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CHICAGO (Reuters) – President-elect Barack Obama announced his top budget officials on Tuesday and promised significant spending cuts to partially offset a costly stimulus package that aims to revive the U.S. economy.
As the top two officials at the Office of Management and Budget, Peter Orszag and Rob Nabors will closely examine federal spending to cut out wasteful programs, Obama said.
“If we are going to make the investments we need, we also have to be willing to shed the spending that we don’t need,” Obama said at his second press conference in as many days.
One obvious example: Crop subsidies to farmers who make more than $2.5 million per year, Obama said.
Though he does not take office until January 20, Obama’s team of economic advisers are already working out the details of a two-year package to save or create 2.5 million jobs that could cost several hundred million dollars.
Obama himself meanwhile has dropped his former low-profile approach and spoken directly to the American people with two news conferences this week. A third Obama press appearance is scheduled for 10:45 a.m. EST Wednesday.
Bush administration officials continue to extend massive life support efforts to the ailing U.S. financial system.
The Federal Reserve on Tuesday announced a $600 billion program to buy mortgage-related debt and securities, and a $200 billion program to increase the availability of consumer debt, such as credit cards and auto loans.
Treasury Secretary Henry Paulson urged patience and said any effort will take time to work.
Orszag now heads the Congressional Budget Office and Nabors currently serves as staff director of the House Appropriations Committee. Both previously held White House positions under President Bill Clinton.
Their announcement follows on Monday’s unveiling of New York Federal Reserve Bank President Timothy Geithner as Obama’s Treasury secretary and Lawrence Summers, a former Treasury secretary under Clinton, as director of his National Economic Council.
Obama’s aides are in contact with Bush administration officials, who said they would work closely with Geithner and other incoming officials on any new rescue plans.
The scope of the economic crisis has widened since Obama’s November 4 victory over Republican John McCain, with auto companies warning that they are short on cash, unemployment numbers rising and the government bailing out yet another gigantic financial institution, Citigroup Inc.
New figures released on Tuesday showed that the U.S. economy shrank more severely during the third quarter than previously estimated as consumers cut spending at the steepest rate in 28 years. Corporate profits and business investment fell as well.
Obama has kept a low profile until this week’s news conferences, which are intended to show the priority he places on addressing the worst economic crisis since the Great Depression.
He said on Monday he has not yet decided whether to roll back President George W. Bush’s 2001 tax cuts for the wealthy, which would provide the government with much-needed revenue, or simply allow them to expire at the end of 2010 as scheduled, a move that would avoid what would likely be a bruising fight in Congress.
Source: Reuters
Treasury Secretary Henry M. Paulson Jr. spoke at a news conference at the Treasury Department on Tuesday in Washington.
The United States government unveiled $800 billion worth of new loans and debt purchases on Tuesday, hoping another massive infusion of cash would smooth troubled credit markets and make borrowing easier for homebuyers, small businesses and students.
The Federal Reserve said it would buy up to $600 billion in mortgage-backed assets from government-sponsored mortgage giants Fannie Mae and Freddie Mac. It would buy up to $100 billion in debt directly from the companies and up to $500 billion in mortgage-backed securities.
“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Federal Reserve said in a statement.
Separately, the Fed and Treasury Department announced a $200 billion program to ease commercial lending on debt like student loans, car loans or business loans. The Fed would lend up to $200 billion to holders of asset-backed securities supported by car loans, credit card loans, student loans, and business loans guaranteed by the Small Business Administration.
The program would be seeded with $20 billion in “credit protection” from the Treasury Department, which is drawing the money from the original $700 billion bailout.
“It gives institutions liquidity and it’s clearly direct lending that will help consumers,” Treasury Secretary Henry M. Paulson Jr. said Tuesday at a news conference.The announcements came one day after President-elect Barack Obama unveiled his economic team and tried to assure Americans that he was seeking to fill any leadership vacuum, and said his economic advisers would begin working “today.” The advisers include Timothy F. Geithner, his choice for Treasury secretary.
President-elect Barack Obama is hearing from private sector economists, and some members of his economic advisory team that Congress should consider — and he should sign into law in January — a far broader stimulus package than anyone has publicly discussed to date.
Instead of $300 billion dollars, which has been the upper limit, they are now talking about $500 billion, which is 3 to 4 percent of GDP.
These advisers are looking at analysis that says next year unemployment could top eight percent, private sector spending could drop six percent of GDP, and the Federal Reserve is basically out of room to do anything more with monetary policy.
So they argue the nation’s economy will need that injection of capital.
How? They’re talking about implementing it through infrastructure — roads and bridges. Tax cuts. Investments in so-called green-jobs and alternative energy development. Unemployment extensions. And other aid to state and local governments.
But the big question is: how do you get the stimulus without making it permanent spending that increases the deficit over the long term?
President-elect Barack Obama has made no final decisions on a stimulus package, but this is what they’re contemplating right now.
Source: ABC News
Jokes: Bush went in as a Social Conservative and came out as a Conservative Socialist.
