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Obama’s bind over aid to banks

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Most Americans oppose more aid
In a Diageo/Hotline poll late last month, 56 percent of Americans said they thought Congress was making a bad move by granting authority for Mr. Obama to spend another $350 billion – the second half of that financial superfund created by Congress last fall. Fewer than one-third thought it was a good idea.

Obama, while not yet calling for additional funds, appeared to open the door to that possibility in an interview earlier this week.

“We can expect that we’re going to have to do more to shore up the financial system,” he told NBC’s “Today” show. But he rejected one rumor of the potential cost, saying, “we’re not going to be spending $4 trillion worth of taxpayer money.”

The International Monetary Fund has recently boosted its estimate of credit losses tied to mortgage loans and other US debts at $2.2 trillion, up from $1.4 trillion last fall – which represented a jump from an earlier estimate of $1 trillion.

One key reason the numbers have risen is the feedback between credit markets and the economy. A worsening economy has raised the likelihood of loans going into default. The resulting turmoil in credit markets, in turn, contributed to a sharp drop in consumer spending and business confidence – deepening the recession last fall.

The ongoing risk for the economy also creates a political risk that Obama has acknowledged.

“I do have confidence that we’re going to be able to get it right,” and restore trust in credit markets, he said in the NBC interview. But “I will be held accountable. I’ve got four years.”

New plan expected next week

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