Morning News Roundup - February 11, 2009

Bankers to appear before dubious Congress

...Eight chief executives will slip behind a witness table in the Rayburn House Office Building on Wednesday morning to face a battery of questions about how they have used more than $160 billion in taxpayers' money.
In prepared testimony, the CEOs applauded the program for making more loans available and promised to pay their share of the money back to the Treasury over time.
...At least one banker sounded almost contrite.
"Many people believe — and, in many cases, justifiably so — that Wall Street lost sight of its larger public obligations and allowed certain trends and practices to undermine the financial system's stability," said Lloyd C. Blankfein, chairman and CEO of The Goldman Sachs Group Inc.
Geithner's highly awaited overhaul of the rescue program would leverage more than $2 trillion for the banking system and impose stricter accountability standards on banks and their executives. But it wasn't enough to dispel Wall Street anxieties or silence congressional doubters.
..."I have to be honest with you," Sen. Robert Menendez, D-N.J., told him. "A lot of questions still remain unanswered. A lot of details are necessary before I can give it my support."
Those doubts are sure to arise Wednesday when Blankfein and the CEOs of Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Wells Fargo and Co., Morgan Stanley, State Street Corp. and the Bank of New York Mellon appear before the House Financial Services Committee.
... A government watchdog reported last week that the Treasury under Bush overpaid the banks for the assets it obtained in exchange for the capital infusion.
...Wells Fargo, which acquired Wachovia on Dec. 31, reported that it had reopened lines of credit to some Wachovia customers who had been denied credit. It also reported $22 billion in new loan commitments and $50 billion in mortgages in the last quarter of 2008.

Negotiators hoped to seal agreement on President Barack Obama's economic stimulus package Wednesday after making good progress in the first rounds of closed-door talks.
Obama's negotiating team insisted on restoring some lost funding for school construction projects as talks began Tuesday in hopes of striking a quick agreement, but by late in the day it appeared resigned to losing up to $40 billion in aid to state governments.
Earlier Tuesday, the Senate sailed to approval of its $838 billion economic stimulus bill, but with only three moderate Republicans signing on and then demanding the bill's cost go down when the final version emerges from negotiations.
..."That's in the ballpark," Senate Finance Committee Chairman Max Baucus, D-Mont., said of the $800 billion figure late Tuesday.
Baucus had said earlier that $35.5 billion to provide a $15,000 homebuyer tax credit, approved in the Senate last week, would be cut back. There was also pressure to reduce a Senate-passed tax break for new car buyers, according to Democratic officials.
Within hours of the 61-37 Senate vote, White House Chief of Staff Rahm Emanuel and other top Obama aides met in the Capitol with Democratic leaders as well as moderate senators from both parties whose support looms as crucial for any eventual agreement.
House Democratic leaders promised to fight to restore some of $16 billion for school construction cut by the Senate. Those funds could create more than 100,000 jobs, according to Will Straw, an economist at the liberal Center for American Progress.
...House leaders are tempering expectations that they'll restore many of the cuts.
"You cannot allow the perfect to be the enemy of the effective and of the necessary, and we will not," said House Speaker Nancy Pelosi, D-Calif.
While they're fighting to preserve cuts to Obama priorities, Specter is fighting to preserve an enormous $10 billion increase for the National Institutes of Health, while Collins obtained $870 million for community health centers in talks last week.

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.
The two chambers began to resolve their differences yesterday on how much money to send to states and other sticking points, after the Senate passed an $838 billion stimulus package. Senate and House leaders played down discrepancies between the two versions, saying that both would provide a boost to the economy and that an agreement on a final bill could come as soon as the end of the week.
But for states, the differences are potentially enormous. The House included $79 billion in direct aid to states, $40 billion more than the Senate, and governors are counting on that money to help balance budgets that are billions in the red.
...The Senate halved the $79 billion as part of a deal to win the support of centrists in both parties who doubted the value and necessity of untargeted aid to states. Some Republicans also had ideological objections, based on a belief in tax cuts and skepticism about expanding the federal government's role in local projects such as school construction.
...The House bill provided $39 billion for state education budgets, $15 billion for incentive grants and innovation, and $25 billion that governors could use at their discretion. The Senate cut the education aid to $31.3 billion and the incentive money to $7.5 billion, and it eliminated the $25 billion in discretionary funding.
...In the budget he delivered this month, Strickland estimated that Ohio would receive $3.4 billion from the federal government for general expenses over the next two years. If the Senate version passes, he said, that number would drop to $2.5 billion or less.
Strickland's office reported that without the extra money, 51,000 fewer Ohioans would receive mental health services, 40 percent of college students would pay more tuition and 17,000 needy young people would not get help.
Washington Gov. Chris Gregoire (D) worried that $500 million in aid not included in the Senate version would mean cuts in higher education, human services and corrections. Special assistant Dick Thompson described the governor's staff as "pretty disappointed" but not giving up.

