White House Update

White House Update
Thursday, April 23

The President’s meeting today with 13 executives from the credit card industry underscores one of the administration’s most vexing dilemmas: trying to stabilize the banks while getting the struggling U.S. economy back on its feet.

Here’s the dilemma: the White House acknowledges that a sound banking system is one of the bedrocks of the American economy. To be sound, banks have to have, and are shoring up, their capital position. But at the same time, they’re being asked to step up lending.

Obama told the executives today that the interest rates and fees they charge are “unfair” and says they need to be more “consumer friendly.” The banking industry’s response – although they didn’t say this to the President’s face today – has been along these lines: “We HAVE been consumer friendly; TOO consumer friendly. We flooded the market with cheap credit for much of this decade and now a lot of customers can’t pay it back.”

The President himself knows all too well about credit card debt. At the White House news briefing this afternoon, Press Secretary Robert Gibbs told reporters that up until recently – obviously before the multi-million dollar book sales – Obama himself was in the red.

But the high levels of credit delinquency, personal bankruptcies, auto repossessions and, of course, mortgage foreclosures, appear to support the banks’ point. No question, millions of Americans are hurting – but for people with a proven inability to pay, who are already up to their necks in debt, is more debt the answer?

In short, that is the banking industry’s position – and the President’s dilemma.


WITHER IRAN?

Another dilemma for the West Wing - surprise, surprise: the Middle East. During talks Tuesday with Jordan’s King Abdullah, the President said he wants to see Israel, the Palestinians and neighboring Arab countries – like Jordan – to step efforts to forge some kind of peace agreement. The White House envoy to the region, former Senate Majority Leader and architect of the Northern Ireland peace agreement, George Mitchell, says he is cautiously hopeful.

To nudge things along, Obama will invite Israeli Prime Minister Benjamin Netanyahu, Palestinian Authority President Mahmoud Abbas and Egyptian President Hosni Mubarak to the White House for talks in the next few weeks. But not all at once.

But Obama’s priorities are not Israel’s. Netanyahu said earlier this week that he will not participate in talks until the President makes headway on Israel’s number one issue: stopping Iran’s nuclear program. To drive that point home this morning, the President was told by Israeli Ambassador Sallai Meridor to confront Iran “before it’s too late.”

Meridor made the comments at a Holocaust memorial service on Capitol Hill. Also speaking: a top official of the U.S. Holocaust Memorial Museum, Joel Geiderman, who was even more blunt, reminding Obama about Iran’s pledge to destroy Israel. He warned the President to ignore that threat at America’s “own peril.”

The White House also faces a dilemma with the Palestinians. Abbas’ Fatah faction has seen its power eroding, to the benefit of the Islamist militant group Hamas. Hamas controls the Gaza Strip, but the administration has so far maintained the Bush policy of refusing to deal with – branding it a terrorist group.


TORTURE LATEST

At the briefing, Gibbs appeared to distance himself from comments made this morning by Defense Secretary Robert Gates, who said he supported the release of sensitive memos on detainee interrogation methods. Gates said he viewed the disclosure as inevitable.

Gibbs’ response: "I have not seen Secretary Gates's full remarks." Gibbs inferred that a lot of people have different opinions on the subject. He added "The problem...isn't the existence of a paragraph or a term in a memo…It is the very existence of their use."

FIRST 100 DAYS (94 and counting)

Conflicting editorials in the Wall Street Journal and Washington Post.

The Post’s David Broder says Obama has gotten off to a good start: The "President has shown - and it is important - a mastery of the art of managing the presidency." He lauds Obama’s He lauds his “good organizational and management skills” and says in sum, “A bravura performance on Obama's part."

The Journal’s Daniel Henniger counters, focusing on the president’s grip-and grin with Venezualan President Hugo Chavez as symbolic of White House weakness. He writes: "The weirdly ebullient Mr. Obama did not...show reserve." He adds: "The Obama people seem to believe that talking top guy to top guy is the yellow brick road to progress" and that "There appears to be no coherent strategy beyond "talk to our enemies."

WEST WING NOTES

…the President will hold a prime-time news conference next Wednesday at 8pm, EDT; it is the 100th day of his presidency.

…it was “Take Your Daughters to Work Day” at the White House, but Malia and Sasha Obama didn’t make the 60-secnd commute to the Oval Office with Dad. First Lady Michelle Obama did speak to 160 kids – of administration, household and Secret Service employees. Mrs. Obama said: She doesn’t miss cooking, the new dog, Bo, is “crazy” and says one of the best parts about being First Lady is that she gets to do a lot of “fun stuff.”

White House Update

Immigration Redux
Immigration is regarded as a “second-tier” issue in the West Wing (education, health care and energy being the administration’s top priorities), but the president still wants a “comprehensive solution” to the problem and a bill to be crafted this Fall. The centerpiece of any legislation would be putting the estimated 12 million illegals in the U.S. on the path to eventual citizenship. But Press Secretary Robert Gibbs told reporters this afternoon that illegals would be put in “the back of the line” and made to wait. Gibbs also suggested that they learn English. The White House also warned that it wants to step up the crackdown on employers who flaunt the law by hiring illegals. If all of this sounds familiar, it is: President George W. Bush tried, and failed, to pass comprehensive immigration legislation in 2007. Analysts warn with the economy in rough shape, the task of passing a sweeping immigration bill may prove to be infinitely more daunting.

War Funding Flip Flop?
The President is also asking for an additional $83.4 billion for military and diplomatic operations in Iraq and Afghanistan. Obama opposed such funding two years ago when he was in the Senate. The request would finance the additional 17,000 troops for the Afghan theater bringing the number of American servicemen and women there to 55,000, a 59% increase. Meantime: the Congressional Research Service says the funding request would push the costs of both wars to nearly $1 trillion since the Sept. 11, 2001, terrorist attacks.

