Obama meets with credit card executives, promises reform

President Barack Obama called his Thursday meeting with top executives from the nation's largest credit card companies "constructive," and then he said he would do what he could to change the way those companies do business.

"We had a discussion with some of the top issuers here, and what I communicated to them is that I think credit cards are an important convenience for a lot of people ... so we want to preserve the credit card market," Obama said. "But we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with--people finding themselves starting off with a low rate and the next thing they know their interest rates have doubled; fees that they didn't know about that are suddenly tacked on to their bills; a whole lack of clarity and transparency in terms of the terms and conditions of their credit cards."

The White House will work with leaders in Congress who have already introduced credit card reform legislation, the president said. On Wednesday a House committee approved a bill that would limit credit card rates and fees. A Senate committee approved similar legislation a few weeks before.

Obama set out four points which his administration would work to change:

1. "I think that there has to be strong and reliable protections for consumers -- protections that ban unfair rate increases and forbid abusive fees and penalties.  The days of any time, any reason rate hikes and late fee traps have to end."
2. "All the forms and statements that credit card companies send out have to be written in plain language and be in plain sight.  No more fine print, no more confusing terms and conditions.  We want clarity and transparency from here on out."
3. "We have to make sure that people can comparison shop when it comes to credit cards without being afraid that they're going to be taken advantage of.  So we believe that it's important to require firms to make all their contract terms easily accessible online in a fashion that allows people to shop for the best deal for their needs."
4. "We think we need more accountability in the system.  And that means more effective oversight and more effective enforcement so that people who are issuing credit cards but violate law, they will feel the full weight of the law."

Learn more from Consumer Reports about credit card rates that jump overnight.

And, learn the dark secrets of debit cards.

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."

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."

Sunday talk shows preview coming budget battle

Administration officials and Congressional Republicans squared off this morning over the President's $3.6 trillion budget outline amidst news that the Congressional Budget Office's forecasts are significantly gloomier than the Administration's own projections.

The CBO announced on Friday that federal deficits would rise an additional $4.8 from 2010-2019, $2.3 trillion more than the Administration's estimates. The difference stems in large part from a disagreement over how fast the economy will grow after it escapes from recession.

"When you get out five, 10 years, they’re assuming that real GDP is only going to grow about 2.2 or 2.3 percent a year," said Christina Romer, chair of the Council of Economic Advisers, on Fox News Sunday. "And that’s just lower than private forecasters. It’s lower than the Federal Reserve. And we think it’s just too pessimistic."

Congressional Republicans, including several powerful moderates, said that the deficits were unacceptably large and would need to be scaled back in the final budget.

Senator Susan Collins of Maine said on ABC's This Week that the debts were "not sustainable," and that they posed "a threat to the basic health of our economy." Senator Judd Greg, who declined to serve as President Obama's Commerce Secretary, called the debts "staggering," and said that deficits of "4 percent to 5 percent of GDP" were "not sustainable under any form of government."

"The practical implications of this," Judd continued, "is bankruptcy for the United States. There’s no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued."

Policymakers also demonstrated their support for Treasury Secretary Timothy Geitner, who received widespread criticism after it was revealed that A.I.G. used part of its bailout money to pay for $165 million in employee bonuses.

"If you’re asking me should he resign," said Senator Chuck Grassley on CBS' Face the Nation, "I don’t think anybody after two months has been tested enough that I would say he should resign. I think he ought to be given some time."

Romer characterized calls for the Secretary's resignation as "really silly."

Members of Congress continued to fume over the A.I.G. bonuses, though it seemed far from certain that the President would sign a House-passed bill reclaiming the bonuses through the tax code.

"Retention bonuses are, to a great extent, extortion," Congressman Barney Frank said. "It is people saying... I’ve got the combination to the safe, and if you don’t bribe me, I’m going to leave and you’ll never be able to open the safe."

Vice Presidential advisor Jared Bernstein responded on This Week that the bill might be "dangerous," saying: “The president would be concerned that this bill may have some problems in going too far – the House bill – may go too far in terms of some legal issues, constitutional validity, using the tax code to surgically punish a small group of people."

Over on NBC's Meet the Press, Governors Ed Rendell and Arnold Schwarzenegger joined with New York City Mayor Michael Bloomberg to discuss their new group, Building America's Future, which will call for substantial investments in the nation's infrastructure.

