After fits and starts, the White House and Congress are moving on parallel tracks toward a new round of heavy intervention in the U.S. economy to try to brake a downturn President Barack Obama says has now grown into "a full-blown crisis."
The Treasury Department planned to announce Tuesday a revamped bank rescue plan, one calling for a stepped-up role by private investors. And an $838 billion stimulus bill was headed for expected Senate approval after clearing a critical procedural hurdle Monday.
"It’s the right thing to do even though I know it’s expensive," Obama said of the legislation, which has little Republican support in either chamber of Congress. At his first White House prime-time news conference, he sought to build public support for quick passage of the legislation.
The Treasury Department was ready to announce how it will spend the remaining $350 billion of the $700 billion financial rescue program started by the Bush administration last fall. The plan envisions big investors buying more than $1 trillion in troubled assets from the banks, according to congressional staffers briefed on the plan Monday night by Treasury officials.
Obama depicted his administration’s rewrite of the bank bailout effort as a template for "restoring market confidence."
"The credit crisis is real, and it’s not over," Obama said.
On a day of high economic activity, Obama was headed Tuesday to Fort Myers, Fla., a metropolitan area among the hardest-hit by mortgage foreclosures, for another town-hall meeting like the one he held Monday in Elkhart, Ind.
There, he warned the crisis was so deep it might become irreversible without strong government actions. At his East Room news conference Monday night, Obama expanded on that dire warning.
"This is not your ordinary, run-of-the-mill recession," he said. He cited Japan’s failure to take bold actions in time to reverse a recession that turned the 1990s into a "lost decade" with no economic growth.
He said failure to act quickly "could turn a crisis into a catastrophe."
"And if there’s anyone out there who still doesn’t believe this constitutes a full-blown crisis, I suggest speaking to one of the millions of Americans whose lives have been turned upside-down because they don’t know where their next paycheck is coming from," Obama said.
The new bank rescue plan, to be announced by Treasury Secretary Timothy Geithner, will propose a government partnership with the private sector to buy troubled debt now clogging the balance sheets of banks.
The administration is counting on private investors to help rescue banks by buying up some of these bad loans and other toxic debt. Hedge fund managers and other big investors are counting on the government to sweeten the deal before they open their checkbooks.
The plan also includes fresh cash injections into banks, new programs to help struggling homeowners and an expansion of a Federal Reserve program to spur consumer lending.
Obama criticized the way the first $350 billion was spent by the Bush administration: "We didn’t get as big of a bang for the buck as we should have."
But he brushed aside a question on whether his administration would seek more funds for the Troubled Asset Relief Program. "We don’t know yet if we’ll need additional money, or how much additional money we’ll need," Obama said.
As for the economic stimulus bill in Congress, Democratic Senate leaders were able to rally the votes needed to clear a procedural barrier Monday to open the way toward expected final passage Tuesday. The 61-36 vote, just one more than the 60 required, was heavily partisan, with only three Republicans — Sens. Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania — joining all Democrats in voting for the package, a blend of federal spending and tax cuts.
Senate Majority Leader Harry Reid of Nevada called it "the first step on the long road to recovery." In the House, not a single Republican had voted for that chamber’s version of the legislation.
Still ahead was a difficult round of further negotiations aimed at producing a final House-Senate compromise. Congressional leaders hope to get the bill to Obama’s desk before the Presidents Day recess next week.
The House and Senate versions are relatively close in size and are similar in many respects, but there are some key differences.
Both include Obama’s call for a tax cut for lower-income wage earners, and billions of dollars for unemployment benefits, food stamps, health care and other programs to help victims of the worst recession in decades. In a bow to the administration, the bills also include billions for development of new information technology for the health industry, and billions more to lay the groundwork for a new, environmentally friendly energy industry that would help reduce the nation’s dependence on foreign oil.
At the same time, the Senate measure calls for more tax cuts and less spending than the House bill. It includes a $70 billion provision to protect middle-class taxpayers from falling victim to the alternative minimum tax, which was intended to make sure the very wealthy don’t avoid paying taxes.
Both bills provide for tax breaks for home buyers, but the Senate’s provision is far more generous. The Senate bill also gives a tax break to purchasers of new cars.
Associated Press writers Martin Crutsinger, David Espo, Andrew Taylor, Matt Apuzzo and Stevenson Jacobs contributed to this report.