Israeli parties reject power-sharing compromise
Senior members of Israel's Kadima and Likud parties, which finished nearly even in Tuesday's general election, rejected the idea of a rotating premiership.
While Kadima won one more seat than Likud (28-27) in the next Knesset, overall the right-wing bloc ended much stronger than Livni's allied parties on the left (65-44), leaving much confusion over whom President Shimon Peres should choose to form the next government.
Israel solved a similar situation following the 1984 general election by forming a unity coalition between Likud and Labor that saw Yitzhak Shamir and then-Labor leader Peres serve two years each as prime minister.
But senior Kadima lawmaker Meir Sheetrit told Army Radio on Wednesday that such a solution today would be a gimmick at the expense of the Israeli public, and is rejected by his party.
Silvan Shalom, number 2 on the Likud list, told Army Radio that his party also sees no need for a power-sharing government, since such solutions are only called for when there is an equal balance between right and left, and Tuesday's election clearly put the right-wing on top.

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Morning News Roundup - February 10, 2009

President Obama declared last night in his first prime-time news conference that the task of saving and creating jobs is more important than cultivating the bipartisan cooperation he promised to bring to Washington, and he pressed his case for the massive economic stimulus plan working its way through Congress.
Warning that inaction could "turn a crisis into a catastrophe," Obama rejected criticism from Republicans about the legislation's effect on the federal deficit, noting that government debt had ballooned on his predecessor's watch. Although he called for lawmakers to break out of their "ideological rigidity," he was unapologetic as he pushed a package with a cost of more than $800 billion that has so far drawn only nominal Republican support.
"I can't afford to see Congress play the usual political games. What we have to do right now is deliver for the American people," Obama said just hours after the legislation narrowly cleared a key procedural hurdle in the Senate, where it is likely to gain final passage today.
..."So, you know, we can differ on some of the particulars, but again, the question I think that the American people are asking is: Do you just want government to do nothing, or do you want it to do something? If you want it to do something, then we can have a conversation," he said. "But doing nothing -- that's not an option, from my perspective." Obama defended the role of government in the recovery process, saying that "with the private sector so weakened by this recession, the federal government is the only entity left with the resources to jolt our economy back to life."
The president fielded 13 questions from reporters in his first wide-ranging session since he took office, touching briefly on foreign policy, his long-range agenda and sports.
...In a brief foray into foreign policy, Obama said with regard to Iran that the administration "will be looking for openings that can be created where we can start sitting across the table, face-to-face diplomatic overtures" with the Islamic republic. He said that "there's been a lot of mistrust built up over the years, so it's not going to happen overnight" and that "even as we engage in this direct diplomacy, we are very clear about certain deep concerns" about Iranian links to militant groups and possible pursuit of a nuclear weapon.
In stark contrast to former president George W. Bush, Obama did not say that the United States would refuse to tolerate a nuclear-armed Iran. Instead, he all but invited Iran to signal that it, too, is interested in talks. "Now it's time for Iran to send some signals that it wants to act differently, as well, and recognize that, even as it has some rights as a member of the international community, with those rights come responsibilities," he said.
The news conference ended a day of action on the stimulus package: Obama traveled to Elkhart, Ind., to promote the legislation as it made its way toward the Senate floor, clearing a procedural hurdle by a vote of 61 to 36 that set the stage for final passage today.
...Asked about a new proposal to establish a truth and reconciliation commission to investigate the potential misdeeds of the Bush administration, Obama demurred, saying he has not yet seen its details.
... Obama's remarks on partisanship -- a gridlock he once vowed to break as part of his signature campaign promise -- were perhaps most striking. ..."In terms of the historic record here, the Republicans were brought in early and were consulted. And you'll remember that, when we initially introduced our framework, they were pleasantly surprised and complimentary about the tax cuts that were presented in that framework.
...Obama swiftly dismissed claims of fiscal irresponsibility, saying: "It's a little hard for me to take criticism from folks, about this recovery package, after they presided over a doubling of the national debt. I'm not sure they have a lot of credibility when it comes to fiscal responsibility."
...Obama will add a new twist when he travels today to Fort Myers, Fla.: He will be introduced at his town hall meeting by Gov. Charlie Crist, one of the few Republicans who are backing the plan in the face of conservative complaints about its size and scope and that it does not rely more heavily on tax cuts. Crist issued a joint statement with Obama yesterday in which he praised the president for continuing to "work hard to reignite the U.S. economy."

