- The Washington Times - Thursday, February 26, 2009

ANALYSIS:

President Obama’s financial-recovery initiatives are getting bad reviews from the constituencies that matter most in his attempts to pull the nation’s sputtering economy out of its nose dive - consumers and the stock markets.

Mr. Obama’s address to a joint session of Congress and the country, during which he laid out what is at stake in the nation’s worsening economic crisis, drew a poor reaction Wednesday from Wall Street, where the financial markets continued their descent, threatening the insolvency of big banks and other major corporations and eroding the investments of millions of workers.

At the same time, a nationwide consumer confidence index fell this month to its lowest level in four decades - reflecting the deepening sense of gloom and insecurity that has spread over the country. The Conference Board, a big-business consortium, said its monthly index tumbled to 25, the latest evidence that the administration’s actions have not been able to stem the decline in public confidence in America’s financial future.

“There’s far too much uncertainty about precisely how the administration plans to help financial markets return to normal and what the administration will demand from financial institutions in return for any aid it provides,” said Stanford University economist John Cogan.

“The president’s speech did nothing to clear up the uncertainty,” he said.

Economic analysts said Wednesday that the sour reactions seemed to be par for the course in each of the administration’s recovery initiatives.

“What it shows is, the court of public opinion is overwhelmingly positive about Obama, his speeches, his charisma, but the parts where you put your money where your mouth is has constantly given him repeated votes of no confidence,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce.

“The hard part is in the markets, where the important work needs to be done, and that is where his lack of detail has really hurt him. His oratory has raised expectations, but the lack of delivery of hard deliverables at this point have hurt him. That’s why the market keeps going down every time he speaks,” Mr. Regalia said.

Interviews Wednesday with Mr. Regalia and other economic analysts drew roughly the same litany of complaints about how the president and his top advisers have dealt with the economic crisis.

The rhetoric sounded good, they said, but there was little detailed economic clarity or efficacy behind the $800 billion stimulus plan, the second $350 billion installment in the bank-rescue plan, or the subprime-mortgage bailout initiative.

“We’ve heard [Tuesday] night’s speech before. It didn’t contain enough that was new and substantive to change the attitudes, either of the financial markets or the general public,” said economist Douglas Holtz-Eakin, a top adviser in Sen. John McCain’s presidential campaign.

“If you look at what the public wanted - someone who was competent in Washington - the rollout of the banking plan by Treasury Secretary [Timothy F.] Geithner and the rollout with the stimulus bill were two strikes. People and the financial markets didn’t like what they saw,” Mr. Holtz-Eakin said.

“I thought that in too many ways his remarks generated fear: Do what I want, or this crisis will worsen,” he said.

David Smick, a global economic analyst who knows the thinking of economic ministers around the world, said the administration has not spelled out the true depth of the banking crisis and its implications for the economy’s long-term future.

“There is a perception that Washington is skirting around the banking issue, primarily for one reason: The numbers are huge, in the trillions. Everyone is ignoring the big elephant in the room,” Mr. Smick said.

“Unfortunately, this is one of those issues where there are no solutions to the banking crisis that do not have serious risks and a lot of heavy downsides.

The stock market sees the paralysis, and that’s why it keeps declining,” he said.

William Gale, director of economic studies at the liberal Brookings Institution, said he thinks Mr. Obama is “saying all the right things, but he’s only been in office a month.”

“They’re just getting up to speed. One of the reasons the Geithner banking plan was vague is that they still haven’t worked out all the details,” he said.

But Mr. Regalia said Mr. Obama’s handling of the banking and mortgage debacle has created “a crisis of confidence in the markets.”

“They can see through the rhetoric, and when you look through the rhetoric, there is no there there,” he said.

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