Post Politics Hour
Monday, March 23, 2009; 11:00 AM
Don't want to miss out on the latest in politics? Start each day with The Post Politics Hour. Join in each weekday morning at 11 a.m. as a member of The Washington Post's team of White House and congressional reporters answers questions about the latest in buzz in Washington and the Post's coverage of political news.
Washington Post White House reporter Scott Wilson was online Monday, March 23, at 11 a.m. ET to take questions about President Obama's $787 billion stimulus package and recovery efforts for the economy, his videotaped message to Iran seeking diplomatic engagement, the expanding federal deficit and more.
A transcript follows.
Scott Wilson: Hi everyone. Thanks very much for joining this morning. The big news so far today appears to be the treasury secretary fleshing out details of his plan to rescue the banks, and the stock market rising on the announcement. Let me get right to your questions.
Philly, Pa.: Will Obama be a hero today if the stock market continues to rise? Or can he only be linked to the stock market when it's failing?
Scott Wilson: That remains to be seen, but if the rally is sustained over days, I'm sure he'll get some credit for it. It won't be declared the "Obama bull market" on one day alone though - and the day is young.
Arlington, Va.: The government presumably will get a share of the profits from the financial institutions we now partially own. They could be in the billions but probably not enough to dramatically change the government's level of red ink. Do the current deficit projections include these potential profits?
Scott Wilson: Interesting question, but no, I don't think the administration has factored any potential profits into its budget calculations. It's still so speculative at this point that the government would recover any of the money. And, as you note, the profits would not likely staunch much of the red ink.
Woodbridge, Va.: Why do I, as a "private investor" want to buy some of these toxic assets? Do I just call my broker and tell him how much to spend?
Scott Wilson: This is a very good question. It looks like the administration is looking for mutual fund managers, big institutional investors and others handling large portfolios and lots of money to get into the game and buy some of these real estate-related assets. As a private investor, the thinking goes, these assets may be priced so low now and some of them in the mix may not be as worthless as they appear to be as a group. So there's money to be made there, the administration's sales pitch goes. But I'd be very interested to hear how your broker would answer that question.
One Person's Take On Stimulus Package: Thanks for taking questions. I am able to refinance my home at a very low interest rate. I am getting an extra $10,000 on the re-fi to do some badly needed repairs. I will be hiring small, local businesses to do the work, who will be employing people to do the job.
In my job, I work with a vendor that handles COBRA administration for businesses all over the country. Because of the new COBRA subsidy and Special Election Period, they have to hire hundreds of new employees to administer this benefit.
Isn't this precisely how the stimulus is supposed to work?
Scott Wilson: Short answer: yes. In fact, you've explained it so clearly, if you sent your name and testimonial into the White House, you may end up in a presidential speech as an example of how stimulus is supposed to work - a relatively small amount of money rippling through the economy in a way that creates jobs.
Buying toxic assets: So, I read this morning about the plan to buy up the banking industry's bad mortgage loan assets, with the FDIC shouldering 84 percent of the risk. How is that helpful? The banks get to recover and hopefully start lending again, but doesn't that mean that we (the taxpayers) get stuck guaranteeing loans with a high likelihood of going into foreclosure?
I guess I'm leery of any plan Wall Street applauds as making fiscal sense . . .
Scott Wilson: This gets at the heart of it. The administration is highlighting the fact that the plan will allow the market to price these assets, and the only way that can happen is for the private sector to take the lead role. But investors won't jump into it without big government guarantees. The treasury secretary noted in an op-ed this morning in the WSJ that his plan calls for the private sector to take on risk, but as you note it won't be that much. That level of backing is what the administration believes is necessary to get investors to take part - and that will greatly increase the amount of "toxic assets" purchased. But it does put the government - ie, taxpayers - on the hook for most of the risk (and, in theory, for a chunk of any rewards to be had.)
washingtonpost.com: My Plan for Bad Bank Assets (WallStreetJournal.com, March 23)
Washington, D.C.: What's with the term "toxic"? This is hardly a technical term, so why is it being bandied about everywhere. Some sort of anti-PR campaign? Struggling assets isn't enough? If the admin wants to convince the U.S. public this is right, it might want to start out by giving it a different name.
Scott Wilson: Good question. Not sure if the term was used first by the government - and it would have been during the Bush administration - or by the media. Worth looking up some time. But, no, not a PR campaign, just a description that has stuck, in part because it captures how these assets have poisoned the rest of the financial system.
Arlington, Va.: Is anyone or any group calling for Sen. Dodd to step down or resign in the aftermath of his involvement in the AIG bonus scandal?
Scott Wilson: Not that I've heard, but he's in for a serious challenge in 2010 to keep his seat.
Longmont, Colo.: Thanks for taking my question. Just wondering why Obama's team hasn't responded more strongly to criticism from Paul Krugman et. al., regarding the bank rescue plan. I would just like to hear Obama's reasoning for why he favors Geithner's plan over Krugman's. Has even thoughtfully considered these opposing views? This seems important, since it's always been argued that Bush never listened to opposing viewpoints.
