Thinking Big Conference TODAY, 9-5, featuring Paul Krugman and many others. Live streaming available at ThinkingBigConference.org. ABC’s The Note reports: “Wednesday’s 800-person gathering, which is taking place at the Capital Hilton Hotel in Washington, D.C., is intended to make the case that ‘jobs-based growth’ and a ‘broadly shared prosperity’ will require far more than a short-term stimulus.”
New Pro-Econ Recovery Ads: No Is Not an Option
President Obama’s allies on the left, AFSCME and the labor-backed Americans United for Change, are ramping up with a massive advertising blitz containing the most direct and hard-hitting attack yet on specific GOP leaders, demanding that they get behind the recovery package and stop saying “No.”
White House aides were told in advance what the concept of the ads would be, though they were briefed while the ad was in production, according to a Democrat familiar with the discussions. The ad, which is running nationally on cable, goes considerably farther than Obama and the White House has in directly calling out Republican leaders, flashing images of GOP Reps John Boehner and Eric Cantor, and Senator Mitch McConnell.
The ad — which is accompanied by a big targeted radio ad blitz hitting 18 GOP House members and three Senators opposing the plan — is a sign that Obama and his advisers won’t try to get in the way as allied groups play hardball with the Republicans in the final stretch of the stimulus fight, even as the Obama administration hits GOPers blocking the plan somewhat less directly or aggressively.
Bridging House-Senate Differences After Senate Econ Recovery Vote
Scaling the package back to $790 billion to $800 billion with the goal of still generating 3.5 million jobs is part of the discussions. One option would be to reduce Obama’s signature “Making Work Pay” tax break to $400 for individuals and $800 for couples—down from $500 and $1000 respectively.
“I see some real possibilities,” Senate Appropriations Committee Chairman Daniel Inouye (D., Hawaii) told Politico. “I will sleep well tonight.” … Senate Finance Committee Chairman Max Baucus (D., Mont.) said it is now “very possible” that an agreement could be reached Wednesday.
Early indications are that the White House does not want a prolonged fight with rural senators over Medicaid [Senate version is less generous to states with large urban populations] but would like to resurrect school construction funds, a priority Obama shares with Pelosi.
Obama aggressively defended the $16 billion initiative during his news conference, and his involvement is crucial if Democrats are to convince moderates such as Collins and Specter to relax their opposition.
Among the spending cuts made last week to win Senate Republican votes, this was perhaps the most ideological. For the Obama camp, it brings back New Deal memories of the Public Works Administration creating construction jobs and building schools across the country. But Collins and Specter singled it out for elimination on the grounds that, in today’s world, it represents an expansion of the federal role in state and local affairs — and ought to be debated outside of a stimulus bill.
W. Post floats a school construction compromise: “Senior Democratic aides said one way for negotiators to restore school funding, without the specificity that Collins and Nelson oppose, would be to add money to more loosely defined state accounts.”
Details began to emerge on the merging of the bills. Two senior Democratic sources said negotiators had agreed on a top line number of $800 billion but later one of those sources said the number could be even less. That would be less than either the Senate’s $838 billion bill or the House’s $819 billion.
Several sources involved tell CNN that the number is lower to satisfy the three moderate Republican senators who wanted a lower final number.
Also, Sen. Max Baucus, D-MT, who chairs the Finance Committee, said that negotiators have kept a one year patch of the alternative minimum tax in the bill – something House negotiators had argued should be handled outside of the stimulus package.
A Democratic source also said a plan to give tax credits to home buyers which is in the Senate bill will likeky be scaled back to make room for House priorities and a Senate proposal to give tax incentives to people who buy American built cars is also likely to be nixed.
Both Obama and Pelosi are hoping to restore significant stimulus spending eliminated by the Senate, especially $21 billion in school construction and technology grants, $10.3 billion in COBRA insurance and $8.6 billion in new Medicaid coverage for the unemployed … When MSNBC asked Collins how she would react to the restoration of the House spending plan, she replied, “The Democrats will lose my vote.”
Similar remarks by Specter prompted House Majority Leader Steny H. Hoyer (D-Md.), not known for his bellicosity, to fire back at his weekly pen-and-pad session with reporters: “I’m shocked that any senator of any party would say this is the bill we passed, take it or leave it.
