Barack Obama - The Economy

Timeline

The significant items related to the economy since President Obama assumed office are listed below.

• January 15, 2009 - The Senate votes to give President Obama the second half of the stimulus funds
• February 17, 2009 - President Obama signs the stimulus into law
• March 18, 2009 - The first round of quantitative easing is announced
• November 3, 2010 - The second round of quantitative easing is announced
• July 21, 2010 - Wall Street Reform legislation signed into law

The Stimulus

President Obama began touting the stimulus after the 2008 presidential election and even before assuming office. Due to the size of data available on the American Recovery and Reinvestment Act for President Obama, that subject is dealt with separately here.

Quantitative Easing

On March 28, 2009 the Federal Reserve issued a statement noting that it was planning to buy $300 billion of longer-term Treasury Securities over the next six months.

Release Date: March 18, 2009

For immediate release
Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Use of TARP Funds for Job Creation

On December 8, 2009 the White House announced that it would be taking the remaining TARP funds and using it for programs to stimulate job growth. The President made the announcement at the Brookings Institution in Washington, DC.

The White House

Office of the Press Secretary

For Immediate Release December 08, 2009
President Obama Announces Proposals to Accelerate Job Growth and Lay the Foundation for Robust Economic Growth

Today, the President laid out some of the broad steps that he believes should be at the heart of our efforts to help put Americans back to work and get businesses hiring again. This announcement is part of the President’s ongoing effort to take every responsible step to accelerate the pace of job growth. The President views every bill through the prism of job growth and will continue to explore additional approaches as well. These measures are part of the overall policy designed to not just create jobs in the short run but also shift America away from consumption-driven growth to a focus on enhancing the competitiveness of America’s businesses, encouraging investment, and promoting exports.

The bold and difficult steps the President took to stabilize the financial system have reduced the cost of TARP by more than $200 billion, providing additional resources for job creation and for deficit reduction.

I. THREE KEY AREAS FOR ACCELERATING JOB GROWTH

1. Helping Small Businesses Expand Investment, Hire Workers and Access Credit

• Tax cuts to support additional business investment next year – with a particular focus on struggling small businesses – with much of the cost recouped over time.
• Zero capital gains for small businesses: To encourage investment by small businesses and improve their access to capital, the Administration is calling for a one-year elimination of the tax on capital gains from new investments in small business stock. The Recovery Act allowed a 75% exclusion from capital gains taxes on small business investments.
• Extension of enhanced expensing provisions for small businesses: The Administration is also calling for the extension through 2010 of the Recovery Act provision that allows small businesses to immediately expense up to $250,000 of qualified investment.
• Extension of Recovery Act bonus depreciation tax incentive: To give businesses an incentive to invest, the Administration is calling for extending the Recovery Act provision that accelerates the rate at which business can deduct the cost of capital expenditures. This provision will put more than $20 billion in the hands of businesses in 2010, while enabling Treasury to recoup much of the funding as business regain their strength.
• A new tax cut for small businesses to encourage hiring in 2010. Although the economy is now growing again, many businesses remain reluctant to hire. In this economic environment, an employment tax cut for small businesses has the potential to accelerate the pace of hiring. The Administration believes it is important to provide a short-term tax incentive to encourage small business hiring and support employment, and will work with Congress to design a provision that accomplishes these goals.
• Eliminating fees and increasing guarantees for small businesses that borrow through major SBA programs in 2010. The President called for the elimination of fees and an increase in guarantees for loans through the Small Business Administration, a measure that extends provisions in the Recovery Act through the end of 2010. In addition, the President called for continued Treasury efforts to use the TARP to support small business lending.

2. Investing in America’s Roads, Bridges and Infrastructure

• Additional investment in highways, transit, rail, aviation and water. The President is calling for new investments in a wide range of infrastructure, designed to get out the door as quickly as possible while continuing a sustained effort at creating jobs and improving America’s productivity.
• Support for merit-based infrastructure investment that leverages federal dollars. The Administration supports financing infrastructure investments in new ways, allowing projects to be selected on merit and leveraging money with a combination of grants and loans as was done through the Recovery Act’s TIGER program.

3. Creating Jobs Through Energy Efficiency and Clean Energy Investments

• New incentives for consumers who invest in energy efficient retrofits in their homes. Smart, targeted investments in energy efficiency can help create jobs while improving our energy security and saving consumers money. The President today called on Congress to consider a new program to provide rebates for consumers who make energy efficiency retrofits. Such a program will harness the power of the private sector to help drive consumers to make cost-saving investments in their homes.
• Expansion of successful oversubscribed Recovery Act programs to leverage private investment in energy efficiency and create clean energy manufacturing jobs. The Recovery Act included historic investments that have helped to build the foundation for a clean energy economy. The Administration supports expanding programs for which additional federal dollars will leverage private investment and create jobs quickly, such as industrial energy efficiency investments and tax incentives for investing in renewable manufacturing facilities in the U.S.

