Treasury Secretary Timothy Geithner said Thursday the economy has regained enough strength to allow a shift in the government’s strategy from rescue to preparing for future growth.
Appearing before the Congressional Oversight Panel for the $700-billion Troubled Asset Relief Program, Geithner said the economy was in far better shape now than a year ago when it was “on the verge of collapse,” though it still had problems.
“As we enter this new phase, we must begin winding down some of the extraordinary support we put in place for the financial system,” Geithner said.
He said banks that received capital injections in the form of taxpayer-provided funds have repaid more than $70 billion, reducing the government’s total investment to $180 billion.
“We now estimate that banks will repay another $50 billion over the next 12 to 18 months,” he added.
Another senior Treasury official told reporters earlier that Treasury will allow its money market mutual fund guarantee program to expire on Sept. 18.
The backstop program was created a year ago to prevent panic withdrawals of $3.4 trillion in savings after a key fund “broke the buck” when its net asset value per share fell below $1.
The program took in $1.2 billion in fees from funds, but has not had any payouts.
Geithner boasted that the economy now was “back from the brink” of a free fall that it was in when the Obama administration took office in January, though he cautioned recovery will be gradual at best.
Still, he cited several signs of progress, including the fact that the government no longer feels it needs a contingency in the budget for another $750 billion in stabilization funds.
“Today, we believe that money is unlikely to be necessary and we have removed it from budget provisions, lowering this year’s deficit,” Geithner said.
Treasury does intend to press ahead with so-called public-private investment funds to buy toxic assets.
The senior Treasury official predicted that the first purchases should occur by early October.
The official said there was a “great deal of interest” in purchasing toxic assets among investors and money managers running the funds, but the appetite among banks to sell their toxic assets has been less than anticipated.
“We thought it would be necessary for banks to sell some of these assets in order to attract private capital.
It turned out that they were able to raise the capital without selling the assets,” the official said.
Geithner said that by providing support for U.S. automakers, the government avoided substantial job losses and that a specially assembled Auto Task Force had avoided intervening in day-to-day decisions by management of General Motors Corp and Chrysler Corp.
“Such intervention could seriously undermine the companies’ long-term viability and, consequently, their ability to repay the taxpayer for its investment,” Geithner said.
He cited a litany of problems still facing the economy, including “unacceptably high” unemployment, a shaky mortgage market outside those covered by mortgage finance sources Fannie Mae and Freddie Mac, strained financing for commercial real estate enterprises and tight credit for small business.
Given those conditions, “it is realistic to assume recovery will be gradual, with more than the usual ups and downs,” Geithner warned.
I’ve put some of the predictions or promises in bold above. Let’s check in periodically to see how they hold up.
* Bob Roddis passes along a good anti-Fed point about GDP volatility.
* Here and here conservative Christian Jared Wilson actually decides not to vote anymore, because of the hysteria over Obama’s talk to school kids. I agree that my talk radio boys really blew this one. I can’t remember who said specifically what, but I know that before the speech, the generally theme was, “Don’t get me wrong, folks, it’s fine if the President of the United States wants to give a generic speech about hard work and staying in school. But that’s not what Barack Obama is up to with this. If he brings up health care…” And then when Obama gave a speech that Ronald Reagan could have (and actually did), there was of course no recognition of, “OK I overreacted” or “I guess we scared them back into line with our protests.” No, it was, “You see folks? This is all conservative philosophy. The left has to steal our principles when they want to appeal to the American people. If Obama said what he really believes in that speech, you can bet it would have made parents run.” (Just to clarify, I TOTALLY OPPOSE the president of the US giving a speech directly to kids, during school hours. But my point is, Obama did exactly what a bunch of the AM guys said they would have no problem with, and they proceeded to have a problem with it.)
* Time to jack up alcohol taxes?
* Tom Woods gets medieval on some poor leftist blogger.
So, for those who are convinced that Obama is the Manchurian Candidate, this certainly isn’t reassuring:
President Barack Obama will make history later this month when he takes the head seat at the table of the United Nations 15-member Security Council. Amazingly, President Obama will become the first United States president to chair the important international council, which deals with issues of global security, including nuclear disarmament.
