View Full Version : So much for "reforming" The Beast
01-26-2009, 10:12 AM
Lobbyists skirt Obama's earmark ban
By JULIE HIRSCHFELD DAVIS – 6 hours ago
WASHINGTON (AP) — President Barack Obama's ban on earmarks in the $825 billion economic stimulus bill doesn't mean interest groups, lobbyists and lawmakers won't be able to funnel money to pet projects.
They're just working around it — and perhaps inadvertently making the process more secretive.
The projects run the gamut: a Metrolink station that needs building in Placentia, Calif.; a stretch of beach in Sandy Hook, N.J., that could really use some more sand; a water park in Miami.
There are thousands of projects like those that once would have been gotten money upfront but now are left to scramble for dollars at the back end of the process as "ready to go" jobs eligible for the stimulus plan.
The result, as The Associated Press learned in interviews with more than a dozen lawmakers, lobbyists and state and local officials, is a shadowy lobbying effort that may make it difficult to discern how hundreds of billions in federal money will be parceled out.
"'No earmarks' isn't a game-ender," said Peter Buffa, former mayor of Costa Mesa, Calif. "It just means there's a different way of going about making sure the funding is there."
It won't be in legislative language that overtly sets aside money for them. That's the infamous practice known as earmarking, which Obama and Democratic congressional leaders have agreed to nix for the massive stimulus package, expected to come up for a House vote this week.
Instead, the money will be doled out according to arcane formulas spelled out in the bill and in some cases based on the decisions of Obama administration officials, governors and state and local agencies that will choose the projects.
"Somebody's going to earmark it somewhere," said Howard Marlowe, a consultant for a coalition working to preserve beaches.
Lobbyists are hard at work figuring out ways to grab a share of the money for their clients, but the new rules mean they're doing so indirectly — and sometimes in ways that are impossible to track.
Congressional earmarks have had a bad name since the 2004 scandal that sent superlobbyist Jack Abramoff to prison and earned the congressional spending committees a new nickname: "The Favor Factory."
Obama, who campaigned promising a more transparent and accountable government, is advocating a system that will eventually let the public track exactly where stimulus money goes through an Internet-powered search engine. In addition, Democratic lawmakers have devised an elaborate oversight system, including a new board to review how the money is spent.
But none of that will happen until after the bill becomes law. Even critics of the earmarks system acknowledge that specifying projects upfront offers some measure of transparency.
"We hate earmarks, but at least it's a way of tracking where influence is had," said Keith Ashdown of the watchdog group Taxpayers for Common Sense. "There is a challenge now that projects will be added behind closed doors without a paper trail."
Indeed, some lawmakers hearing from local groups say they're doing their own lobbying of governors and state and local officials who could have say-so over the funds.
"I've talked to my governor and suggested some things I think are important in our area," said Republican Rep. C.W. Bill Young, who represents St. Petersburg, Fla. "He knows what the needs are."
Democratic Rep. Ed Pastor of Arizona suggested it's not entirely accurate to say there will be no earmarks in the measure. "There are and there aren't," Pastor said. "A lot of it depends on what the formula looks like."
For instance, the House measure, which includes $358 billion for road, water and energy programs among others, gives priority to transportation projects in high-unemployment areas that could be begun and completed quickly and that state and metropolitan transportation authorities have included in their long-term plans.
In California, Buffa, now board chairman of the Orange County Transportation Authority, said he's changed his strategy from asking for specific projects to pleading for more favorable general guidelines, including more money for infrastructure projects overall and a formula that lets cities — not states — decide how to spend it.
His organization has enlisted Potomac Partners, a large firm that specializes in lobbying for project spending, to help.
In most cases, lawmakers know exactly which projects in their districts can benefit from the money, even though the legislation won't spell them out. State and local officials have released lists of projects that could start quickly and be completed within a few years.