"This country desperately needs to build a high-speed rail passenger system." Governor Rendell said. "We need to improve our rail freight system. But it's not just transportation.  It's the levees that failed in Cedar Rapids and New Orleans.  It's dams, it's water and wastewater systems. It's so much more."

President, Republicans, return focus to the budget

Both President Obama and Republicans attempted through their weekly addresses to further define the Administration's proposed federal budget.

Congress this week will begin deliberation over the $3.6 trillion spending outline, which the President described as an "economic blueprint for our future."

Acknowledging that negotiations and compromises with the Congress are a "normal and healthy part of the process," the President laid out four principles that he would like the final budget to honor. The principles, largely reiterations of the points the President has previously made, include energy independence, comprehensive education reform, health care reform, and deficit control.

"These investments are not a wish list of priorities that I picked out of thin air," the President said. "They are a central part of a comprehensive strategy to grow this economy by attacking the very problems that have dragged it down for too long: the high cost of health care and our dependence on foreign oil; our education deficit and our fiscal deficit."

Mississippi Governor Haley Barbour, shot back that the budget was too risky and too expensive.

"This astronomical record federal deficit would be accompanied by the largest tax increases in history," Barbour said. "It’s breathtaking," he continued. "The Obama budget spends too much, taxes too much and borrows too much."

Barbour singled out the President's proposed cap and trade system to control greenhouse gasses, saying that the potential cost would "clobber" families.

Neither the President nor Governor Barbour mentioned A.I.G. and the extravagant bailout bonuses that dominated the past week's news coverage.

Congress hopes to complete work on the budget resolution before its Easter recess.

CBO: Obama's budget could push federal defecit to $1.8 trillion in 2009

If all the president's budget proposals were to be enacted and the economy continued to struggle, the nation's deficit would climb well beyond what the White House had previously projected, according to a new analysis from the Congressional Budget Office.

The deficit estimate for 2009 would total $1.8 trillion, or 13.1 percent of GDP, the nonpartisan CBO estimated, with another $1.4 trillion of debt the next year.

President Obama's budget initiatives, if enacted, would add an estimated $4.8 trillion to the nation's deficit between 2010-2019, the CBO report said.

That's a lot more than the numbers put out by the White House. The CBO wrote in its report:

Our estimates of deficits under the President’s budget exceed those anticipated by the Administration by $2.3 trillion over the 2010-2019 period.  The differences arise largely because of differing projections of baseline revenues and outlays. CBO’s projection of baseline deficits exceeds the Administration’s estimate (prepared on a comparable basis) by $1.6 trillion.

By comparison, if current laws were maintained, the 2009 deficit would be an estimated $1.7 trillion, and the 2010 deficit would be $1.1 trillion. Even those lower numbers would be the largest deficits as a share of GDP since 1945, the CBO said.

The CBO's estimate of overall economic conditions did not offer particularly cheerful news either.

Despite the steps already taken by the White House and the Treasury, "the economy is likely to continue to deteriorate for some time," the CBO report said.

The recession may technically end by the fall, but:

For the next two years, CBO anticipates that economic output will average about 7 percent below its potential—the output that would be produced if the economy’s resources were fully employed. That shortfall is comparable with the one that occurred during the recession of 1981 and 1982 and will persist for significantly longer—making the current recession the most severe since World War II. In this forecast, the unemployment rate peaks at 9.4 percent in late 2009 and early 2010 and remains above 7.0 percent through the end of 2011. With a large and sustained output gap, inflation is expected to be very low during the next several years.

Politicians pile on AIG after news of bonus payments

Since the news broke that AIG, the floundering insurance giant, was paying out $165 million in bonuses, the company has become an easy target for politicians.

The company announced this weekend that it was contractually obligated to pay up to $450 million in bonuses, with the first round going to executives.

This morning, President Barack Obama lashed out at AIG, which has been the beneficiary of $170 billion in emergency government aid.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?"

Noting that AIG's previous management signed the deals with its employees, Obama said his administration would do what it could to reverse the payments.

"I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole," he said.

It is unclear what if anything can legally be done to stop the bonus payments. Edward Liddy, the current CEO of AIG, said in a letter to Geithner that his hands were tied.

"Needless to say, in the current circumstances, I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote. "Honoring contractual commitments is at the heart of what we do in the insurance business. I cannot have our clients lose faith in our desire and ability to do just that."

