mr. Simpson also dismissed Republicans’ antitax arguments that deficits could be controlled with spending cuts alone. “But they don’t cut spending,” he said, referring to the years Republicans governed with President George W. Bush.

Elected Republicans, however, are under intense pressure from their party’s conservative base to oppose any tax increases — a line in the sand that dims any prospects for bipartisan cooperation. Yet economists, including veterans of past Republican administrations, are vocal in insisting that the debt problem is too great to be solved without increasing revenues somehow and perhaps moving to a new consumption tax system like Europe’s.

The same economists also say a significant deficit-reduction plan is not possible unless Mr. Obama breaks his campaign promise not to raise taxes for households making less than $250,000. Last week, Mr. Obama said he would not impose that condition or any other on a fiscal commission.

The situation is complicated by a debate over how quickly Washington should act even if it could. The Obama administration, Congressional Democratic leaders and many economists are pushing for additional government stimulus measures while the private sector remains weak. But anger about big deficits has stoked the populism roiling politics, and Republicans as well as some conservative Democrats want to cut spending right now as a way of addressing perceptions among voters that government has gotten too big, too intrusive and too profligate. Mr. Obama himself proposed a budget that would freeze spending on some categories of domestic spending for three years.

Many analysts say the president and Congress could send a strong signal to global markets by agreeing this year to a package of both long-term tax increases and spending reductions, especially in the popular entitlement programs, that would not take effect until 2012. That is the recommendation of two new studies, one from a diverse group sponsored by the National Academy of Sciences and a separate joint project of the Peter G. Peterson Foundation, the Pew Charitable Trusts and the Committee for a Responsible Federal Budget.

As debt rises, so do interest costs; by 2014, at a projected $516 billion, they will exceed the budget for annual appropriations for domestic programs. The government will be competing with the private sector for credit, forcing interest rates higher and imperiling future prosperity.

Foreign investors now own more than half of the publicly held debt, and officials for the largest creditor, China, have fretted publicly about the fiscal course of the United States. While few expect foreigners to dump their assets, since the resulting plunge in values would hurt them as well as everyone else, the fear is that investors will demand higher interest payments and reduce or stop future debt purchases, threatening the government’s ability to finance its borrowing.

Lesser financial and fiscal crises have brought the two parties together to compromise on tough choices about taxes and spending.

Obama Shifting To Other Levers Of Power To Push Agenda

NY Times:

With much of his legislative agenda stalled in Congress, President Obama and his team are preparing an array of actions using his executive power to advance energy, environmental, fiscal and other domestic policy priorities.

Mr. Obama has not given up hope of progress on Capitol Hill, aides said, and has scheduled a session with Republican leaders on health care later this month. But in the aftermath of a special election in Massachusetts that cost Democrats unilateral control of the Senate, the White House is getting ready to act on its own in the face of partisan gridlock heading into the midterm campaign.

“We are reviewing a list of presidential executive orders and directives to get the job done across a front of issues,” said Rahm Emanuel, the White House chief of staff.

Any president has vast authority to influence policy even without legislation, through executive orders, agency rule-making and administrative fiat. And Mr. Obama’s success this week in pressuring the Senate to confirm 27 nominations by threatening to use his recess appointment power demonstrated that executive authority can also be leveraged to force action by Congress.

Mr. Obama has already decided to create a bipartisan budget commission under his own authority after Congress refused to do so. His administration has signaled that it plans to use its discretion to soften enforcement of the ban on openly gay men and lesbians serving in the military, even as Congress considers repealing the law. And the Environmental Protection Agency is moving forward with possible regulations on heat-trapping gases blamed for climate change, while a bill to cap such emissions languishes in the Senate.

In an effort to demonstrate forward momentum, the White House is also drawing more attention to the sorts of actions taken regularly by cabinet departments without much fanfare. The White House heavily promoted an export initiative announced by Commerce Secretary Gary Locke last week and nearly $1 billion in health care technology grants announced on Friday by Kathleen Sebelius, the health and human services secretary, and Hilda L. Solis, the labor secretary.

White House officials said the increased focus on executive authority reflected a natural evolution from the first year to the second year of any presidency.

“The challenges we had to address in 2009 ensured that the center of action would be in Congress,” said Dan Pfeiffer, the White House communications director. “In 2010, executive actions will also play a key role in advancing the agenda.”

The use of executive authority during times of legislative inertia is hardly new; former Presidents Bill Clinton and George W. Bush turned to such powers at various moments in their presidencies, and Mr. Emanuel was in the thick of carrying out the strategy during his days as a top official in the Clinton White House.

But Mr. Obama has to be careful how he proceeds because he has been critical of both Mr. Clinton’s penchant for expending presidential capital on small-bore initiatives, like school uniforms, and Mr. Bush’s expansive assertions of executive authority, like the secret program of wiretapping without warrants ...

Another drawback of the executive power strategy is that actions taken unilaterally by the executive branch may not be as enduring as decisions made through acts of Congress signed into law by a president. For instance, while the E.P.A. has been determined to have the authority to regulate carbon emissions, the administration would rather have a market-based system of pollution permits, called cap and trade, that requires legislation ...

The use of executive power came to a head this week when Mr. Obama confronted Senator Mitch McConnell of Kentucky, the Republican leader, about nominations held up in the Senate. In a meeting with Congressional leaders at the White House on Tuesday, Mr. Obama turned to Mr. McConnell and vowed to use his power to appoint officials during Senate recesses if his nominations were not cleared.

By Thursday, the Senate had voted to confirm 27 of 63 nominations that had been held up, and the White House declared victory.

"Deal on Jobs Shows Limits of Push for Bipartisanship"

NY Times:

Key Democrats and Republicans in the Senate reached a rare bipartisan agreement on Thursday on steps to spur job creation. But Democratic leaders said they would move ahead on only some elements as the two parties maneuvered to address both the struggling economy and voter unrest over gridlock in Washington.

Senator Harry Reid, the Nevada Democrat and majority leader, said he would take four core job-creating initiatives from the bipartisan proposal — including tax breaks for businesses that hire unemployed workers and increased public works spending — and seek to move those rapidly through the Senate.

“We feel that the American people need a message,” Mr. Reid said. “The message that they need is that we’re doing something about jobs.”

Yet his decision to embrace only portions of the bipartisan plan developed by Senators Max Baucus, Democrat of Montana, and Charles E. Grassley, Republican of Iowa, caught some lawmakers by surprise and threatened to undermine Republican support for the proposal even as members of Congress and the White House sought ways of working together across party lines after months of deep partisan division.

The White House projected Thursday that unemployment would fall this year by only a little, if at all, and would remain well over 6 percent until 2015.

While Mr. Reid stripped out of the bipartisan bill some tax breaks and other provisions intended to win Republican support, as well as special-interest provisions to win the backing of specific senators, the scaled-back package retained a combination of tax cuts and spending with the potential to win support from both parties.

The centerpiece is a payroll tax holiday that would waive the 6.2 percent Social Security tax for any employer who hires a worker who has been out of a job for at least 60 days. In addition, the bill would provide a $1,000 income tax credit for every new employee retained for at least 52 weeks.

It would also extend a tax break that would allow businesses to write off up to $250,000 in capital investments in 2010 rather than depreciating the costs over time, and reauthorize spending on road and transit programs through the end of the year. And it would allow state and local governments to receive a federal subsidy for a portion of the interest paid on bonds that finance public works projects.

The cost of the package laid out by Mr. Reid would be at least $15 billion over the next decade.

Hours before Mr. Reid’s announcement, Mr. Baucus, chairman of the Finance Committee, and Mr. Grassley, the senior Republican on the panel, had unveiled a broader, $85 billion agreement that also included an array of other provisions intended to generate support. They included extended unemployment benefits and health care for the unemployed as well as the renewal of an array of tax breaks that are due to expire.

GOP Obstructionism On Tape: Maddow Shows Again & Again How GOP Rejects Their Own Ideas When Obama Agrees To Them

Obama Again Attempts To Bridge The Divide With The GOP

Wash Post:

President Obama brought Republicans to the negotiating table on Tuesday, hoping to stem a steady deterioration in relations between the two parties that has brought business in Washington to a standstill, left the Democratic agenda in tatters and angered voters who are eager to have lawmakers address their concerns.

The two-hour session was part of a renewed drive by the White House to create legislation by consensus, regardless of party label. Obama tried the approach after he took office, but it did not take hold. After the meeting, the president paid a surprise visit to the White House press room to brief reporters.

He accused Republicans of indiscriminate obstruction that he said has created legislative gridlock, especially in the Senate, but he also called on Democratic leaders to "put aside matters of party for the good of the country."

Obama outlined issues that could bridge the divide, including job creation, health-care reform, energy and trade. But he extracted few concrete commitments from his GOP visitors.