In Orange County, they include freeway improvements and the Placentia Metrolink station. The American Shore and Beach Preservation Association, which is pushing for more water projects to be funded, wants repair and restoration of beaches from Sandy Hook, N.J., to Newport Beach, Calif.
Members of Congress are privately outlining their priorities, too.
"Everybody's making their list and checking it twice," said Sen. Mitch McConnell, R-Ky., the minority leader. "You are inevitably going to have a lot of projects that are not going to pass the smell test."
Some groups are careful not to get too specific, fearing that public scrutiny could draw unwelcome attention to projects easily caricatured as special-interest goodies, such as a 2007 earmark for spinach growers that found its way into an Iraq war spending bill or the now-infamous "Bridge to Nowhere" in Alaska.
The United States Conference of Mayors released a 300-plus-page list of some $150 billion in "ready-to-go" projects that quickly became fodder for criticism. It included money for the Miami water park, which McConnell has ridiculed publicly, and a skate park in Portland, Maine.
The American Association of State Highway and Transportation Officials was more guarded about its list of 5,000 projects totaling $64 billion. No specific projects were mentioned — just the number in each state and an overall dollar amount — making it impossible for lawmakers, advocacy groups or members of the public to criticize any one item.
Peter J. "Jack" Basso, an association executive, said it's up to states to decide what goes on their "ready-to-go" wish lists, but that the projects must meet rigorous tests including clearing environmental reviews.
"We really rely on them to pick things that, frankly, are not bridges to nowhere," Basso said.
01-26-2009, 05:04 PM
Three card monte, every time.
Looks like the county might get that water park after all, infrastructure, yes?
01-27-2009, 03:17 PM
It is one irony on top of another.
I don't believe Paulson and company set out to steal on TARP. I think they woke up one morning and the credit markets were in free-fall and it was time to become instant Keynesians. Put out $2 trillion in Federal Reserve cash, allocate $700 billion for TARP and they're off to the races. Of course, idiot Dems and Republicans start whining, the banks blow the dog whistle and before you know it, not a single dollar goes out for "toxic assets" or mortgage relief and it all goes to the banks, who wait a week to see if they are alive and the ones that are immediately go back to stealing.
"Highway robbery", cries the Congress... and everything shifts to Barack Delano Obama. Meanwhile, the Democratic plan is "Stimulus". It is the cheer of the day: S-T-I-M-U-L-U-S. But the basis of that stimulus can't be government jobs ala FDR. That would be too "slow"... and too "old school". So, instead of government jobs there will be government spending for the private sector - infrastructure (I-N-F-R-A-S-T-R-U-C-T-U-R-E). But, even here, not just any infrastructure but only the projects that are ready to go - "shovel ready" (S-H-O-V-E-L). "That'll work", cry even the "left" Nobels (Stiglitz and Krugman). Perhaps $500 billion of infrastructure spending, each year for two years... why that'll create maybe 2 million jobs. Of course, that is less than what was lost in 2008 alone and it ain't exactly "efficient", but it's "fast", so... for the first time... it's gonna be: "damn the efficiency and full speed ahead". Maybe they can toss another $250 to $500 billion to leverage the States and get them to take on debt and make a few jobs... and, and...
And then the Obama political train pulls into town. "Stimulus", yes, but bipartisanship too... and don't forget the "middle-class tax cuts" and we want 80% of congress to vote for it and, and...
So, now they go to work... and the Tax cuts are a "middle-class tax cut" which amounts to virtually the exact same amount as Bush's "stimulus check" ($187 billion versus $152 billion), and a $100 billion corporate tax cut which won't have any effect at all, and a few hundred billion to the states, but not as "leverage" so much as to make up for state deficits, and a zillion fuckin' projects of which half are much needed relief (but you can't call them "relief" cause that's bad so we call them "stimulus" too), and the other half are not stimulus or relief or "fast", but instead are somebody's bacon. And, by the time we get to "infrastructure", we are really talkin' about only $90 billion. But, magically, this $90 billion (a fifth of what was originally proposed) will NOW create 3 million jobs. And... they know they are lying so they change the words around to read "create or sustain" 3 million jobs... and the whole thing is a fuckin' disaster with everybody callin' everything, "stimulus".
