Prices are falling, isn't that a good thing?

The government's March report on consumer prices registered an annual drop, a first in over 50 years, but that might not be good news for cash-strapped consumers, economist Nouriel Roubini told Consumer Reports.

Roubini, a professor of economics at New York University’s Stern School of Business, warned that deflation could cause more problems for an already struggling economy.

"There are different types of deflation. There is good deflation and there is bad deflation. And we are now in a period of bad deflation," Roubini said. "Right now there is too much supply and not enough demand."

More from our interview with Roubini:

Part 1: It’s not all bad news

Part 2: Surviving the next year

$13 billion from stimulus to go to high speed rail

President Barack Obama continued to push his vision of a rebuild American economy Thursday with an event promoting high-speed rail lines, promising that a $13 billion investment would create jobs and help rebuild the nation's aging infrastructure.

Flanked by Vice President Joe Biden, an avid train traveler, and Secretary of Transportation Ray LaHood, the president said the money from the American Recovery and Reinvestment Act would be handed out to worthy projects in two stages.

"The first round of funding will focus on projects that can create jobs and benefits in the near term," Obama said. "We're not talking about starting from scratch, we're talking about using existing infrastructure to increase speeds on some routes from 70 miles an hour to over 100 miles per hour--so you're taking existing rail lines, you're upgrading them."

The second batch of funding--some $5 billion--is an investment in the future, with new trains that could travel in excess of 100 miles per hour, the president said.

"The next step is investing in high-speed rail that unleashes the economic potential of all our regions by shrinking distances within our regions," he said. "There are at least 10 major corridors in the United States of 100 to 600 miles in length with the potential for successful high-speed rail systems."

Obama again pointed out the criticisms his economic plans have met.  To those who would say that high-speed rail isn't realistic, Obama gave examples of successful lines around the world.

For those who would say the president's investment in railways does not really fight the recession, Obama replied with the story of Abraham Lincoln who built the transcontinental railroad during the Civil War.

"While fighting raged on one side of the continent, tens of thousands of Americans from all walks of life came together on the other," Obama said. "Dreamers and risk-takers willing to invest in America."

You can learn more about the White House's high-speed rail plan from the Department of Transportation.

Obama describes the rock and reasoning supporting his economic policies

In a Tuesday speech, President Barack Obama harkened back to Biblical times for a comparable situation to the economic crisis in which the country (and his administration) are mired.

Now, there's a parable at the end of the Sermon on the Mount that tells the story of two men. The first built his house on a pile of sand, and it was soon destroyed when a storm hit.  But the second is known as the wise man, for when 'the rain descended, and the floods came, and the winds blew, and beat upon that house, it fell not: for it was founded upon a rock.'

It was founded upon a rock.  We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock.  We must lay a new foundation for growth and prosperity--a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.

The rock the president wants under the U.S. economy is actually made up of five "pillars," he said.

As he described them in his speech at Georgetown University:

1. "New rules for Wall Street that will reward drive and innovation, not reckless risk-taking"
2. "New investments in education that will make our workforce more skilled and competitive"
3. "New investments in renewable energy and technology that will create new jobs and new industries"
4. "New investments in health care that will cut costs for families and businesses"
5. "New savings in our federal budget that will bring down the debt for future generations"

Despite the government's efforts, Obama said that the country will not recover quickly from this recession.

"There is no doubt that times are still tough," he said. "By no means are we out of the woods just yet.  But from where we stand, for the very first time, we're beginning to see glimmers of hope.  And beyond that, way off in the distance, we can see a vision of an America's future that is far different than our troubled economic past."

Fighting stimulus bill fraud will take a village, apparently

As hundreds of billions of dollars head out of Washington in an effort to stimulate the sagging economy, many are concerned about where and how the money will be spent.

The Government Accounting Office is required to review the spending bimonthly, and today, the investigative arm of Congress asked the public for help fulfilling that role.

From the GAO's press release:

“Congress and the President have insisted on accountability and transparency over Recovery Act funds, and we at GAO are taking steps to help ensure that accountability. The public can help to identify improper activities or weaknesses in programs that warrant scrutiny. FraudNET can play an important role in alerting GAO, potentially early on, to questionable uses of Recovery Act funds,” said Gene L. Dodaro, Acting Comptroller General of the United States and head of the GAO

“The Recovery Act has set aside billions of dollars to create jobs, invest in infrastructure, and fund other measures to counter the current economic downturn. Experience tells us that the risk of fraud and abuse grows when large sums are spent quickly, eligibility requirements are being established or changed, and new programs created.” Dodaro added.