A new Washington Post-ABC News poll suggests that the public is frustrated by the bickering and recriminations. According to the survey, 57 percent of Americans consider the loss of the Senate Democrats' filibuster-proof supermajority a "good thing," but few think Republicans should wield their new power to block bills frequently. Nearly six in 10 say that Republicans are not doing enough to forge compromise with Obama on important issues, while nearly half view the president as doing too little to overcome differences with the GOP.

On the issue of health-care reform, public attitudes about the stalled Democratic legislation remain virtually deadlocked. But nearly two-thirds of voters, or 63 percent, want Congress to keep trying to tackle the issue.

A major test of whether Obama's new strategy will yield legislative results could come when the Senate takes up a job-creation bill, which Senate Majority Leader Harry M. Reid (D-Nev.) had hoped to introduce last week but which was sidetracked by a snowstorm.

Sens. Orrin G. Hatch (Utah) and Charles E. Grassley (Iowa) -- senior Republicans who walked away from health-care talks last year -- have been heavily involved in drafting the legislation but are reluctant to sign on to the bill unless it attracts broad GOP support. After the White House meeting, Senate Minority Leader Mitch McConnell (R-Ky.) said there is "a chance" that Republicans would back the jobs measure, although he said his conference is "not entirely comfortable with it yet."

Later, McConnell convened GOP members of the Senate Finance Committee for an impromptu gathering, and the senators emerged expressing some support for the overall framework. But Republicans were reluctant to agree to Reid's timeline for speeding the legislation to completion by the weekend. On Tuesday evening, Reid announced that snowstorms made continued legislative action all but impossible, and put off its formal introduction and a final vote until later this month ...

Obama has reached out to Republicans on health-care reform by inviting them to participate in a bipartisan summit on Feb. 25. GOP leaders have expressed wariness that the event will amount to little more than political theater and so far have not committed to attending.

With Stimulus Money Gone, Many Schools Face A Budget Cliff

NY Times:

Federal stimulus money has helped avoid drastic cuts at public schools in most parts of the nation, at least so far. But with the federal money running out, many of the nation’s schools are approaching what officials are calling a “funding cliff.”

Congress included about $100 billion for education in the stimulus law last year to cushion the recession’s impact on schools and to help fuel an economic recovery. New studies show that many states will spend all or nearly all that is left between now and the end of this school term.

With state and local tax revenues still in decline, the end of the federal money will leave big holes in education budgets from Massachusetts and Florida to California and Washington, experts said.

“States are going to face a huge problem because they’ll have to find some way to replace these billions, either with cuts to their K-12 systems or by finding alternative revenues,” said Bruce Baker, an education professor at Rutgers University.

The stimulus program was the largest one-time infusion of federal education dollars to states and districts in the nation’s history. As the program took shape last year, Education Secretary Arne Duncan and other officials repeatedly warned states and districts to avoid spending the money in ways that could lead to dislocations when the gush of federal money came to an end.

But from the start, those warnings seemed at odds with the stimulus law’s goal of jump-starting the economy, and the administration trumpeted last fall that school districts had used stimulus money to save, or create, some 250,000 education jobs.

Now the new studies point to the problems likely to beset thousands of school districts when the federal money runs out.

Obama's Dilemma (cartoons)

He's got to execute a very tough maneuver

While relying on a very inept team

"I am not a hypocrite" Says The Politician As He Decries The Deficit While Resisting Cuts In His District

NY Times:

While Senator Saxby Chambliss, Republican of Georgia, said he was all for slowing federal spending, he has no appetite for the substantial cuts in farm programs proposed in President Obama’s new budget.

Representative Todd Akin, Republican of Missouri, issued a press release simultaneously lamenting the deficit spending outlined in the new budget and protesting cuts in Pentagon projects important to his state.

And Senator Jeff Sessions of Alabama, a fiscal conservative and a senior Republican on the Budget Committee, vowed to resist reductions in space program spending that would flow back home.

The positions of these Republicans — and similar stances by dozens of other lawmakers of both parties — are a telling illustration of why it is so hard to control federal spending. Every federal program has a constituency, and even lawmakers who profess to be alarmed by rising deficits will go to the mat to preserve money that provides jobs and benefits to their constituents.

“I am not a hypocrite,” Mr. Sessions said in reconciling his fiscally conservative credentials with his outrage over the administration’s proposal to essentially end the human space flight program and allow private enterprise to take on some of the load — an approach that Republicans typically favor.

Mr. Sessions said money taken from NASA would not be saved but would instead be directed to other Obama administration priorities that he did not support. He said his preference would be to set an overall spending limit and allow Congress to determine what programs should get the money. “Then we can debate it,” Mr. Sessions said.

Others said that the annual tableau in which members of Congress criticize the spread of red ink even as they reassure voters back home of protection for popular subsidies and Pentagon projects exposed the high degree of cynicism and lack of conviction that colors the fight over Congressional spending.

“It shows that in Washington, you can be firm on your opinions; it is your principles you can be flexible on,” said Rahm Emanuel, the White House chief of staff.

The Republican juggling act on spending comes after a legislative proposal for an independent commission to study ways to cut the deficit stalled in the Senate, partly because some Republicans who had originally backed the idea balked.

A Peek Behind The Curtain At How Washington Really Works

Though the Wash Post thinks the big news in this Propublica report is the suggestion that GE lied to investors about the condition of its short term debt, I found the most interesting thing to be how freely and how often Immault, GE's CEO, picked up the phone and spoke directly to Paulson, Bush's Sec of the Treasury. It is this unfair access (how many businesses do you know that have a direct line to the Treasury?), and the resultant ability to influence decisions as this story implies, that is the root of corporate & special interest control of our government.

As the financial crisis worsened toward the end of 2008, chief executive Jeffrey Immelt and other leaders at General Electric repeatedly assured the public there was no need to worry about the company's ability to access credit markets and refinance its massive debts as they came due.

But in private conversations that alarmed then-Treasury Secretary Henry M. Paulson Jr., Immelt laid out a different picture of GE's credit situation, according to Paulson's new book about the crisis.

Instead, Paulson writes, Immelt on at least four occasions expressed worries about GE's short-term debt, known as commercial paper, and eventually lobbied for access to special government guarantees for such debt.

To take one example: On Sept. 15, 2008, the day Lehman Brothers declared bankruptcy, Paulson says he was "startled" when Immelt came to his office and told him GE was finding it "very difficult" to sell short-term debt "for any term longer than overnight." A day earlier, GE sent investors a letter saying its ability to sell commercial paper was "robust."...

Today's Digest

Sorry, I don't have time today to separately post each of the stories I today found interesting.  Instead, here they are in a "quickie" digest form:

Obama Maps a Way Forward for a Health Overhaul

President Obama on Thursday evening presented his clearest plan yet to move forward with comprehensive health care legislation, saying that he wanted to meet with Democrats, Republicans and independent experts, lay out the facts for the American people and then, he said, “I think that we have got to move forward on a vote.”

Mr. Obama said he would first work with Congress to enact a jobs package ... But he also said that he would take the time to refute false statements and misunderstandings about the health care legislation and to hear alternate ideas from Republicans. After “several weeks” of work, he said, he would be prepared to live with whatever decision is made by Congress, but he also warned that voters, too, would be watching and would decide at the polls in November whether lawmakers had made the right choice.

The myth of Washington bipartisanship and the art of true compromise

Give this to Scott Brown: He's just been sworn in, and he's already having a positive impact on the governing dynamic in the capital. The president, key lawmakers and even the press have begun to focus on the dysfunctionality of the political process that now threatens all incumbents, irrespective of party and ideology. People have begun to talk to one another -- Obama with House Republicans, Jon Stewart with Bill O'Reilly -- and the tone has gotten noticeably more civil. In the 12-step program for overcoming our partisan addiction, we're now somewhere between Step 1 (acknowledging the problem) and Step 2 (accepting personal responsibility for doing something about it).

GOP senator blocking all Obama nominees

Sen. Richard Shelby (R-Ala.) has placed a blanket hold on more than 70 Obama administration nominees because he wants funding for projects in his state.

Republican lawmaker's budget plan gets Obama's attention

Released two days before the unusual back-and-forth session between Obama and the GOP, the bill sponsored by Ryan and five other House members would seek to reduce the deficit and spur economic growth by cutting the tax rate on corporations, shifting future Medicare and Medicaid beneficiaries to private insurance plans, and both raising the retirement age gradually to 70 and reducing the growth of benefits to make Social Security solvent ...

By Sunday, less than 72 hours after Obama praised Ryan, Office of Management and Budget Director Peter Orszag was highlighting potentially controversial elements of the plan. Ryan, meanwhile, was leading the GOP opposition to what he called the president's "far-left budget" and attacked the administration's support for a fiscal commission to examine how to reduce the national debt as "not leadership," but "punting."

Obama to get deficit commission with or without Republican help

President Obama will appoint a commission to tackle the nation's budget problems with or without the cooperation of Republican congressional leaders, House Majority Leader Steny Hoyer (D-Md.) said Thursday.

Lobbying Imperils Overhaul of Student Loans

An aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business. House and Senate aides say that the administration’s plan faces a far tougher fight than it did last fall, when the House passed its version.