The Republicans are watching this and they know it is the same old Democratic Party racket... but, even if they are right, it is the old monkey and typewriter thing. Even if they are right, they are proven liars and thieves for over two decades so even if they said the sun will rise in the east... "LIARS!". And anyway, they have their own own corruption to fry.
And so now, we have proven that everybody knows exactly, positively what to do and not one of them can do it... so it is up to the fates, the stars, and Greek muses to decide if the economy will recover all on its own or whether there is another huge step downwards, and either way there will be tens of millions (perhaps hundreds) on the edge of survival and not a few will fall off that edge...
And meantime, they could just hire 10 million people tomorrow... deciding later what they would do... and at $70,000 a year, that would only have been $700 billion. But, then everyone would quit their real jobs to take the new phoney-balony ones because they paid a lot more... and then you would have to create more phony jobs and how could you do that without actually producing stuff and then that would compete with the private sector and pretty soon you would end up without one, so...
Better to leave things just as they are.
Kid of the Black Hole
01-27-2009, 03:24 PM
You should do more stream-of-consciousness-y rants, this is classic :)
01-28-2009, 11:31 AM
Not long ago, I was talking to someone who once had been a deficit hawk but had been turned into a full-blooded Keynesian by the current recession. He wanted a stimulus package in the range of $500 billion to $700 billion. "Consumers are dead in the water," he said fervently, "so government has to rev up the economy so they'll start buying again." I agreed. But I didn't tell him that his traditional Keynesianism is based on two highly questionable assumptions in today's world and that Keynes' underlying logic inevitably leads us toward something bigger and more permanent than my friend has in mind.
The first assumption is that American consumers will eventually regain the purchasing power needed to keep the economy going full tilt. That seems doubtful. Median incomes dropped during the last recovery, adjusted for inflation, and even at the start weren't much higher than they were in the 1970s. Families went on a spending binge over the last 30 years despite this because women went into paid work, everyone started working longer hours, and then, when these tactics gave out, went deeper and deeper into debt. This indebtedness, in turn, depended on rising home values, which generated hundreds of billions of dollars in home-equity loans and refinanced mortgages. But now that the housing bubble has burst, the binge has ended. Families cannot work more hours than they did before and won't be able to borrow as much, either.
The rest of the article is bullshit and more of his blame-the-victim talk ("binge") but the message is important:
"The recovery will not be a recovery..."
01-28-2009, 11:40 AM
The Obama administration is close to deciding on a plan to purchase bad—or non-performing and illiquid—assets from banks, according to industy sources. The plan could be announced early next week.
The so-called "bad bank" plan, would address the key problem of how to price the assets by using a model-pricing mechanism.
The model would take account of the government's ability to hold onto assets, even to maturity, and pay for the them with cheap funding. Result: the government might end up paying more than current market prices for the securities.
On the other hand, if the government paid less than the value at which the asset is carried on the bank's books, the bank would issue common equity to the government.
In previous Troubled Asset Relief Program deals, banks issued preferred equity to the federal government. But the conclusion is growing within government circles, sources say, that preferred equity is not sufficient to make the banks healthy.
Clearly, the idea of a "bad bank" is gaining momentum. On Capitol Hill today, Senate Banking Chairman Chris Dodd said he was aware the idea is under discussion and "it makes some sense to me."
The move toward a bad bank concept comes amid growing speculation that banks may need another government bailout.
Goldman Sachs economist Jan Hatzius recently said global credit losses may approach $2.1 trillion. Of that total, banks worldwide have already absorbed about $975 billion in losses, he estimated in a research report, suggesting the worst is far from over.
