Obama Defends His Bailout

By Dan Froomkin
12:35 PM ET, 02/11/2009

President Obama finds himself at a disadvantage today when it comes to defending the bank-bailout plan announced by his Treasury secretary yesterday.

At the very least, as Frank James blogs for Tribune, Obama oversold what Timothy Geithner ended up delivering.

At his Monday night press conference, Obama said Geithner would "be announcing some very clear and specific plans for how we are going to start loosening up credit once again..... It means that we correct some of the mistakes with TARP that were made earlier, the lack of consistency, the lack of clarity in terms of how the program was going to move forward."

But as David Cho and Lori Montgomery write in The Washington Post, "the lack of detail in [Geithner's] plan dismayed lawmakers and investors, triggering a steep sell-off on Wall Street....

"The Treasury Department provided only the most general descriptions of how struggling homeowners and small businesses would be helped. And officials said they have yet to design a program that is a core part of the plan: A public-private initiative that would encourage investors to buy up the toxic assets now weighing down the books of banks and threatening to overwhelm the firms with losses.

"Cleansing the financial system of these assets, which are backed by failing mortgages and other troubled loans, has vexed officials since Congress approved the $700 billion rescue package in October. But financial analysts said Geithner, who took a strong hand in casting the new plan, appeared to have no better grasp on a solution than his predecessor, Henry M. Paulson Jr."

Neil Irwin writes in The Washington Post: "In rolling out his overhaul of the financial rescue yesterday, Treasury Secretary Timothy F. Geithner lambasted the Bush administration's response to the crisis over the past year.

"'Policy was always behind the curve, always chasing the escalating crisis,' Geithner said, criticizing his predecessor, Henry M. Paulson Jr. 'The emergency actions meant to provide confidence and reassurance too often added to public anxiety and to investor uncertainty.'

"But yesterday, Geithner seemed to be following the Hank Paulson playbook, according to a wide consensus on Wall Street, in Washington, and beyond."

In Geithner's defense, he's trying to solve an enormously complicated problem in a challenging political environment.

Jim Puzzanghera and Maura Reynolds write in the Los Angeles Times about the "double bind for the Obama administration.

"Fixing the financial system has turned out to be a bigger, harder and much more expensive challenge than expected, potentially requiring billions more in additional federal commitments.

"But the political climate has turned so sour that Congress, enraged by what it sees as irresponsible excesses by Wall Street executives, is unlikely to approve more funding, at least for now.

"As a result, the administration is moving toward approaches that reduce the government's financial risk and require no new congressional action. But those constraints mean the plans are taking longer to design and implement."

Deborah Solomon writes in the Wall Street Journal: "A senior Treasury official said the administration explored 'quite a few alternatives' but concluded it was a 'challenge' to have the government set a price for the bad assets. Instead, they believe their structure will allow the private sector to value them."

In his interview with ABC News's Terry Moran yesterday, Obama didn't seem overly troubled at Wall Street's negative reaction to the Geithner plan.

"Well, you know, Wall Street, I think, is hoping for an easy out on this thing and there is no easy out. Essentially, what you've got are a set a banks that have not been as transparent as we need to be in terms of what their books look like," Obama said.

"And we're going to have to hold out the Band-Aid a little bit and go ahead and just be clear about some of the losses that have been made because until we do that, we're not going to be able to attract private capital into the marketplace. And so, you know, I think that you have two choices in this situation: You can prolong the agony and shareholders will be happy until they're not happy, and that could be a year from now or two years from now, or, in the case of Japan, eight years later.

"Or you can just go ahead and acknowledge that, yeah, there's a lot of work that has to be done to put these banks back on a firmer footing."

Obama also explained why he thinks nationalizing banks -- the increasingly preferred solution of many left-leaning economists -- wouldn't make sense.

Moran: "There are a lot of economists who look at these banks and they say all that garbage that's in them renders them essentially insolvent. Why not just nationalize the banks?"

Obama: "Well, you know, it's interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called 'The Lost Decade.' They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn"t see any growth whatsoever.

"Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model. Here's the problem; Sweden had like five banks. [He laughs.] We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn"t make sense. And we also have different traditions in this country."