Scott Brown Raised A Tsunami Of Money From Financial Industry: 80% From Outside Mass.

Scott Brown 's a real man-of-the-people, beholden to no one. That's why he raised as much as the Boston Globe reports he did from the financial industry and why I couldn't resist reposting this cartoon:

In a six-day span just before the US Senate election, Republican Scott Brown collected nearly $450,000 from donors who work at financial companies, a sign the industry is prepared to spend heavily in the upcoming midterm elections to beat back new controls and taxes President Obama wants to impose.

The donations, from hundreds of financial executives, far exceeded what Brown received from doctors and others in the health care industry in the final days of the campaign. While Brown saw donations from all quarters explode in mid-January, as polls showed him closing fast on opponent Martha Coakley, the donations from financial workers coincided with several key developments that would affect their companies.

On Jan. 14, five days before the Senate election, President Obama proposed a fee on large financial firms to recoup the cost of the government’s bailout of the industry, and he angrily demanded that those firms cut executive bonuses.

The president was also pushing the Senate to follow the House of Representatives and adopt sweeping changes that would impose controls on the trading of exotic securities, limit risk-taking by the largest institutions, and create an agency to protect consumers from abusive lending practices.

Martin Gruss, owner of a West Palm Beach, Fla., investment firm, said he gave $2,400 to Brown because he vehemently disagrees with the policies being pursued by Obama and his economic aides.

“They have no real understanding of the business implications of their actions,’’ he said, adding that limits on trading securities would undermine the position of the United States as the world’s financial capital. “I contributed to Scott Brown because his election will help redress the balance of power in the Senate.’’

The industry’s giving could also spell trouble for Democrats in next fall’s midterm elections, especially following the US Supreme Court decision last month that allows corporations to spend unlimited amounts to influence political contests.

Already, the financial services sector is the single largest base of donors to federal campaigns, giving an industry record $476 million in the 2007-2008 election cycle, much more than the second-largest giver, lawyers and lobbyists, who contributed $270 million, according to the Center for Responsive politics.

“People like me are scouring the country for conservative candidates,’’ said John Mumford, a California venture capitalist who gave the maximum $2,400 contribution to Brown four days before the election. “What’s going on in Washington is against everything I believe in, which is small government, balanced budgets, and support for free enterprise.’’

It's The Economy Stupid: 4Q09 GDP Grew 5.7%; Most In Six Years

What's the GOP going to do if the economy is noticeably healthier by November? Bloomberg:

The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software.

The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades.

Manufacturers such as Intel Corp. may keep leading the recovery as increasing sales prompt companies to restock. A slowdown in consumer spending last quarter is a reminder that 10 percent unemployment is causing Americans to hold back, one reason why the Federal Reserve is keeping interest rates low and the Obama administration is proposing new plans to create jobs.

“The economy is still healing and improving,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected a 5.6 percent gain in GDP. “I think this is a sustainable recovery.”///

Confidence Rising

Private reports released today showed confidence among U.S. consumers improved in January for a second month, and companies expanded this month at the fastest pace in more than four years as orders and employment increased.

The economy was forecast to grow at a 4.7 percent annual pace, according to the median estimate of 84 economists in a Bloomberg News survey. Estimates ranged from gains of 3 percent to 7.5 percent.

For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946.

Consumer spending, which comprises about 70 percent of the economy, rose at a 2 percent pace, more than anticipated following a 2.8 percent increase in the previous three months. Economists projected a 1.8 percent gain, according to the survey median.

Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.

Media Comparison: The "strategy for breaking the partisan logjam holding up President Obama’s agenda" Begins To Come Into Focus

Or at least the NY Times thinks so. The Wash Post isn't so sure, however.  As regular followers of our Media Comparisons know, there is no "truth" ... just different news sources interpretations of "truth."

The White House on Thursday signaled the outlines of its strategy for breaking the partisan logjam holding up President Obama’s agenda, saying Democrats would move quickly to underline their commitment to fixing the broken economy and to build an election-year case against Republicans if they do not cooperate.

With Mr. Obama’s health care overhaul stalled on Capitol Hill, Rahm Emanuel, the White House chief of staff, said in an interview that Democrats would try to act first on job creation, reducing the deficit and imposing tighter regulation on banks before returning to the health measure, the president’s top priority from last year.

But Mr. Obama quickly got a taste of how difficult it would be to bring the opposition party on board.

One day after the president upbraided Congress in his State of the Union address for excessive partisanship, Senate Republicans voted en masse against a plan to require that new spending not add to the deficit (it passed anyway as all 60 members of the Democratic caucus hung together). And some Republicans peremptorily dismissed Mr. Obama’s main job-creating proposal, expressing no interest in using $30 billion in bank bailout money for business tax credits.

“I think there is a right way and a wrong way to do it, and that is not the right way,” said Senator John Cornyn, the Texas Republican heading the effort to elect more Republicans to the Senate.

On Friday, Mr. Obama will travel to Baltimore to announce specifics of his jobs plan, including a proposed $5,000 tax credit for small businesses for each new employee they hire in 2010. While there, he will address House Republicans at a retreat they are holding.

The instant Republican resistance to the jobs plan — coupled with a vote this week to kill a deficit-reduction panel that had been initiated with high bipartisan hopes — illustrated the chasm between the two parties and the difficulties Mr. Obama faces if he is serious about trying to work with an energized opposition.

Increasingly confident of their prospects after the Massachusetts Senate victory, Republicans are disinclined to give ground in policy debates and appear willing to stick with their near-unanimous opposition to major initiatives unless Democrats offer significant concessions.

“House Republicans will seize the opportunity in respectful terms, but candid and frank terms, and make it clear to the president that we have better solutions,” said Representative Mike Pence of Indiana, the chairman of the House Republican Conference.

The administration showed no signs of capitulating either, with officials saying the White House will pursue a strategy of trying to shame Republicans whenever they stand in lock-step against Mr. Obama. In an interview Thursday, Mr. Emanuel warned that Republicans would suffer politically for their opposition to the pay-as-you-go plan.

Media Comparison: "Democrats confused about path ahead"

Or at least the Wash Post thinks so. The NY Times isn't so sure, however.  As regular followers of our Media Comparisons know, there is no "truth," just different news sources interpretations of "truth."

A day after President Obama called on them to renew efforts to pass his ambitious agenda, congressional Democrats remained in disarray Thursday about how to move forward, with at least some pointing at the White House as the cause of the legislative standstill gripping Capitol Hill.

Democrats left town early Thursday weighing their next steps on everything from the stalled health-care bill to competing job-creation packages. Before they departed, some criticized Obama for casting blame on the Senate, where moderates felt singled out for ridicule. Others sought to shift the burden to the GOP, latching on to Obama's call for Republicans to share responsibility for governing after a devastating special-election loss left Democrats a vote shy of a filibuster-proof majority in the Senate. Still others said the president's calls for bipartisanship were wishful thinking and suggested that daring Republicans to block their ambitious agenda would set up a "liberating" contrast for November's midterm elections.

"We also have the responsibility, if we can't find that common ground, to stand our ground on principles," said House Speaker Nancy Pelosi (D-Calif.), rejecting bipartisanship as a goal unto itself. "If we can't find a bipartisan way to do it, we are not going to say, 'Well, if it is not bipartisan, we are not going to do it.' We are going to do what we believe."

The first order of business continues to be the far-reaching health-care bill that Obama once considered the cornerstone of his domestic agenda but that took a back seat to the economy in his State of the Union address Wednesday. Senate Majority Leader Harry M. Reid (D-Nev.) said he felt "a little bit" more confident about the health-care bill's prospects after Obama sought to rally the 48 million Americans who watched the speech.

"I think he did a good job of laying out the problem," Reid said.

Reid and Pelosi said they remain stalled on the most likely option for moving ahead on health-care reform. That would require the Senate to pass a bill, through a parliamentary move requiring a simple majority, resolving issues in its version of the legislation that have prompted objections from House Democrats. That would allow the House to then approve the Senate's measure, thus avoiding another vote on the entire bill in the Senate, where it would almost certainly face a successful 41-vote filibuster by Republicans.

Pelosi, reiterating her opposition to simply passing the Senate legislation, said it is only "75 percent the same" as the House bill and mocked Obama for suggesting that the two measures are 90 percent similar.

Obama Announces $8 Billion For Rail Improvements

NY Times:

A day after delivering his State of the Union address, Mr. Obama came to Florida to announce the investment of $8 billion in high-speed rail projects in 13 major corridors, which he said would provide a down payment for the most significant advance in transportation since the Interstate highway system was built more than a half-century ago ...

The administration announced the $8 billion awards to coincide with the president and vice president’s trip here on Thursday. For months, states have been competing for the financing.