Now here’s the really odd thing. I wanted to link to this story at a news site more reputable than “ChattahBox.” But doing a google news search for “obama un security council,” I couldn’t find any mainstream publications covering this. It was only ChattahBox and a few other political blogs.
So, is the story a fabrication? If not, isn’t that just a bit odd, that the first time in history the US president is going to head the UN Security Council, and no major news organization even mentions it? Do I just need to refine my google skills, or is this Point Set Match for the Bilderberg Group?
How do you guys and gals feel about this? I can’t decide. On the one hand, I think it’s great that someone shatters the mystique of a presidential address. On the other hand, how incredibly tacky.
Watch Biden and Pelosi during this short clip. Biden looks crushed; “I can’t believe these Republicans.” Pelosi is more pro-active, trying to find who said it and presumably preparing a list of 5 ways he can accidentally die.
One last thing: Of all the lies Obama told during this speech–I didn’t watch it, so I’m going out on a limb–was the funding of health care for illegal immigrants really the most outrageous? Why do so many right-wingers object doubly so when their paychecks are raided in order to pay for Mexicans as opposed to Texans?
My son has lately been in the habit of assigning gender to everything in sight. E.g. “The table, it’s a girl.” (When he’s a bit older I can explain that they do this in France. But we’re Americans!)
He is also at that awkward stage where he can take care of his potty business but needs adult supervision. After relieving himself, he pointed in the potty and said, “The poopy, it’s a boy.”
How astute! I’ve heard many women state this truism (or actually its reverse), but never at such a young age.
I guess deep down I knew it was all an act, but this clinches it. Watch the first one if you haven’t already (just the first 50 seconds), and then the “explanation.” *sigh* Go ahead and call me a fool in the comments, but I was holding out hope. I can’t make excuses any more.
* Jeff Tucker says some very politically incorrect things about higher education.
* Rob Bradley discusses the Houston Chronicle science reporter’s public doubts on the “consensus” that he had been confidently told four years ago. (And if you don’t trust anything from Rob Bradley, here is the Chronicle reporter’s post. Nothing “anti-science” in there, it seems to me. Just saying, “Whoa, four years ago I was told this was a slam-dunk, and now even some top IPCC people are saying we might have a decade or two of cooling from this point. Huh?”)
* Scott Sumner doesn’t let Krugman off the hook (in his “What Went Wrong With Economics?” 8-pager) as easily as I did. Scott shows that Krugman’s apparently fair and balanced survey of what happened in the last few years, doesn’t jibe with Krugman’s blog posts. Specifically, in his Solomonic magazine piece, Krugman says that the Fed did what it could but failed, whereas Scott shows that this doesn’t fit in with what Krugman knows about options the Fed could have tried.
* Glenn Greenwald explains the ruling against Ashcroft. This is some scary stuff. For those who think Obama at least spared us “another Bush,” try this:
The real significance of this case is that it highlights the dangers and evils of preventive detention — an issue that will be front and center when Obama shortly presents his proposal for a preventive detention scheme, something he first advocated in May. What Ashcroft is accused of doing illegally is exactly the same thing Obama wants the legal power to do (except that Obama’s powers would presumably apply to foreign nationals, not citizens): namely, order people imprisoned as Terrorist suspects — “preventively detained” — where there is insufficient evidence to prove they committed any crime.
I really urge everyone to read the section of the court’s decision which sets forth in a concise, clear and non-legalistic manner the facts of what was done to al-Kidd by the DOJ: it’s just 3 pages long, beginning on page 12271 [.pdf] (“Facts and Procedural Background”) through 12274 (the three pages after that, also highly recommended, detail Ashcroft’s culpability in creating this nefarious, illegal detention scheme). Please just go read this 3-page section laying out the facts of what was done to al-Kidd’s life and what preventive detention powers allow the Government to do. Anyone who supports Obama’s call for a preventive detention scheme is, by definition, supporting things like this (though, if anything, what happened to al-Kidd — as horrible as it is — is short and innocuous compared to what a “prolonged detention” scheme would permit: years of indefinite, charge-free imprisonment).