New York Times columnist Paul Krugman responds in his blog: "Yes, we have thousands of banks — but the problems are concentrated in a handful of big players. In fact, the Geithner plan, such as it is, already acknowledges this: the 'stress test' is to be applied only to banks with assets over $100 billion, of which there are supposed to be around 14.

"And the argument that our culture won’t stand for nationalization — well, our culture isn’t too friendly towards bank bailouts of any kind. Yet those bailouts are necessary; and even in America they may be more palatable if taxpayers at least get to throw the bums out.

"Oh, and not a week goes by without the FDIC taking several smaller banks into receivership. Nationalization is actually as American as apple pie."

Stimulus Talk

By Dan Froomkin
12:25 PM ET, 02/11/2009

The presidential motorcade wended its way to suburban Virginia this morning, stopping at the construction site for the final segment of the Fairfax County Parkway so President Obama could make a pitch for infrastructure spending.

"Look around us," Obama said. "Look at this construction site right where we're standing. We're surrounded by unmet needs and unfinished business -- in our schools, in our roads, in the systems we employ to treat the sick, in the energy we use to power our homes. And that's the core of my plan: putting people to work doing the work that America needs done.

"We're here today because there's a lot of work that needs to be done on our nation's congested roads and highways, crumbling bridges and levees, and crowded trains and transit systems. Because we know that with investment, we can create transportation and communications systems ready for the demands of the 21st century -- and because we also know what happens when we fail to make those investments."

Meanwhile, White House and Congressional negotiators worked furiously to resolve differences between the House and Senate stimulus packages.

David M. Herszenhorn and Jeff Zeleny write in the New York Times: "Congressional leaders moved quickly into intense negotiations with the Obama administration on Tuesday after the Senate voted to approve an $838 billion economic stimulus plan, and officials said the talks were on a fast track to finish the legislation perhaps by the end of this week.

"In a sign of their determination to reconcile the differences between the Senate bill and the $820 billion House version swiftly, the White House chief of staff, Rahm Emanuel, and the budget director, Peter R. Orszag, huddled at the Capitol on Tuesday evening with Speaker Nancy Pelosi; the Senate majority leader, Harry Reid of Nevada; and other lawmakers....

"Administration officials said that one priority would be to restore Mr. Obama’s middle-class tax cut to its original size. The Senate, trying to lower the cost of the plan, had trimmed it by more than $2 billion."

Greg Hitt and Jonathan Weisman write in the Wall Street Journal: "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....

"As lawmakers meet to reconcile the House and Senate versions of the legislation, the White House's effort to reshape it is leading to skirmishes among House and Senate Democrats, as well as with the moderate Republicans and Democrats who pushed to cut the size of the original Senate package....

"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 David S. Broder writes in The Washington Post that Vice President Biden yesterday "signaled that the administration may try again this week to make the bill more palatable to at least some in the GOP."

James Oliphant writes in the Los Angeles Times: "Once a final deal is struck, the bill has to pass both houses of Congress again. That means that the legislation must satisfy a variety of voting blocs: the moderate Republicans in the Senate who broke with the party to ensure the bill's passage, the conservative Democrats in the House who may favor elements of the Senate bill, and more liberal members of the House who don't want to see the bill's commitments to funding for state budgets and education sacrificed."

The Washington Post's Michael D. Shear and Anne E. Kornblut address Obama's use of a straw-man argument. (See this post from yesterday.)

"President Obama likes to portray the battle over the economic stimulus package that passed the Senate on Tuesday as a stark choice between his approach and that of those who would 'do nothing.'" Shear and Kornblut write.

"But in truth, few of those involved in the stimulus debate are suggesting that the government should not take action to aid the cratering economy.

"Many of the president's fiercest congressional critics support a stimulus package of similar size but think it should be built around a much higher proportion of tax cuts than new spending. Others have called for a plan that is half the size of the one headed for a House-Senate conference -- still massive by historical standards."

That said, Obama is on much safer ground saying that, practically speaking, the choice in Washington has come down to one between passage of his plan and doing nothing -- at least for now.

And in his interview with ABC News's Terry Moran yesterday, Obama more specifically addressed the critics of his stimulus plan -- calling their arguments incoherent and petty.

