- The Washington Times - Wednesday, March 4, 2009

President Obama on Tuesday urged Americans to look past the steady decline on Wall Street that has continued on his watch and even to consider buying some bargain stocks with an eye toward better days ahead.

The comment came as the White House sought to calm fears about its banking and economic stimulus plans, declaring it doesn’t plan to cater to the whims of the “investor class” as it tries to fix the long-term fiscal crisis.

“The stock market is sort of like a tracking poll in politics. You know, it bobs up and down day to day. And if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong,” said Mr. Obama, taking questions in the Oval Office after meeting with British Prime Minister Gordon Brown.

White House press secretary Robert Gibbs said that Mr. Obama has rejected the idea that Wall Street’s opinion of his policies should have a significant impact on his decision-making.

“For many years, as the president has said often, we had a mind-set that, if it was good for Wall Street, it was good for Main Street. Now we know that’s not the case,” Mr. Gibbs said. “The president has to look out for the broader economy and for the broader population … many of whom are investors, but not exclusively investors.”

He added later that “obviously there is concern for the investor class, because the investor class … is a great percentage of the American public.”

The president’s comments were notable not only because he declared his faith in the markets for the first time, helping to produce a relatively calm day on Wall Street Tuesday, but also because he largely shrugged off criticism by some stock investors and analysts who link the market’s latest downturn to Mr. Obama´s banking and budget policies.

Allan Meltzer, an economist teaching at Carnegie Mellon University, refuted Mr. Obama’s characterization of the market as fluctuating.

“The stock market has not been ‘up and down’ since January 20. It is mostly down substantially. And it falls especially on days when the administration announces its plans and proposals. A wise president would not dismiss this vote of no confidence,” Mr. Meltzer said.

“The administration and the Congress propose to redistribute a large share of income from upper to middle- and lower-income groups. They have set off a race between the tax rate, the inflation rate, and controls. I believe all three will win the race.”

The Dow has dropped almost 1,500 points since Mr. Obama’s inauguration a little more than a month ago, and nearly 3,000 points since his election on Nov. 4.

Mr. Obama said that his critics - financial analysts who are stars on NBC’s financial news TV channel, CNBC - are focused too much on the short term and that he sees hopeful signs emerging.

“Profit-and-earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it. I think that consumer confidence, as they see the [stimulus deal] taking root, businesses are starting to see opportunities for investment and potential hiring,” Mr. Obama said.

The Dow Jones Industrial Average sustained a small loss in seesaw trading Tuesday, closing down 37 points at 6,726. The Standard & Poor’s 500 index broke through the critical 700 level, however, and ended down 0.6 percent at 696.

Also helping the market Tuesday was the Federal Reserve‘s launch of a long-awaited program to jump-start lending to consumers and small businesses. But that and Mr. Obama’s expression of confidence in the market were offset some by concern over Federal Reserve Chairman Ben S. Bernanke’s testimony that financial markets remain weak and unstabilized.

Mr. Bernanke has testified several times that he thinks a major stimulus package like the one Mr. Obama pushed through Congress was needed to help revive the economy. But Mr. Bernanke declined to criticize specific provisions of the president’s budget on Tuesday and called such elements as its paid-for health care reform program “constructive.”

The Fed chairman, who formerly was a top economist in the Bush White House, endorsed Mr. Obama’s move to try to quickly halve budget deficits of more than $1 trillion once the recession and financial crisis have ended in 2011. He said that a plan for reducing the deficit after the recession is needed to reassure investors in China and other overseas nations that are helping to finance the mounting debt.

The Fed chairman mostly attributes the downturn in the markets to the deep recession, continuing loan problems at banks and the shutdown of credit markets that began in September under President Bush.

Mr. Brown, who was in the District to meet with Mr. Obama in advance of a global summit in London next month focused on the world economy, supported the new U.S. president’s policies.

“I think the history books will record that what he has done in his first nearly 50 days of office has been momentous in setting the means by which we can see the economic recovery happening,” said Mr. Brown while sitting next to Mr. Obama.

Vincent Reinhart, a former Federal Reserve official now at the conservative American Enterprise Institute, knocked Mr. Gibbs’ use of the term “investor class.”

“It’s a classic example of wedge politics. That’s not going to get the economy growing,” Mr. Reinhart said. “For the fiscal stimulus to work and the economy to pick up, financial markets have to be supportive. You don’t get financial markets to be supportive by casting them in such a terrible light.”

In a November survey, pollster John Zogby found that 38 percent of voters considered themselves investors, and even most of those who didn’t consider themselves investors had a 401(k) retirement investment plan.

The Federal Reserve Board’s Survey of Consumer Finances found 17.9 percent of American families held stocks, while 52.6 percent had retirement accounts of some sort in 2007.

• Patrice Hill, Stephen Dinan and Christina Bellantoni contributed to this report.

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