Most of the money, officials decided, will go toward improving existing rail service. More than a billion dollars, for instance, will go to speed train travel between Chicago and St. Louis to up to 110 miles per hour — faster than it is now, but a far cry from the kind of bullet trains that zip along at speeds of more than 150 m.p.h. in Japan and Europe. Two of the largest shares of money are being distributed for investments in bullet-train projects.

The administration said that a $2.25 billion award would help California make a small down payment on its ambitious $45 billion plan to build trains that can go 220 miles an hour. The stimulus money will go to buy right-of-way, build track, and do engineering and environmental work.

Another $1.25 billion will go to build 84 miles of track from Tampa to Orlando, which would allow trains to travel at up to 168 m.p.h., the first leg of a corridor that is eventually expected to go to Miami. If the state and federal financing hold, the first phase of the railway is scheduled to be completed by 2015.

“It’s the biggest thing since Walt Disney World for the I-4 Corridor,” said Representative Kendrick B. Meek, Democrat of Florida, who is running for Senate this year.

The president’s trip to Tampa on Thursday marked his third visit to the state since taking office. The high-speed rail project represented a considerable investment into the state, which the Obama-Biden ticket carried in 2008.

Before any suggestions could be made about any potential political benefits of the awards, Mr. Biden told the audience here that both Florida and California have something in common: Republican governors.

“We didn’t pick this based on politics. I mean this sincerely,” Mr. Biden said. “We’re picking the places that make the most sense, have the highest density, are ready to go.”

$8 Billion In Grants Awarded For "High-Speed" Rail

AP:

High-speed rail projects in California, Florida and Illinois are among the big winners of $8 billion in grants to be announced Thursday by the White House -- the start of what some Democrats tout as a national rail-building program that could rival the interstate highways begun in the Eisenhower era.

Thirteen rail corridors in 31 states received funds. The White House, which supplied a list of the grants to reporters late Wednesday, billed the program as ''high-speed rail,'' but only the California project calls for trains with maximum speeds exceeding the 200 mph achieved by some trains in Europe and Asia.

Some of the money will go toward trains with top speeds of 110 mph, while others -- such as the $400 million allotted to Ohio to connect Cleveland, Columbus, Dayton and Cincinnati by rail -- will go toward trains traveling no faster than 79 mph.

President Barack Obama and Vice President Joe Biden are expected to pitch the program as a boost to the economy at a town hall meeting Thursday in Tampa, Fla. A half-dozen Cabinet members and other senior administration officials were scheduled to fan out across the country for rail events Thursday and Friday. The White House said rail projects will create or save thousands of jobs in areas like track laying, manufacturing, planning, engineering and rail maintenance and operations.

Except for Amtrak's Acela line between Boston and Washington, there are no high-speed trains in the U.S. and no domestic high-speed rail industry. Transportation Secretary Ray LaHood and members of Congress have acknowledged they expect much of the expertise and equipment to be supplied by foreign companies.

Congress set aside the $8 billion as part of the economic recovery plan enacted last year. The money is just a start. Last year, Obama asked Congress in his budget request for an additional $1 billion a year for five years. Congress for this year approved another $2.5 billion that remains to be awarded. And Obama is expected to ask for yet more rail funds when his budget is unveiled next week.

Also, LaHood has hinted that some of the $1.5 billion allotted in the stimulus plan for discretionary transportation projects may go toward high-speed rail.

Japan launched the first high-speed trains in 1964, and France and other European countries followed in the 1980s and 1990s. China has announced plans to expand its high-speed rail system to a network of more than 16,000 miles by the year 2020 and has spent more than $50 billion.

... < See list of  states awarded money> ...

By spreading the $8 billion among so many states, Obama is ignoring the advice of transportation experts and high-speed rail advocates who said the best way to build continuing political support for the program would be to concentrate on two or three grants large enough to get a high-speed line up and running. Once that happens, they reasoned, other parts of the country would lobby for more money to build their own lines.

''We can't try to touch as many political bases as we can with that money. We have got to do major projects,'' Pennsylvania Gov. Ed Rendell said in a recent interview.

Sen. Dick Durbin, D-Ill., disagreed. ''You really have to look at local and regional approaches to create the political will to expand the program,'' he said.

Poll: Americans "Fed Up" With Congress, Both Parties & The Feds; Obama Approval Inches Up

NBC News (complete poll):

Visit msnbc.com for breaking news, world news, and news about the economy

As President Barack Obama prepares to deliver his first State of the Union address Wednesday night, he will be speaking to an American public that’s fed up with Congress, the country’s two main political parties, and the federal government, according to a new NBC News/Wall Street Journal poll.

Only 28 percent believe the federal government is “working well” or even works “okay,” versus seven in 10 who think it’s “unhealthy,” “stagnant” or needs large reforms.

By comparison, in December of 2000 — during the height of the disputed Bush-Gore presidential election — 55 percent said the government was working well or okay.

What’s more, a whopping 93 percent believe there’s too much partisan infighting; 84 percent think the special interests have too much influence over legislation; nearly three-quarters say that not enough has been done to regulate Wall Street and the banking industry; and an equal 61 percent complain that both Democrats and Republicans in Congress aren’t willing to compromise.

And the percentage who believe the country is headed in the wrong direction now stands at 58 percent, the highest level of Obama’s presidency.

“The message is a big one,” said Democratic pollster Peter D. Hart, who conducted this survey with Republican pollster Bill McInturff. “The message is, ‘We hate what’s going in Washington.’”

Public’s anger isn’t directed at Obama
Indeed, the NBC/Journal survey finds that nearly half of the country (48 percent) said last week’s stunning election in Massachusetts, in which Republican candidate Scott Brown won a Senate contest in one of the nation’s most Democratic-leaning states, was aimed at sending a message to Washington. Only 15 percent disagreed.

But if the public is fed up with Washington, its anger isn’t necessarily directed at President Obama.

Only 27 percent say they blame him for not being able to find solutions to the country’s problems. By contrast, 48 percent blame Republicans in Congress and 41 percent blame congressional Democrats.

“The president has problems,” Hart adds, “but the Congress has much bigger problems.”

Obama’s numbers, in fact, are virtually unchanged from last week’s poll, which was released on the day of the Massachusetts election.

The president’s approval rating inched up two points to 50 percent, while the number believing his health care plan is a good idea declined two points to 31 percent.

“This data set reminds us that the Scott Brown election has been a huge event in Washington, D.C.,” said McInturff, the Republican pollster. “But around the country, I think this polling would suggest that it had a modest effect.”

Focus more on the economy, less on health care

Defiant Obama Vows to Push Agenda

NY Times (watch the Town Hall):

President Obama, striking a no-retreat, no-surrender posture in the wake of his party’s humiliating defeat in the Massachusetts Senate race this week, vowed Friday to press on with his expansive domestic agenda — including a health care overhaul and tough new restrictions on banks — even if it meant he had to “take my lumps” from political critics.

Mr. Obama came to this Cleveland suburb for the second stop on his White House to Main Street Tour to spread the word that his administration is about jobs, jobs, jobs. With his approval rating down to about 50 percent, a bruising season of midterm elections ahead and Democrats reeling from the resounding note of disapproval in Massachusetts, the ordinarily cool and cerebral Mr. Obama sounded unusually defiant, even fiery, at a town hall-style question and answer session at Lorain County Community College here.

The president used the word “fight,” or some version of it, more than 20 times.

Mr. Obama vowed to “never stop fighting for policies that will help restore home values.” He promised that he was “not going to stop fighting to give our kids the best education possible.” He pledged he would not “stop fighting to give every American a fair shake,” to continue fighting for a new Consumer Protection Agency and for openness in government. And of course, Mr. Obama pledged to fight for jobs.

“So long as I have some breath in me, so long as I have the privilege of serving as your president, I will not stop fighting for you,” Mr. Obama said. “I will take my lumps. But I won’t stop fighting to bring back jobs here.”

The president’s appearance here comes one day after he picked an especially big fight, with Wall Street, by calling for new limits on banks that would prevent them from becoming too big to fail. He sounded as if he would relish it.

“It’s going to be a fight,” the president said, warming up to the crowd. “You watch. I guarantee you, when we start on financial regulatory reform, trying to change the rules to prevent what has caused so much heartache all across the country, there are people who are going to say, ‘Why is he meddling in government’ or ‘Why is he meddling in the financial industry? It’s another example of Obama being big government.’ No, I just want to have some rules in place so that when these guys make dumb decisions, you don’t end up having to foot the bill. That’s pretty straightforward. I don’t mind having a fight.”

Mr. Obama’s bellicose rhetoric carried echoes of his tone in the 2008 campaign. He is now trying to strike a more populist tone to tap into anger many Americans feel about bailouts on Wall Street while Main Street is suffering. At the same time, the White House is trying to frame the midterm elections on terms favorable to Mr. Obama, by casting him as someone who will stand with the little guy, even if those fighting words contrast with his image as a politician who cares about bringing people together.

“There will be a fulsome debate about who is fighting for Main Street and who is siding with the special interests,” said Dan Pfeiffer, Mr. Obama’s communications director, adding, “There is nothing inconsistent between trying to bring people together to solve problems and standing up to the insurers and the lobbyists.”

