Wall Street Journal — U.S. Eyes Large Stake in Citi
The Obama White House was adamant over the weekend that there was no plan to nationalize major U.S. Banks as was being reported in many quarters. But reporters David Enrich and Monica Langley discovered that the administration is in talks to take over up to 40 percent of Citigroup stock and establish new rules for governance – nationalization lite.
While administration officials tell the Journal that they may wait months before going through with the plan, but stockholders are already nervous that their investments in the bank may get wiped out. Critics are worried that the shift could be another interim step toward full government control.
“If the deal gets nailed down, it will be Washington’s third effort to aid Citigroup since last fall. In October, the Treasury Department put a total of $125 billion into eight giant financial institutions, including $25 billion to Citigroup, in exchange for preferred shares and warrants to buy stock.
Then, shortly before Thanksgiving, the government agreed to infuse another $20 billion into Citigroup as its stock tumbled. It also agreed to protect the banking company against most losses on a $301 billion pool of assets.”
Forbes — Obama Turns To Deficit-Cutting
In meetings with a bipartisan group on entitlement reform, with his address to Congress and with his budget rollout on Thursday, President Barack Obama is looking to reclaim the high ground on fiscal responsibility.
Writers Brian Wingfield and Daniel Indiviglio provide a handy look ahead to what the White House is going to do to achieve its stated goal of halving the $1.2 trillion budget deficit in three years. There are only a few places where the president is looking for $533 billion.
“The president’s full budget won’t be released until April, but the overview being issued Thursday will provide the first real assessment of this administration’s spending priorities. According to a White House official, the savings will result primarily from winding down the Iraq war, raising taxes on people who make more than $250,000 and trimming or eliminating yet unnamed wasteful government programs. The cuts would put the deficit at about 3% of GDP.”
New York Times — Obama Finds Resistance in His Party on Addressing Social Security
Part of the Obama administration’s long-term plan for fiscal restraint relies on the reordering of entitlement programs like Social Security and Medicare. But as Jackie Calmes found, Democrats are not eager to address problems that may not approach calamitous levels for another decade.
“Despite Mr. Obama’s interest, his political and policy advisers are divided, with most arguing that taking on Social Security would overload a legislative system already strained by the economy and war.
Within the administration, ‘the question is whether it helps you in moving the rest of the agenda or hurts you,’ said John D. Podesta, an informal adviser to Mr. Obama and former chief of staff to President Bill Clinton who is now head of the Center for American Progress, a left-leaning research group.
Washington Post — Governors Hope to Guide Spending of Stimulus Funds
When he meets with the nations governors today, President Barack Obama will announce that he has tapped former Secret Service agent Earl Devaney, who led the recent blockbuster investigation into Interior Department corruption, to be the watchdog on stimulus spending. And much of what the White House has floated to reporters in advance of today’s meeting has been about just how stringent the standards for waste, fraud and abuse.
But as writer Philip Rucker points out, for the fiscally disciplined and competent governors are feeling hamstrung by the limits imposed by the mega spending bill.
“Indiana Gov. Mitch Daniels (R) said that the stimulus money is ‘already in fairly narrow buckets’ and that the Obama administration should give states discretion in spending it.
‘If they really want to see the money put to work quickly, they would take a radically — radically for Washington — flexible attitude for the use of it,’ Daniels said. ‘What I’m afraid we’re going to get instead is a micromanaged structure.’”
Wall Street Journal — Bankruptcy Funding Solicited for Car Makers
The fallout from the plans submitted by automakers last week is starting to filter out. Since the plan for small concessions and big loans doesn’t seem to be workable, the government is ramping up preparations for bankruptcy reorganization.
Writers Jeffery McCracken and Philip Stoll look at what might happen if car makers are placed under bankruptcy protection.
“GM said it might need as much as $100 billion in financing from the government if it were to go through the conventional bankruptcy process. GM’s $100 billion estimate stems from the belief that it would suffer “catastrophic revenue reduction impact” in a prolonged conventional Chapter 11 process, as it would expect to sustain as much as an 80% decline in sales after a bankruptcy filing. GM would need financing not only so it could weather the storm, but also to help its suppliers and dealers survive.”