FBR Capital Markets analysts said eight of the largest U.S. financial institutions need up to $1.2 trillion in new common equity and that "the government is the only entity that can provide bridge capital to get past the current credit crises."
01-28-2009, 05:39 PM
The capitalist market and Obama’s stimulus plan
27 January 2009
Even before the Obama administration's economic stimulus package comes to a vote, the rapidity and scale of job losses in the US makes it clear that it will be woefully inadequate. On Monday alone, corporations including Caterpillar, Pfizer, Home Depot, SprintNextel and GM, announced 74,000 new job cuts.
Even if the White House were to achieve its aim of creating or saving 3-4 million jobs over the next two years, it would not make up for job losses that could be twice as large by the end of 2010. The pace of job-cutting has sharply accelerated since the end of 2008—a year that saw 2.6 million jobs lost, the highest number since 1945.
The overriding principle of Obama's plan is that nothing will be done that impinges on the wealth and prerogatives of America's financial elite. He made this clear in his inaugural address when he hailed the "free market," saying its "power to generate wealth and expand freedom is unmatched." Meanwhile, the new president has dropped any mention of his campaign pledge to rescind Bush's tax cuts for the wealthy.
Despite the talk of a "21st century New Deal," the $825 billion package includes no proposals for government public works projects, let alone plans to hire the millions who have lost their jobs. Ninety percent of the newly created jobs will be in the private sector. Major corporations are already lining up and licking their chops in anticipation of profit windfalls as private contractors for government-funded programs.
A third of the package will be used to pay for tax cuts, half of which are for big business. The House bill includes $7.7 billion in grants for investors in renewable energy, while the Senate Finance Committee inserted a provision that would give companies tax relief on forgiven debt, a measure for which the US Chamber of Commerce and casino giant Harrah's Entertainment lobbied hard.
Less than a third of the proposal—including just $30 billion for roads and $10 billion for transit and rail—will be used for infrastructure repair, under conditions in which the American Society of Civil Engineers estimates that it would cost at least $1.6 trillion to bring the country's crumbling bridges, roads and schools back to "good condition." Robert Yaro, the president of the Regional Plan Association, which has guided civic projects in the New York metropolitan area since 1929, told the New York Times, the infrastructure proposal was a "drop in the bucket."
There is no aid for homeowners facing foreclosure—a number which could rise to as many as 10.2 million in the next four years, according to estimates by Credit Suisse—nor the tens of millions more who owe far more on their homes than they are worth due the sharpest decline in housing prices since the Great Depression. Millions more have seen their life savings wiped out due to the falling value of their 401 (K) retirement plans, but they merit no help either.
The stimulus package provides only minimal relief to the unemployed in the form of extended jobless benefits and money to help laid off workers keep their medical coverage. In addition, there is about $87 billion to help states pay increasing Medicaid health insurance for the poor.
None of these measures are a solution to the crisis because they do not address its source: the decades-long decline of American capitalism and the systematic drive by the corporate and financial elite to starve industry and basic infrastructure of investment in order to reap billions in the most parasitic forms of a financial speculation.
It is striking that the stimulus plan includes no measures to rebuild the shrunken industrial base of the country. This is one more indication of the degree to which it is tailored to the needs of the financial aristocracy. The financial elite has no interest in rebuilding basic industry because it can amass far higher profits from financial speculation than it can from investment in basic production—even as it uses mass unemployment and the threat of bankruptcy to drive down the wages and increase the exploitation of the working class.
Moreover, there is no merely national solution to the crisis, which is a catastrophic failure of the world capitalist system.
In the 1930s, the New Deal measures taken by Franklin Roosevelt put nearly 4 million unemployed workers to work building roads, bridges, dams, schools and other public projects. However, even these measures—possible only in a country with unmatched industrial and financial resources—failed to end the Great Depression. A partial recovery collapsed in 1937, and unemployment once again surged. It took a world war and the deaths of nearly 80 million people to revive the world capitalist economy and create the conditions for the post-war boom.
