Obama Proposes New Economic Recovery Measures

By Ravi Bhatia – Talk Radio News Service

President Barack Obama discussed his administration’s plans to continue accelerating economic recovery Tuesday at the Brookings Institute in Washington, D.C. Obama suggested that growth will occur through tax cuts and incentives for small businesses, continued investment in American infrastructure, and job creations through clean energy investments.

The measures, at least in part, would be funded by money saved from the Troubled Asset Relief Program, a program which allowed the U.S. government to purchase assets and equity from troubled financial institutions in order to trigger economic growth after the financial collapse. Administration officials say TARP cost about $200 billion less than expected.

“We are going to wind down [TARP],” Obama said. “There has never been a less loved or more necessary program. It was flawed… but today has served its original purpose and at a much lower cost.”

["This] gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street,” Obama added.

However, senior administration officials noted that the administration has not determined the minimum costs of the proposed programs, and at a press conference this morning, House Minority Leader John Boehner (R-Ohio) said Obama’s announcement indicates a “Stimulus 2,” being paid for with TARP money that Boehner says, “was to go to the deficit.” Boehner said the idea of spending money that was intended to be in excess, is “repulsive.”

Obama said that the programs would eliminate a tax on capital gains from new investments in small business stock for one year and expand on the 75 percent exclusion in the Recovery Act. The small business measures would also create a tax cut for small businesses to encourage new hiring next year, and would continue giving companies enhanced expensing provisions through 2010, allowing them to instantly expense up to $250,000 of qualified investments.

Besides investments in bridges, roads and infrastructure, the new economic programs could provide new incentives for consumers who invest in energy efficient retrofits for their homes.

Following the President's speech, top Economic Adviser Christina Romer and Labor Secretary Hilda Solis told reporters during a conference call briefing that the measures align with the administration's continuing plans to end the recession.

“This really is an evolution,” Romer said. “We had done important actions early in the administration to heal the economy...the Financial Stability Plan, the Recovery Act (ARRA), our housing program.”

Romer added that as indicated in Obama’s speech, today’s announcement of tapping into TARP funds isn’t “a sum total of everything that we are considering.” The economic advisor said congressionally extending ARRA provisions is also being considered.

As far as unemployment benefits that are expected to end this month, Solis promised that there will be a discussion on the Hill about extending unemployment insurance and extending certain ARRA provisions that would be applicable.

Republican Senators Seek To Retire TARP

John DuBois, University of New Mexico-Talk Radio News Service

Senators John Thune (R-S.D.) and Bob Bennett (R-Utah) introduced the TARP Sunset Act Tuesday in the hope of making sure the controversial program, meant to stabilize the U.S. financial system, does not extend beyond this year.

“Now is the time to end this program to ensure that additional taxpayer dollars are not wasted since TARP has devolved into a slush fund for the administration,” said Thune.

The TARP Sunset Act will eliminate Treasury Secretary Timothy Geithner's ability to spend outstanding funds after the end of 2009.

"[The] crisis has passed and the usefulness of TARP therefore is over,” said Benett. “It should be terminated is that this administration is using it like a revolving credit account.”

Bank Of America Executives Defend Merrill Lynch Deal

By Ravi Bhatia - Talk Radio News Service

Bank of America (BOA) executives, including two members of the bank’s board of directors, testified Tuesday in front of the House Oversight Committee to explain how a private deal between BOA and Merrill Lynch turned into a federal bailout.

The $50 billion deal between the two banks occurred in September, 2008 and saved Merrill Lynch from bankruptcy. A January 2009 report of its earnings, however, showed that Merrill Lynch lost $21.5 billion in the fourth quarter of 2008, requiring the government to subsequently provide it with an emergency $15 billion preferred stock investment through the Troubled Asset Relief Program.

Committee Chairman Rep. Edolphus Towns (D-N.Y.), claimed during Tuesday's hearing that the government did not force Bank of America to take the bailout. Towns noted that it was former Bank of America Chairman Ken Lewis who asked former Treasury Secretary Hank Paulson on Dec. 17, 2008 to intervene.

“That one phone call put everything in motion,” Towns said. “Lewis claimed that he believed Bank of America could back out of the deal with Merrill Lynch based on the Material Adverse Change clause in the merger agreement - the so-called ‘MAC clause.’ [Former Bank of America General Counsel Timothy J.] Mayopoulos was suddenly fired nine days later without explanation and replaced by a senior insider who had not practiced law in years.”

Mayopolous testified Tuesday that, “Based on information [that was] already disclosed to shareholders, a reasonable investor would have been on notice that Merrill Lynch might well suffer multi-billion dollar losses in the fourth quarter of 2008.”