Begun in 1979 as a toll-free phone number, FraudNet has expanded in recent years to receive allegations via the internet, fax, or letter. The public can call 1-800-424-5454 (an automated answering system); send an e-mail to fraudnet@gao.gov; send a fax to (202) 512-3086; or write to: GAO FraudNet 441 G Street, NW, Mail Stop 4T21, Washington, DC 20548. The public may also visit the FraudNet page of our website at http://www.gao.gov/fraudnet/fraudnet.htm.

President Barack Obama has appointed Vice President Joe Biden to oversee the implementation of the $787 billion American Recovery and Reinvestment Act and has appointed Earl Devaney, a former Secret Service Agent, to be the Executive Department's watchdog.

Obama and team flood Sunday talk shows to discuss the economy, Afghanistan

President Obama joined the Secretaries of Defense and the Treasury this morning on the Sunday talk shows to discuss the economy and the commitment of additional troops to the war in Afghanistan.

Speaking on CBS' Face the Nation the President recounted his tough conversation with the leaders of the nation's top banks.

"What I said was, look, first of all, there are a lot of bankers that are doing good work in the community, that are acting responsibly, that haven’t taken huge risks. I understand that. But understand that for the average single mom who is just barely struggling to pay her mortgage or medical bills for her kid, who is paying her taxes, who is playing by the rules, and then finds out that a taxpayer-assisted firm is paying out multimillion-dollar bonuses, that’s not just not acceptable."

The President reaffirmed his commitment to make permanent the two-year middle class tax cuts passed as part of his recent stimulus package. "I’m going to be pushing as hard as I can to get it done in this budget," he said. "If it’s not done in this budget, then I’m going to keep on pushing for it next year and the year afterwards, so that we don’t see a drop-off after the two-year tax cuts."

Over on ABC's This Week, Treasury Secretary Timothy Geithner stressed that the government's response to the crisis would not end soon. "The lesson of financial crises is governments tend to do too little," he said, "They wait too long to escalate."

On NBC's Meet the Press, the Secretary defended his decision to provide nearly $1 trillion public-private loan guarantees as a simple choice between action and prolonged economic turmoil. "We can let -- leave that as it is, hope that banks earn their way out of this over time. That would be a mistake," he said. "That would leave us with a strong -- with a deeper, longer recession."

The President also discussed his decision to commit additional troops to the war in Afghanistan, saying it was a vital step in combatting Al-Qaida.

"What we want to do is to refocus attention on Al Qaida.," he said. "We are going to root out their networks, their bases. We are going to make sure that they cannot attack U.S. citizens, U.S. soil, U.S. interests and our allies’ interests around the world."

Secretary of Defense Robert Gates agreed on Fox News Sunday that Al-Qaida remained a serious threat, saying that Administration was willing to consider alternate proposals if the troop increase proved ineffective. "I think [The President has] been clear -- and frankly, it was my view in our discussions -- that we don’t want to just pursue -- settle on this strategy and then pursue it blindly and open-endedly," he said.

Senator McCain speaking on Meet the Press endorsed the President's approach, saying: "I think this -- the outlines of this proposal are good. The best way to get out of Afghanistan fast is people to think we’re staying."

Obama goes online to talk about the economy

President Barack Obama hosted an online town hall meeting today from the White House.

The president answered 12 questions in a little more than an hour--six were from the web site and six were from the audience. About 3.5 million people voted on which questions should be asked, the president said.

The White House said that 104,081 questions were submitted by 92,933 people and that about 67,000 people watched on WhiteHouse.gov, in addition to those who watched on television. 

The general topic was the struggling economy, but the questions ranged from the job market to small business loans to what the government is doing about the auto industry.

The president did answer one question which wasn't officially asked, but was one of the most popular topics in the voting on WhiteHouse.gov.

"I have to say that there was one question that was voted on that ranked fairly high and that was whether legalizing marijuana would improve the economy and job creation," Obama said with a chuckle. "And I don't know what this says about the online audience, but I just want--I don't want people to think that--this was a fairly popular question; we want to make sure that it was answered. The answer is, no, I don't think that is a good strategy ... to grow our economy."

Collect Social Security? You get $250

The White House announced today that people who receive Social Security and Supplemental Security Income benefits will be getting a bonus $250 check courtesy of the economic stimulus package.

No action is required to get the payment, the White House says. The $250 checks will be sent separately from regular benefit payments, and the Social Security Administration expects everyone who is entitled to a payment to receive them by late May 2009.

In a video posted on the Social Security web site, Darlynda Bogle explained how the payments would be delivered.