(I was going to scan the 3-page description and post the most unsavory things, but I leave it as an exercise for the reader.)
* Dan Kish sends me this link [.pdf] with the note, “I think you might find this book familiar.” Hmm, indeed.
* Mario Rizzo continues to explain how ridiculous the pro-stimulus arguments from the Administration are, but he decides to get a little saucy:
At the outset of the Obama Administration, as Greg Mankiw reminds us, their economists laid out a series of predictions about where the unemployment rate would be with the stimulus package and without it. Currently, the economy is doing worse than their predictions of unemployment without the stimulus and, of course, much worse than the predictions with stimulus.
You wouldn’t know this from the statements being made by Obama, Romer, Summers, et al. All of those statements focus on the second derivative: the unemployment rate is growing less quickly than before.
Now it is a “well-known” constant of economics that, in the absence of fiscal stimulus, the rate of increase in unemployment never falls. The big debate among economists is whether that rate remains constant or increases — in the absence of stimulus.
Now it is quite impossible for the rate of increase itself to increase without limit. So I guess the law must be: In the absence of stimulus the rate of increase will remain constant until no one is employed. Or perhaps until the Great Depression’s famous unemployment rate of 25 percent is reached.
In case he is too clever by half here, what Rizzo means is that even with no stimulus, obviously at some point the recession would have bottomed out, and the rate of increase of jobless workers would first have dropped, until finally it became negative (i.e. net jobs started to be added to the economy). So for the Administration tools to say, “The stimulus is working! The economy is shedding fewer jobs per month now, than it was before the money kicked in!” is a complete non sequitur.
* Due to my email to Jeff Hummel, Bob Higgs has clarified his assertion about real wages falling in the 1920-1921 depression. See? Who would have thought one email could change the world. (Note that Higgs and I were both unjustifiably confident in our position; Hummel slapped back my email and then I said something like, “Whoa you should send this to Higgs because he made the same mistake.”)
* I have been sitting on the latest Auburn/GMU skirmish (concerning Mises’ views of fractional reserve banking) because obviously, you don’t casually throw down against the combined forces of Horwitz, Rizzo, and O’Driscoll. But I’ve got a bunch of traveling coming up, so I’m not going to get hip-deep into quotations from various editions of The Theory of Money and Credit. Let me just relate this anecdote:
At a party at Tom Woods’ house, I actually managed to get Bob Lawson and Walter Block to call a truce. They were going at it, fueled by righteous indignation and alcohol [UPDATE: Walter emailed me and said he doesn't drink, so I mistook his Diet Coke for alcohol, sorry], and I said something like this: “OK what about this compromise? Bob is telling Walter that there is no way a modern financial economy is going to do business with all current banking operations turning into 100% reserves. Walter keeps insisting that two people can’t have a simultaneous claim to the same piece of property. So, what if Bob’s predictions are right, but what happens is that the volume of checking deposits shrinks considerably, to be replaced by an increase in very short-term loans?” Believe it or not, they both seemed happy with my suggestion.
In this blog post Karen DeCoster talks about a fire chief who was shot in court by police officers, and then says, “The police department in this town exists to steal from and harass its residents.” I thought, “Ah yes, the LRC hyperbole we’ve all [well some of us] come to love and expect.” So I clicked on the link to see if there were some specific thing that drove Karen to say that, since her beliefs mean that all police departments exist to steal from and harass residents (since taxation = theft in pure libertarian theory).
Well guess what? Karen wasn’t joking. This has to be one of the craziest AP stories I’ve ever read. Did you even think this was possible before reading the story? (Or I should say, did you think it was possible that it would be reported so brazenly?)
I was going to try to edit out the extraneous stuff, but really, you just have to read this whole thing. Otherwise you’ll think I cut out the “explanatory” portions.
JERICHO, Ark. – It was just too much, having to return to court twice on the same day to contest yet another traffic ticket, and Fire Chief Don Payne didn’t hesitate to tell the judge what he thought of the police and their speed traps.
The response from cops? They shot him. Right there in court.
