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Capitol Hill and the Financial Crisis: A Busy Week

The big bank CEOs returned to Capitol Hill this week, adding to the overall chaos that characterized the American Economy.  In addition to the CEO arrival, Obama’s stimulus plan was pushed through the house and senate.  Geithner outlined his plan as to how this administration plans to distribute the remaining funds for the bank bailout.  A number of banks that will be receiving these funds vowed to suspend or halt home foreclosures for the time being.

The bankers came to Capitol Hill to plead their case to congress, desperate to convince congress that the money they were given-nearly $165 billion combined-has not been used to pay excessive bonuses.  They stated that all of their effort was being put forth to increase lending, and hope to return all of the tax payers’ money by 2012 or sooner.

Timothy Geithner was less exact with the specific amount of money needed to pick up the financial system and increase lending.  Details of Geithner’s plan were vague; however, Geithner did promise promised that more details will follow.

Obama seemed to have better success this week on Capitol Hill, as the House and Senate reached an agreement on his stimulus plan.

The effects of the activity on Capitol Hill this week could not come at a more crucial moment.  It was reported that 6.3 million Americans are on unemployment.  The stimulus plan is key, as part of these funds will increase and extend unemployment to those who qualify.

The biggest banks involved in the escalating foreclosure numbers have vowed to stop foreclosures until early March.  Some said they will wait to hear details from the Obama administration’s loan modification program, which is said to invest at least $50 billion more to prevent foreclosures.  The plan is set to be released in the upcoming week.

Many more of these busy weeks are in store for the government.  The administration is working tirelessly to curb the long term effects that are characterize this recession.  I’m not sure if I trust the bank CEOs, as I have seen no evidence of lending opening up.  I will await details of Geithner’s plan before passing judgment.  The stimulus plan was without a doubt the most promising thing to happen on Capitol Hill this week.

Timothy Geithner’s Important Role

Upon hearing that Barack Obama named Timothy Geithner as the new Secretary of Treasury, the American markets got excited! Then I started to hear and read about this tax issue of $34,000. After all, our President had just named the man that could potentially fix the ever worsening financial crisis we currently face. Timothy Geithner is only 47 and was going to get us out of the deepest recession we have seen in generations.

Timothy Geithner’s management style and economic approach differs strongly from the former Secretary of Treasury, Henry Paulson, who is also the former CEO of Goldman Sachs. Geithner held office in the Treasury Department before working in the New York Fed in 2008. Based upon his background, I think he will have a much better understanding of the bailout and the overall process we must go through to execute the solution successfully. Paulson failed to impress me with his brief attempt to bail out some while letting others fall. He was able to rescue Bear Sterns and AIG, but letting Lehman Brothers fail? Geithner comes into office looking like the steady hand that can handle the crisis and understand our goals on a larger level.

So Long to Declare a Recession

Why did it take so long to declare that America is in a recession?  If a recession is defined as two consecutive quarters of negative growth, then why did the government finally declare that we have been in a recession for 12 months?  I mean come on—did they think the public was that stupid?  You and  I knew it.  We knew it every time we went out to eat, every time we filled up our gas tank, every time we looked at out bank statements, and every time we heard about another close friend getting laid off.  Why did it take  the National Bureau of Economic Research so long to “officially” confirm it? My guess is they didn’t see it when more and more mortgages were going into default.  I guess they didn’t see if after more and more homes were going into foreclosure.  Did they see it   when the government set up $700 billion to bail out the banks?  Well actually we did hear about the recession in early December, so maybe the bailout triggered in the light bulb?

The Stimulus Plan Outlined: Will it Work the Way They hope?

After a series of hard negotiations, we are finally there-or are we?  Will the details of Obama’s stimulus  plan work the way this administration hopes?  We certainly hope so.  If not for me, then for my children, and my children’s children.  This mess is going to cost us in the long run either way, but this question remains: will the amount of money invested in this plan, and the goals it hopes to accomplish,  pull us out of this hole?

Most of the ideas that make up this plan will create jobs instantly/ The crucial question we must ask is whether or not the plan will have significant impact in the long run?  Again, I am optimistic.

Why am I so optimistic, you ask?  Let me give you an example.  The $50 billion that is set to be spent on energy programs focuses on efficiency and renewable energy.  This monetary investment in energy efficiency will create jobs, as it will require jobs that conduct  expanded research.  We will be taking a step toward  a better the future for all mankind as we strive for clean energy.  Actions like these contribute to my overall sense of optimism for the future.

Another aspect of the stimulus plan that brings a smile to my face is the $46 billion being invested in state relief for education.  Some of this money will be used to repair schools and to modernize their facilities and resources.  Again, the need for this action will bring about short term job creation.  Moreover, in both the short and long term, we are taking tangible steps towards bettering the educational environment for our children.  We will be able to provide them with the tools and resources they need to maximize their academic potential.  Giving students the best technology available to them will  ultimately better their future and the country’s future.

While Obama’s stimulus plan is a costly plan, the possible benefits America can reap as a result are too promising to dismiss.  While some of us will not  see first hand the effects of the plan, the changes it will bring about will impact all of our lives in some way.  The lawmakers behind the scenes need to carefully examine the way money is allocated to various parts of the plan.  They have to consider the short term objectives while simultaneously keeping an eye on how every action will affect us in the long term.  By no means is that an easy job for anyone-even an experienced senator.  I do not envy them, as the stakes of this plan involve an entire country’s present and future well-being.