Unlike the 1930s, however, the US is not the rising economic hegemon, but the world's most indebted nation. Moreover, the American ruling class—which has enriched itself over the last three decades through the systematic dismantling of the reforms of the past—has no intention of allowing any encroachment on its power and wealth. A huge amount of the stimulus money will find its way into the bank accounts of major financial houses, corporations and the wealthiest one percent of the population.
What then are the motives behind the stimulus package?
The first is to stave off a complete collapse of consumer spending and avert a deflationary spiral that would lead to a full-scale depression.
The second is to provide at least the semblance of relief for those facing economic distress in order to contain growing social discontent over a disaster precipitated by the recklessness and avarice of the super-rich.
Finally, the measure is aimed at providing political cover as the White House and Congress prepare to launch another, even more massive bailout of Wall Street and the banks.
The stimulus package pales in comparison to $8 trillion already handed out in loans, grants and financial guarantees to the banks, which have used the public assets not to free up credit for consumers and businesses—bank loans have actually decreased—but to finance a wave of mergers that are further consolidating the grip of financial and corporate monopolies over the economy.
The cost of the bailout will be borne by the American public itself, as Obama and his advisors have made clear in public statements calling for cuts in vital social programs such as Social Security and Medicare.
There is increasing speculation in the media that the Obama administration might be forced to "nationalize" the banks. If carried out, this measure would have nothing to do with exerting public control over Wall Street. Instead, taxpayers would assume responsibility for the worthless assets held by the banking giants so they could take these liabilities off their books and once again become profitable. After a temporary period of government direction, the banks would be turned over once again to private investors, who would buy the now lucrative shares for pennies on the dollar.
As the New York Times noted Monday, "Mr. Obama's advisors say they are acutely aware that if the government is perceived as running the banks, the administration would come under enormous political pressure to halt foreclosures or lend money to ailing projects in cities or states with powerful constituencies, which could imperil the effort to steer the banks away from the cliff."
The stimulus package, like the bailout of the banks, is predicated on the profit interests of the most powerful sections of the capitalist class. There cannot be any rational or socially progressive solution to the crisis within t
he framework of the present economic and political system.
To assert their own interests working people will have to break with the Democrats and Republicans and mobilize their strength against the Obama administration. Only the creation of a workers' government and the establishment of real democratic rule by the majority can break the power of the financial aristocracy and make possible the reorganization of economic life to meet the needs of society as a whole.
A socialist policy will include the nationalization of the banks and basic industries under public ownership and democratic control by the working class, the input of working people into all economic decision-making, and emergency measures to protect the jobs and homes of workers, including a reduction in work hours with no loss of pay and a ban on all home foreclosures and evictions.
01-28-2009, 05:44 PM
House hurries to pass economic stimulus bill
WASHINGTON – Moving with remarkable speed, the Democratic-controlled House lined up eagerly Wednesday to approve $819 billion in spending increases and tax cuts at the heart of President Barack Obama's economic recovery program. Republicans fought the bill as wasteful. "We don't have a moment to spare," Obama declared at the White House as Democrats hastened to do his bidding.
A mere eight days after Inauguration Day, Speaker Nancy Pelosi heralded a new era. "The ship of state is difficult to turn," said the California Democrat. "But that is what we must do. That is what President Obama called us to do in his inaugural address."
With unemployment at its highest level in a quarter-century, the banking industry wobbling despite the infusion of staggering sums of bailout money and states struggling with budget crises, Democrats said the legislation was desperately needed.
"Another week that we delay is another 100,000 or more people unemployed. I don't think we want that on our consciences," said Rep. David Obey, D-Wis., chairman of the House Appropriations Committee and one of the leading architects of the legislation.
Republicans said the bill was short on tax cuts and contained too much spending, much of it wasteful and unlikely to help laid-off Americans.
