Financial Reform Watch

What will it take to jolt the U.S. economy back into shape? Congressional leaders have floated ideas for an economic stimulus package ranging from $500 to $700 billion. President-elect Obama is not espousing numbers yet but has assembled his economic team and charged it with developing recommendations for restoring economic growth and creating 2.5 million jobs. While serious rumors about his economic advisors started circulating last week, Obama officially presented the group at a noon press conference today:

• Treasury Secretary—Timothy F. Geithner, President and CEO of the Federal Reserve Bank of New York and former long-time Treasury official
• Director of the National Economic Council—Lawrence H. Summers, former Clinton Administration Treasury Secretary and Harvard economist
• Director of the Council of Economic Advisors—Christina D. Romer, University of California at Berkeley economics professor
• Director of the Domestic Policy Council—Melody C. Barnes, former counsel to Sen. Edward Kennedy (D-MA) and policy director of the Center for American Progress
• Deputy Director of the Domestic Policy Council—Heather A. Higginbottom, former legislative director and presidential campaign advisor to Sen. John Kerry (D-MA)

Obama broadly laid out his economic plan, noting there is consensus between conservative and liberal economists that the nation needs a big economic stimulus. Recognizing that Wall Street problems have Main Street consequences, Obama indicated his recovery plan will address both. His plan will:

• stabilize the financial system and get credit flowing;
• address the foreclosure crisis;
• help the "struggling" auto industry;
• create and save 2.5 million jobs;
• rebuild infrastructure, including roads, bridges, and schools; and
• create the clean energy infrastructure of the 21st century.

Emphasizing continuity, Obama remarked, "These extraordinary stresses on our financial system require extraordinary policy responses. And my administration will honor the public commitments made by the current administration to address this crisis." One point of continuity Obama declined to address at this time is the issue of the Bush tax cuts, most of which are due to expire in 2010. There has been speculation that Obama would announce a policy of no tax increases, for anyone, until 2010 or perhaps even 2011. At today’s press conference, Obama refused to go beyond his campaign pledge to provide a net tax cut to 95 percent of workers. He is counting on his new economic team to recommend how.

In other late-breaking news, the Treasury Department announced it would extend the Temporary Guarantee Program for Money Market Funds until April 30, 2009. The program was originally announced by Treasury on September 19, 2008 and was to last for three months, at which point the Treasury Secretary could extend it up to another nine months or allow the program to terminate. Only money market funds currently in the program are eligible to apply for the extension, and applications must be submitted by December 5, 2008.
 

Treasury Announcement:  Extension of Money Market Guarantee Program (PDF)