Obama gives specifics of stimulus plan

Obama gives specifics of stimulus plan

More electric transmission lines, investment on wind and solar power

(WASHINGTON) President Barack Obama, offering the first specifics on a key element in his US$825 billion stimulus package, said over the weekend that it would add 3,000 miles (4,828km) of new electric transmission lines and double the nation’s use of wind and solar power within three years.

Speaking to win over critics: Mr Obama is seeking to pass his US$825 billion stimulus programme with at least a plausible claim of bipartisan support
But he pressed ahead in the face of continued Republican resistance to his ideas. And some Republicans rejected his claim that he is open to their initiatives, renewing complaints that GOP proposals were being brushed aside as the administration and congressional Democrats hammered out details of the massive legislative package.

Mr Obama used his first radio address to the nation as president to offer new specifics about how the US$825 billion would be spent. The speech seemed aimed at building a broad public consensus behind a package that Mr Obama acknowledged has generated scepticism, especially among Republicans.

He said that it was needed to lift the economy out of the most serious economic downturn since the Great Depression.

Mr Obama’s stimulus - an early test of his skills in winning major legislation victories - is on track to pass before the congressional break in mid-February.

What remains unclear is whether it will attract significant Republican support.

In effect, the White House and congressional Republicans are engaged in the early stages of a political negotiation in which Mr Obama seeks to pass his stimulus programme with at least a plausible claim of bipartisan support. Republicans want to exert as much influence over the final package as they can without appearing to be obstructing action on a problem that has stirred deep concern among millions of voters.

The president travels to Capitol Hill tomorrow to meet Republicans and invited them to discuss the plan in a meeting at the White House on Friday. Although Republicans seemed resigned to passage of the stimulus, they are complaining that the legislation moving through Congress contains none of their ideas.

The GOP is pushing especially hard for a new round of traditional tax cuts, while suggesting that the Democrats are rushing into new government spending programmes that will send the deficit soaring.

Democrats insist that only large-scale federal action can stabilise the economy and begin the process of recovery.

Those competing positions were reflected in Mr Obama’s radio speech and in GOP comments over the weekend.

‘On the House side, they seem to be moving toward a vote on Wednesday, and unless there are some real changes in the Bill, I can’t imagine there will be much, if any, Republican support,’ said Kevin Smith, a spokesman for House minority leader John Boehner.

Mr Boehner gave a radio address of his own last Saturday, in which he called for a stimulus plan that relies mostly on tax cuts - ‘not slow-moving government spending programmes’. He cast the proposal touted by Mr Obama and Democratic leaders as fraught with wasteful spending. He cited plans to pump US$6 billion into wealthy colleges and universities; set aside US$600 million for the federal government to buy new cars and lay out US$50 million for the National Endowment for the Arts.

Even though the main action is in Congress, Mr Obama and the Republicans want to mobilise voters watching at home. If Mr Boehner wanted to stoke outrage, Mr Obama’s strategy is to persuade Americans that the stimulus would improve their lives in concrete ways.

The White House says the package will modernise 10,000 schools, improving the classroom setting for five million children.

A centrepiece is alternative energy. Mr Obama is proposing to reduce energy costs by powering two million homes and 75 per cent of all federal buildings from alternative sources.

The president wants the nation to generate as much renewable energy in three years as was developed in the previous 30, according to the White House. Six million homes could be powered by the new energy supplies that he has promised.

With less than a month before the issue is decided, the prospects for bipartisan cooperation seem to be receding. At the meeting in the White House last Friday, Republican Senator Jon Kyl complained about one of the tax provisions in the Bill, according to people who were briefed on the session. Mr Obama showed no willingness to budge. ‘I won,’ he said.

Some Republicans concede that the numbers favour Mr Obama. Democrats are solidly in control of the House and Senate.

And as the process has rolled forward, the shape of the package has increasingly tilted towards the Democrats’ ideas. Mr Obama initially called for a mix of 60 per cent spending, 40 per cent tax cuts. Folding in tax cuts was a gesture meant to woo Republicans.

Under Democratic pressure, though, Mr Obama is now backing a plan that relies more on direct spending, less on tax cuts.

‘The true test of whether this Bill will get bipartisan support, as Democrats said they wanted, is whether they will incorporate any Republican ideas,’ Mr Smith said. — LAT-WP

Source : Business Times - 27 Jan 2009

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Obama team plans quick action on regulation - WASHINGTON

Obama team plans quick action on regulation - WASHINGTON

Measures include stricter federal rules, greater oversight

(WASHINGTON) The Obama administration plans to move quickly to tighten the nation’s financial regulatory system.

Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit-rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.

Broad new outlines of the administration’s agenda have begun to emerge in recent interviews with officials, in confirmation proceedings of senior appointees and in a recent report by an international committee led by Paul Volcker, a senior member of President Barack Obama’s economic team.

A theme of that report, that too many major companies and financial instruments now mostly unsupervised must be swept back under a larger regulatory umbrella, has been embraced as a guiding principle by the administration, officials said.

Some of these actions will require legislation, while others should be achievable through regulations adopted by several federal agencies.

Officials said they want rules to eliminate conflicts of interest at credit-rating agencies that gave top investment grades to the exotic and ultimately shaky financial instruments that have been a source of market turmoil. The core problem, they said, is that the agencies are paid by companies to help them structure financial instruments, which the agencies then grade.

‘Until we deal with the compensation model, we’re not going to deal with the conflict of interest, and people are not going to have confidence that the ratings are worth relying on, worth the paper they’re printed on,’ Mary Schapiro, the nominee to head the Securities and Exchange Commission (SEC), testified this month before the Senate banking committee.

Timothy Geithner, the nominee for Treasury secretary, made similar comments in written and verbal testimony before the Senate Finance Committee.

Aides said they would propose new federal standards for mortgage brokers who issued many unsuitable loans and are largely regulated by state officials. They are considering proposals to have the SEC become more involved in supervising the underwriting standards of securities that are backed by mortgages.

The administration is also preparing to require that derivatives instruments, including many kinds of credit default swaps (CDS), be traded through a central clearing house and possibly on one or more exchanges, a move that would make it significantly easier for regulators to monitor and supervise their use. CDS, which protect the holder of a debt security against a possible default, have been widely blamed for spreading the crisis.

Officials said that the proposals were aimed at the core regulatory problems and gaps that have been highlighted by the market crisis.

They include lax government oversight of financial institutions and lenders, poor risk management efforts by banks and other financial companies, the creation of exotic financial instruments that were not adequately supported by their issuing companies, and risky and ill-considered borrowing habits of many homeowners whose homes are now worth significantly less than their mortgages.

‘I believe that our regulatory system failed to adapt to the emergence of new risks,’ Mr Geithner said in a written response to questions that was made public on Friday by Michigan Democratic Senator Carl Levin. ‘The current financial crisis has exposed a number of serious deficiencies in our federal regulatory system.’

The regulatory changes are a major piece of a broader package being prepared by the new administration to address the market crisis. Another piece to be issued soon will provide the strategy for how the government will go about repairing the declining banking industry.

Senior aides have vowed to move quickly on the administration’s financial regulatory agenda. The Emergency Economic Stabilization Act, approved last autumn, requires the White House to make regulatory recommendations to Congress by April 30, although the administration is preparing to make legislative and regulatory proposals sooner.

Other elements of the regulatory overhaul, such as the requirement that hedge funds register with and be more closely supervised by the SEC, would mark a sharp departure from the policies of the Bush administration. — NYT

Source : Business Times - 27 Jan 2009

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