Mr. Obama’s shift in tone actually began last week, before Tuesday’s bruising loss in Massachusetts, when the president appeared before the House Democrats and warned that if Republicans want to “stand up for the status quo” and block his health care bill, “that is a fight I want to have.” He used a version of that language at the White House on Thursday in announcing his plan for restrictions on banks.

While here, Mr. Obama made a plea for the health care bill ... Conceding that the plan had “hit a little bit of a buzz saw this week,” Mr. Obama acknowledged that the process “has been less than pretty” and that the measure was so big and unwieldy it looked like “a monstrosity,” creating fear and anxiety among ordinary Americans. But he made the case that passing the measure was an imperative ...

Mr. Obama rode to office on the strength of his cool temperament, but in recent weeks, even some Democrats have questioned whether he appears too distant from voters. Earlier this week, in an interview with ABC, the president acknowledged that many Americans have a sense of “remoteness and detachment” from policy makers in Washington.

On Friday, Mr. Obama alluded to it again, saying it was “pretty easy to get a warped view of things” in Washington. With all the problems he faces in the capital, he sounded especially happy to be let loose for a few hours.

Obama's Town Hall In Elyria Ohio (video)

Watch (read NY Times analysis):

"Obama bank plan wins tentative support in Europe"

Reuters:

France, Britain and Germany offered support on Friday for U.S. President Barack Obama's plan to limit banks' size and trading activities but fell short of pledging to follow suit on the proposal that has stunned world markets.

Obama's dramatic proposals could rewrite the world financial order but experts said they were light on detail and could cloud the global approach fostered by the Group of 20 nations.

Obama made his proposals on Thursday, saying he was ready to fight resistance from Wall Street banks he blamed for helping cause the global financial crisis.

The plan would prevent banks from investing in, owning or sponsoring a hedge fund or private equity fund.

It would set a new limit on banks' size in relation to the overall financial sector and, perhaps most dramatically, could also bar institutions from proprietary trading operations, which are unrelated to serving customers, for their own profit.

Proprietary trading involves firms making bets on markets with their own money and has been the source of much of banks' bumper profits before and after the financial crisis.

French Economy Minister Christine Lagarde welcomed the proposal, saying it was a "very, very good step forward."

"They see that regulation, which was a taboo word that was difficult to use in financial circles in the United States, is vital to contain ... banking excesses," she said.

UK Treasury Minister Paul Myners said Britain had already acted to address problems in its banking industry.

"He's developing a solution to what he sees as the American issues, we've already taken the necessary action in the UK," Myners said in an interview with Reuters Insider TV.

But Britain's opposition Conservatives, tipped by polls to win an election to be held by June, offered more solid support.

"President Obama has created a lot of space for the rest of the world to come up with what I think would be a sensible system of international rules," Conservative finance spokesman George Osborne told BBC Radio.

"I have said consistently that we should look at separating retail banking from activities like large-scale propriety trading and that this was best done internationally."

Doubts remain as to whether Obama's scheme can be enacted unchanged, not least since his party lost a key Senate seat this week, depriving it of a "super majority" in that house.

But it will strike a popular chord.

Banks' return to paying massive bonuses has prompted public and media outrage in the United States and Europe after taxpayer money was used to bail many of them out.

Wall Street sold off on Thursday and the threat that other countries will follow Obama's lead rattled European lenders.

Banker Cluelessness (cartoon)

 

Weekly Radio Address: Getting Our Money Back from Wall Street

WhiteHouse.gov:

As the President continues to work on immediate job creation, he discusses his proposal for a new fee on the largest financial institutions to ensure that every cent of taxpayer assistance gets paid back. Saying that, "we're not going to let Wall Street take the money and run," he then to discusses the ongoing push to make sure banks can never put our economy at risk again.

Obama Proposes Financial Crisis Responsibility Tax

President Obama explains the proposed Financial Crisis Responsibility Fee that will ensure that the largest financial firms meet their obligations to repay American taxpayers for the assistance provided to Wall Street. January 14, 2010.

The NY Times Argues Bankers Should Pay A One-Off Windfall Tax On Bonuses

This NY Times editorial agrees with Let's Put To Bed The Tarp Repayer's Number One Rationale Against A Tax, and proposing addsinga new, one time tax to the mix:

... House Democrats on Thursday proposed imposing a 50 percent windfall tax on bankers’ bonuses. And it is unlikely to satisfy taxpayers. It shouldn’t.

For the sake of fairness, Congress should pass a one-off windfall tax on bonuses. After all, what profits the banks had in 2009 were largely underwritten by taxpayers, who pumped in billions of dollars of capital, covered losses from the collapse of the American International Group and guaranteed the debts of Fannie Mae and Freddie Mac. The Federal Reserve lent hundreds of billions against shoddy collateral that no one else would touch and the Federal Deposit Insurance Corporation guaranteed loans worth hundreds of billions more.

And for the sake of long-term financial stability, Congress should also pass President Obama’s proposed big bank fee — intended to recover, over 12 years, the $117 billion that the administration estimates it will spend on financial bailouts. That should discourage banks that are already too big from getting even bigger and posing a larger threat to the overall economy.

Let's Put To Bed The Tarp Repayer's Number One Rationale Against A Tax

Over the last few days, I've heard again and again how taxing the firms who received TARP funds, and have already paid it back with interest, is unfair. After all these folks say, the interest was the "fee" the government assessed Wall Street for the "service" it provided so assessing some new, additional fee is unfair. Plus, the government has made a record return on their repaid TARP "investments".

Unfortunately for these apologists, they're forgetting two very important facts:

1. The largest slug of TARP money by far has gone to AIG to cover the stupid "insurance" policies it wrote with Wall Street. These policies were covered when there was NO loss and at full face value (when any reasonable business assessment would have dramatically reduced their value) directly benefiting AIG's Wall Street counterparties. This massive subsidy is in large part responsible for the rapid and dramatic rise in these company's stock prices because, while it's hard for most folks on Main Street to understand what occurred, Wall Street understands what's really going on.
2. TARP is not the Feds' biggest source of largesse to financial firms, the FDIC's bond-guarantee program is. And that program is still running, and benefiting, Wall Street.

So it is not the case that Wall Street has paid back the government for its help; in fact they're still receiving massive amounts of help. So paying for that ongoing help is totally fair and not just populist anger.

"White House's Tax Proposal Targets Big Banks' Risks"

Wall St Journal:

President Barack Obama plans Thursday to propose taxing large banks based on their exposure to risk as a way to recover taxpayer losses from the 2008 bailout of the financial sector, people familiar with the matter said.

The plan marks the latest in a slew of proposed fees, penalties and constraints the White House envisions slapping on Wall Street during the clean-up of the financial crisis.

If approved by Congress, the new tax—which the White House calls a "financial crisis responsibility fee "—would force more than 25 banks to collectively pay the federal government roughly $100 billion over 10 years.

The numbers could change as the final tally of losses from the $700 billion Troubled Asset Relief Program is calculated. The top five Wall Street banks earned profits of about $30 billion through the third quarter last year. The proposal will also help the administration tackle the U.S.'s giant budget deficit.

Companies that benefited from the government's debt-guarantee program would also be taxed, a decision that would affect GE Capital, the finance arm of General Electric Co.

The banking industry has already objected to initial reports of the proposal, which Mr. Obama is expected to detail at the White House on Thursday ...

The proposal would not require small banks to pay the fees, the people familiar with the matter said, the latest sign that Washington's post-crisis clean-up is hitting large financial institutions most heavily.

The administration hasn't disclosed the exact equation it will use to determine what each bank owes, but the rough contours suggest that J.P. Morgan, Citigroup Inc. and Bank of America Corp. will top the list of banks with the largest exposure.

Banks that lean heavily on funding sources other than customer deposits, meanwhile, could pay proportionally higher taxes. That means that Goldman Sachs Group Inc. and Morgan Stanley could get penalized. Another big loser could be Citigroup, whose main U.S. banking unit's insured deposits represent a relatively small slice of the company's liabilities.

The 2008 law creating TARP required the White House to come up with a proposal to recoup any losses. The latest government report estimates losses to be about $120 billion. A large portion of those losses are expected to be from government investments in the automotive industry, a burden Mr. Dimon said Wednesday that banks shouldn't be required to shoulder.

Bank CEO's Grilled By Congress: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars”

NY Times:

The 10 members of the panel, brows furrowed and some furiously taking notes, squared off against the Wall Street chiefs in Washington over the billions in bonuses, and who was really to blame for bringing the financial system to its knees.

But the hearing shifted to new ground when Phil Angelides, chairman of the group, the Financial Crisis Inquiry Commission, bore in on Lloyd C. Blankfein, Goldman Sachs’s chairman.

He asked Mr. Blankfein to explain how his firm could have sold bundles of troubled mortgages at the same time it placed bets with Goldman’s own money that their value would fall.

