Tales from the Trail

We were all primed for the release of the Treasury’s global currency report this afternoon, which would have included a ruling on whether China was a currency manipulator. But a decision was taken to delay the report until after the Group of 20 summit in Seoul in mid-November.

Pressure from lawmakers and business had been mounting on President Barack Obama to act, but the delay shouldn’t come as a big surprise. After all, Treasury Secretary Tim Geithner told Congress last month he wanted to rally the G20 around the issue and take a multilateral approach. Perhaps more importantly, the administration is conveniently ducking the issue until after the Nov. 2 congressional elections.

Some Democrats, who have made China’s currency practices an issue in their campaigns, are disappointed today. Our Breakingviews columnist James Pethokoukis says Obama should be given credit for resisting populist pressures for the second time this week, after also declining to heed appeals to impose a national moratorium on home foreclosures.

That may be true but Obama also knows no amount of populism is going to help his party in the midterms, and he is already looking ahead.

It is safe to assume the president wants to avoid starting the second half of his term embroiled in a damaging trade war with China, which also happens to be the largest holder of U.S. government debt. The administration clearly thinks a direct confrontation would be counterproductive, make the Chinese dig in their heels and, if they stop buying U.S. debt, potentially push up long-term interest rates. There are also big issues to address around market access and intellectual property rights, which confrontation would have obscured.

After irking the Chinese with the award of the Nobel peace prize last week, the Nobel committee set a few feathers flying in Washington today by awarding the economics prize to Peter Diamond, an MIT professor who has also been nominated by President Barack Obama for a spot on the Board of Governors of the Federal Reserve.

Diamond’s nomination to the Fed job has been held up by Senate Republicans who have questioned his qualifications. At the time Richard Shelby, the most senior Republican on the Senate Banking Committee said the current uncertain environment would not benefit from board members deciding monetary policy “who are learning on the job” and told Reuters Diamond was a “behavioral man” who had no background in monetary policy and the economy.

It is a probably little conspiratorial to suggest the Nobel committee was deliberately tweaking Republican noses by recognizing Diamond along with two other leading economists for their work in helping to explain unemployment and jobs markets. Nevertheless, critics are bound to seize on this, along with Obama’s peace prize last year and Paul Krugman’s economics prize in 2008, to draw their own conclusions.

There was a tremendous outpouring of goodwill and money for Haiti after the quake, which prevented a further humanitarian catastrophe. But so far, nine months after the capital was devastated, progress in “building back better” seems painfully slow. Rubble still chokes the narrow streets of Port-au-Prince, and 1.3 million people occupy every available scrap of land in tents awaiting resettlement, or even just a government plan on what to do with them.

Given the mind-boggling scale of the disaster, the weakness of the government and economy even before the earthquake, the lack of land as well as clearly defined land ownership records, it is unfair to expect too much.

But today everyone seems to be asking: What has all this goodwill achieved in terms of lasting benefits to Haiti? One thing that is clear from our interviews this week is the government, local elites and the international community seem to be playing something of a blame game.

In the past few days we have seen the president and the chairman of the Federal Reserve both standing up and insisting they had more cards at their disposal to rescue the faltering American economy. In truth, though, both men look like they are holding weak hands, and are reduced, for the time being, to putting a brave face on things.

With short-term interest rates already at zero, Ben Bernanke has few cards he can play, and none of them feel like sure-fire winners. One is to restart an aggressive program of purchasing government securities to drive long-term interest rates down still further, another is to cut the interest rate on reserves, and a third, desperate measure would be to raise the inflation target. None of those cards are likely to be played unless things get significantly worse.

In theory President Barack Obama has more options at his disposal, but it is far from clear what he can actually get through Congress in election season. Today Obama promised that his economic team was “hard at work in identifying additional measures” to support the economy and boost hiring. But he had few new ideas to offer, besides extending tax cuts for the middle class that are set to expire this year, increasing government support for clean energy development, and rebuilding more U.S. infrastructure.