"You've got some folks who say, 'well, it doesn't spend out fast enough. That's why it's not stimulative. But by the way, we'd like to see more infrastructure spending.' Well, it turns out that infrastructure spending provides terrific stimulus to an economy but most infrastructure projects may take three, four, five years to move forward.

"There's some folks who complain that, you know, things like investing in energy efficiency for federal buildings or automobile fleets is a, you know, government program. Well, actually, there's no reason why if you're creating jobs, we might not as well save taxpayers $2 billion in potential energy costs every year....

"So some of these arguments just haven't been real coherent. And you know, where there are good ideas for very effective job creation, I've adopted them....

"But most of -- for the most part, they haven't really been making those arguments. What they've been doing is picking the 1 or 2 percent of the entire package that fell in the category of policy and then just going after that, ignoring the fact that 98 percent of the package is exactly the kind of stimulus that people would want."

Poll Watch

By Dan Froomkin
12:20 PM ET, 02/11/2009

The Pew Research Center reports: "After weeks of intense debate over President Obama’s economic stimulus plan, a narrow majority of Americans (51%) who have heard about the $800 billion plan say it is a good idea, while 34% say it is a bad idea. In January, the balance of opinion regarding the plan was more positive: 57% of those who had heard about the proposal viewed it positively, compared with just 22% who viewed it negatively.

"Reaction to the proposal has become much more politicized since January...

"The survey finds that, after nearly a month in office, Obama’s personal image is extremely strong. Overwhelming majorities view Obama as a strong leader (77%) and trustworthy (76%), while an even higher percentage (92%) says he is a good communicator. Moreover, the belief that Obama represents a break from politics as usual is widespread, despite the highly partisan reaction to his economic stimulus proposal. About two-thirds of Americans (66%) – including a narrow majority of Republicans – say that Obama 'has a new approach to politics in Washington'; that compares with 25% who say his approach is 'business as usual.'

"Obama’s 64% job approval rating is higher than the initial marks for his two most recent predecessors, George W. Bush (53%) and Bill Clinton (56%)."

Quick Takes

By Dan Froomkin
12:18 PM ET, 02/11/2009

Katharine Q. Seelye writes in the New York Times: "Defense Secretary Robert Gates suggested today that he was open to allowing the media to photograph the flag-draped coffins of fallen soldiers as their bodies and remains are returned to the United States...He said he was ordering a review of the military policy that bars photographers from taking pictures of the return of the coffins, most of which go through Dover Air Force Base in Delaware, and set a 'short deadline' for a decision."

Zachary Coile writes in the San Francisco Chronicle: "President Obama is shelving a plan announced in the final days of the Bush presidency to open much of the U.S. coast to oil and gas drilling, including 130 million acres off California's shores from Mendocino to San Diego. Interior Secretary Ken Salazar put the plan on hold Tuesday while his agency conducts a 180-day review. But Salazar's critical comments about the proposal made clear that the new administration will rewrite it if not completely scrap it."

The New York Times editorial board writes: "The Obama administration failed — miserably — the first test of its commitment to ditching the extravagant legal claims used by the Bush administration to try to impose blanket secrecy on anti-terrorism policies and avoid accountability for serial abuses of the law....Voters have good reason to feel betrayed if they took Mr. Obama seriously on the campaign trail when he criticized the Bush administration’s tactic of stretching the state-secrets privilege to get lawsuits tossed out of court."

Diane McWhorter writes in a USA Today opinion piece that for Obama, the imperative to investigate Bush-Cheney torture policies "transcends even legal duty. For Obama to temporize on this issue will nullify the near-sacred significance attached to his victory: the virtue restored to the U.S. by the election of a black president."

The Los Angeles Times yesterday published some comments that former Bush senior adviser Karl Rove made at a speech last week, in which he argued that government leaks can cause serious harm. He added: "I love how the last eight years, this White House, the Bush White House, was criticized for being tight-lipped. We didn't leak." Thinkprogress highlights some of the reaction from the blogosphere.

Late Night Humor

By Dan Froomkin
12:15 PM ET, 02/11/2009

Jon Stewart compares Bush and Obama's town-hall meetings and press conferences. Monday night, for instance, Stewart says: "Obama displayed a brand-new rhetorical technique: The thoughtful answer."