Mr. Blankfein tried a variation of the tagline used by the Syms clothing chain: “An educated consumer is our best customer.” He said that Goldman’s clients knew what they were buying and that his firm was simply providing a customer service.

“These are professional investors who want this exposure,” Mr. Blankfein said.

But Mr. Angelides had his comeback: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.”

The exchange was particularly revealing because it laid bare an essential truth about the Wall Street ethos: if there’s a buyer — no matter how sophisticated — there’s always a seller.

Maybe that’s fine within the confines of Wall Street. But it didn’t work so well when people wanted to buy homes they clearly could not afford and banks were quick to provide them with mortgages.

And it didn’t work so well when companies sought to finance enormous takeovers by leveraging their balance sheets to dizzying heights and banks were happy to provide them with the debt.

Mr. Angelides also dismissed Mr. Blankfein’s line about “professional investors” by saying that those same investors represented the savings of teachers and police officers.

After the hearing, Mr. Angelides said he was frustrated with Mr. Blankfein’s answer. “Mr. Blankfein himself never admitted that there was any responsibility of Goldman Sachs to make sure the products themselves were good products,” he said. “That’s very troublesome.”

Mr. Blankfein took the brunt of other lines of questioning, and when the hearing shifted to more predictable exchanges, he was clearly more comfortable. The executives, for the most part, had figured out how to avoid directly apologizing, despite the commission’s best efforts to pry some admission of guilt out of them.

“Whatever we did, it didn’t work out well,” Mr. Blankfein said. “We regret the consequence that people have lost money.” (John J. Mack, Morgan Stanley’s chairman, who has been the most outspoken about the need for regulation, had apologized at a Congressional hearing last year.)

All of them suggested that reform was necessary, including detailed explanations of how they might put into effect changes to compensation plans and making the sale of derivatives more transparent.

But it was unclear whether it was just lip service. “If the leaders of Wall Street believe regulation is needed, as they stated today before the Financial Crisis Inquiry Commission, then they should tell their lobbyists because they are fighting every serious regulatory change and improvement being considered by Congress,” John Taylor, president of the National Community Reinvestment Coalition, said in a statement after the hearing.

Mr. Taylor also said the banks should be held more accountable for what they sell.

“If the leaders of Wall Street did not consider the possibility of housing prices dropping in their own stress tests and due diligence,” he added, “if they did not know that the F.B.I. had been raising red flags about mortgage fraud since 2004, and if they did not know that high-cost, no-doc, interest-only loans were being made right and left to anyone, then their spirited defense of their employees falls flat.”

“Based on what we heard today,” he added, “they should be firing people, not giving them bonuses.”

Bank Fee Cartoons

Govt Stimulus Added 2% To GDP, Saved 2M Jobs In 4Q09

NY Times:

The Obama administration, in its latest progress report on the $787 billion stimulus program, said both the overall economy and employment continued to be in better shape at the end of 2009 than they would have been without the government’s help.

But as expected, the program’s impact on economic growth in the fourth quarter was less than in two previous quarters, according to President Obama’s Council of Economic Advisers.

The council’s report, the second of the quarterly assessments mandated by Congress, said that in the fourth quarter the stimulus plan’s tax cuts and spending added about 2 percentage points to the gross domestic product, which is the size of the economy as measured by the total goods and services produced.

Though unemployment reached 10 percent at year’s end—two percentage points higher than the peak that the council forecast when the administration proposed the stimulus package to Congress nearly a year ago—the number of jobs was between 1.5 million to 2 million greater in the fourth quarter than it would have been without the recovery plan, the council said ...

The council estimated that the stimulus provisions boosted economic growth in the fourth quarter by less than in the second and third quarters. But the council chairman, Christina Romer, has said that such a leveling off is typical of stimulus measures, which have their biggest economic bang at the outset.

Mr. Obama signed the recovery plan into law late in the first quarter of 2009, when the economy shrank by 6.4 percent. It shrank by a much smaller 0.7 percent in the second quarter before growing 2.2 percent in the third.

Private forecasters project that the economy grew about 4 percent in the year’s final quarter. If so, the council said, that would be the first time that the economy grew by an amount greater than the boost attributed to the stimulus plan. “Even so,” the council added, “growth would have been considerably more anemic without the fiscal stimulus.”

The report acknowledged the difficulty of accurately gauging the stimulus program’s economic impact when it is impossible to know what would have happened without such action. But to buttress its own conclusions, the council included in its report comparable estimates from five private-sector analysts at economic forecasting firms and big banks.

The administration figures, however, consistently are on the more optimistic side. Even so, the public and private estimates together suggest “that the Recovery Act has played a key role in the turnaround of the economy that has been occurring over the past three quarters,” the report said.

Obama Considering Tax On Big Banks

NY Times (also see Federal Reserve Earned Record $45 Billion In 2009; More Than Bank of America, Goldman Sachs & J.P. Morgan Chase Combined):

President Obama will try to recoup for taxpayers as much as $120 billion of the money spent to bail out the financial system, most likely through a tax on large banks, administration and Congressional officials said Monday.

The president has yet to settle on the details, and his senior economic advisers are weighing a number of options as they finish the budget proposal Mr. Obama will release next month.

The general idea is to devise a levy that would help reduce the budget deficit, which is now at a level not seen since World War II, and would also discourage the kinds of excessive risk-taking among financial institutions that led to a near collapse of Wall Street in 2008, the officials said.

But the president also has a political purpose — to respond to the anger building across the country as big banks, having been rescued by the taxpayers, report record profits and begin paying out huge bonuses while millions of Americans remain out of work.

The administration previously rejected two ideas that have received much attention in recent months: a transaction tax on financial trades and a special tax on executives’ bonuses. The most likely alternatives would be a tax based on the size and riskiness of an institution’s loans and other financial holdings, or a tax on profits.

Lobbyists for bankers, taken by surprise, immediately objected to any new tax ...  But the industry’s objections carry less weight at a time when Mr. Obama is under intense pressure to crack down on Wall Street. In coming days, big banks are expected to begin announcing huge bonuses for their top executives and traders. A bipartisan commission charged with reporting on the causes of the financial crisis will begin a two-day hearing on Wednesday with testimony from the heads of four big banks: Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America. Meanwhile, industry opposition continues to stymie the president’s initiative in Congress to tighten regulations.

“The president has talked on a number of occasions about ensuring that the money that taxpayers put up to rescue our financial system is paid back in full,” Robert Gibbs, the White House spokesman, said.

So has the Treasury secretary, Timothy F. Geithner, who has drawn criticism from both the left and the right as not being tough enough on Wall Street.

Representative Barney Frank of Massachusetts, the Democrat who is chairman of the House banking committee, said the president was required to seek recovery of any losses under the law that created the $700 billion financial rescue fund, known as the Troubled Asset Relief Program, in October 2008. The law did not spell out how to do so.

“I did know they were thinking about doing this and I encouraged them,” Mr. Frank said.

Mr. Frank and others in Congress said they did not know any details, and administration officials say no decisions have been made beyond the fact that a proposal will be in the budget. Mr. Obama has been meeting with Mr. Geithner and with Lawrence H. Summers, his senior White House economic adviser, to discuss options from the Treasury department. News of the decision to propose some kind of tax was first reported by Politico.

Federal Reserve Earned Record $45 Billion In 2009; More Than Bank of America, Goldman Sachs & J.P. Morgan Chase Combined

So much for the Republican criticism that saving the economy was going to be a money loser ... From the Wash Post (also see Obama Considering Tax On Big Banks):

Wall Street firms aren't the only banks that had a banner year. The Federal Reserve made record profits in 2009, as its unconventional efforts to prop up the economy created a windfall for the government.

The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury.

The numbers are good news for the federal budget and a sign that the Fed has been successful, at least so far, in protecting taxpayers as it intervenes in the economy -- though there remains a risk of significant losses in the future if the Fed sells some of its investments or loses money on its stakes in bailed-out firms.

This turn of events comes as the banks that benefited from the Fed's actions are under the microscope. Starting at the end of the week, major banks are expected to announce significant earnings and employee bonuses. Anger in Washington is at such a high boil that the Obama administration will probably propose a fee on financial firms to recoup the cost of their bailout, officials confirmed Monday.

As it happens, the Fed's earnings for the year will dwarf those of the large banks, easily topping the expected profits of Bank of America, Goldman Sachs and J.P. Morgan Chase combined.

Much of the higher earnings came about because of the Fed's aggressive program of buying bonds, aiming to push interest rates down across the economy and thus stimulate growth. By the end of 2009, the Fed owned $1.8 trillion in U.S. government debt and mortgage-related securities, up from $497 billion a year earlier. The interest income on those investments was a major source of Fed profits -- though that income comes with risks, as the central bank could lose money if it later sells those securities to reduce the money supply.

The Fed also made money on its emergency loans to banks and other firms and on special programs to prop up lending, such as one that supports credit cards, auto loans, and other consumer and business lending. Those programs impose interest and fees on participants, with the aim of ensuring that the Fed does not lose money.