• If you receive your Social Security or SSI benefit payment by direct deposit in your bank, we'll deposit the $250 one-time payment in your bank. Direct Deposit is the fast, safe and most reliable way to receive monthly Social Security benefits. We encourage all of our beneficiaries to use Direct Deposit.
• If you get your Social Security or SSI benefit payment in the mail, we'll send your $250 one-time payment by mail. 
• If your benefit goes directly to your Direct Express debit card, we'll deposit the $250 one-time payment to your debit card. We'll send your one-time economic recovery payment separately from your Social Security or SSI benefit; it won't be included with your monthly benefit payment.

For details on the one-time payments, visit www.socialsecurity.gov/payment.

Stock markets soar after Treasury details plan to buy bad assets

With just about every member of the financial world looking on, Treasury Secretary Tim Geithner detailed his department's plan to launch a public-private partnership to buy toxic loans from struggling banks. And, if the stock market is a barometer of their mood, they liked what they saw.

The Dow Jones Industrial Average climbed 6.8 percent, closing up almost 500 points.

The S&P 500 ended the day more than 7 percent higher.

The NASDAQ Composite jumped more than 98 points.

White House touts funding for clean energy, releases $1.2 billion from stimulus bill

President Barack Obama met with leaders in the alternative power business at the White House today, while his administration announced that $1.2 billion dollars from the economic stimulus package would be released to build infrastructure for energy research.

While the president noted the environmental benefits of "green" power, he focused on the economic aspects of developing sustainable power production.

The American Reinvestment Recovery Act will provide $39 billion to Department of Energy for research and development, as well as $20 billion in tax incentives, according to the White House.

"Through $59 billion invested in clean energy and in tax incentives to promote clean energy, the Recovery Act is estimated to create more than 300,000 jobs," Obama said. "And these are jobs that will be created as we double our country's supply of renewable energy and make the largest investment in basic research funding in American history."

And the president said that, if he gets his way, more money will be put into energy research and development.

"The budget I've proposed builds on this foundation," Obama said. "The budget is a comprehensive strategy to grow this economy."

The president's budget, however, has met resistance from many in Congress who are concerned about the large amount of federal spending.

At the Brookhaven National Laboratory in New York, Energy Secretary Steven Chu announced the release of the $1.2 billion.

"Leadership in science remains vital to America’s economic prosperity, energy security, and global competitiveness,” Chu said in a statement. “These projects not only provide critically needed short-term economic relief but also represent a strategic investment in our nation’s future."

Treasury Department's plan to fix banking starts with at least $75 billion

The Treasury Department's effort to clear bad loans off banks' books will begin with an investment of $75 billion to $100 billion, with the option to commit more funds later.

The government's money will be used to kick start investment in the "Public-Private Investment Program" which will buy up to $500 billion in troubled assets from banks.

Once those toxic assets--the Treasury calls them "Legacy Assets"--are cleared from the banks' balance sheets, those banks can begin offering new loans to power the economy, or so the Obama administration hopes.

The Treasury Department said its plan was designed around three basic principles:

• Maximizing the Impact of Each Taxpayer Dollar: First, by using government financing in partnership with the FDIC and Federal Reserve and co-investment with private sector investors, substantial purchasing power will be created, making the most of taxpayer resources.
• Shared Risk and Profits With Private Sector Participants: Second, the Public-Private Investment Program ensures that private sector participants invest alongside the taxpayer, with the private sector investors standing to lose their entire investment in a downside scenario and the taxpayer sharing in profitable returns.
• Private Sector Price Discovery: Third, to reduce the likelihood that the government will overpay for these assets, private sector investors competing with one another will establish the price of the loans and securities purchased under the program.

The government also described how the process will work:

Banks Identify the Assets They Wish to Sell: To start the process, banks will decide which assets – usually a pool of loans – they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Assets eligible for purchase will be determined by the participating banks, their primary regulators, the FDIC and Treasury. Financial institutions of all sizes will be eligible to sell assets.
Pools Are Auctioned Off to the Highest Bidder: The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50 percent of the equity requirement of their purchase.
Financing Is Provided Through FDIC Guarantee: If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
Private Sector Partners Manage the Assets:Once the assets have been sold, private fund managers will control and manage the assets until final liquidation, subject to strict FDIC oversight.

The initial reaction from the financial community to the Treasury Department's plan seemed to be positive, as stock markets climbed in early trading. At 11:30 a.m., the Dow was up about 275 points and the NASDAQ was up around 50 points.

More information about the Treasury Department's "Public-Private Investment Program" is available at financialstability.gov.