U.S. Economic/Financial News
Obama Puts High-Speed Rail into the Stimulus Bill
Feb. 18 (EIRNS)A beginning for the development of high-speed railroads was budgeted for $8 billion, in the Obama Administration's $787 billion stimulus bill. Politico.com reports that the rail provision was quietly stuck into the bill at the last minute, at the insistence of President Barack Obama. The sum of money involved is only a small fraction of the investment needed to actually rebuild a modern U.S. rail network; but the budget allocation is the first time anything on this level has been done. (George W. Bush signed a bill for less than $1.5 billion for high-speed rail through 2013.)
Politico.com, reporting the story under the headline "Obama plots huge railroad expansion," quoted an Obama campaign speech: "The time is right now for us to start thinking about high-speed rail as an alternative to air transportation connecting all these [Midwest] cities." Presidential Chief of Staff Rahm Emanuel said the President considers high-speed rail his "signature issue." Transportation Secretary Ray LaHood has two months to prepare a plan to use the money, a combination of up-front capital and later annual appropriations.
The high-speed rail item was requested by the President a couple of days before the Senate committee marked up the bill, and Senators reportedly had to scramble to cut $2 billion from other Obama requests to accommodate it. George Soros's Moveon.org is on quite a different track. It e-mailed its members today, warning that even though Obama is committed to the green agenda, "unless we create a massive green-economy movement across America, Obama won't have the mandate he needs to overcome the oil companies and make fundamental change.... So we've worked up a big plan to build a green-economy groundswell. It'll mean tripling our field organizing team, mobilizing hundreds of thousands of MoveOn members to take local action, and running ads targetting powerful interests that stand in the way. It'll be MoveOn's biggest long-term campaign ever."
Volcker: Crisis Worse Than Great Depression
Feb. 20 (EIRNS)Paul Volcker, chairman of President Obama's Economic Recovery Advisory Board, said today that he was "shocked" by the scope of the global collapse: "I don't remember any timemaybe even the Great Depressionwhen things went down quite so fast and quite so uniformly around the world." As the keynote speaker at Columbia University's sixth annual Center on Capitalism and Society conference today, Volcker, who was Fed chairman 1979-87, warned that "the Fed shouldn't lose sight of a key part of its mandateto fight inflation."
Responding to the rise in inflation in January, for the first time in six months, and to those who say a little inflation is good as a sign of recovery, Volcker said: "I think a little inflation is bad, because a little inflation means some more inflation. I don't think there's any arguing for a little inflation solving our problems in any realistic sense."
Lyndon LaRouche noted that this could well indicate that Volcker and others in the Obama advisory team have an early reading on the pending next stage in the breakdown crisis.
Geithner Bailout Originally Had $3 Trillion Price Tag
Feb. 17 (EIRNS)Corroborating what EIR had been told by independent sources, a report in the Washington Post Business section today indicates that, two days before its scheduled unveiling, Treasury Secretary Timothy Geithner's bailout revision team made a sudden about-face. This happened when the team totalled up the government's liabilities under the plan, and the number came to $3 trillion! Realizing that they couldn't possibly approach Congress or the public with such a figure, they opted to release a non-plan, rather than having to revise it later, as former Treasury Secretary Hank Paulson had done. As a result, the plan announced last week was absent of any specifics.
According to the Post, Geithner had been involved in the Paulson bailout process, and had been thinking about what to do since November. Two lines of thought had emerged in that two months, a "bad bank" variation, and a combination of government guarantees for institutions. As the numbers totalled higher, Geithner came up with a new idea: a fund in which private equity could help buy the toxic waste, and the government would guarantee the funds. Always left unanswered was, how much was this stuff worth?
With time running out, it became obvious that the best "Democratic" minds had been unable to solve a problem which the best "Republican" minds had also failed to solve. There is a solution, however: reorganization of the system under bankruptcy protection, as defined in Lyndon LaRouche's Homeowners and Bank Protection Act. As LaRouche said yesterday, for the sake of the credibility of the Obama Presidency, Geithner has to "immediately change policy. Otherwise, he should resign."
U.S. States Descend into Economic-Financial Turmoil
Feb. 18 (EIRNS)Here are some the latest developments facing state and local governments, as they attempt to grapple with the economic-financial collapse:
* Housing construction hit its lowest level since 1959.
* Year on year, factory production has fallen 10% from January to January.
* Goodyear announced 5,000 layoffs and a $330 million loss. It laid off 4,000 workers in 2008.
* Technology sector layoffs grew by 100,000 in January, bringing the total since August 2008 to 300,000.
* Colorado has a pending bill which, if passed, will require state employees making $60,000 or more to take two unpaid days/month; those earning $40,000-$59,999 to take one and a half days off; and those with take-home pay of $39,999 or less one day/month. "It's drastic, but we're in a drastic situation," State Rep. Steve King (R), told KUSA radio.
* New Jersey's Gov. John Corzine said labor must share the budget pain, as he called for all state workers to take two furlough days in May and June, and a wage freeze. If they don't agree, he warned of more furloughs or layoffs starting in July.
* A new report from the Commerce Department showed January new-home construction fell to its lowest level on record, with housing starts for single-family homes falling 16.8% in January from December. That is lowest pace since at least 1959.
* A new Federal Reserve report show that January factory production dropped by 2.5%. Shutdowns across the auto sector figured prominently in that decline. Output at mines fell 1.3% in January, following a 2.4% drop in December.
New Jersey Hospitals Suffer Drastic Cuts
Feb. 18 (EIRNS)The New Jersey Hospital Association released a report Feb. 18 showing the life-and-death impact of the economic crisis. The results of its survey conducted in January and February, from half of the state's 74 acute-care hospitals showed all responding hospitals had a 27% drop in cash reserves.
The decline represents $1.7 billion vanishing from hospitals' balance sheets. This loss of revenue, the survey found, has resulted in the following: 45% of hospitals made layoffs in 2008, with another 21% expecting layoffs this year; 48% reported eliminating vacant positions in 2008, while 13% have instituted a hiring freeze in 2009; and 17% of responding hospitals have eliminated services such as clinics and inpatient psychiatric care, while 80% reported an increase in charity-care patients with a 76% increase in ER visits, the Philadelphia Business Journal reported. In 2007, three acute-care hospitals in New Jersey closed and five filed for bankruptcy.
Four More Banks Close
Feb. 15 (EIRNS)Federal regulators closed four more small U.S. banks on Friday, Feb. 13, bringing to 13 the number that have been closed six weeks into the year.
CNNMoney.com reports that deposits at Sherman County Bank, based in Loup City, Neb., the first bank in the state to fail since 1990, will be taken over by Heritage Bank, based in Wood River, according to the Federal Deposit Insurance Corporation.
Accounts held by Riverside Bank of the Gulf Coast based in Cape Coral, Fla., will be assumed by TIB Bank based in Naples, the FDIC said. It is the second Florida bank to fail in this year, and the fourth to go under in that state since the economic crisis became publicly recognized by regulators.
Corn Belt Bank and Trust Company, based in Pittsfield, Ill., the third bank to fail in the state since January 2008, was also shuttered by state regulators, and its deposits were turned over to The Carlinville National Bank in Carlinville.
Pinnacle Bank, of Beaverton, Ore., was closed by the Oregon Division of Finance and Corporate Securities. The FDIC entered into an agreement with Washington Trust Bank, Spokane, to assume all of the deposits of Pinnacle.