Prospect of Geithner at Treasury buoys markets. Will it last?
An auto bailout, a second stimulus package, and foreclosure help are on hold as Washington awaits the new administration.
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One proposal, backed by auto state Democrats, some congressional Republicans, and the Bush administration, called for auto firms to get cash via eased restrictions on an already-passed $25 billion program meant to fund fuel-efficient cars.Skip to next paragraph
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But the Democratic leadership wants to save that money for green purposes. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid pushed instead for a Big Three bailout from other funds – perhaps the Treasury’s $700 billion Troubled Asset Relief Program (TARP).
Now Speaker Pelosi and Senator Reid have told the Big Three to come back to Congress in early December with more specifics about how they might spend taxpayer money. But Detroit burned through $18 billion in cash last quarter, and GM and Chrysler have warned that they could collapse within weeks.
“It is appalling that Congress decided to leave town without addressing a problem that they themselves said needed to be addressed,” White House press secretary Dana Perino said on Friday.
At a House hearing on Nov. 18, Secretary Paulson was pummeled by Democrats for resisting efforts to use TARP funds for the auto companies or for a broad mortgage-guarantee program.
But Paulson clearly does not see TARP as everyone’s pot of gold at the end of the rainbow. It is, he said, all about the banks – or the nation’s financial system, more generally.
“I’ve answered this a couple of times. I’ll answer it again. And I think it is very, very important to stay with the purpose of the TARP, because this is all about protecting the financial system, avoiding collapse, and recovery,” said Paulson.
Washington will eventually approve some sort of financial stimulus. The probability is growing that the package will exceed $200 billion, note Goldman Sachs economists.
But the timing and magnitude of that remain unclear – beyond the fact that it will probably wait until after Obama's Jan. 20 inauguration.
As for a stimulus helping the economy, “at the moment, any significant impact seems unlikely until [the second quarter of 2009] at the earliest,” Goldman concludes.
– AP material was used in this story.