Scott Wilson: There are a couple of questions related to Paul Krugman's opposition to Geithner's plan. Krugman prefers an option where the government would guarantee bank debts - most of them anyway - and take over insolvent ones. I can't say for certain, but I'd imagine the administration considered a variety of options before deciding on the one it rolled out today. It seems to me that the administration has been intent on bringing the private sector into this in a central way, which differs somewhat from Krugman's plan. I believe that has to do with the importance the administration is placing on pricing these real estate-related assets; I'd imagine the Geithner and his advisers would argue that Krugman's proposed solution would not allow that to happen, at least to the degree they want to see. Krugman is worried about experimentation at a time when the economy is shedding hundreds of thousands of jobs a month, and his approach would leave most major decisions in the administration's hands, perhaps bringing a quicker resolution to the problem and freeing up credit faster.
Pittsburgh, Pa.: Some people dismiss the AIG bonuses as trivial, because they constitute just a tiny percentage of AIG's overall bailout. Yet some of these same people demagogue over "earmarks" in the stimulus bill, which are also only a tiny percentage of that total package. Is this as inconsistent as it seems?
Scott Wilson: You're raising an important point. Both issues represent tiny fractions of the budget and bailout yet they are dicussed, debated, blogged far beyond that proportion. For one, in my view, they are both issues easy to talk about in sound bites. But the bonuses issue, in particular, is clearly a symbol of something larger for the public - something, as the president noted last week, that runs counter to "our values." I'm not sure the "earmarks" issue ever caught fire in quite that way, especially since it can be argued that "earmarks" are precisely how lawmakers should be winning a state or district's share of federal money.
Stafford, Va.: I'm glad "One Person's Take on Stimulus Package" is happy, because I'm not. My house, appraised at $400K just one year ago, is now appraised at $291K not due to anything I did, and I'm now upside down on my mortgage and unable to refinance and get a lower rate. What's Obama doing for the millions of people like me who have paid their mortgage regularly and not gotten behind because of buying too much house or frivolously spending on other things? Obama's "housing assistance" rewards bad behavior.
Scott Wilson: The administration's message to you - and millions of others like you - has so far been, well, we've got to save your defaulting neighbors to save what value remains in your home. If you're the last man standing in a neighborhood of abandoned homes, your property won't be worth much. Not much solace. I think the president's message at one event in Los Angeles last week is aimed at people like you - that is, he said, for everyone with good credit and a good record of paying your mortgage, take advantage of low interest rates and save money. That's more like advice than an actual program, though.
Washington, D.C.: Is it likely or possible that the wave of people hired now with the stimulus money will then be let go in a few years when the money dries up and there's nothing left to sustain their jobs?
Scott Wilson: Quite possible, especially in the construction sector. The thinking is, though, that in a few years the economy will be creating jobs, not losing them, and the credit markets will be working. So those jobs, in construction for example, would just move onto a new project. It's a gamble, but that's why the president has included lots of money in his budget and in the stimulus package that he says will create jobs in new areas of the economy that will drive future growth. The energy sector, first among them.
Monroe, Mich.: Pres Obama's gesture of goodwill was rebuffed by Ayatollah Khamenei, who stated the U.S. needed to demonstrate by its actions that it is committed to a dialogue with Iran. It seems clear that he was referring to the U.S. unconditional siding with Israel. How do you see the recent fiasco with Chas Freeman and Israeli lobbyists affecting U.S. policy in the Middle East? Lastly, how have increased U.S. arms sales to the Gulf Cooperation Council affected Iran's view of U.S. intentions in the Gulf?
Scott Wilson: We're all awaiting the administration's plans to re-engage the Israeli-Palestinian peace process and whether that will mean a broader recalibration of U.S. policy toward Israel and Sunni Arab governments in the region. So far, at least in public, the administration has not talked much about changes to its Middle East policy. But in reaching out to Iran - not just its people, but also its leaders - the administration is going to bump into Israel. How that plays out we'll be watching.
Pennsylvania: If certain Republican governors stick by their guns re refusing federal funds to extend unemployment insurance, causing some of their constituents great economic pain as a result, isn't the risk awfully great that this can be used by their Democratic opponents next time they run for office? Seems to me like anyone who thinks this is a good idea is going to get painted as a cold-hearted villain of Dickensian proportions.
Scott Wilson: I agree that it will be a tough argument to make, especially if the economy is still in rough shape come next elections.But it's part of the Republican Party getting back to conservative roots after the big-government Republicanism of the Bush administration. Less federal spending, no federal mandates, etc. Still, that means making an ideological argument at a time when people are out of work and hurting. As I said...perhaps a tough one to make.
Scott Wilson: That's about all the time I have everyone. Thanks very much for all the thoughtful questions, and my apologies to those of you I didn't get to. Next time. Have a good day.
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