During his prepared remarks, Mayopolous also denied involvement in Bank of America's approving Merrill Lynch to pay billions of dollars in bonuses to its employees. However, he did advise Steele Alphin, Bank of America’s Chief Administrative Officer, that Merrill Lynch, not Bank of America, should determine year-end bonuses for Merrill Lynch employees.

“I also advised Mr. Alphin, however, that it was appropriate for him to make clear to the Chair of Merrill’s Compensation Committee that it would be inappropriate for John Thain, Merrill Lynch’s CEO, to be paid a year-end bonus,” Mayopolous said. “My advice was not legal advice that such a bonus would be illegal, but rather my business judgment as to what would be best for the combined company.”

Bank of America’s President of Consumer and Small Business Banking Brian Moynihan said Tuesday he was proud of the role his firm has played in the economy “during this period of economic difficulty,” and that Bank of America's acquisition of Merrill Lynch helped prevent a further financial collapse.

“We have extended $759 billion in new credit since we filed our first report in the fourth quarter of 2008,” he said. “That represents almost $17 for every dollar of the $45 billion of taxpayer assistance to the Bank of America.”


Pay Czar Lists Recommendations He's Made For Executive Compensation Limits

By Laura Smith - University of New Mexico/Talk Radio News Service

Treasury Official Kenneth Feinberg testified on Wednesday before the House Oversight and Government Reform Committee about his review of the bonuses paid to executives at the seven largest TARP recipients.

According to Feinberg, the Special Master for Executive Compensation under the Troubled Asset Relief Program - also referred to by some as the White House's 'Pay Czar' - those recipients include American International Group (AIG), Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC.

“For the last five months, I have a narrow mandate under the law, and that was to determine pay compensation packages for the top 25 officials in just seven companies that receive the most TARP assistance,” he said.

Feinberg explained that he received proposals from each of the seven companies on the matter of compensation, and after he reviewed them, he took specific actions to correct their flaws.

“I requested and received comprehensive submissions from each of the seven companies, explaining their view on what they thought they needed for their top 25 officials in the way of a comprehensive package. I examined those submissions with the utmost care and scrutiny, and I concluded that six of the seven submissions...were contrary to the statute, contrary to the regulations, and contrary to the public interest,” he said.

Feinberg clarified his remarks by stating that certain of the companies “wanted too much cash guaranteed salary...and made no mention of the perks that were part of their salary.”

Feinberg said that his office evaluated the submissions and made some material changes.

“First we greatly reduced the amount of cash that would be available to the senior officials. Second, they required that when they issue stock, that stock may not be cashed out for up to four years. Third, we said no more unlimited perks. Perks are limited to $25,000 per individual, and anymore than that would have to be approved by the Office of the Special Master,” he said.

Ron Paul Seeks Fed Oversight, Fed Fights Back

by Julianne LaJeunesse- University of New Mexico

Should the Federal Reserve Committee be regulated by the Government Accountability Office? U.S. Representative Ron Paul (R-Texas) says yes, and Scott G. Alvarez of the Federal Reserve says no.

Paul is the sponsor of H.R. 1207, which calls for audits on the Federal Reserve, a quasi-public entity that in theory can control the nation's money supply, set interest rates, and implement monetary policy.

At a Friday hearing, Paul said the Fed needs GAO oversight because they aren't doing their job correctly.

"The Federal Reserve was designed, and their mandate was to make sure that we have full employment, price stability, and stable interest rates," Paul said. "In my lifetime, interest rates have been 21 percent and less than one percent- so they fail there. They [the Fed] want a stable dollar and stable prices... well, we have continuous inflation."

Paul said it's Congress' responsibility to make sure the Fed does what it was created for and not buy into the idea that the Fed needs more power and more secrecy.

Fed Board of Governors General Counselor Scott G. Alvarez argued before Paul, Chairman Barney Frank (D-Mass.), and other members of the House Financial Services Committee, saying that Fed autonomy is instrumental in safeguarding U.S. interest rates, but also that an independent Fed is a nonpolitical Fed.

Alvarez said from an economic stance, GAO regulation would hinder Fed access to and implementation of some programs.

"If it looks like the Federal Reserve is changing directions because a statement [of] the policy review by another agency is influencing the Federal Reserve's decision... then the integrity of the process will be undermined, confidence that the Federal Reserve will move in the direction that is best for the economy will be undermined, and we won't be able to carry out our job as well," Alvarez said. "And that's what we're concerned about."

Alvarez said the Fed has taken many steps to increase transparency since the 2008 bank bailouts, but when Rep. Emanuel Cleaver II (D- Mo.) asked him about the misinterpretation between Congress and the Treasury Department and the Federal Reserve, as far as Troubled Assets Relief Program allocations, Alvarez said the latter departments decided to use the funds to restore confidence to banking institution, a decision Cleaver said was not immediately apparent when TARP was passed.