How Bad Will It Get?

Obama Proposes Small Business Rescue Plan

BY Robert Barnes

Download: Obama|Small Business Rescue Plan

Barack Obama today proposed a plan of tax cuts and loans for small businesses hurt by the current credit crisis, a temporary program he said is needed to help Main Street and complement what has already been done for Wall Street. He said the $5 billion Small Business Rescue Plan would be similar to one implemented after the terrorist attacks of Sept. 11, 2001, and would be run through the Small Business Administration. He told a courthouse crowd that the program would be a way of “extending our hand to the shops and restaurants, the start-ups and small firms that create jobs and make our economy grow. Main Street needs relief and you need it now.” He said the plan would make it easier for private lenders to make small business loans by expanding the SBA’s loan guarantee program and eliminating fees for borrowers and lenders.

Obama has previously called for eliminating capital gains taxes on investments in small businesses and start-ups and today proposed an additional temporary business tax incentive through next year to encourage new investments. “Because it’s time to protect the jobs we have and to create the jobs of tomorrow by unlocking the drive, and ingenuity, and innovation of the American people,” Obama said.

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What?

By Andy Barr

Download: McCain|Economic Rescue Plan

Conservative pundits and bloggers expressed outrage Wednesday over John McCain’s plan for the federal government to spend $300 billion to buy up troubled mortgages, announced during his debate with Barack Obama Tuesday night. “Last night, he took that position on the housing issue of buying up everybody’s mortgage,” former Arkansas Gov. Mike Huckabee said on Fox News. “Conservatives are scratching their heads today and saying, ‘What happened?'”

“What on earth is that about?” Huckabee asked. “Then you got to ask, which houses? The condos in southern Florida, where people bought $500,000 homes as a second home and now can’t pay for them? Are we buying those, too?” Conservative columnist and blogger Michelle Malkin couldn’t hold back her disdain for the proposal. “I can’t underscore enough what a rotten idea John McCain’s ACORN-like government mortgage buy-up is,” Malkin wrote on her blog, referring to the controversial Association of Community Organizations for Reform Now, a group reviled by conservatives for its support of liberal ideals and alleged corruption. “Will he propose a similar plan for those who bought mutual funds at or near the market top?”

“Folks, forget about all this policy wonkery,” National Review’s Andy McCarthy advised in the magazine’s online blog, The Corner. “McCain’s policies have driven us crazy for years.” “The thought that he’s going to win this thing on policy is foolish,” McCarthy wrote. “I mean, now, Fan, Fred and $800 billion later, his great idea is to spend a few hundred bill more to buy the bad mortgages? Really gets the juices flowing, doesn’t it?” McCain senior domestic policy adviser Douglas Holtz-Eakin defended the plan in a conference call with reporters, calling it the “best way to go forward.” “Sen. McCain believes this is exactly the right kind of policy. Provide direct help to homeowners; at the same time, support the financial markets and keep them from further damaging the availability of credit to Main Street America, one of the – the real threats to the economy at this point in time,” Holtz-Eakin said.

Under McCain’s plan, the government would purchase mortgages directly from homeowners rather than from banks, and replace the homeowners’ current payments with “manageable fixed-rate mortgages” designed to keep people from defaulting. Taxpayers would cover the difference in cost between the old mortgage and the cheaper one provided by the government. McCain critics said the plan was similar to ones already proposed and scoffed at the notion that it anything new. But among conservatives, the idea of rescuing failed mortgages sparked the same sort of ire as the $700 billion economic bailout recently passed by Congress. “Conservatives groaned in unison when John McCain launched his ‘new’ initiative to renegotiate the principal on home mortgages with owners approaching bankruptcy,” conservative blogger Ed Morrissey wrote.

“Some called this a ‘second bailout,’ and others predicted a massive hit on home values nationwide,” he added. “In fact, this is nothing terribly new nor innovative, and it has as much chance of preserving home values as it does of eroding them.” When introducing his plan during the debate, McCain acknowledged that it carried a high price tag. “Is it expensive? Yes,” McCain said. “But we all know, my friends, until we stabilize home values in America, we’re never going to start turning around and creating jobs and fixing our economy. And we’ve got to give some trust and confidence back to America.” Conservative financial scholar Alex J. Pollock of the American Enterprise Institute said he understands why conservatives are upset, but he sided with McCain nonetheless.

“Nobody who understands the power of free markets likes bailouts, but it is a phase we go through again and again,” Pollock said. “These are not things you’d like to do, but you’re addressing the crisis, so you do it.”

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Hired: CFO; Spending Limit: $700 Billion

“Treasury Secretary Paulson appoints a veteran federal interim CFO to oversee the finances of the office that will buy banks’ illiquid securities.”

By Sarah Johnson

Veteran federal CFO Thomas Bloom has been appointed by Treasury Secretary Henry Paulson as interim finance chief of the newly created Office of Financial Stability. Bloom currently is CFO for the Office of the Comptroller of the Currency. According to the OCC, Bloom will leave his current job for three to four months and report to Neel Kashkari, interim assistant secretary of the Treasury, whom Paulson appointed to head the new office on Monday. Kashkari, whose appointment is subject to Senate approval, is one of Paulson’s senior advisers and formerly served as a Goldman Sachs vice president.

Paulson has acted quickly to fill the leadership roles of the new Treasury office in the days since President Bush extended the agency’s powers to buy banks’ so-called toxic assets, which have crippled the credit markets. With up to $700 billion to spend, the department “is moving rapidly to implement the [new law] to help strengthen financial institutions while also protecting taxpayer interests,” Paulson said yesterday. He added that it will be several weeks before the Treasury makes its first purchase. Bloom has worked at the OCC for nearly five years, and also holds the title of senior deputy comptroller. Patricia Pointer, deputy comptroller for workforce effectiveness at the OCC, will fill in for him in that office. At the OCC, Bloom oversees the agency’s planning and financial management, human resources diversity programs, facilities, and security services, according to the agency’s website.

He has split his career between public accounting and public service. Before the OCC, he was director of the finance team for the Department of Defense, and previously held CFO titles at Commerce and the General Services Administration. At the GSA, he was responsible for a $13 billion annual budget. He also once served as the Department of Education’s inspector general. Prior to working for the federal government, he was a senior audit partner at accounting firm Kenneth Leventhal & Co. He graduated from the University of Michigan in 1975 with a bachelor’s degree in business administration and accounting.

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