Obama May Seek $850 Billion Stimulus PackageWhen President-elect Barack Obama enters office next year, his first task will be rebuilding the country's sinking economy, and the figure he will be asking Congress to do it may be as high as $850 billion, cites one of his close advisers.
The transition team Obama has working on the economy thinks that the amount, around 6 percent of the U.S.'s $14 trillion economy, is necessary to turn around skyrocketing unemployment. This sum is higher than estimates given by economists and leaders of the House and Senate. The proposal is making the rounds in Congressional circles as Obama's transition team aims to create a package to improve roads, bridges and other sections of the country's infrastructure, much of which has not been touched in more than 40 years. Obama's plan will most likely also include tax credit incentives for renewable energy production, state aid for unemployment and healthcare programs.
He has pledged to create as many as 2.5 million jobs over the first two years he is in office. Economists and others that have seen unemployment increasing say that an even bigger spending program will be needed to change the direction of the economy, some call for a $1 trillion spending plan.
Chrysler Closes North American Plants
Chrysler announced on Wednesday it will close all of its North American manufacturing plants for at least a month. Anxious U.S. automakers are still waiting for any news from the White House about government loans to help keep them afloat.
Ford also says it will shut down 10 plants for an extra week in January because of slow sales.
Chrysler, GM and Ford all have moved to slash operating costs and lay off workers in a bid to remain viable during the recession. U.S. domestic auto sales are at the lowest in 26 years. GM says it will run out of operating capital by the end of the year, and Chrysler has made similar statements. In a bid to further cut costs GM has stopped construction of a plant that would build its electric hybrid, the Volt.
A lack of consumer credit has hindering sales and forcing the automakers' production cuts. Chrysler says it has dealers with willing buyers but they can't close deals because of the tightened credit being offered.
Earlier the Bush administration had talked with the automakers after a failed vote in Congress couldn't help deliver $14 billion in loans for GM and Chrysler. Ford had applied for a $9 billion line of credit, and says it has enough cash to survive through 2009, but if one of the other two fails that may change.
Obama to Name New SEC Head
President-elect Barack Obama is to name on Thursday a seasoned securities regulator to take over the embattled Securities and Exchange Commission. Mary Shapiro, chief executive of the Financial Industry Regulatory Agency, a self-regulatory body that oversees the securities industry, also served as an SEC commissioner for six years. Shapiro was chairwoman of the Commodity Futures Trading Commission (CFTC) in 1994 during Clinton's administration. Her appointment may open the way for an overhaul of the troubled agency.
The SEC was created after the 1929 stock market crash as a police force to oversee the markets and restore investors' confidence. The SEC has been heavily criticized for its lack of oversight prior to the Wall Street meltdown and financial failures of major investment firms Bear Stearns and Lehman Brothers. Lawmakers say the agency should have seen those collapses ahead of time and flagged problems earlier to reduce the impact. Now with the $50 billion Bernard Madoff Ponzi scam that may turn out to be the biggest investment frauds in history, the agency is under fire for possible wrongdoings by SEC staff when performing earlier investigations of the firm.
Federal Reserve Board Votes on Credit Card Rules
The Federal Reserve voted on Thursday on broad changes to controversial credit card practices and help consumers. The proposed rules have wide consumer support and will stop banks from practices like raising the interest rates on pre-existing credit card balances unless a payment is more than 30 days late, and stop banks from applying payments in a way that maximizes interest penalties. The Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration approved the regulation. (Read OTS announcement)The rules would take effect by 2010.
The new rules will fundamentally alter the way banks and cardholders do business. The rules would bring to an end double-cycle billing, a practice that averages out the balance from two previous bills, meaning that consumers who carry a balance would be hit with retroactive interest from a previous month's bill, even if they paid it off. Card holders would have a reasonable amount of time to make payments and they would apply to higher-rate balances first to reduce fees and interest penalties. There would also no longer be universal defaults, a policy that allows credit card issuers to increase the interest rate on one card if a customer misses a payment on another card, even if it is not issued by them.
The rules come at a time when credit card companies are seeing more consumers default on their credit card debt and consumer spending has plummeted. U.S. consumers have about $976 billion in revolving credit and 4.9 percent of all credit cards were delinquent in the third quarter, says the Federal Reserve.