Tales from the Trail

CORRECTS POLL NUMBER ON OBAMA’S HANDLING OF ECONOMY

The United States is due to hit its $14.3 trillion debt limit today, and tensions are understandably on the increase with Republicans and Democrats wide apart on the budget deal the GOP wants in exchange for increasing the ceiling.

World markets and America’s economic future could be jeopardized if negotiators still have no deal when the Treasury Department runs out of tricks to stave off default.

But do those fears a crisis make?

Senate Minority Leader Mitch McConnell suggests not. “Rather than thinking of this as a crisis, I think of it as an opportunity to come together and those talks are under way led by the vice president.”

Those talks are looking for ways to reduce the current annual U.S. budget deficit of $1.4 trillion and the mounting debt. McConnell also says any deal should be reviewed by Wall Street credit rating agency Standard & Poor’s, which has warned it could nix the AAA U.S. debt rating without a credible plan to tackle those pesky fiscal issues.

However, it’s not as if Wall Street and the federal government always see eye to eye, particularly on the regulatory side.

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.

An eerie calm has descended over the blogosphere after the feeding frenzy that broke out earlier this week on whether President Barack Obama was poised to name Elizabeth Warren to lead the new consumer financial agency.

The week started with an avalanche of stories and blogs speculating on the possibility of Obama naming Warren, a Harvard law professor, as an interim director of the Consumer Financial Protection Bureau.

The move would have allowed Obama to avoid what would likely be a heated confirmation battle.

Sounds like people had plenty to say about the future of Fannie Mae and Freddie Mac at a Treasury forum today. For example, Bill Gross of PIMCO, who oversees more than $1 trillion in assets, called for a massive program to refinance mortgages at low rates as a way to lift the economy – a more sweeping recommendation than Treasury organizers had anticipated. “It is not tenable to leave in place the system we have today,” Treasury Secretary Timothy Geithner acknowledged, but said the government must still have some role.

The bailed-out mortgage giants have received nearly $150 billion in taxpayer funds since they were placed in government conservatorship, and are likely to need tens of billions of dollars more to survive.

A new Reuters/Ipsos poll on the Kentucky Senate race shows Republican Rand Paul, a Tea Party favorite, with a narrow 5 point lead over Democrat Jack Conway among likely voters. The poll also probed voter views on the controversy about Paul’s alleged college pranks, and found that 53 percent of Kentucky voters had not heard anything about it. Among Republicans, 12 percent said the stories made them more likely to vote for Paul.

What's in U.S. Treasury Secretary Timothy Geithner's wallet? Not much.

While testifying in front of a House Appropriations Subcommittee on Capitol Hill Thursday Geithner was shown a $50 Billion Zimbabwean bank note (rendered worthless by Zimbabwe's hyperinflation) by U.S. Representative John Culberson (R- TX) and asked if he had ever seen one himself. Geithner immediately pulled a piece of Zimbabwean currency out of his own pocket and showed it off to the committee. At the next break in the hearing I approached Geithner and asked how he happened to have a piece of foreign currency in his pocket. His response was "I often have some foreign currency in my wallet. Want to see?" He pulled a very thin and mostly empty wallet from his pocket.

Amongst many empty slots in the thin weathered leather wallet there could be seen three credit or debit cards with Visa and Mastercard logos (all inserted into the wallet upside down so that the card issuers could not be seen) and an old and yellowed looking identification card of indeterminate origin.

From inside the wallet Geithner extracted a small pile of receipts and paper including a New York City MTA farecard, pointing out that there were European Euros tucked amongst the paper.

A trillion dollars is a million million dollars or 12 zeros after the one.

And that’s how much apparently every program costs to save the U.S. economy these days.

Treasury Secretary Timothy Geithner outlined what he called “a new financial stability plan” to help restart the flow of credit, strengthen banks, and  “provide critical aid for homeowners and for small businesses.”

His proposal included a program in which the FDIC, the Federal Reserve, and the private sector would establish a fund, using government financing, to deal with bad assets weighing on financial firms.

WASHINGTON – TARP, the four-letter acronym for a $700 billion government bailout, has lost its original definition and needs a new name.

Even the White House on Tuesday acknowledged that TARP was perhaps not the most accurate portrayal of the changing intent of the financial rescue package.

After all, Treasury Secretary Henry Paulson last week said the Troubled Assets Relief Program would not be used for troubled asset relief but rather to shore up financial firms.