Fear returned to global financial markets today, with stocks sinking and the dollar rising sharply on renewed worries about an economic slowdown in China and the United States. President Barack Obama met with senior economic adviser Larry Summers and “talked through some scenarios” on what was playing out around the globe, and how to keep the U.S. recovery on track.

Obama, signing a bill meant to boost U.S. manufacturing, said he was determined to do everything possible to hasten the economic recovery. The problem is – how much more can he do?

Legislation to support small businesses and manufacturing and bolster state finances might be saving jobs, but are unlikely to make much of a difference if American consumers remain reluctant to buy, or if the global economy takes another turn for the worse.

There were three big stories competing for our attention in Washington today. The first was the tragic death of former Senator Ted Stevens in a small plane crash in his home state of Alaska. Stevens, the longest serving Republican senator ever, was on a fishing trip with Sean O’Keefe, the North American chief of European aerospace giant and Airbus maker EADS, who was among the survivors.

Dominating eyeballs in the financial markets was the Federal Reserve’s surprise decision to move back in the direction of what it calls “quantitative easing.” The Fed will use cash from maturing mortgage bonds it holds to buy more government debt. So for now, there is no more talk of an “exit strategy” from the extraordinary monetary stimulus the central bank delivered during the financial crisis. It is a significant policy shift for the Fed, and a sign it does not view the recent slowing in the economy as simply a soft patch.

The third is our exclusive Reuters/IPSOS poll from Ohio, which showed Republican Rob Portman holding a narrow lead over Democrat Lee Fisher in a race marked by, guess what, concerns over the economy and unemployment. Interesting nuggets in the survey too about who voters blame for the economic mess. Bankers and Wall Street were identified by 93 percent of voters as mostly or partially to blame for the economic downturn, while Bush’s administration was blamed by 86 percent. Obama, though, did not get off scot-free, with 69 percent of voters also holding his administration at fault.

Phil Angelides, Financial Crisis Inquiry Commission chairman, says he'd rather see some taking of responsibility than hear another "I'm sorry."

"Personally I don't see my role as ... to obtain apologies. What I don't hear is a sense of responsibility and self-assessment about what occurred. There seems to be a disconnect between the practices that people undertook and the financial collapse," he said at the Reuters Global Financial Regulation Summit.

"I'm struck by the extent to which all fingers point away generally from the person testifying," Angelides said.

It’s been a year since Americans have gone to the polls, but as they do on Tuesday President Barack Obama may be less excited than he was last year, particularly in Virginia and New Jersey where his fellow Democrats are facing trouble.

Republicans are hoping to capture the governors’ mansions in those two states to rebuild some momentum after being trounced by Democrats last year. They also are trying to make it a referendum against Obama’s agenda to overhaul the U.S. healthcare system and financial regulatory structure as well as his plans to address climate change.

In Virginia where Obama won narrowly in 2008, Republican Bob McDonnell has built a sizable lead over Democrat Creigh Deeds while in traditionally Democratic-leaning New Jersey Republican Chris Christie is neck and neck with Democratic incumbent Governor Jon Corzine.

President Barack Obama began his summer vacation by sending a specific message to the White House press corps.

 ”He wants you to relax and have a good time,” Deputy Press Secretary Bill Burton said as Air Force One carried the first family to the Massachusetts island where they are spending a week-long holiday. “Take some walks on the beaches. Nobody is looking to make any news, so he’s hoping that you guys can enjoy Martha’s Vineyard while we’re there.”

“I asked him if he had a message for the press corps, and that’s what it is,” Burton said.

Watch out for the quiet ones in the War of the Wonks (OK so we’re being a bit dramatic).

Mild-mannered Ben Bernanke gets to keep his five-star financial job as Federal Reserve Chairman, winning out over speculation that President Barack Obama was thinking about replacing him with Larry Summers, known among other things for his outsized ego.

Delving into the past of the grey-beard, here are some clues about what propelled him to become the nation’s economic engineer — a job he managed to hold on to despite a national unemployment rate approaching 10 percent.