Tales from the Trail

Bold budget boosts bailout

USA-OBAMA/How do you buy $750 billion of toxic bank assets with only $250 billion of taxpayer money?

If you know to play U.S. budget rules like a violin.

President Barack Obama told Congress in passing this week he might need more money than lawmakers have already approved to stabilize banks and pull the economy out of the ditch. 

How much? His budget virtuoso Peter Orszag said on Thursday he could support buying up to $750 billion in bad assets but only needed to set aside $250 billion to do it.

Regular US budget rules assume government credit subsidies will recoup some of their value. Appropriators budget for such items according to how much they think the government will lose — not the full amount of the credit.

Orszag explained his thinking on Thursday:

“Honest budgeting suggests, when you pay a dollar for a financial asset, that doesn’t make the government worse off by a dollar,” he said at a news conference. “It’s not the same thing as a net cost of a dollar, because you are getting something in exchange for it.”

Fed staff in trouble, but cited for raise, too

USA/It’s not just U.S. stocks that are on a roller coaster ride in reaction to congressional testimony by Federal Reserve Chairman Ben Bernanke and other top officials.

Fed staff stock plunged on Wednesday when they put their boss in an awkward position during Bernanke’s testimony before Congress on the financial bailout and efforts to stabilize the swooning economy.

Rep. Scott Garrett testily reminded Bernanke that he was still waiting for answers for a letter he sent in December.

The First Draft: black tie before “Fiscal Responsibility Summit”

While Hollywood strutted the red carpet at the Academy Awards, President Barack Obama hosted a black-tie dinner on Sunday for U.S. governors — who are debating whether it’s a good idea to take federal bailout money — at the White House in advance of a self-described “Fiscal Responsibility Summit” on Monday. The afternoon event is part of the push to sell Obama’s broader economic package before his speech to Congress on Tuesday and the unveiling of his first federal budget on Thursday.

Even before U.S. markets or the White House got going this week, the U.S. banking regulators issued an early morning statement, saying the U.S. government “stands firmly behind the banking system.” The statement added that a new capital assistance program to ensure banks are appropriately capitalized will start on Wednesday.

Meanwhile, a notorious Washington “cold case” appears headed for resolution. The Washington Post and other media report police are seeking an arrest warrant in the death of Chandra Levy. Levy was the government intern from California whose disappearance was the hottest story of summer 2001. Her body was found in the city’s rambling Rock Creek Park.

Stimulus cash not so bad after all, some find

Last week, Republicans were nearly united in their opposition to the massive $787 billion stimulus bill. But now that it’s been signed into law, many are changing their tune.

Nine Republican House members from Florida, who all voted against the stimulus bill, are now asking the government to send money to their state quickly, Politico reports.     USA/

North Carolina Representative Heath Shuler, who also voted against the bill, has also told his constituents he’s going to fight for federal dollars.

The First Draft: roller coasters

JAPAN/All eyes will be on Capitol Hill today as the Senate moves closer to a vote on the massive $900 billion stimulus bill. Lawmakers added expanded help for home buyers late last night in a bid to attract much-needed Republican support, but it’s still unclear whether Democrats have enough votes to pass the measure.

In a Washington Post opinion piece, President Barack Obama urged Congress not to strip out ambitious efforts to upgrade schools, boost energy effiency and upgrade crumbling bridges and highways.

Voters “have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide,” Obama wrote.

U.S. stimulus to cost more than Iraq, Afghan war so far

US/WASHINGTON – Republican critics of the Democratic-backed landmark stimulus package are pointing out that its 800-billion-dollar-plus price tag would — “in one fell swoop,” as Republican Representative Todd Akin put it — consume more resources than have been laid out for two wars, so far.

The Pentagon says the United States has committed $524.6 billion to the nearly six-year-old conflict in Iraq and $120.9 billion to the fighting in Afghanistan since 2001.

“I almost have to pinch myself, gentlemen, to think that just standing here a couple of hours ago, we just voted to spend $800 billion, more than the cost of the war in Iraq and Afghanistan,” the Republican Akin declared Wednesday after the House of Representatives passed the stimulus without a single Republican vote in favor.

The First Draft: Nomination hearings today

It’s a busy old day on Capitol Hill.