(Bloomberg) -- President Barack Obama signaled he would be open to seeking an expansion of the $700 billion financial-rescue program should the plan fail to restore stability to the U.S. banking system.
“We don’t know yet whether we’re going to need additional money or how much additional money we’ll need until we’ve seen how successful we are at restoring a sense of confidence in the marketplace,” Obama said in a news conference last night in Washington.
Treasury Secretary Timothy Geithner today will announce an overhaul of the bank-bailout fund. The plan, which so far won’t seek additional government money, is designed to support about $1.5 trillion in new lending and handling of distressed assets. It has three main components: more capital for banks, financing for as much as $1 trillion of consumer and business loans, and public financing for investors willing to buy the distressed assets, people familiar with the matter said.
...“The financial system is working against recovery, and that’s the dangerous dynamic we need to change,” Geithner said in remarks prepared for delivery today. “Without credit, economies cannot grow, and right now, critical parts of our financial system are damaged.”
Geithner, whose announcement is scheduled for 11 a.m. in Washington, will also rename the $700 billion TARP fund, which will be known as the Financial Stability Plan. Among the plan’s other components is $50 billion for measures to stem mortgage foreclosures, Republican and a Democratic congressional aides said after Treasury officials briefed lawmakers and staff members yesterday.
“We are going to have to work with the banks in an effective way to clean up their balance sheets so that some trust is restored within the marketplace,” Obama said in his first prime-time news briefing. At “any given bank they’re not sure what kinds of losses are there. We’ve got to open things up and restore some trust.”
...“The American people have lost faith in the leaders of our financial institutions” and are skeptical of the rescue spending so far, Geithner will say today.
...“To kick-start new lending, the Financial Stability Plan will expand a Federal Reserve program for consumer and business loans to as much as $1 trillion from the current $200 billion. The Term Asset-Backed Securities Lending Facility will be backed by as much as $100 billion of Treasury funds in case of losses.

Obama warning on Pakistan 'haven'
US President Barack Obama has said his administration will not allow "safe havens" for militants in Pakistan's tribal region bordering Afghanistan.
Mr. Obama's comments at his first White House prime-time news conference came as his envoy to the region, Richard Holbrooke, arrived in Pakistan.
Mr Holbrooke, who said he was there to "listen and learn" about the region, began key meetings on Tuesday.
Mr Holbrooke earlier said the situation in Pakistan was "dire".
..."My bottom line is that we cannot allow al-Qaeda to operate," he said. "We cannot have those safe havens in that region."
Mr Obama added: "We're going to have to work both smartly and effectively, but with consistency in order to make sure that those safe havens don't exist."
The US president said he had appointed Mr Holbrooke as a special envoy for Pakistan and Afghanistan to give a new focus to dealing with terrorism.
"I've sent over Richard Holbrooke - one of our top diplomats - to evaluate a regional approach," he said. "We are going to need more effective coordination of our military efforts with diplomatic efforts, with development efforts, with more effective coordination with our allies in order for us to be successful."
Mr Obama said he had no schedule for the withdrawal of US troops from Afghanistan.
"I do not have yet a timetable for how long that's going to take. What I know is... I'm not going to allow al-Qaeda or Osama Bin Laden to operate with impunity, planning attacks on the US homeland."
Mr Holbrooke met Pakistani Foreign Minister Shah Mehmood Qureshi on Tuesday and will later meet President Asif Ali Zardari and Prime Minister Yusuf Raza Gilani.
...The envoy is likely to restate the need for Pakistan to do more to tackle militants and express concern over the recent release of disgraced nuclear scientist AQ Khan from house arrest.
Pakistan in turn has repeatedly criticised US drone attacks on militants in its territory.
...Mr Holbrooke will stay in Pakistan until Thursday and is due to visit Afghanistan and India.