Payne ended up in the hospital, but his shooting last week brought to a boil simmering tensions between residents of this tiny former cotton city and their police force. Drivers quickly learn to slow to a crawl along the gravel roads and the two-lane highway that run through Jericho, but they say sometimes that isn’t enough to fend off the city ticketing machine.
“You can’t even get them to answer a call because normally they’re writing tickets,” said Thomas Martin, chief investigator for the Crittenden County Sheriff’s Department. “They’re not providing a service to the citizens.”
Now the police chief has disbanded his force “until things calm down,” a judge has voided all outstanding police-issued citations and sheriff’s deputies are asking where all the money from the tickets went. With 174 residents, the city can keep seven police officers on its rolls but missed payments on police and fire department vehicles and saw its last business close its doors a few weeks ago.
“You can’t even buy a loaf of bread, but we’ve got seven police officers,” said former resident Larry Harris, who left town because he said the police harassment became unbearable.
Sheriff’s deputies patrolled Jericho until the 1990s, when the city received grant money to start its own police force, Martin said.
Police often camped out in the department’s two cruisers along the highway that runs through town, waiting for drivers who failed to slow down when they reached the 45 mph zone ringing Jericho. Residents say the ticketing got out of hand.
“When I first moved out here, they wrote me a ticket for going 58 mph in my driveway,” 75-year-old retiree Albert Beebe said.
The frequent ticketing apparently led to the vandalization of the cruisers, and the department took to parking the cars overnight at the sheriff’s department eight miles away.
It was anger over traffic tickets that brought Payne to city hall last week, said his lawyer, Randy Fishman. After Payne failed to get a traffic ticket dismissed on Aug. 27, police gave Payne or his son another ticket that day. Payne, 39, returned to court to vent his anger to Judge Tonya Alexander, Fishman said.
It’s unclear exactly what happened next, but Martin said an argument between Payne and the seven police officers who attended the hearing apparently escalated to a scuffle, ending when an officer shot Payne from behind.
Doctors in Memphis, Tenn., removed a .40-caliber bullet from Payne’s hip bone, Martin said. Another officer suffered a grazing wound to his finger from the bullet.
Martin declined to name the officer who shot Payne. It’s unclear if the officer has been disciplined.
Prosecutor Lindsey Fairley said Thursday that he didn’t plan to file any felony charges against the officer or Payne. Fairley, reached at his home, said Payne could face a misdemeanor charge stemming from the scuffle, but that would be up to the city’s judge. He said he didn’t remember the name of the officer who fired the shot.
Payne remains in good condition at the Regional Medical Center at Memphis. He referred questions to his lawyer.
“I know that he was unarmed and I know he was shot,” Fishman said. “None of that sounds too good for the city to me.”
After the shooting, Martin said police chief Willie Frazier told the sheriff’s department he was disbanding the police force “until things calm down.” The sheriff’s department has been patrolling the town in the meantime.
A call to a city hall number listed as Frazier’s went to a fax machine. Frazier did not respond to a written request for comment sent to his office.
Alexander, the judge, has voided all the tickets written by the department both inside the city and others written outside of its jurisdiction — citations that the department apparently had no power to write. Alexander, who works as a lawyer in West Memphis, resigned as Jericho’s judge in the aftermath of the shooting, Fairley said. She did not return calls for comment.
Meanwhile, sheriff’s deputies want to know where the money from the traffic fines went. Martin said that it appeared the $150 tickets weren’t enough to protect the city’s finances. Sheriff’s deputies once had to repossess one of the town’s police cruisers for failure to pay on a lease, and the state Forestry Commission recently repossessed one of the city’s fire trucks because of nonpayment.
City hall has been shuttered since the shooting, and any records of how the money was spent are apparently locked inside. No one answered when a reporter knocked on the door on Tuesday.
Mayor Helen Adams declined to speak about the shooting when approached outside her home, saying she had just returned from a doctor’s appointment and couldn’t talk.
“We’ll get with you after all this comes through,” Adams said Tuesday before shutting the door.
A white Ford Crown Victoria sat in her driveway with “public property” license plates. A sales brochure advertising police equipment sat in the back seat of the car.
Wasn’t there an awful Chevy Chase / Dan Akroyd movie about this town?