But privately, House Democratic staffers see several areas of potential accommodation, including alterations to the mixture of tax cuts and spending that could result in scaling back a $15,000 homebuyer tax credit, a favorite of the Senate GOP, and $11 billion in deduction of taxes on auto purchases, strongly opposed by Senate Finance Chairman Max Baucus (D-Mont.).”
The compromise proposal “has to be under $800 billion,” said Senator Ben Nelson, a Nebraska Democrat. “It’s not just me who believes that; there are some Democrats who believe that and our colleagues from the Republican side as well.”
He said he voted for the $838 billion package only to get it off the Senate floor and into negotiations with the House.
A spokeswoman for Senator Susan Collins, one of three Republicans who supported the stimulus bill in the chamber, said the Maine lawmaker agrees with Nelson. Another Republican backing the Senate bill, Pennsylvania’s Arlen Specter, said on MSNBC that he wants the compromise plan to total less than $800 billion.
“During a lengthy caucus meeting, where Democratic members railed against the cuts the Senate compromise made to education funding and aid to the states, Pelosi told the members that she agreed and would seek to appoint conferees who push for changes to those reductions.”
Sen. Arlen Specter (R-Penn.), one of three Republicans who broke ranks with his party to deliver Reid the 60 votes needed to cut off debate on the bill, said his continued support was dependent on the conference report reflecting the Senate compromise language.
“My support for the Conference Report on the stimulus package will require that the Senate compromise bill come back virtually intact including, but not limited to, overall spending, the current ratio of tax cuts to spending, and the $110 billion in cuts,” Specter said in a statement released Monday night.
Asked if Specter’s statement meant that the House had no choice but to accept the Senate bill, House Majority Leader Steny Hoyer (D-Md.) shot back: “Nobody’s said that, and I don’t think that’s the case, and I certainly hope that’s not the case.”
The White House is seeking to restore funding cut by the Senate for schools, health insurance and computerizing health records as the economic-stimulus plan headed into a final round of negotiations in Congress, with top lawmakers struggling to bring the price of the two-year package down to $800 billion.
To make room for added spending, the White House, joined by House Democratic leaders, is pressing to scale back certain Senate-passed tax breaks, including measures intended to boost auto and home sales.
White House officials said they can hold on to support for the package, even if spending is increased as a share of the total plan. “We don’t think it’s that precarious,” one administration official said.
But in pushing for more generous spending, the White House risks alienating moderate Republicans and Democrats in the Senate, who supported the package only after more than $110 billion was trimmed from it. Sens. Ben Nelson (D., Neb.) and Susan Collins (R., Maine) are insisting that the tab for the final package come in near $800 billion, and aides in both the House and Senate, as well as lawmakers, suggested that is the target for the negotiations. “That’s in the ballpark,” said Senate Finance Chairman Max Baucus (D., Mont.).
The three Republicans who voted for the plan — Sen. Collins, Sen. Arlen Specter of Pennsylvania and Sen. Olympia Snowe of Maine — are monitoring negotiations. Sen. Snowe said the final package must preserve small-business tax breaks and a measure ensuring that unemployment benefits are tax-free for some workers, among other things. Sen. Collins insists that the cost be kept to $800 billion. Sen. Specter warned that the Senate bill should “come back virtually intact” in the final compromise.
…the Senate’s strong insistence on protecting the moderates was not without costs, raising tensions as the day wore on. “It is so difficult to talk with a body that is controlled by three people,” said House Ways and Means Chairman Charles Rangel (D., N.Y.).
“If the House version of the federal stimulus package becomes law, Ohio will save 300 youth services jobs, 130 more in addiction counseling and at least 20 positions for aides who provide a respite to relatives of Alzheimer’s patients. It would mean keeping as many as 8,000 children in state-supported child care and saving 500 corrections jobs in a state where prisons are well over capacity.
If the Senate version triumphs, all of those jobs and subsidies — plus many more — will disappear, said Gov. Ted Strickland (D), who has joined with other governors to press members of Congress to back the more generous House approach.
Oxdown Gazette’s TobyWolin mocks whining from Senate obstructionists: “The other item which borders on the delusional is his platform that as long as the GOP held the reins of power in the WH and Congress – the private sector boomed. I’d like him to say that to the hundreds of thousands of people whose jobs have been overseas’d during the last 25 years (before the 3.6 million lost theirs over the past 13 months).”
Wonk Room: “Right Wing Launches Smear Campaign Against Popular Health Provisions”
TARP –> TALF –> BARF?
