US President Barack Obama was to take his case for a huge economic rescue plan directly to the US public yesterday, warning of a “catastrophe” without urgent action, as a pivotal vote loomed in the US Senate.
Confronting the biggest challenge of his new presidency, Obama was returning to barnstorming campaign mode with a “town hall” meeting in rust-belt Indiana before his first White House news conference in prime time at 8pm.
The president on Saturday had welcomed signs of a tentative deal by lawmakers on his stimulus plan as the Senate held a rare weekend session, following news that the US economy shed a staggering 598,000 jobs last month.
“Because if we don’t move swiftly to put this plan in motion, our economic crisis could become a national catastrophe,” Obama said.
His Indiana visit, to be followed by a trip to Florida today, underscored Obama’s determination to drum up support in the country at large for a stimulus package that looks set to top US$800 billion.
The Democratic-led Senate was expected yesterday to decide on a key procedural motion to override Republican blocking tactics and put the package to a full vote, possibly today.
The Democrats control 58 votes in the Senate and need 60 to break through a Republican “filibuster.” They appear to have the support of at least three Republican moderates — Susan Collins, Olympia Snowe and Arlen Specter.
Despite the outlines of a compromise brokered with the help of the centrist Republicans, senior opposition senators were adamant that Obama’s mix of infrastructure spending and tax cuts would prove a massive waste of money.
“We are going down a road to financial disaster. We’ll pay dearly,” Richard Shelby, the top Republican on the Senate’s banking committee, told CNN Sunday.
“Until we straighten out our banking system ... this economy is going to continue to tank,” the Alabama senator said.
Administration officials said on Sunday that just such a program to revive the stricken banking industry and housing market would be presented today by US Treasury Secretary Timothy Geithner.
National Economic Council director Larry Summers said US$350 billion remaining from the Troubled Asset Relief Program would prise open credit markets and include at least US$50 billion for housing.
The funds were freed up when former president George W. Bush in October signed a bill authorizing US$700 billion to buy up distressed mortgage securities and other complex financial instruments.
Instead however, then-treasury secretary Henry Paulson injected about half of the funds directly into struggling banks, with few conditions on how the money was to be spent or accounted for.
The Obama administration has promised tighter controls, including limits on executive pay.
The New York Times yesterday reported that Geithner’s plan to save the foundering US banking system would rely on investors in hedge funds, private equity funds and other financial institutions buying the contaminated assets that wiped out the capital of many banks.
The newspaper, citing unnamed officials, reported that under the plan, the US government would guarantee a floor value for the assets as a way to overcome investors’ reluctance to buy them.