From Reuters UK

By Joseph Nasr
JERUSALEM (Reuters) - Israelis voted on Tuesday in a tight election race, with right-wing opposition leader Benjamin Netanyahu bidding to oust the centrist party of Foreign Minister Tzipi Livni.
The short campaign was overshadowed by Israel's January war with Palestinian militants in Gaza. The key issue facing voters is which leader can best assure the security of the state while chances of a peace deal seem remote.
Likud party leader Netanyahu, once a clear frontrunner in opinion polls, has lost ground to Livni since the 22-day war last month in which 1,300 Palestinians and 13 Israelis were killed. The two leaders were locked in a statistical dead heat.
Livni has led the stalled peace talks with Palestinians on a two-state solution which U.S. President Barack Obama wants to resume. Netanyahu has vowed not to cede Arab East Jerusalem, where Palestinians want to site the capital of a future state.
"It'll be a big day. We'll have a good victory," Netanyahu said in Jerusalem where he cast his vote.
Ultra-rightist Avigdor Lieberman, a potential spoiler for Netanyahu, has soared in the polls. His Yisrael Beiteinu party pledges to get tougher with Palestinians, including Israeli Arab citizens, and keep Jewish settlements in the occupied West Bank.
...Defense Minister Ehud Barak of the once dominant Labor party was trailing in fourth place, though his poll numbers have more than doubled since the Gaza war. He reminded voters that Labor was the only genuine left-wing party in the race.
...In Gaza, where 1,300 people were killed in the 22-day Israeli offensive, Palestinians said they were sure it would make no difference to their lives whoever wins the election. And in the occupied West Bank, from which Israel barred Palestinians traveling, there was similar indifference.
The election could be determined by how smaller parties do. Up to 15 percent of voters were undecided in the final days of campaigning, pollsters said. Some 5.3 million people are eligible to vote, in 9,000 polling stations nationwide.
"The trend we've seen the last few days indicates a very close battle," said pollster Rafi Smith of the Smith Research Center. "No one has jumped ahead and it's tough to call."
Israelis vote by party, and parliament seats are allocated by proportional representation to national party lists. The party with most votes usually is called to form the government.
...Prime Minister Ehud Olmert, the outgoing leader who quit in a corruption probe in September, would stay on as caretaker premier until a new cabinet is sworn in.
Foreign Minister Livni, 50, formerly of the Mossad intelligence agency, would be the first female prime minister since Golda Meir in the 1970s.
Netanyahu, 59, a former finance minister, and Barak, 66, a former general, have served previously as premiers.
....The left-leaning Haaretz newspaper said Netanyahu and Livni were not ideal candidates but threw its weight behind Livni given her support for the peace process with Palestinians --- "the most important issue at stake."
Underscoring the enduring conflict, Israel has closed the doors to the occupied West Bank, denying Palestinians entry to the country for the duration of the election, the army said. Some 16,000 police were deployed nationwide for extra security.

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Morning News Roundup - February 9, 2009

From The Washington Post

Senior Obama administration officials sought to intensify pressure on Congress yesterday to pass a massive stimulus package for the crumbling economy, warning lawmakers of the consequences of delay while rescheduling the unveiling of their financial rescue plan to keep the spotlight on Capitol Hill.
...The Senate will hold a key procedural vote today on the stimulus package to determine whether a compromise struck this weekend, which removed about $100 billion in spending from the bill, will persuade enough Republicans to support the measure.
...President Obama plans to fly today to Elkhart, Ind., where the unemployment rate has soared to 15.3 percent -- about twice the national average -- before holding a prime-time news conference to urge congressional leaders to quickly reconcile the two versions of the bill.
The administration's top economic officials said yesterday that, as negotiations on the stimulus bill progress, Obama is interested in restoring support for education and for cash-strapped state and local governments -- measures that were stripped out in the Senate version of the plan.
To persuade enough moderate Republicans to vote for the measure, leaders also added tax credits for home and auto purchases, and provided relief from the alternative minimum tax.
..."The most important thing is to get this done for the sake of an economy that lost 600,000 jobs in one month," Lawrence H. Summers, director of the National Economic Council, said yesterday on ABC's "This Week."
The plan has come under intense criticism from many Republicans, who have called it unfocused and wasteful. They also have complained that they have been locked out of the bill-writing process, despite Obama's public efforts to reach out to Republicans.
..."You need to get it right. You don't want to spend these precious taxpayer dollars in the wrong way," Sen. John Ensign (R-Nev.) said on NBC's "Meet the Press."
Christina D. Romer, chair of the Council of Economic Advisers, warned that if a large stimulus plan were not enacted, it would have a "catastrophic" impact on the economy. "I feel very strongly it's in our hands, that if we can get this package through, we can turn it around and be back on the road to growth," Romer said on CBS.
...Administration officials have emphasized that the economy needs both the stimulus package, which is aimed at creating millions of jobs and reviving consumer spending, and the financial system rescue plan, which is supposed to loosen the credit markets that provide the loans for homes, cars and businesses.