The plan won’t admit where we are: the major banks in the US are insolvent. They aren’t addled by a temporary fever. They are broke. If they actually marked their toxic paper to the market price – where there is one – their losses would wipe out their capital, even including the billions kicked in by the government in the first round. Clearly, the Obama administration – like the Bush administration before it – hasn’t accepted that reality.
The plan won’t get us where we need to go: we need to restructure – and downsize – our financial sector. Its baroque excesses – billions in bonuses, golden parachutes, million dollar office renovations, $35,000 “commodes on legs,” $50 million private jets, legions of employees – were constructed atop a housing bubble that finally burst. Now the banks and financial houses must be downsized, chastened, and regulated. As President Obama stated, “the party is over.” But the administration’s plan envisions a restoration, not a restructuring. We don’t want to go there even if we could afford it.
Robert Kuttner in USA TODAY, “take over the large banks”:
Treasury Secretary Timothy Geithner’s plan is far too complex, and too much of a gift to Wall Street. Judging by the initial verdict of Tuesday’s financial markets, the plan might well fall of its own weight.
Geithner’s plan basically tries to paper over the fact that several of America’s biggest banks are insolvent in the absence of taxpayer bailouts. It attempts to restart the same system of excessive loan securitization that caused the crash — this time with guarantees or loans by the Treasury or Federal Reserve. Many details have not been released, because the Treasury has not figured out how this can work.
The taxpayers have already effectively bought much of the banking system. It would be far cleaner and more efficient for government to acknowledge that, take over the large banks, clean out their balance sheets, and then sell healthy banks back to private industry.
Drawing praise is an expansion of a program announced last December to have the Federal Reserve backstop loans to consumers. The Fed and Treasury Department will provide up to $100 billion in loans to private investors willing to purchase pools of loans for cars, students, credit cards, small business and nonresidential mortgages…
…On the negative side of the ledger, however, Geithner’s plan offered little detail on how the government will use $50 billion to prevent foreclosures and modify troubled mortgages. Shoddy lending fueled a housing boom and run-up in prices that’s proved unsustainable. Mortgage finance created what now are considered distressed mortgage bonds and triggered the wider financial crisis. Geithner’s plan essentially asked markets and citizens alike to do little more than stay tuned on this front.
The plan also lacked details on the expected purchases of billions of dollars worth of “toxic” assets on bank balance sheets that investors won’t touch. Last October, Congress gave the Bush administration authority to purchase these assets, but the effort shifted instead to injecting capital into troubled banks.
These assets have a new name: legacy securities. Yet the problem of what do about them is unchanged. Banks could crumble if forced to unload them too cheaply, and taxpayers will grumble if government buys them at inflated prices.
Banks taking government aid to stay solvent must accept tougher business restrictions and disclose more about their operations under a new financial rescue plan announced yesterday…Guidelines for transparency and accountability exceed those in the program devised by Geithner’s predecessor, Henry Paulson. Barack Obama’s administration has promised more oversight to make sure bailed-out banks use government money to increase lending. The plan also includes restrictions on acquisitions, dividends, and executive pay. Still, only time will tell how successfully such requirements can be enforced and whether, in practice, the rules turn out to be as tough as they sound…
…The new plan’s accountability provisions don’t explicitly give the Treasury authority to fire bank executives who misuse taxpayer money. Geithner, 47, told Bloomberg Television yesterday that “we have done it already, and we would do it again” when appropriate. Geithner “didn’t put it in writing,” said consumer advocate Ralph Nader. Unless the government has the power to remove executives, Nader said, “there’s no chance here of success.”
OurFuture.org’s David Sirota: “James Galbraith calls Tim Geithner’s latest giveaway to Wall Street the BARF – the Bad Assets Relief Fund. Details remain sketchy about what this will and will not do … you’ll notice that Geithner effectively admits the plan would likely be rejected by the public if it had any sort of say in the matter. How does he admit this? By specifically structuring the plan to spend over $1 trillion without asking Congress for a dime. Knowing that Congress would probably reflect the public’s simmering anger at this kleptocracy and therefore reject or reform this plan, Geithner has structured it to draw cash from various governmental agencies like the Federal Reserve that are insulated from congressional – and therefore public – control.”
Economic Populist’s Robert Oak: “[I] wonder if a public relations, marketing master wrote up this plan for one can project what one wants to believe within the text.”
Brad DeLong: “I trust Tim; I think Tim is very smart; I think Tim is very public-spirited; I am sure that he is doing the best he can. That said, I cannot have an informed view of his plan until I see some real pieces of paper about it.”
