Feb. 8 (Bloomberg) -- Treasury Secretary Timothy Geithner postponed his unveiling of the administration’s plan to shore up the financial industry as officials focus on getting approval for their separate economic stimulus plan in the Senate.
“The Senate votes on Monday, and economic officials administration-wide will be working and consulting with senators throughout the day,” the Treasury said in an e-mailed statement in Washington today. “Secretary Geithner will postpone the release of the administration’s Financial Stability and Recovery Plan until Tuesday to allow for that to happen.”
President Barack Obama has said the stimulus is needed to avert a deeper recession, and he wants a bill on his desk by Feb. 16. A key procedural vote on the Senate’s $780 billion measure is scheduled for tomorrow, with a final vote to take place the next day. The Senate measure must then be reconciled with an $819 billion plan the House approved last month.
“There’s a desire to keep the focus right now on the economic recovery program, which is so very, very important,” Lawrence Summers, director of the National Economic Council, said on ABC’s “This Week” program today. “If there was ever a moment to transcend politics, this is that moment,” he said.
Competing House and Senate versions of the measure are more than “90 percent” in agreement, Summers said separately on the “Fox News Sunday” program. “We’ve got to work through the differences, find the best bill we possibly can, and get it in place as quickly as possible to contain what is a very damaging and potentially deflationary spiral,” he said.
Increasing Credit
Summers said Geithner’s proposal will stabilize the banking system and increase the flow of credit.
“The focus is going to be on increasing the flow of credit and doing it with transparency, with accountability for those who receive support, and with a kind of consistency that, frankly, we haven’t seen so far,” he said. “There will be support for banks so that they remain stable, and are in a position to lend.”
He also told Fox that private investors may be asked to play a role in reviving ailing banks.
“With the right strategic approaches, Secretary Geithner believes that we can bring in substantial private capital, and that’s something we all ought to be able to agree on, that where we can catalyze private capital, that’s a better route to solving this problem than government resources.”
Summers didn’t rule out the administration coming back to ask for more Troubled Asset Relief Program money, saying “we’ll see what happens.”
“We’ll do what’s necessary,” he said.
Private Capital
The first part of the TARP has so far provided almost $400 billion to more than 360 banks, including Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc.
The stimulus package before Congress is just a part of what it will take to pull the economy out of the 14-month-old recession. The stimulus will be effective only if credit markets, currently frozen by illiquid assets clogging banks’ balance sheets, begin to function again.
A report last week showed the unemployment rate jumped to 7.6 percent in January, the highest since 1992. Companies including Macy’s Inc., Boeing Co. and PNC Financial Services Group Inc. have announced thousands of job cuts in the last couple of weeks.
Economic Contraction
The world’s largest economy entered a recession in December 2007, according to the National Bureau of Economic Research in Cambridge, Massachusetts. Gross domestic product contracted at a 3.8 percent annual rate in the fourth quarter, the most since 1982.
“The economy lost 600,000 jobs just in January, lost 3 million jobs last year,” Summers said on Fox. “We’ve got to give this economy some help.”
Senator Chuck Schumer, a Democrat from New York, today predicted lawmakers will meet Obama’s Feb. 16 deadline.
“We will have a bill by the end of this week,” he said on CNN’s “State of the Union” program. Schumer, the No. 3 Democrat in the Senate, also said he anticipates the final cost of the bill will be about $820 billion.
The Senate agreement pared $20 billion for school construction, $2 billion to expand broadband access in rural areas, $3.5 billion to make federal buildings more energy efficient and $200 million for NASA. It also reduced a proposed subsidy that would allow the jobless to buy health insurance through their former employers.
No Earmarks
Transportation Secretary Ray LaHood, one of three Republicans Obama has selected for his Cabinet, said the stimulus package won’t include any “earmarks,” or money required to be spent on specified congressional pet projects.
“There aren’t going to be any earmarks and there aren’t going to be any boondoggles,” LaHood said on CNN.
LaHood so far has failed in his efforts to help persuade his former Republican colleagues to support the measure. House Republicans voted unanimously against the plan, and Senate Republicans are also balking at the size the bill.
“The bottom line is this bill, nearly $1 trillion before it’s over with, is not going to turn around our economy,” Republican Senator Richard Shelby of Alabama said on the CNN show.
Obama and his staff are vying to win support from at least three Senate Republicans -- Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania.
“That’s not bipartisanship,” Republican Senator John McCain of Arizona said on CBS’s “Meet the Press” today. “That’s just picking off a couple of Republican Senators.”
The head of Obama’s White House Council of Economic Advisers, Christina Romer, said the president’s highest priority was to have a plan enacted quickly.
“The American economy is sick and by all indications getting sicker,” she said on NBC’s “Meet the Press.”
To contact the reporter on this story: Catherine Dodge in Washington, at Cdodge1@bloomberg.net