And while the central bank in its most recent financial report had recorded a $3.8 billion decline in the value of loans it made in bailing out the investment bank Bear Stearns and the insurer American International Group, the Fed also logged $4.7 billion in interest payments from those loans. Further losses -- or gains -- on the two bailouts are possible as time goes by. The Fed also charges fees for operating the plumbing of the financial system, such as clearing checks and electronic payments between banks.

From its revenue, the Fed deducts operating expenses, such as employee salaries, then returns to the Treasury almost all of the earnings that remain. The largest previous refund to the Treasury was $34.6 billion, in 2007.

"This shows that central banking is a great business to be in, especially in a crisis," said Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former Fed official. "You buy assets that have a nice yield, and your cost of funds is very low. The difference is profit."...

In effect, the unprecedented range of actions taken to address the crisis has made the Fed's balance sheet more like that of a private bank.

The Aughts Were The Worst Economic Decade In 70 Years

Wash Post:

The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth.

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.

And the net worth of American households -- the value of their houses, retirement funds and other assets minus debts -- has also declined when adjusted for inflation, compared with sharp gains in every previous decade since data were initially collected in the 1950s.

"This was the first business cycle where a working-age household ended up worse at the end of it than the beginning, and this in spite of substantial growth in productivity, which should have been able to improve everyone's well-being," said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank.

The miserable economic track record is, in part, a quirk of timing. The 1990s ended near the top of a stock market and investment bubble. Three months after champagne corks popped to celebrate the dawn of the year 2000, the market turned south, a recession soon following. The decade finished near the trough of a severe recession.

But beyond these dramatic ups and downs lies an even more sobering reality: long-term economic stagnation. The trillions of dollars that poured into housing investment and consumer spending in the first part of the decade distorted economic activity.

Capital was funneled to build mini-mansions in Sun Belt suburbs, many of which now sit empty, rather than toward industrial machines or other business investment that might generate economic output and jobs for years to come.

"The problem is that we mismanaged the macroeconomy, and that got us in big trouble," said Nariman Behravesh, chief economist at IHS Global Insight. "The big bad thing that happened was that, in the U.S. and parts of Europe, we let housing bubbles get out of control. That came back to haunt us big-time."

The housing bubble both caused, and was enabled by, a boom in indebtedness. Total household debt rose 117 percent from 1999 to its peak in early 2008, according to Federal Reserve data, as Americans borrowed to buy ever more expensive homes and to support consumption more generally.

Consumers weren't the only ones. The same turn to debt played out in commercial real estate and at financial firms. It resulted in a corporate buyout boom that often produced little of lasting value. It is a truism of finance that for businesses, relying heavily on borrowed money makes the good times better but the bad times far worse. The same thing, as it turns out, could be said of the nation as a whole.

The first decade of the new century was an experiment in what happens when an economy comes to rely heavily on borrowed money.

"A big part of what happened this decade was that people engaged in excessively risky behavior without realizing the risks associated," said Karen Dynan, co-director of economic studies at the Brookings Institution. "It's true not just among consumers but among regulators, financial institutions, lenders, everyone."

The experiment has ended badly. While the stock market bubble that popped in 2000 caused only a mild recession, the housing and credit bubble has had a much greater punch -- driving the unemployment rate to a high, so far, of 10.2 percent, compared with a peak of 6.3 percent following the last such downturn.

Feds Invests More $, Now Majority Owner Of GMAC

Wash Post:

The federal government said Wednesday that it will take majority control of troubled auto lender GMAC and provide an additional $3.8 billion in aid to the company, which has been unable to raise from private investors the money it needs to staunch its losses.

The Treasury Department has said for months that GMAC would need more federal money, but the decision to increase the government's ownership stake came as a surprise, cutting against the grain of the Obama administration's recent efforts to wind down its bailout of large banks.

What initially appeared to be a closing act now looks more like year-end portfolio rebalancing, with companies including Citigroup and Bank of America allowed to repay aid even as the government deepens its involvement in mortgage financiers Fannie Mae and Freddie Mac -- and now, GMAC.

The government now owns majority ownership stakes in those three firms, General Motors and insurance giant American International Group. It also holds large stakes in Citigroup and Chrysler.

The additional aid for GMAC underscores both its struggles and its importance to the administration's efforts to revive the auto industry. GMAC, which already has taken $12.5 billion in direct federal aid along with other forms of government support, is the largest lender to General Motors and Chrysler dealerships and to their customers.

Treasury said that it will increase its stake in GMAC to 56 percent from 35 percent. The government also will hold about $14 billion in what amounts to loans that GMAC may eventually repay. The government plans to appoint four of the company's nine directors.

Wednesday's announcement is a coda to the stress test of 19 large banks conducted earlier this year. GMAC, which was required to add $9.1 billion to its capital reserves against unexpected losses, was the only bank unable to satisfy regulators by finding private investors.

"We said, if you do not go raise capital from the private markets, if you are unable to, we will put capital into you because it is important to the stability of the system," Treasury Secretary Timothy F. Geithner told the Congressional Oversight Panel earlier this month. "It was never going to be possible for GMAC. They are in a unique and difficult situation."

Congressional Republicans criticized the action Wednesday.

"The government should be releasing its grip on financial institutions, not buying more of them," said Rep. Tom Price (R-Ga.), chairman of the Republican study committee, a conservative House caucus.

GMAC was created to finance GM auto sales, but during the housing boom it focused on mortgage lending. The company, no longer owned by GM, lost $13 billion in the last three years as borrowers defaulted on those loans.

The federal aid will help GMAC sop up those losses and return to its roots.

The Apocalypse The Right-Wing Fears With Stupifying Consistency Has Not Come To Pass

The New Republic:

Conservatives have lined up in near-unanimous opposition to any progressive legislation introduced during President Obama’s first year in office. Whether they’ve been railing against health care reform, a climate bill, or financial regulation, their ire has stemmed less from legislative specifics than from a generalized prophecy of doom: Obama’s proposals will move the country toward socialism, bankrupt entire industries and small businesses, and deny Americans their basic freedoms.

These arguments, however, aren’t new. Conservatives—not just Republicans, but various politicians and groups who’ve resisted major social changes—recycled them throughout the twentieth century. They used them to oppose numerous progressive measures that Americans now take for granted, from women’s suffrage to child-labor laws to Medicare. [See "The Republican Party ... [has not and] cannot come to grips with the very nature of the problems of modern American politics"]. Here we’ve collected a few choice predictions about disaster that never came. Conservatives today might prefer they be forgotten.

“It may be impracticable that our distinctively American experiment of individual freedom should go on.”

—Senator David Hill (D-NY), in 1894, bemoaning the creation of a federal income tax

“Woman suffrage would give to the wives and daughters of the poor a new opportunity to gratify their envy and mistrust of the rich. Meantime these new voters would become either the purchased or cajoled victims of plausible political manipulators, or the intimidated and helpless voting vassals of imperious employers.”

—Former President Grover Cleveland, in 1905, on why women shouldn’t be able to vote

“[T]he child will become a very dominant factor in the household and might refuse perhaps to do chores before six a.m. or after seven p.m. or to perform any labor.”

—Senator Weldon Heyburn (R-ID), in 1908, on why child labor should remain unregulated

“I fear it may end the progress of a great country and bring its people to the level of the average European. It will furnish delicious food and add great strength to the political demagogue. It will assist in driving worthy and courageous men from public life. It will discourage and defeat the American trait of thrift. It will go a long way toward destroying American initiative and courage.”

—Senator Daniel O. Hastings (R-DE), in 1935, listing the evils of Social Security

“[I]t would make it practically impossible for any publisher in the United States to accept any food, drug, or cosmetic advertising without facing squarely into the doors of a jail.”

—Federal Trade Commission Chair Ewin L. Davis, in 1935, on the dangers of empowering the Food and Drug Administration to regulate the food, drug, and cosmetic industries ...

“[The Act represents] a step in the direction of Communism, bolshevism, fascism, and Nazism.”

—The National Association of Manufacturers, in 1938, condemning a national minimum wage and guaranteed overtime pay

“It is destroying the amicable relations between the white and Negro races that have been created through 90 years of patient effort by the good people of both races. It has planted hatred and suspicion where there has been heretofore friendship and understanding.”

—Senator Strom Thurmond (D-SC), Senator Richard Russell (D-GA), and other Southern legislators, in 1956, describing the perils of integrating public schools

“It is socialism. It moves the country in a direction which is not good for anyone, whether they be young or old. It charts a course from which there will be no turning back.”

—Senator Carl Curtis (R-NE), in 1965, opposing Medicare

“[T]his bill could prevent continued production of automobiles . . . [and] is a threat to the entire American economy and to every person in America.”

