By Louis Uchitelle
The New York Times
October 10, 2008
The Federal Reserve and Congress are pushing out close to $1 trillion to repair the nation’s financial system and to encourage lending. But that is not enough to revive the economy. Spending has to resume.
Consumers, however, have cut back sharply on their spending, in what will be the first quarterly decline in 17 years when the government tally is in for the third quarter.
Business, in response, is shrinking its outlays for equipment, supplies and personnel. And now dozens of state and city governments, their tax revenue falling short of expectations, are engaged in yet another round of cost-cutting.
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The Associated Press
USA Today
October 9, 2008
House Speaker Nancy Pelosi said Wednesday that a $150 billion economic stimulus plan is needed now because of the faltering economy and she may call the House into session after the election to pass it.
Pelosi told reporters that the stock market meltdown, which has caused an estimated $2 trillion loss from pension funds, was a factor in her recommendation for a second stimulus bill. The first relief plan sent out $600-$1,200 tax rebate checks to most individuals and couples this year.
The House did pass a $61 billion economic aid proposal last month before lawmakers left Capitol Hill ahead of the Nov. 4 election. But a similar plan failed to pass the Senate. President Bush had promised a veto anyway.
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By Edmund Andrews and Mark Landler
The New York Times
October 9, 2008
Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.
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The Associated Press
USA Today
October 8, 2008
The federal budget deficit hit a new record in the just-completed 2008 budget year under the latest estimates from the Congressional Budget Office.
The record $438 billion shortfall for the budget year that ended last week is up from $162 billion posted last year. The previous record of $413 billion was posted in 2004.
CBO said Tuesday that with the economy in a slump, revenues dropped by almost 2%. Corporate income receipts dropped by $65 billion, or nearly 18%. At the same time, individual income tax revenues declined by 1.6%.
The deficit is virtually certain to balloon even higher next year as the government sorts out the financial crisis and taps a $700 billion Treasury fund to buy toxic mortgage-related securities.
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By Jim Snyder
The Hill
October 7, 2008
Congressional approval of the $700 billion bailout last week marks the beginning of a new debate over how to prevent a similar financial crisis from happening again.
“The $700 billion rescue plan is a life-support measure. It may keep our economy from collapsing, but it won’t make it healthy again,” said Rep. Henry Waxman (D-Calif.), after he brought to order the first of five hearings his committee will hold in the coming weeks concerning the financial crisis.
“To restore our economy to health, two steps are necessary. First, we must identify what went wrong. Then we must enact real reform of our financial markets.”
Treasury, meanwhile, moved Monday to implement the rescue plan by releasing a solicitation to financial services firms that would be paid to manage what will become the department’s massive new portfolio.
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