Obama Says His Honeymoon's Not Over

By Dan Froomkin
9:23 AM ET, 02/11/2009

In an interview with ABC News's Terry Moran yesterday, President Obama said that his honeymoon is still going strong, despite resistance from congressional Republicans.

He also criticized Washington for its "narrow way of keeping score," said no one should underestimate the value of civility, and spoke of his struggle to stay free of the White House bubble.

Moran: "Mr. President, you got no honeymoon. Not a single Republican vote in the House on your first major piece of legislation --"

Obama: "Oh, I'm getting, I'm getting a big honeymoon from the American people."

Moran: "But what happened in Washington --"

Obama: "Oh -- oh, what happened in Washington was, I think that they made a decision that they want to continue the same fights that we've been having over the last decade. The American people, on the other hand, realize that we want something different; hence, the results of the election.

"And, you know, I think if you look at how people are doing right now and how the Republicans have responded to a great deal of overtures by me, I think it's pretty clear that the American people would like to see a different way of doing business. But old habits break hard and, and you know, I, I understand that and so we're going to keep on reaching out and eventually, I have confidence that it's going to pay off...."

Moran: "I wonder, in coming into the presidency, maybe you were too nice. If I'm a Republican senator or a Republican Congress, I think you're a very nice guy but I don't have enough reason to fear you..."

Obama (laughing): "Well, I tell you what -- you know, that accusation -- I think, if I'm not mistaken, was leveled at me a couple years ago and I'm going to be flying out on Air Force One in a little bit. So, people shouldn't underestimate the, the value of civility and, and try to get people to work together.

"Over the long term, it pays off. I think Washington has a very narrow way of keeping score. You know, who's up, who's down, who won this vote, who didn't and what kind of tactical maneuvers did they make, who's getting on cable. You know, who's dominating the chatter in mid-day with these not-so-vast audiences of, of political junkies.

"The American people are [sic] keeping score. What they're asking is, does this person seem to be really trying to work for us, create jobs, help us keep our home, send our kids to college. That's the measure that they're looking at. And, and as long as I stay focused on that, I think the politics will take care of itself."

Moran: "Nice guys don't finish last."

Obama: "I haven't so far."

Moran trailed along with Obama yesterday during his trip to Fort Myers, Fla. After the town-hall meeting there, in a part of the interview shown on "Nightline" but not in the ABC transcript, Obama spoke of the importance of getting out of town.

Obama: "When you hear directly from a contractor who's losing business or a woman who is living in her car, then it reminds you of what this work's about. And sometimes when you're in Washington it's all about keeping score and what are the cable stations saying and, you know, what's happening on this vote or that vote. And you forget this is why we're supposed to be doing this."

Moran: "So where, for you, is the power of the presidency? In Washington? Or out here?"

Obama: "Oh, it's always out here. Now, you have to be skilled enough to translate the energy and enormous need that you see here into action in Washington and that's hard. And so part of what we're going to try to do over the course of my presidency is get out at least once a week just to remind everybody -- myself included -- that these are the folks who we're working for."

Moran: "So had you missed this? Did you feel you had to do this, that you were kind of losing touch already?"

Obama: "You know, the bubble is powerful. And we did what we had to do, which is to set up an administration and, you know, cultivate relationships with members of Congress and, you know, spend time with the Washington press corps so they don't feel neglected....But ultimately if I don't get a dose of this, I do think that the possibilities of thinking inwardly are very great. And you see it happening. You see it happening to presidents and members of Congress and the Senate. When I was in the Senate, it was a little easier because I was going back home every weekend and, you know, then Michelle and I are going out to Target or taking the kids to a soccer game. Now that we're living where we work, it -- i think these kind of events become that much more important."

Live Online

By Dan Froomkin
9:22 AM ET, 02/11/2009

I'm Live Online today at 1 p.m. ET. Come join the conversation.

Cartoon Watch

By Dan Froomkin
9:20 AM ET, 02/11/2009

Kevin Siers, RJ Matson, and Nick Anderson on the GOP, Bob Gorrell and Mike Lane on Congress, Dan Wasserman and Robert Ariail on Geithner's gambit, and Tom Toles on the doping scandals.

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