II. A FISCALLY RESPONSIBLE APPROACH TO JOB CREATION THROUGH STEWARDSHIP OF TARP AND OVERALL FISCAL DISCIPLINE

These steps are part of the President’s overall approach to fiscal discipline. This includes:

• Freeing up resources from stabilizing Wall Street and putting them to work on Main Street. Because of the Administration’s stewardship of the TARP program – combined with our broader efforts to revive the economy – we now expect the cost to be at least $200 billion less than anticipated as recently as August. Indeed, since the Obama Administration has taken office, only $7 billion has been provided in assistance to banks, compared to $114 billion in capital that banks subject to the “stress test” have raised from the private sector. These savings will allow us to pay down the deficit faster than was anticipated while also investing funds that would have gone to banks in job creating efforts instead.
• An overall approach to fiscal discipline in the budget. Although additional resources are needed in the short-run to address the unemployment crisis, the Administration is committed to doing what we need to bring the medium-term deficit under control – and is exploring a range of steps to take as part of the FY2011 budget process. An additional important component of returning to fiscal responsibility is passing health reform legislation that not only reduces the deficit but also reduces the long-term growth rate of health care costs.

III. AN ONGOING FOCUS ON JOB CREATION

In addition to the proposals outlined above, the Administration will be working with Congress to ensure that those hit hardest by this economic crisis continue to receive the support they need. This includes: extending unemployment insurance for Americans who are struggling to find jobs, extending the Recovery Act provision that helps out-of-work Americans keep their health insurance through COBRA, providing an additional $250 Economic Recovery Payment to our seniors and veterans, and taking steps to ensure that state and local governments are not forced to lay-off teachers, police officers and other key personnel at this critical time.

These steps will build on the efforts that the Administration has already taken to accelerate the pace of job growth, including tax cuts for struggling businesses, an expanded homebuyer credit, additional unemployment insurance to one million Americans, and the Cash for Clunkers program. The Administration is also continuing to pursue efforts to increase the competitiveness of U.S. businesses and strengthen their capacity to export to overseas markets.

Wall Street Reform

After the passage of Wall Street reform legislation, President Obama used his weekly address to talk about the legislation and the watchdog organization it created. He criticized Republicans that opposed the legislation as it was passing Congress and was disappointed that Republicans were calling for repeal of the legislation during the election. He stated that powerful financial interests and Republicans seeking an election year victory used a large amount of capital and influence to defeat the legislation, but were unsuccessful.

On White House.gov, the following statements are made about the Wall Street reform legislation.

It has now been two years since the collapse of Bear Stearns and more than a year since the financial crisis peaked. Trillions of dollars in household wealth were erased and over 8 million jobs were lost, in large part, because of failures in our financial system. That failed regulatory system will now come to an end.

The Obama Administration has made Wall Street reform a top priority since day one, and it will now become a reality. Wall Street Reform will hold Wall Street accountable, protect and empower American consumers with the strongest consumer protections ever, increase transparency in financial dealings -- including in the derivatives market -- and end taxpayer bailouts once and for all.

1. Holding Wall Street Accountable

The financial crisis was the result of a fundamental failure from Wall Street to Washington. Wall Street took irresponsible risks that they didn’t fully understand and Washington did not have the authority to properly monitor or constrain risk-taking at the largest firms. When the crisis hit, they did not have the tools to break apart or wind down a failing financial firm without putting the American taxpayer and the entire financial system at risk.

Taxpayers Will Not Have To Bear The Costs Of Wall Street’s Irresponsibility. If a firm fails in the future it will be Wall Street – not the taxpayers – that pay the price.

“Proprietary Trading” Will Be Separated From The Business of Banking. The “Volcker Rule” will ensure that banks are no longer allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. Responsible trading is a good thing for the markets and the economy, but firms should not be allowed to run hedge funds and private equity funds while running a bank.

Ending Bailouts. No firm should be “Too Big To Fail”. Reform will constrain the growth of the largest financial firms; restrict the riskiest financial activities; and create a mechanism for the government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook.

2. Protecting American Families From Unfair, Abusive Financial Practices

Too many responsible American families have paid the price for an outdated regulatory system that left our financial system vulnerable to collapse and left families without adequate protections. We must protect and empower families with the strongest consumer protections ever.