—Lee Iacocca, executive vice president of Ford Motor Company, in 1970, on why the government shouldn’t regulate airborne contaminants that are hazardous to human health

“The effects include serious long-term losses in domestic output and employment, heavy cost burdens on manufacturing industries, and a resultant gradual contraction of the entire industrial base. The irony of this bleak scenario is that these economic hardships are borne with no real assurance they would be balanced by a cleaner, healthier environment.”

—The National Association of Manufacturers, in 1987, on the perils of an emissions reduction program to combat acid rain

“The doctor begins to lose freedoms; it’s like telling a lie, and one leads to another. First you decide that the doctor can have so many patients. They are equally divided among the various doctors by the government. But then the doctors aren’t equally divided geographically, so a doctor decides he wants to practice in one town and the government has to say to him you can’t live in that town, they already have enough doctors. You have to go someplace else. And from here it is only a short step to dictating where he will go.”

—Ronald Reagan, in 1961, arguing against the creation of Medicare

The Unemployment Line After Xmas (cartoon)

 

Financial Reform, Unlike Health Care Reform, Seems To Be On A Bipartisan Senate Track

Wash Post:

... Wednesday's announcement by the two senators, who serve as chairman and ranking member of the banking committee, that they have resolved key differences and hope to complete a compromise by the end of the Senate's winter vacation.

While both sides cautioned that a deal remained far from certain, political analysts said they were not surprised that Dodd and Shelby had returned to the bargaining table, even amid the partisan rancor of the simultaneous debate over health-care reform.

"There is a political imperative on both sides of the aisle to get a financial reform bill done before the election" in the fall, said Jaret Seiberg of Washington Research Group. "This is about incumbents being able to tell their constituents that they are not going to allow another financial crisis."

President Obama declared financial reform one of his major legislative priorities this summer as he unveiled a package of proposals that would effect the greatest increase in federal oversight of the financial industry since the Great Depression. His administration pushed Congress to take action by the end of the year, and the House passed a bill containing most of the president's proposals earlier this month.

Dodd, who is guiding reform legislation through the Senate, initially said he also planned to produce a bill this year. But Dodd and other Democrats decided not to adopt the administration's proposals on key issues, and they entered into time-consuming negotiations with Republicans. The House bill was passed without any support from the minority party, but that is a more difficult battle in the Senate,

Aides to both parties say that senators would prefer to find common ground. The poisoned atmosphere of the final health-care debates even prompted Dodd to recently seek out Minority Leader Mitch McConnell (R-Ky.) on the Senate floor to emphasize that he was serious about working across party lines on financial reform.

"Our country needs financial regulatory reform and we are committed to working together on legislation to create a sound regulatory structure," Dodd and Shelby said in a joint statement issued Wednesday.

That commitment to bipartisanship appeared to break down in November when Dodd and Shelby suspended talks over Shelby's opposition to creating a new agency devoted to protecting consumers from abuse by lenders. Dodd views the agency as a key reform, while Shelby believes that keeping consumers safe and banks healthy should be handled by the same agency so that the two priorities remain in balance.

Dodd circulated draft legislation among Democrats, but not even his own party was lined up behind him. At the hearing at which Shelby aired his opposition, several moderate Democrats also expressed concerns about the powers of the new consumer agency, along with other elements of the bill.

Dodd and Shelby decided to resume talks, splitting the major issues among four bipartisan pairs of senators. The two men kept for themselves the questions of how to safeguard consumers and banks.

Obama Assesses His First Year & Rejects Criticism Of Health-Care Bill

Wash Post:

President Obama outlined Tuesday a first-year legislative record that he said rescued the economy and placed it on a path of long-term growth, even as he acknowledged that some unfinished items would probably be more difficult to achieve heading into a midterm election year.

In an Oval Office interview with The Washington Post, Obama rejected criticism that he has compromised too much to secure health-care reform or turned over too much authority to congressional leaders in pursuing his broad legislative agenda.

But some of Obama's signature initiatives, including cap-and-trade legislation and financial regulatory reform, remain unfulfilled heading into an election year likely to be shaped by what he achieved in Congress this year. Obama personally made the case for his legislative record at a time when his approval ratings are among the lowest of his presidency and as even some of his most ardent supporters are questioning the results of his congressional strategy.

"Overall, if you had a checklist of promises made, a lot of those promises have been kept," Obama said. "When those things are complete, and I think they will be, we will have achieved a fundamental shift in health care, energy, education and our financial regulatory system that will put this economy on a firmer footing to grow over the long term."

As the Senate prepares to pass its version of health-care reform legislation, Obama's advisers have portrayed a highly successful year pushing important bills through Congress, comparing his record to those of Franklin D. Roosevelt and Lyndon B. Johnson. Presidential scholars offer a more cautious appraisal, even as they note that Obama is operating in a more partisan time in Washington than those Democratic predecessors had.

Obama's legislative record includes the $787 billion stimulus bill passed in February, a mix of tax cuts, infrastructure spending and aid to state and local governments that was the largest of its kind. It also includes a variety of bills addressing issues of particular interest to his political base that had been languishing for years.

Although Obama noted in the interview that "the most important thing we did this year was to ensure that the financial system did not collapse," health-care reform dominated his agenda and will stand as at least one pillar of the legacy he leaves behind. He has come under sharp criticism for the size and shape of the legislation, including from former Democratic Party chairman Howard Dean ...

In the interview, Obama vigorously defended the legislation, saying he is "not just grudgingly supporting the bill. I am very enthusiastic about what we have achieved."

"Nowhere has there been a bigger gap between the perceptions of compromise and the realities of compromise than in the health-care bill," Obama said. "Every single criteria for reform I put forward is in this bill."

In listing those priorities, he cited the 30 million uninsured Americans projected to receive coverage, estimated savings of more than $1 trillion over the next two decades, a "patients' bill of rights on steroids," and tax breaks to help small businesses pay for employee coverage.

On Climate Change & Health Reform, Obama Is Willing To Take What He Can Get

NY Times:

President Obama’s chief of staff, Rahm Emanuel, likes to say that the only thing that is not negotiable is success. The last 48 hours offered a case study in how the president applies that maxim to governing.

After weeks of frustrating delays and falling poll numbers, Mr. Obama decided to take what he could get, declare victory and claim momentum on some of the administration’s biggest priorities, even if the details did not always match the lofty vision that underlined them.

From Copenhagen to Capitol Hill, the president determined the outer limits of what he could accomplish on climate change and health care and decided that was enough, at least for now. He brokered a nonbinding agreement with other world powers to fight global warming, averting the collapse of an international summit meeting. And he blessed a compromise on health care to guarantee the votes needed to pass the Senate.

Neither deal represented a final victory, and in fact some on the left in his own party argued that both of them amounted to sellouts on principle in favor of expediency. But both agreements served the purpose of keeping the process moving forward, inching ever closer toward Mr. Obama’s goals and providing a jolt of adrenaline for a White House eager to validate its first year in office.

Mr. Obama seemed encouraged by the progress ... After landing in a Washington-area snowstorm and retiring for a few hours of rest, Mr. Obama appeared in the Diplomatic Reception Room of the White House on a snowy Saturday. He called the health care deal “a major step forward” and the climate change agreement an “important breakthrough.”

Still, he acknowledged that neither was exactly what he had set out to achieve. On climate change, he said that the Copenhagen pact “is not enough” and that “we have a long way to go.” On health care, he noted that “as with any legislation, compromise is part of the process.”

In an interview, Mr. Emanuel said the developments showed that Mr. Obama “sets out the North Stars for us” in terms of broad and ambitious goals, but is willing to let his staff and allies haggle over the specifics. “He doesn’t negotiate the ends,” Mr. Emanuel said. “He’s very open to discussing alternative routes.”

Critics cautioned against making too much of the agreements. “They are pyrrhic victories,” said John Feehery, a Republican strategist and former Capitol Hill aide. “Neither deal will necessarily improve his poll ratings with swing voters, nor will they energize his base. And neither take the necessary steps to put the American economy back on track, which should be the only thing he is thinking about right now.”

The climate deal in particular may seem more than it is. With the Copenhagen conference unable to agree on binding limits on greenhouse gases linked to climate change, Mr. Obama settled for a three-page agreement with no short or midterm goals but a long-term commitment to prevent world temperatures from rising by more than two degrees by midcentury.

The health care legislation is much further along, and while it compromised on abortion and abandoned a government-run health plan, it still includes many changes long favored by Democrats. If it passes the Senate this week as now appears probable, it stands a much better chance of actually becoming law, culminating decades of largely failed efforts to revamp the nation’s health care system.

Mr. Obama has put a high value on process and keeping things moving, recognizing that history generally does not remember the to and fro, only the big sweep of presidential accomplishments. He may not get the health care plan he envisioned but, if the legislation passes, he will insure 30 million more people, stop insurers from denying coverage for pre-existing conditions and at least try to rein in costs. He will not end climate change in his presidency, and may not get the market-based emission caps he wants, but he may move the country, and the world, toward meaningful action.

Of course, to many on both sides of the aisle, there is a less sympathetic narrative.

Wall St Back Together Again (cartoon)