There are two problems here – one is the folding banking industry around the world – and the other is that the weakened banking industry would allow – outsiders and mainly sovereign wealth funds to come in a cherry pick the banks and or industries that they want at rock bottom prices – these very powerful sovereign funds are mainly coming from three areas – the Middle East, Russia and China. Their investments at a time like this would give these areas undue influence over US and EU banking and insurance industries – but more their investments will give these countries or regions undue influence over US and possibly EU policy. With undue Middle East influence we could all be eating Halal. Western governments had to act.
To blame – of course are a number of things – but one is George Bush’s oil policy. Since the US only has 3% of the world’s oil – to fund its oil usage – it has to get oil from somewhere else. Saudi Arabia held almost all of the cards up until the war in Iraq – and the removal of Saddam Hussein – allowed the US create a major oil player in Iraq. But the cost was enormous. Yesterday 40bn barrel Iraqi oil contracts were put on sale in London. Drill Baby Drill to Big Oil. The problem is that the cost of the war could have funded the industry to build solar panels for every roof – in sunnier areas. And the new research in a whole host of energy alternatives – which would one day become fixtures – or until we develop the new technology.
If you listen to McCain – and Palin – Russia is ready to attack – but the real deal is the laying and operation of a gas pipeline through Georgia. So like Iraq – likely there will be a military build up there – against the evil Russia – to secure the oil or gas coming from there.
Under Bush’s policy vast amounts of money is being transferred to the Middle East – vast amounts of money is going into wars for oil – under “security” – Condi recently had a meeting with the Libyan leader – with the intention of vast amounts of US money flowing into Libya.
While in the US infrastructure crumbles, while the people in the Western world are at the whim of dictators – like Chavez, or Russia which clearly is putting its interests first. And in the Middle East – which showed itself when George Bush didn’t speak at the Israeli Kenesit – as the German Chancellor Angela Merkel did- because – he had to ask the Saudi’s to lower the price of oil – and as a part of that deal – he slung them some nuclear technology.
The oil game is a crazy game and it is leaving the US broke and at a disadvantage. The advantage and the money are in new generation of ET energy technology – one where for example cars are run on magnetism (magnetic motor) – and more efficient battery technologies. What would it mean to the US and EU countries – if they could get a mechanized factory – a factory of robots – to work around the clock without having to take into account the cost of energy. With this we can compete with China. There would be no need to ship jobs abroad.
The candidate with real foresight is Barack Obama. He’s thinking.
President Bush, right, smiles during the G20 ministerial meeting at the International Monetary Fund Saturday, Oct. 11, 2008 in Washington. From left, Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Bush. (AP Photo/Evan Vucci) (Evan Vucci - AP)
The U.S. government is dramatically escalating its response to the financial crisis by planning to invest $250 billion in the country’s banks, forcing nine of the largest to accept a Treasury stake in what amounts to a partial nationalization.
News that European governments also planned to take stakes in their banks and anticipation of new U.S. measures unleashed a tremendous surge in U.S. stock prices yesterday, with the Dow Jones industrial average soaring to the biggest percentage gain since the 1930s, up 11.1 percent. It ended 936.42 points higher, the largest point gain ever, just days after the Dow had its steepest weekly decline in history.
The Treasury Department’s decision to take equity stakes in banks represents a significant reversal, coming just weeks after Treasury Secretary Henry M. Paulson Jr. had opposed the idea. In a momentous meeting yesterday afternoon in Washington, Paulson, flanked by top financial regulators, told the executives of nine leading banks that they needed to participate in the program for the good of the national economy, two industry sources said on condition of anonymity because they were not authorized to speak publicly.
The government’s initiative, which was to be announced this morning before the markets open for New York trading, is part of a wider plan that goes beyond the $700 billion rescue package approved by Congress earlier this month. The Federal Deposit Insurance Corp. is also set to announce today the launch of an insurance fund to guarantee new issues of bank debt. It will provide unlimited deposit insurance for non-interest-bearing accounts, which are widely used by small businesses for payroll and other purposes.
In pressing the bank executives to accept partial government ownership, Paulson’s message was clear: Though officially the program was voluntary, the banks had little choice in the matter. In exchange for giving the Treasury minority stakes, the nine firms would jointly receive an investment worth $125 billion. The government would make another $125 billion available for the next 30 days to thousands of other banks and thrifts across the country.
Federal officials set conditions, telling the banks they could not raise their dividends without government permission and could not offer their executives new retirement packages, though the old packages would remain intact.
Paulson told them the moves would shore up confidence in their own institutions, spark lending throughout the system and send a message to smaller institutions that there is no stigma in accepting federal funding. Though some were reluctant, all of the executives complied.
There is a risk that banks will take the new government capital and use it to bolster their balance sheets but still not resume lending, and the Treasury is not getting any specific contractual guarantee to prevent that from happening. But bank regulators, particularly the Federal Reserve, will lean heavily on the firms receiving infusions to use the capital to increase their lending to businesses and consumers.
Taken together, the steps planned by the Treasury, the FDIC and the Federal Reserve amount to a monumental effort to jump-start the business of lending, which all but dried up in recent weeks as banks have lost faith in one another and their customers. Global markets began to melt down. Some emerging nations teetered on the brink of financial collapse.
Source: Washington Post
Out Foxing Karl Rove 
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