Obama's Focus: "People, Not Banks"President Barack Obama's first speech to the nation reeling under the strains of recession was a message of hope, a simple reminder: "We are not quitters," he told the nation on Tuesday. There was an underlying message to the financial services companies about the bank bailout. "It's not about helping banks; it's about helping people."
Acknowledging that the country's economy is weakened and gripped by recession, the President says though the country is living through "difficult and uncertain times," he vows to rebuild and recover, and the country will emerge stronger than before.
His speech pointed out that the era where short-term gains were prized over long-term prosperity is over, such as regulations that were "gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn't afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day."
Vice President Joe Biden will lead a tough, unprecedented oversight effort to oversee the spending of the stimulus bill's money, and says that the mayors and governors will be held accountable for "every dollar they spend." He said his appointment of Earl Devaney, the inspector general behind the exposure of the Jack Abramoff scandal and last fall's Department of Interior program corruption revelation, "will ferret out any and all cases of waste and fraud."
No real recovery will happen Obama said unless "we clean up the credit crisis" that has severely weakened the country's financial system.
He reiterated that money deposited in banks is safe, and said Americans can rely on the continued operation of the country's financial system and that it is not the source of concern, but the flow of credit must be re-started. Saying credit has stopped flowing the way it should because of too many bad loans from the housing crisis have "made their way onto the books of too many banks. And with so much debt and so little confidence, these banks are now fearful of lending out any more money to households, to businesses, or even to each other."
Obama said his administration is moving quickly to re-start the lending cycle and restore confidence. There will be a new lending fund to help provide auto loans, college loans and small-business loans. The second part is the housing plan that will help homeowners facing foreclosure to refinance mortgages. The third action Obama's administration will take is on the major banks. "When we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution."
He vowed to hold the banks fully accountable for the money received in the bailout. "And this time they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer." Referring to the excesses seen at Merrill Lynch by John Thain, "This time CEOs won't be able to use taxpayer money to pad their paychecks, or buy fancy drapes or disappear on a private jet. Those days are over."
Obama said the plan will probably cost more than has already been budgeted, "But while the cost of action will be great, I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade." He said he realized that the last bank bailout and the excesses and mismanagement infuriated everyone, and that helping banks now will be unpopular, "especially when everyone is suffering in part from their bad decisions. I promise you: I get it."
Obama sees his job is to solve the problem and govern with a sense of responsibility and he won't allow Wall Street executives to be rewarded, but help small businesses and families get mortgages. "That's what this is about. It's not about helping banks; it's about helping people." In one sentence Obama made clear that more regulatory changes are coming. "To ensure that a crisis of this magnitude never happens again, I ask Congress to move quickly on legislation that will finally reform our outdated regulatory system."
Fed's Bernanke: Recession Could Last To 2010
U.S. Federal Reserve Chairman Ben Bernanke warned the Senate Banking Committee that unless the government succeeds in recalibrating the nation's financial stability, the recession here may not end until 2010.
Bernanke says the U.S. economy is shrinking quickly and is at even more risk from the cycle of weak growth and strains in the financial market. "To break the adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilize financial institutions and financial markets," he told the Senate Banking Committee.
"If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, in my view -- there is a reasonable prospect that the current recession will end in 2009, and that 2010 will be a year of recovery," he said.
Bernanke was short on details as to further steps the government may take to plug the holes in the American banking industry. The speculation of big bank nationalization and dropping stock prices in big banks weighed down the stock market that hit a 12-year low on Monday.
US stocks jumped on Tuesday, with the S&P 500 up more than 4 percent a day after hitting a 12-year low, after Federal Reserve Chairman Ben Bernanke signaled that nationalization of major banks was not at hand. The Dow ended a six day slide closing up 236 points, its biggest one-day rally in more than a month.