OBAMA FINANCIAL STIMULUS PLAN PASSES U.S. SENATE - But Status of Next Step of U.S. Financial Bailout Plan Still A Mystery!
UNCERTAINTY IN U.S. FINANCIAL MARKETS CAUSES STOCKS TO TUMBLE 4.6% TODAY! TIMING OF HOUSING MARKET TURNAROUND? NOT IMMEDIATELY!
A couple of things are sure of the new administration of President Barack Obama.
First, nobody is going to confuse his administration's strategy with that of his Republican Predecessors, dating back to President Reagan in the 1980's. No, "The Government IS the Problem" approach here.
Second, you can't say the new President isn't living up to his campaign promise of "Change," although many dyed-in-the-wool Republican Mainstreamers will continue to argue his actions are more of the same.
The story has been chronicled in today's Chicago Tribune, in articles by Jim Pussanghea and Maura Reynolds, and in a second story by Janet Hook, as well as an article in today's Wall Street Journal by Reporter Deborah Solomon.
This morning, the President applauded the action of Senate Democrats, and three of their moderate Republican brethren, for passing his now-$838 Billion Economic Stimulus Program. It now goes to a joint House/Senate Conference Committee to presumably reconcile differences between the House and Senate versions of the bill and send it to the President for his signature.
After lunch, new U.S. Treasury Secretary Timothy Geithner dropped the other shoe - an up-to-$1.2 Trillion Dollar Plan to stabilize U.S. Financial Markets, boost consumer and business lending, and stave off Home Foreclosures for thousands of Americans.
Geithner's plan was a bit short on specifics - the Obama Administration is still a few weeks away from releasing details on what will exactly be done. But it will involve investing a minimum of $500 Billion in a new public-private partnership geared to buy bad mortgage debt, and an additional $1 Trillion to spur consumer and business lending and un-freeze the currently-ice-cold U.S. Credit Markets.
These incomprehensible levels of funding would come ON TOP OF the second half of the $700 Billion in Troubled Asset Relief Program (TARP) funds which continue to inject money into struggling banks.
The Treasury Plan would also create a wide-ranging program to turn around the struggling U.S. Housing Market, including allocating funds for Mortgage Loan Modification. The objective here would be to make home mortgages more affordable, especially for homeowners in distress, and slash loan default and home foreclosures.
Treasury Secretary Geithner was a key figure in the original $700 Billion TARP last fall. At that time, he predicted sure catastrophe if the bailout program were not enacted.
But after release of the first half of approved bailout money did little to increase lending or un-freeze the U.S. Credit Markets, lawmakers became disillusioned that much of the money wasn't being funneled into loans. Rather, it apparently went toward executive Christmas bonuses, elaborate, well-publicized year-end employee recognition parties, and acquisition of other financial institutions. That's, at least, how some saw it!
The Obama Administration would tighten federal oversight as additional Fed money is released. Executive Compensation at firms receiving bailout funds would be capped. Guidelines for lending may be introduced. And tracking these funds by government agencies and the public would be made easier, via a new Treasury Department Website - FinancialStability.gov.
Both Secretary Geithner and President Obama agree any actions will not constitute a quick fix. Recovery will take time, perhaps several years, both contend.
And many, many opponents of the plan feel its sheer financial magnitude is more likely to leave a major financial burden to future generations, and its likelihood for success - slim!
But even the strongest opponents have no sure-fire alternative. Although these folks contend otherwise, there is no guarantee that only massive tax cuts they favor will have any faster, more far reaching effect, or that the negative impact of such cuts could be potentially as devastating.
So the old debate continues - which tact is more likely to work? Government hands off, in terms of stimulus programs and financial market aid? Or massive, expensive government intervention, with hopes of a more positive outcome?
Supporters of The President's Plan point to the failure of the lack of government oversight and intervention as the reason we're in the midst of the current crisis. And that proceeding down the same road would simply bring more of the same.
We'll get to see - yes?
DEAN MOSS & DEAN'S TEAM CHICAGO