President-elect Barack Obama’s picks to head the Securities and Exchange Commission and the Department of Homeland Security and his nominees for attorney general and ambassador to the United Nations will be on Capitol Hill for their Senate nomination hearings.

The Senate Banking, Housing and Urban Affairs committee will hold a hearing on the nomination of Mary Schapiro as SEC head at 10 a.m. EST. At the same time, Obama’s nominee for Homeland Security, Gov. Janet Napolitano, will be quizzed at a separate hearing on her suitability for the job.

Eric Holder, Obama’s nominee for attorney-general, is expected to be questioned by the Senate Judiciary Committee about his role in pardons granted by former President Bill Clinton, in particular the case of billionaire financier and fugitive Marc Rich.

The First Draft: Bailout Bingo

Congress is nervous about spending more money.HUNGARY
    
In other news, pigs are flying, hell is freezing over and Democrats and Republicans are cooperating for the good of the country. 
     
Two of those things are actually true. The outgoing Bush administration and the incoming Obama administration are working together to get Congress to approve the second half of the $700 billion financial bailout, so Obama can hand it out quickly if needed. 
     
But Democrats on Capitol Hill want to attach more conditions to banks that accept federal cash — limits on executive pay, more oversight, and more help for homeowners facing foreclosure.  
     
“My colleagues in the Senate will not provide any additional funds unless they are assured by the Obama administration taht these provisions will be a part of it,” Senate Banking Committee Chairman Chris Dodd said on ABC’s “Good Morning America.”
    
Republicans, meanwhile, question whether the money is needed at all.
    
Obama is also urging Congress to approve an additional $800 billion economic stimulus package. Should be a stimulating week.
    
Obama also will discuss trade and the drug war with Mexican President Felipe Calderon today in his first meeting with a foreign leader since his election.
    
Bush, meanwhile, holds a press conference at 9:15 EST.

Photo credit: REUTERS/Laszlo Balogh (Pigs are hung at a butcher shop in Budapest)

For more Reuters political news, click here.

The First Draft, Friday Jan. 2

The new year begins on a quiet note in Washington, but lawmakers are preparing to hit the ground running next week when the 111th Congress will be seated.

obamaPresident-elect Barack Obama is scheduled to return to Washington this weekend and plans to meet House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Monday to discuss the legislative agenda and plans for a nearly $1 trillion economic stimulus package.

Obama also plans to meet Republican leaders Rep. John Boehner and Sen. Mitch McConnell.

The First Draft, Wednesday, Dec. 24

President-elect Barack Obama’s pecs were gone from the news Wednesday, replaced by Chicago shenanigans.
 BUSH/
Newspapers and television covered the Obama team’s report detailing its contacts with Illinois Gov. Rod Blagojevich.
 
Blagojevich is charged with trying to sell the U.S. Senate seat Obama vacated after his November election victory.
 
The report cleared Obama and his aides of any misconduct. But it revealed for the first time that the president-elect sat for an interview last week with the U.S. prosecutor investigating Blagojevich. So did two of his aides.
 
President George W. Bush’s holiday pardons also made the newspapers.
 
Among those receiving pardons was Charlie Winters, who was imprisoned for 18 months breaking a weapons embargo against Israel by ferrying bombers to the new state in 1948, The New York Times reported.
 
Winters, an Irish protestant from Boston, is viewed as a hero in Israel. He died in 1984 at the age of 71.
 
Not on the pardons list: I. Lewis Libby, the former chief of staff to Vice President Dick Cheney, who was convicted of lying and obstructing justice during an investigation into who leaked the name of an undercover CIA operative.
 
Bush previously commuted Libby’s sentence.
 
Data out Wednesday showed new jobless claims jumped by 30,000 last week to a 26-year peak. Consumer spending posted a fifth monthly drop. Stock futures were little changed, pointing to a flat opening on Wall Street.
 
It’s Christmas Eve. Obama continued his holiday in Hawaii and Bush was at Camp David. Congress was in recess.
 
Not everyone was on holiday though. The folks at NORAD, the North American Aerospace Defense Command, were hard at work with their traditional Christmas Eve task – keeping an eye on Santa Claus.
 
For more Reuters political news, click here.

Photo credit: Reuters/Larry Downing (Bush leaving White House Tuesday to go to Camp David for holidays)