An Independent Bureau of Consumer Financial Protection Will Set And Enforce Clear, Consistent Rules For The Financial Marketplace. A single consumer bureau will set clear rules of the road and ensure that financial firms are held to high standards. For example:

• For families who want to buy a home: The piles of forms needed for a regular mortgage can be overwhelming, and many brokers have taken advantage of that confusion to give borrowers loans they didn’t need or couldn’t afford. The new consumer financial protection bureau will take steps to consolidate and simplify with plain language two overlapping and sometimes inconsistent federal mortgage forms. The bureau will, for the first time, provide ongoing federal oversight of both nonbank companies and banks in the mortgage market and protect borrowers from unfair, deceptive or other illegal mortgage lending practices.
• For families with credit cards: The new consumer financial protection bureau will enforce the new credit card law signed by President Obama that bans rate hikes on existing balances and other unfair practices. For families who have used credit cards to get by when times are tight, the law will give them clarity on the interest rates they are charged.
• For families caught by unexpected overdraft fees: Many households have been automatically enrolled in expensive overdraft programs. These programs can hit consumers with costly overdraft fees for even the smallest purchases. For example, the FDIC found that the average overdraft charge for a single purchased item—like a $2 cup of coffee—is $30 at banks with assets more than $1 billion. The new consumer financial protection bureau will enforce new rules that give consumers a real choice as to whether to join expensive overdraft programs so that they are not unknowingly charged unnecessary fees. [FDIC, “FDIC Study of Bank Overdraft Programs” (November 2008) at Table IV‐3]

Until Now, There Have Been Seven Different Regulators With Authority Over The Consumer Financial Services Marketplace. Accountability has been lacking because responsibility is diffuse and fragmented. In addition, many mortgage lenders and mortgage brokers were almost completely unregulated. All that will change..

3. Closing The Gaps In Our Financial System

We depserately needed to modernize our financial system and take the necessary steps to close the gaps in our system and eliminate regulatory arbitrage.

Reform Will Address the Gaps that led to Regulatory Failure – At Its Peak, The “Shadow Banking System” Financed About $8 Trillion In Assets. In the lead-up to the financial crisis, our regulatory system as a whole failed. One of the greatest weaknesses of our financial system was the risk that built up in the “shadow banking” system where there was explosive growth in a range of financial firms that acted much like banks – but operated without oversight.

Market Discipline Was Not Enough. Relying on market discipline to compensate for weak regulation and then leaving it to the government to clean up the mess was not a good strategy for economic growth nor financial security.

Our Financial System Will Have Clear Accountability. There is no substitute for vigorous, consistent enforcement of the laws governing the financial system. But each regulator should have a clear mission and the authority to execute that mission.

• Gaps and loopholes that allowed large firms like AIG to avoid strong, comprehensive federal oversight will be eliminated.
• To achieve accountability, one entity will have the responsibility and the authority to supervise the most complicated firms.

4. Reform is Critical to Market Certainty and Stable Growth

Reform is central to providing a foundation for stable growth. Our financial system is most competitive when our system is stable, resilient and transparent.

Reforms Will Make The Financial Industry And The Markets They Operate In Stronger, Safer, And More Competitive.

• Clearer accountability in supervision and regulation so that financial firms can operate under a coherent set of rules and expectations without the current regulatory arbitrage opportunities that allow some firms to “game the system.”
• Stronger capital buffers to increase the ability of financial companies to weather the ups and downs of financial markets.
• Lesser concentration of risk among the largest financial firms so that any one firm can fail without creating a domino effect throughout the entire financial system that jeopardizes jobs, family savings and the entire economy .
• Greater transparency in the derivatives market that will make the system safer by providing regulators with the data they need to manage systemic risk and help ensure the integrity of financial markets so we can prevent future AIG-like disasters.

Comprehensive Reform Will Help Generate Innovation And Economic Growth. A key test of a strong financial system is whether or not it effectively channels savings to finance future innovation. The old system produced waves of credit bubbles and real estate booms followed by severe financial shocks and damage. Under reform, the financial system serve not only short-term profits, but long-term growth, entrepreneurship, and savings.

Leading the Way on International Financial Reform. We have worked in parallel with our international partners to make sure that as we move to reform and strengthen our financial system at home, the G20 is moving to implement reforms to achieve a level playing field.

QE2

On November of 3, 2010 the Federal Reserve released a statement noting that it was initiating a second round of quantitative easing. This time the announcement was that the Federal Reserve was purchasing an additional $600 Billion in longer-term Treasury securities at a pace of about $75 billion per month.

Release Date: November 3, 2010

For immediate release
Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.

