By Daniel Politi
The Washington Post leads with news that the White House has delayed its announcement of the new plan to bail out ailing financial firms in order to keep all eyes focused on the massive stimulus package. The Senate will hold a procedural vote today to determine whether the compromise $827 billion measure will receive enough Republican support to move forward. If it is approved, the Senate will have to spend the week negotiating with the House to reconcile their versions of the bill. The New York Times and the Wall Street Journal‘s world-wide newsbox lead with details on what the new bailout plan will look like. It seems the White House wants private investors to play a big part in helping banks get the bad assets out of their balance sheets.
USA Today leads with a look at how the effort to rebuild the Gulf Coast “remains largely stalled” more than three years after hurricanes Katrina and Rita struck the area. More than $3.9 billion of the $5.8 billion promised to help fix public works remains unspent. Homeland Security Secretary Janet Napolitano has ordered the Federal Emergency Management Agency to look once again at the issue to determine how the process can be improved. The Los Angeles Times leads with the worst wildfires in Australia’s history, which have killed at least 130 people so far. Arson is suspected in at least some of the fires, which have destroyed more than 750 homes.
The NYT notes that the details of the new bailout plan for financial institutions are still “sketchy” and probably will remain that way even after the program is announced on Tuesday. Right now it looks as if the program will have four parts. The Treasury will inject more money into banks, institute new programs to help homeowners avoid foreclosure, expand a Federal Reserve program to thaw the consumer credit markets, and devise a method to help banks get rid of bad assets. The NYT says that in order to get the private sector involved, the government “would guarantee a floor value” on the bad assets to push investors to take up the risk. The WSJ says the plan will call for an “aggregator bank,” or “bad bank,” to buy up the bad assets. The government would put up some money, but the idea is that the private sector would provide most of the financing.
By getting the private sector involved, the Obama administration hopes to avoid having the government determine the price of the bad assets and risk overpaying for them. And by taking away some of the risk for investors, the White House hopes to restore confidence in the banking system. The WSJ points out that some sort of of incentive is essential to get the private sector to participate in the bad bank, since investors can already buy some toxic assets in the open market. While cautioning nothing has been decided yet, the WSJ says it’s likely that investors will buy a stake in the bad bank, which would then go out to buy the bad assets. But that assumes financial institutions will want to sell their assets for the price that investors and the government would be willing to pay. Some banks have proved reluctant to sell and are holding onto their assets in the hope that they’ll be able to recoup some of their losses when the market recovers.
The new bailout plan has so many different unknowns that Americans will soon realize that the massive stimulus plan was the “easy part,” notes an analysis piece inside the NYT. The stimulus plan may involve a huge political fight, but the truth is that the government is relying on a well-known formula to jumpstart the economy while “the problems facing the financial system have no real parallels in scale or complexity,” writes David Sanger. Lawmakers can easily explain the stimulus package to their constituents, but getting support to spend what could amount to trillions of dollars to save the very institutions that have “become symbols of excess and greed” will be much more difficult. “We know what we need to do,” a senior member of Obama’s economic team said. “But the perception is that you are bailing out a bunch of Wall Street bankers, and even many Democrats are going to rebel at that.”
For now, the White House is keeping its focus on the stimulus package, and Obama will launch a new effort to try to sell the plan to the American people. He will spend today in Indiana before holding his first prime-time news conference, where he will urge lawmakers to work quickly on reconciling the House and Senate versions of the bill. On Tuesday, Obama will fly to Florida. As the fight drags on, public support for the package appears to be decreasing, so White House advisers told the president “he had no choice but to fire up Air Force One and return to a mode of campaigning that helped him win the presidency,” notes the NYT.
Even though senators haven’t voted yet, congressional aides have started working on trying to figure out the main differences between the House and Senate versions of the stimulus package. It looks as if we’re in for a long process, and Democratic aides tell the WP that it might be difficult to get the legislation on the president’s desk by this weekend. The White House has tried to minimize the differences between the two bills, but House Speaker Nancy Pelosi said some of the changes in the Senate compromise are “very damaging.” Democrats are holding out hope that more Republicans will be willing to support the measure. Three GOP senators have suggested that they would back the compromise but have made no commitments to support the bill that will come out of the negotiations between the House and the Senate.
In a front-page piece, the WP points out that Republican leaders are beginning to see opposition to the stimulus package as the first step “in the party’s liberation from an unpopular president.” Republicans say that they have been able to pull together and it won’t matter if the bill ultimately passes because they’ve made their point. “We’re standing on our core principles, and the core principle that suffered the most in recent years was fiscal conservatism and economic liberty,” Rep. Paul Ryan of Wisconsin said. It’s a risky strategy that has so far successfully given the appearance of unity, when, in fact, Republicans are divided on how they should regroup. Many think that as long as Republicans stick to the principles of small government, much of their base will come back. But others say that’s a misreading of the electorate, and the party has to develop new ideas if it hopes to regain power.
The WP talked to contracting specialists who warn that the stimulus plan may end up wasting billions of dollars if the government tries to spend the money too quickly. Although the bill does contain measures to ensure oversight, many say it would be nearly impossible to do so effectively, considering that contracting officials “would be asked to spend more money more rapidly than ever before.”
The NYT takes a look at Avigdor Lieberman, a candidate in Tuesday’s Israeli parliamentary elections who wants all Arab citizens to sign a loyalty oath. He wants all citizens to vow allegiance to Israel as a Jewish state and to commit to military service. It’s highly unlikely that Lieberman will be the next prime minister, but his Yisrael Beitenu (Israel Is Our Home) party will probably come in third and become a key power broker. Unlike others who have espoused similar views, Lieberman isn’t religious and has been able to get lots of support by not adhering to a traditional right-wing agenda while characterizing the Arab Israeli population as a threat.
The WP‘s Jackson Diehl writes that “for the first time in decades, Israelis may choose a prime minister who is promising to wage war.” Binyamin Netanyahu is slightly ahead in the polls and has vowed to topple Hamas if he is in power, while Foreign Minister Tzipi Livni, who is in second place, is promising to continue peace talks. At a time when the Obama administration is trying to increase diplomacy in the Middle East, “it may find itself with an Israeli partner that rejects negotiations with its neighbors and does its best to push the United States toward military confrontation with Iran and its proxies.”