Housing Confab
President Obama claims that his administration’s policies (along with actions by the Federal Reserve) have lowered mortgage rates to historic lows, giving millions of Americans the opportunity to refinance their homes. Critics say the rates are artificially low, but the administration says it will do whatever is necessary to get the housing industry moving again. Meeting in the Roosevelt Room with the president was Treasury Secretary Geithner, Housing and Urban Development Secretary Donovan – and homeowners from the Washington DC area who seemed pretty nervous in their high-powered surroundings. Reporters asked about the Somali pirate situation and were rebuffed by the president: “Guys, we’re talking about housing now…”

Quick Hits
…Did the President bow when meeting Saudi King Abdullah at last week’s G20 summit? “No,” Press Secretary Robert Gibbs said. “He bent over to shake his hand…”
…Next Thursday (Apr. 23) the White House sponsors “Bring Your Child to Work Day.” Will Malia and Sasha accompany Dad on his 60-second commute to the Oval?
…The East Wing has released the White House Easter egg design. They have an environmental theme…
…First Lady Michelle Obama was seen puttering around in the new White House garden this afternoon. With her: Agriculture Secretary Tom Vilsack, a White House chef and students from Bancroft Elementary. They planted seeds – 55 kinds of fruits and vegetables, except for beets. The President doesn’t like beets…

Need To Close the Gaps In Resolution Regimes

By Kayleigh Harvey - Talk Radio News Service

“From the outset I have argued that our financial system is not merely in need of ‘reform,’ but of ‘modernization,’” said Senator Christopher Dodd (D-Conn.), Chairman of the Senate Banking, Housing and Urban Affairs Committee.

At the hearing, which discussed “Enhancing Investor Protection and the Regulation of Securities Markets,” Senator Dodd asked the Chairman of the SEC Mary Schapiro, “Were you consulted by the Treasury and the Fed? What role do you think the SEC should play in this resolution mechanism, given the oversight and regulatory responsibilities?”

Senator Dodd also asked Ms. Schapiro to “comment on the reports of the regulatory changes that Secretary Geithner has mentioned this morning.”

Ms. Schapiro responded, “generally there was consultation.”

Ms Schapiro added, “We clearly have gaps in our resolution regime for large financial institutions....I fully support the concept of closing the gap in resolution regime so that we have a more coherent approach.”

Senator Chuck Schumer (D-N.Y.) said, “We all believe people should be rewarded for good performance, that’s not the problem, but what we’ve seen in many instances that has enraged Americans is a heads-eye wind tail you lose system. In which executives are rewarded for flashing the pan short term gains, or even worse, rewarded richly when the company does poorly and the shareholders have been hammered.”

Pence: “Welcome To The Next Installment Of The Party Of Yes”

By Kayleigh Harvey - Talk Radio News Service

At a press conference today, leading Republican Party members’ discussed their House Republican Housing Plan proposal.

Congressman Cantor said, “The notion in this country is you work hard, you play by the rules and that you can get a reward. This administration in the housing area doesn't quite jive with that sense of the American spirit. Instead what we have seen are proposals that call upon the 90 some percent of the Americans, who are paying their mortgage, playing by the rules, calling on them to subsidize those who don’t. So the plan we have unveiled today responds to that notion and speaks to all Americans and tries to address the severe problem with excess and home inventories.”

Congressman Cantor added that this was a “central element to addressing the bank failures and capital markets failures.”

The Republican plan says that it can “provide a $5,000 refinancing tax credit to help families cover the costs of a mortgage refinancing, buy down points, or reduce their principle balance (covers refinancing through July 1, 2010).” The plan also states that, “in exchange for a lender investing in keeping a homeowner in their family home by refinancing their mortgage and lowering their monthly payments, if the homeowner agrees to share a portion of future home appreciation with the lender, then the lender will not be taxed on that future profit and the borrower will not incur any tax liability as a result of the refinancing (covers refinancing through July 1, 2010).”

Congressman Pence said, “Welcome to the next installment of the party of yes. Yes to new solutions, yes to alternatives that will resonate with millions of Americans because they are grounded in the timeless personal responsibility.

Congressman Pence added, “Unfortunately our democratic colleagues have only offered failed policies that reward bad behavior and massively expand government programs. The Republicans today unveil a better solution, and when the American people have a chance to look at it I believe most of them will agree.”

New direction for Fannie and Freddie

In early September the two government sponsored mortgage finance companies Fanninie Mae and Freddie Mac were put under the conservatorship, or legal control, of the U.S. government. The CEOs were dismissed and the Federal Housing Finance Agency Director James Lockhart III was installed as a temporary replacement for the board of directors.

"We did not take this action lightly. We counseled with Chairman Bernake...we also consulted with Secretary Paulson. They both concurred with me that conservatorship needed to be undertaken," said Lockhart during a House Financial Services Committee hearing.

"First signs, despite all the market turmoil are that the conservatorships are positive. I am pleased to say that the enterprises are funding costs and the spreads on the {Mortgage Backed Security} have declined."

Lockhart went on to say that since the conservatorship home rates for thirty year mortgages fell below six percent for the first time in 2008.

In order to pursue stability, Freddie Mac and Fannie Mae both had to go through major changes. The CEOs were replaced by former U.S. Bancorp Vice Chairman David Moffit and former Merrill Lynch president Herb Allison. Both companies have severely limited approval of low document and no document loans, and common stock and preferred dividends were eliminated, saving the companies $2 billion. In addition, Lockhart says both CEOs have been urged to be more creative in preventing home forclosures.