The party's leader, Rep. John Boehner of Ohio, said the measure "won't create many jobs, but it will create plenty of programs and projects through slow-moving government spending."
The legislation includes an estimated $544 in federal spending and $275 billion in tax cuts for individuals and businesses.
Included is money for traditional job-creating programs such as highway construction and mass transit projects. But the measure tickets far more for unemployment benefits, health care and food stamp increases designed to aid victims of the worst economic downturn since the Great Depression of the 1930s.
Tens of billions of additional dollars would go to the states, which confront the prospect of deep budget cuts of their own. That money marks an attempt to ease the recession's impact on schools and law enforcement. With funding for housing weatherization and other provisions, the bill also makes a down payment on Obama's campaign promise of creating jobs that can reduce the nation's dependence on foreign oil.
The centerpiece tax cut calls for a $500 break for single workers and $1,000 for couples, including those who don't earn enough to owe federal income taxes.
The House vote marked merely the first of several major milestones a for the legislation, which Democratic leaders have pledged to deliver to the White House for Obama's signature by mid-February.
Already a more bipartisan — and costlier — measure is taking shape in the Senate, and Obama personally pledged to House and Senate Republicans in closed-door meetings on Tuesday that he is ready to accept modifications as the legislation advances.
Rahm Emanuel, a former Illinois congressman who is Obama's chief of staff, invited nearly a dozen House Republicans to the White House late Tuesday for what one participant said was a soft sales job.
This lawmaker quoted Emanuel as telling the group that polling shows roughly 80 percent support for the legislation, and that Republicans oppose it at their political peril. The lawmaker spoke on condition of anonymity, saying there was no agreement to speak publicly about the session.
In fact, though, many Republicans in the House are virtually immune from Democratic challenges because of the makeup of their districts, and have more to fear from GOP primary challenges in 2010. As a result, they have relatively little political incentive to break with conservative orthodoxy and support hundreds of billions in new federal spending.
Also, some Republican lawmakers have said in recent days they know they will have a second chance to support a bill when the final House-Senate compromise emerges in a few weeks.
That gave an air of predictability to the proceedings in the House, as Democrats defended the legislation as an appropriate response to the specter of double-digit unemployment in the near future.
Rep. Randy Neugebauer, R-Texas, sought to strip out all the spending from the legislation before final passage, arguing that the entire cost of the bill would merely add to soaring federal deficits. "Where are we going to get the money," he asked.
Obey had a ready retort. "They don't look like Herbert Hoover, I guess, but there are an awful lot of people in this chamber who think like Herbert Hoover," he said, referring to the president whose term is forever linked in history with the Great Depression.
Greenspan backs bank nationalisation (http://www.ft.com/cms/s/0/e310cbf6-fd4e-11dd-a103-000077b07658.html)
By Krishna Guha and Edward Luce in Washington
Published: February 18 2009 00:06 | Last updated: February 18 2009 00:06
The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman, has told the Financial Times.
In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.
”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”
Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.
“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”
Speaking to the FT ahead of a speech to the Economic Club of New York on Tuesday, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.
The former Fed chairman said temporary government ownership would ”allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”
But he cautioned that holders of senior debt – bonds that would be paid off before other claims – might have to be protected even in the event of nationalisation.
”You would have to be very careful about imposing any loss on senior creditors of any bank taken under government control because it could impact the senior debt of all other banks,” he said. “This is a credit crisis and it is essential to preserve an anchor for the financing of the system. That anchor is the senior debt.” (More at the link)
02-25-2009, 05:54 PM
Big banks face 'stress tests' from regulators
Treasury says biggest banks face 'stress tests' to gauge capital needs amid recession
* Christopher S. Rugaber, AP Economics Writers
* Wednesday February 25, 2009, 4:18 pm EST
WASHINGTON (AP) -- The Obama administration hopes to restore confidence in the nation's ailing financial sector by subjecting 19 of the largest banks to "stress tests" that will gauge whether each institution has adequate capital to survive a severe downturn.