Economist’s View reacts to Geithner interview on Bloomberg: “To me, Geithner’s attempt at reassurance, that they’re not quite sure how the program will work, or if they will get it right, but be assured that they are determined to keep tinkering with the program until it does work, has just the opposite effect. It undermines confidence. Why not wait until they actually have a plan before going public? Why were they in such a rush to reveal that they aren’t sure what to do, or if it will work?”
Matt Yglesias: “There’s clearly a desire here to avoid nationalization. A strong desire. But if the situation in the banking sector is as bad as the skeptics tend to think, this plan is going to end up with the government owning a substantial share in at least some large banks.”
Calculated Risk criticizes Obama answer on ABC’s Nightline eschewing nationalization: “On the issue of ‘cultural differences’ between the U.S. and Sweden, I’ve joked that we should call taking over the banks ‘preprivatization’ to avoid the stigma of ‘nationalization’. But stop and think about what Obama is saying. We know the correct answer, but we are afraid to do it – because of our ‘culture’ – so we are going to follow the Japanese plan.”
Felix Salmon is more impressed with Obama’s answer: “Obama then makes the good point that the banking system in the US is orders of magnitude larger and more complex than the banking system in Sweden was when it was nationalized. He doesn’t even need to mention that the Swedish government is good at getting things done in the way that American governments simply aren’t.”
EPI statement is supportive: “While final details for many parts of the program are still to be determined, the new approach seems to be a significant improvement over the initial bailout efforts. By requiring changes in lending practices, requiring greater balance sheet scrutiny, and by targeting consumer and business loans more directly, the Treasury’s new plan is more likely to impact Main Street and provide overall financial stability.”
Geithner was vague about all this, this morning. That’s understandable. The Treasury doesn’t have the entire plan worked out yet, and also needs some wiggle room in case certain aspects prove unworkable. Too much detail can also attract the attention of critics who will inevitably find fault or raise awkward questions. Remember: Nothing has ever been tried on this scale before.
But the vagueness works against him in terms of both confidence-building objectives. The public wants specificity in terms of where the second tranche of TARP’s$350 billion is going, and exactly how it will translate into more loans and more help for distressed homeowners — and will surely demand more specificity if Geithner comes back for additional authorization. More to the point, investors (whoever they are) need lots of specificity before they’re going to put up a single dollar, no matter how much of their downside risk is assumed by the government.
Paul Krugman finds the silver lining in the vagueness: “So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.”
Conservative Seek To Exploit Bailout Skepticism To Undermine Econ Recovery
Grover Norquist in W. Post: “The only difference between Geithner’s plan and the Pelosi-Reid spend-fest is that the House speaker and Senate majority leader are going to make us rich by spending our money, and Geithner is going to make us rich by lending/giving our money to other people.”
If you don’t really need it…
NYT: “Wall Street banks have taken billions of taxpayer dollars. Now some of them are starting to wonder if they should give the money back … banking executives worry that the government may intrude further into their businesses as long as they are beholden to Washington.”
W. Post on Wall Street’s strategy for today’s congressional hearings: “The chieftains of eight of the nation’s largest banks could receive a tongue-lashing when they testify before a House committee today, but some on Wall Street have moved to preempt the withering criticism by proposing their own solutions to the economic meltdown. ”
CNN: Bank CEOs to defend use of TARP money
Ambinder reports Labor nom could move today: “Organized labor had been told not to expect a vote on the confirmation of Rep. Hilda Solis to be Labor Secretary until after a brief Congressional recess. Now, labor’s being told that Solis’s vote will take place [today] at 2:00 pm. One White House official says that scenario ‘looks good’ but wouldn’t confirm it any further; another said that there is a mark-up scheduled but no vote.”
LA Times on coastal oil drilling: “The Obama administration put the brakes on a push to expand oil and gas drilling off America’s coasts Tuesday and promised to speed development of offshore wind farms. Interior Secretary Ken Salazar announced he will extend public comments for six months on a last-minute proposal by the Bush administration to open swaths of the California, Alaska, Atlantic and Gulf coasts for drilling.”
Rep. John Dingell on HuffPost: “For more than 50 years, I have fought for universal coverage, and there has been no better opportunity than now. I will not let this window slip by, and I urge my friends, my colleagues, and the American people to join with me in making 2009 the year major health care reform legislation is delivered to the Oval Office.”