From The New York Times

...In an effort to build support for his signature economic stimulus plan, Mr. Obama is setting off for Indiana on Monday, holding his first prime-time news conference on Monday night and heading to Florida on Tuesday. In both states, he will be working to counter Republican criticism of his $800 billion recovery package and take greater control of the debate.
...For the first 20 days of his presidency, Mr. Obama has been captive to the fixtures of government, dashing from the White House to Capitol Hill to a series of agencies for an early look at his administration. The images, while presidential, bore only a faint resemblance to the man who charmed voters with an outside-of-Washington persona.
...Since moving into the White House on Jan. 20, he has enjoyed a series of firsts, including sitting in the presidential box at the Kennedy Center for the Performing Arts on Friday night and flying aboard Marine One to the presidential retreat at Camp David on Saturday.
...On Monday night, Mr. Obama will address the nation for the first time in a prime-time appearance from the East Room of the White House and make his argument for why the economic bill is necessary. When he does, aides said, he will recount his visit earlier in the day to Elkhart, Ind., a city he visited twice during the presidential race that has seen its unemployment rate rise to 15.3 percent, largely because of layoffs in the recreational vehicle industry.
“They’ve watched their unemployment triple,” said Robert Gibbs, the White House press secretary. “This isn’t just something that people debate. It’s something that they live every day.”
Mr. Obama is set to meet with the mayor, Dick Moore, who has assembled a list of 18 construction projects, from rebuilding runways at the local airport to upgrading sewer systems, that he said could help create 2,300 jobs.
...To members of Congress who have yet to say how they intend to vote on the economic stimulus plan — including Senator Richard G. Lugar, Republican of Indiana — a bit of high-profile arm-twisting by the president will not go unnoticed on Capitol Hill. The White House is taking six members of Congress along for the ride on Monday, including one Republican, Representative Fred Upton of Michigan, whose vote the president is trying to win.
In Washington, the White House prepared Sunday for its first major presidential trip and a week that could help define Mr. Obama’s presidency with the votes on the economic bills.

From The USA Today

NEW YORK — Wall Street is hoping that the latest government intervention to fix banks and stimulate the economy will do what earlier rescue attempts could not: pave the way for a lasting stock market recovery.
This could be the most pivotal week of the year for investors. Treasury Secretary Timothy Geithner is slated Tuesday to roll out the Obama administration's revamped plan to rehabilitate the nation's ailing banking system.
Investors will also be closely eyeing an expected Senate vote on a massive stimulus plan designed to boost the economy and create jobs.
Stocks began rallying last week amid hopes that the roughly $800 billion stimulus bill would get passed and that the bank plan will have the ingredients needed to restore confidence to the financial system, get credit flowing again and provide help to homeowners facing foreclosure.
The big question is whether the 5.2% gain last week for the Standard & Poor's 500-stock index is the start of a full-fledged stock rebound or just another failed rally built simply on hope.
...The four major rallies since March 2008 — when the government orchestrated the JPMorgan Chase rescue of Bear Stearns — have all been brief and have been followed by fresh bear market lows for stocks soon after, Strategas Research Partners says.
...Learning details of the various plans could rid the market of paralyzing uncertainty, adds Jim Paulsen at Wells Capital Management: "At least for a while, the future looks more clear."

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