US lawmakers are likely to hand Barack Obama the first major win of his week-old presidency on Wednesday, overriding chiefly Republican objections to pass an US$825-billion economic stimulus plan. The US House of Representatives was expected to approve the package, a centerpiece of Mr Obama's efforts to resurrect lost US jobs and kickstart stalled US growth, in the late afternoon or early evening largely along party lines. Key US Senate committees have begun shaping their chamber's version of the bill, as Democrats and the White House say they hope to speed the final measure through the US Congress and to the White House by mid-February.
The House vote was to come one day after the Democratic president made his first work visit to the capitol, wooing defiant Republicans with closed-door assurances that he hears their complaints and shares some of their worries. 'Nobody is more worried about the deficit and the debt than me. I will be judged by the legacy I have left behind,' Obama told House Republicans. The appeal came hours after Republican leaders, looking for more tax cuts and less spending, directed their troops to oppose the Democratic bill, which provides about US$550 billion in spending and US$275 billion in tax cuts.
Publicly, Mr Obama said he recognised 'legitimate' Republican gripes with his approach but argued waves of jobs losses and punishing economic news dictated urgent action and not political gamesmanship. 'I don't expect one hundred per cent agreement from my Republican colleagues,' Mr Obama said as fevered political maneuvering on Capitol Hill contrasted with the euphoria of his inauguration there a week before. 'But I do hope that we can all put politics aside and do the American people's business,' the president said in a time-honored appeal for Washington to overcome its bitter partisan divisions. Mr Obama may need Republican support for political cover if the stimulus plan, now widely popular with the US public, fails to achieve its sought-for effects.The president wants thumping congressional majorities for the stimulus, the first big test of his presidency, to give him momentum for other priorities and to make good on his vow to be a bipartisan leader. Republicans lack the votes to defeat the stimulus bill on their own, but could slow its progress, especially in the Senate. The Congressional Budget Office estimates that $169 billion of the $825 billion in stimulus will hit the economy before the end of September and that the bulk of it will show up in 2010 and 2011. - AFP
WSJ: A measure to allow judges to reduce the principal amounts of mortgages for troubled borrowers in bankruptcy cleared a key hurdle Tuesday when it was approved by a U.S. House panel. The legislation, which is progressing quickly in Congress, would amount to the most aggressive step yet by the federal government to help strapped borrowers avoid foreclosure. Proponents contend it will act like a stick, spurring mortgage servicers to complete more loan modifications. Meanwhile, the banking industry warns that it will raise mortgage costs for all borrowers.
The measure was approved on a 21-15 vote after its House sponsor, Judiciary Chairman John Conyers, D-Mich., agreed to changes that would narrow its scope. "While bankruptcy reform may not provide all of the answers to this crisis, surely it provides a common sense and practical approach to helping stop the spiral of home foreclosures," Conyers said in remarks before his panel.
Under the legislation, borrowers would be eligible to have a bankruptcy judge reduce the principal balance on their home loan - a move known as a "cram down." Current law allows cram downs for mortgages on vacation properties, but not for those on primary residences.-----------------------------------------------------
CNBC: A Senate committee approved $342 billion in tax cuts on Tuesday as part of a larger plan to stimulate the economy. The Senate Finance Committee voted 14 to 9 to approve the legislation after amending the original proposal to make sure middle-class taxpayers aren't hit by the alternative minimum tax this year. All Republicans on the committee opposed the package except for Sen. Olympia Snowe, R-Me. The bill includes a $500 individual tax credit, tax breaks for businesses to hire workers and buy equipment, and tax incentives for energy efficiency.
In Tokyo, the Nikkei Stock Average climbed 4.9% to 8061.07 Tuesday, also getting a boost from the Ministry of Economy, Trade and Industry, which said it is considering a plan to provide public funds to companies beyond banks that have been hardest hit by the financial crisis. The fact that governments are beginning to look beyond the banking sector to revive the economy is a major step to begin to understand the gravity of the issues.
The biggest catalyst has to be the report that the government is creating a plan to buy up toxic assets from firms in an effort to stabilize the shaky banking system. What that means is that there will probably be a person in charge mediating on the price to buy off the toxic assets from the banks. Right now, no private funds are willing to buy as there is no certainty on the price. This is the 'bad bank" plan, the bad bank will end up with the toxic assets. In reality we are going via the RTC method whereby we are consolidating the toxic assets, we are just ONE step shy of nationalising some of the banks - which may not be a bad thing. In fact, if Geithner takes the nationalisation path, I am certain the markets would rise further.
p/s photos: Sara Malakul Lane