Official Website Statements

Economy

Progress

• The President signed the American Recovery and Reinvestment Act, which has been responsible for about 3 million American jobs and brought the economy back from the brink of another depression.
• The President signed Wall Street Reform, the most sweeping reforms since the Great Depression, to hold Wall Street accountable, put an end to bailouts and "too big to fail," and enforce the strongest consumer protections in history.
• The President signed the Small Business Jobs Act providing tax breaks and better access to credit for millions of small businesses.
• The President signed the HIRE Act providing a payroll tax credit for companies that hire employees who have been looking for work for 60 days or more. Millions of workers have been hired through this process already.
• The President launched the National Export Initiative with a goal of doubling exports and supporting several million new jobs over five years.
• The President announced the "Making Home Affordable" home refinancing plan.
• The President launched a $15 billion plan to boost lending to small businesses.
• President Obama played a lead role in G-20 Summit that produced a $1.1 trillion deal to combat the global financial crisis.
• The President signed the Fraud Enforcement and Recovery Act which gives the federal government more tools to investigate and prosecute fraud, from lending to the financial system, and creates a bipartisan Financial Crisis Inquiry Commission to investigate the financial practices that brought us to this point.
• The President signed the Helping Families Save Their Homes Act, expanding on the Making Home Affordable Program to help millions of Americans avoid preventable foreclosures, providing $2.2 billion to help combat homelessness , and helping to stabilize the housing market for everybody.
• The President signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act to protect Americans from unfair and deceptive credit card practices.

Guiding Principles

President Obama’s central focus is on stimulating economic recovery and helping America emerge a stronger and more prosperous nation. The current economic crisis is the result of many years of irresponsibility, both in government and in the private sector. As we look toward the future, we must confront the many dimensions of this crisis while laying the foundation for a new era of responsibility and transparency.

Creating Jobs

President Obama’s first priority in confronting the economic crisis is to put Americans back to work. The American Recovery and Reinvestment Plan signed by the President will spur job creation while making long-term investments in health care, education, energy, and infrastructure. Among other objectives, the recovery plan will increase production of alternative energy, modernize and weatherize buildings and homes, expand broadband technology across the country, and computerize the health care system. The recovery plan will save or create about 3.5 million jobs while investing in priorities that create sustainable economic growth for the future.

Keeping Americans in Their Homes

Millions of hard-working, responsible families are at risk of losing their homes as home prices fall and jobs are threatened. The Making Home Affordable Refinancing program will expand access to refinancing for up to 4 to 5 million families who are current on their mortgages but otherwise unable to refinance because their homes have lost value. The Making Home Affordable Modification program has a $75 billion commitment to support loan modifications so that up to 3 to 4 million borrowers at risk of foreclosure can keep their homes. President Obama’s programs to prevent foreclosures will help bolster home prices and will provide direct support to up to 9 million homeowners to refinance for lower payments or have their mortgages modified to prevent foreclosure. President Obama also launched MakingHomeAffordable.gov, where borrowers can learn basic facts about mortgages, homeownership, and resources available.

Bringing Stability to Financial Markets

This crisis has taught us the real impact that financial markets and institutions can have on working families. President Obama has worked to get credit flowing again so that small businesses can rebuild and hire workers and families can afford to send their children to college. At the same time, the President has demanded accountability and transparency both on Wall Street and in Washington, taking steps to ensure that banks use taxpayer assistance to support lending and create sustainable economic growth. For the long term, the President will create a new regulatory framework that holds market players responsible for their actions and stops fraudulent practices before they take hold. 

Voting Record

Troubled Asset Relief Program (TARP)

The TARP program was designed to prevent the failure of large banks by purchasing their "troubled assets" and allowing them to move them off their records as liabilities. The bill received both bipartisan support and bipartisan opposition and passed 74-25 with the two parties making up about half of each vote. In January of 2009, the Senate voted on granting the second half of the TARP funds to President Obama. Barack Obama voted in favor of the TARP program.

The Bush Stimulus

In early 2008, the Recovery Rebates and Economic Stimulus for the American People Act of 2008 was passed in an attempt to stimulate the economy. Also known as the Bush Stimulus, the act consisted largely of checks sent to individuals. The bill received wide bipartisan support and passed the Senate 81-16. Barack Obama cast a "No Vote"

Bankruptcy Reform

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 completely redefined bankruptcy in the United States. The bill made it much more '); echo('for people to walk away from unsecured debt, such as credit cards, and permitted the court to award some compensation to creditors in the event that a bankruptcy was awarded. The bill got bipartisan support and passed 74-25. Barack Obama voted against the Bankruptcy Reform bill.

Sponsored and Cosponsored Legislation

Credit Card Accountability Responsibility and Disclosure Act of 2008 - Cosponsor

A bill to amend the Consumer Credit Protection Act, to ban abusive credit practices, enhance consumer disclosures, protect underage consumers, and for other purposes.

References

[1] Website: Washington Post Article: Fed to Pump $1.2 Trillion Into Markets Author: Neil Irwin Accessed on: 03/15/2011

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