Banks that need new funds will be given six months to obtain it from the private sector or, failing that, from the federal government's $700 billion bank rescue program, the Treasury Department said Wednesday.
Treasury officials said the new support will be provided through the government's purchase of preferred shares of the bank stock that are convertible into common shares at a 10 percent discount to their price before Feb. 9.
The preferred shares will carry a 9 percent dividend and be convertible at the bank's option, but subject to regulatory approval.
The option to convert the preferred shares into common shares is a change in the rescue program designed to give the government greater flexibility in managing its assistance.
Common shares absorb losses before preferred shares do, which means that under a stock-conversion plan taxpayers would be on the hook if banks keep writing down billions of dollars' worth of rotten assets, such as dodgy mortgages, as many analysts expect they will.
However, common stock in banks is incredibly cheap, and taxpayers would reap gains if the banks come back to health and the stock price rises.
The Treasury Department also provided details of how a new stress test will function to ensure banks have enough capital to survive a downturn that would be even more severe than the current recession. The tests will be conducted by bank regulators, including the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision.
Government officials hope the tests will boost market confidence in the banks by making it clear the institutions either have the necessary capital to weather a major downturn, or will obtain it from private investors or the government.
The results will help regulators decide whether banks may need additional assistance so they can carry out the critical mission of boosting lending to customers, a key ingredient to the economic turnaround.
Bank regulators said they wouldn't release the tests' results, but the banks will likely make some disclosure of the outcome, particularly if it shows they don't need more capital. Banks that seek private capital likely will indicate how much they need and the government will announce any new investments.
Administration officials did not say whether they expect to request more taxpayer money to fund the next round of investments in banks, beyond general statements that they would provide the capital that banks need.
But in his speech to Congress Tuesday evening, President Barack Obama said more money beyond the $700 billion committed last year would be needed. Saying he understands bank bailouts are unpopular, he insisted it was the only way to get credit moving again to households and businesses. He also called on Congress to move quickly on legislation to overhaul regulations on the nation's financial markets.
Meanwhile, Fed Chairman Ben Bernanke on Wednesday again spurned speculation that the government may nationalize Citigroup Inc. or other large financial institutions.
During an appearance before the House Financial Services Committee, Bernanke said nationalization "is when the government seizes the bank and zeros out the shareholders and begins to manage and run the bank. And, we don't plan anything like that."
But the Fed chief said it is possible the government could end up with a much bigger ownership stake in Citigroup or other banks. In the case of Citigroup, Bernanke said "we'll see how their test works out and what evolves."
Citigroup has been involved in talks with regulators over ways the government could help strengthen the bank, including use of the stock conversion plan. New York-based Citigroup already has received $45 billion in bailout money, plus guarantees to cover losses on hundreds of billions of dollars in risky investments.
The new stress tests will use two economic scenarios to gauge banks' health and are expected to be completed by the end of April.
The "baseline" scenario envisions the nation's gross domestic product, which is the value of all goods and services produced within the U.S. and the broadest barometer of the country's economic health, falling 2 percent this year, unemployment rising to 8.4 percent and home prices dropping 14 percent.
The "adverse" scenario assumes GDP will drop 3.3 percent, unemployment rising to 8.9 percent and home prices falling 22 percent this year.
For all of 2008, GDP rose 1.3 percent, which was the smallest increase since 2001. In the fourth quarter, GDP fell 3.8 percent, the biggest contraction since 1982.
The unemployment rate last month surged to 7.6 percent, the highest in more than 16 years. It was 5.8 percent last year, the highest since 2003.
Median home prices in the U.S. fell 9.5 percent last year, according to the National Association of Realtors, though many big cities like Los Angeles, Las Vegas and Miami showed far larger declines.
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