On ABC's This Week, Larry Summers, the president's top economic adviser, said, "We are a country of laws. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system."

Rep. Barney Frank, the chairman of the House Financial Services Committee, gave the impression on the Today show that he intended to find a way.

"These people may have a right to their bonuses. They don't have a right to their jobs forever," said Frank

New York's Attorney General Andrew Cuomo is already pressuring AIG to release the names of those who are getting the payments and is threatening an investigation.

"We have requested the list of individuals who are to receive payments under this retention plan, as well as their positions at the firm, and it is surprising that you have yet to provide this information," Cuomo wrote in a letter to AIG. "In addition, we also now request a description of each individual's job description and performance at AIG Financial Products."

Cuomo's letter gave four reasons for wanting the company to name names:

1. whether any of the individuals receiving such payments were involved in the conduct that led to AIG's demise and subsequent bailout
2. whether, as you claim, such individuals are truly required to unwind AIG Financial Product's positions
3. whether such contracts may be unenforceable for fraud or other reasons
4. whether any of the retention payments may be considered fraudulent conveyances under New York law

More stimulus funds released for energy and transportation projects

At a White House meeting with state officials responsible for stimulus programs, Vice President Joe Biden announced another round of funds being handed out.

The Energy Department has the bigger chunk from the $787 billion in the Recovery and Reinvestment Act.

"Through the Department of Energy, $8 billion in weatherization funding and energy efficiency grants are going to go out to the states," Biden said. $780 million of that money will be released in the next few days.

The vice president said, "This funding will go to weatherizations of homes for insulation, ceiling leaks, and modernizing heating and air-conditioning equipment. It's an investment that will pay for itself many times over."

Wondering what weatherization is and why it's important? Read our Home & Garden Blog's explanation of the buzzword.

Today in Washington

President Obama will give a speech on earmark reform this morning and later will meet with Democratic members of the Senate and House Budget Committees.

There are several hearings today on Capitol Hill of interest to consumers.

At 10 a.m., the House Energy and Commerce subcommittee on health hosts, "How Do You Fix Our Ailing Food Safety System?"

• Read testimony and watch video of this hearing
• CR Safety Blog: Nation's food safety system a 'fine mess,' says lawmaker
• Consumers Union: Not in My Food

At 2 p.m., the House Judiciary subcommittee on commercial and administrative law hosts, "Circuit City Unplugged: Why Did Chapter 11 Fail To Save 34,000 Jobs?"

• Read testimony from this hearing
• CR Electronics Blog: Circuit City’s demise may mean more driving

At 2:30 p.m., the House Financial Services subcommittee on financial institutions and consumer credit hosts, "Mortgage Lending Reform: A Comprehensive Review of the American Mortgage System."

• Read testimony and watch video of this hearing

Obama defends his wide-ranging reform agenda amid recession

With the rumblings of dissent building over the breadth of reform proposals coming from the White House, President Barack Obama said this morning that America can--and must--take on so many challenges even as the economy continues to decline.

"I know there are some who believe we can only handle one challenge at a time." the president said before he announced his plans to reform the nation's education system, following on the heels of initiatives on health care, capping emissions, and averting economic catastrophe.

Obama compared his agenda to other presidents who pushed changes through tough times. Abraham Lincoln, he said, accomplished much during the Civil War, and Franklin Roosevelt dealt with depression and a world war.

"And we don’t have the luxury of choosing between getting our economy moving now and rebuilding it over the long term," Obama said. "America will not remain true to its highest ideals–and America’s place as a global economic leader will be put at risk–unless we not only bring down the crushing cost of health care and transform the way we use energy, but also do a far better job than we have been doing of educating our sons and daughters; unless we give them the knowledge and skills they need in this new and changing world."

The president outlined five "pillars" of his school reform agenda:

• Investing in early childhood initiatives
• Encouraging better standards and assessments
• Recruiting, preparing, and rewarding outstanding teachers
• Promoting innovation and excellence in America’s schools
• Providing every American with a quality higher education

The president also called on parents to rededicate themselves to their children's education, and he also had a warning for the nation's kids: "Don’t even think about dropping out of school."

"So, yes, we need more money," he said near the end of his remarks. "Yes, we need more reform. Yes, we need to hold ourselves more accountable for every dollar we spend."