Posts Tagged ‘Joe Biden’

Right Up to the Cliff

Friday, January 4th, 2013

Like a good 30’s serial, Congress seems to enjoy brinkmanship and 11th hour rescues. And it was historic. For the first time in 20 years, Republicans voted to raise income taxes (the last time was when George H.W. Bush broke his “read my lips, no new taxes” pledge).  The Senate’s “fiscal cliff” bill passed 257-167. The Bush-era tax cuts will expire for people making $450,000 and up on earned and investment income. They will see their top rate go back to where it was during the Clinton era – from 35 percent to 39.6 percent. The deal also delays implementation of the sequester – $110 billion in automatic spending cuts set to begin Jan. 2—by two months. Ultimately, it comes down to gamesmanship and how the issues poll. Higher taxes on the middle class poll badly for Republicans as opposed to refusing to raise the debt ceiling. That’s why Republicans fared better in August of 2011 during the debt ceiling talks than in January of 2013.

Not that the Democrats won a clear victory. Left-leaning house and senate members decried the deal for sparing people earning between $250,000 and $450,000 from higher taxes. And the administration faces three new cliffs in short order – when the sequester comes back in two months; followed by a new debt ceiling deadline and expiration of the continuing budget resolution at the end of March.  We are now in an era of cliffhangers.

One clear winner is Joe Biden who burnished credentials as a wily tactician and a master of backroom deals. After the Obama-Boehner impasse, it was Biden and Senate minority leader, Mitch McConnell who made the deal happen (by a landslide 89-8 vote). With Biden set to lead the campaign for gun control, it seems clear that the administration sees him as their chief negotiator.

All told, the fiscal-cliff deal produces $620 billion in deficit reduction over 10 years. Stay tuned.

TARP: Money Well Spent

Wednesday, March 23rd, 2011

A top Treasury official defended the federal government’s $700 billion bank bailout financial crisis-response program at a hearing where the effort was criticized by members of a watchdog panel insisting that it did more for Wall Street than Main Street. “The cost of TARP is likely to be no greater than the amount spent on the program’s housing initiatives,” said Timothy Massad, acting assistant secretary of the Treasury for the Office of Financial Stability, to the Congressional Oversight Panel that oversees the Troubled Asset Relief Program (TARP).  “The remainder of the programs under TARP — the investments in banks, credit markets and the auto industry — likely will result in very little or no cost,” he said.

Panel member J. Mark McWatters, a Dallas-based CPA ad tax attorney, argued that it is difficult to call TARP a success when the unemployment rate is still approximately nine percent and millions of Americans are fighting foreclosure.  Panel Chairman Ted Kaufman – who was Vice President Joe Biden’s chief of staff of 19 years and temporarily replaced him in the Senate – said that Wall Street bankers ended up in better shape than Main Street.  “It’s not a tough economy on Wall Street, it’s a tough economy everywhere else,” Kaufman said.

According to Massad, TARP will end up spending no more than $475 billion; 86 percent of which has been disbursed.  To date, Treasury has received $277 billion back, including $241 billion in repayments and $36 billion in additional income. The Treasury expects to receive an additional $9 billion, which will leave $150 billion outstanding through various investments.  The department hopes to recover those funds over the next several years.  “TARP helped bring our financial system back from the brink and paved the way for an economic recovery,” Massad said.  “Banks are better capitalized, and the weakest parts of the financial system no longer exist.  The credit markets on which small businesses and consumers depend — for auto loans, for credit cards and other financing — have reopened.  Businesses can raise capital, and mortgage rates are at historic lows.  We have helped bring stability to the financial system and the economy at a fraction of the expected costs.”

William Nelson, deputy director of the Federal Reserve’s division of monetary affairs, agrees with Massad. In testimony about the Fed’s program to restart the asset-backed securities markets with backing from the Treasury’s TARP program, Nelson said even that program is unlikely to experience any losses.  “The Term Asset-Backed Securities Loan Facility (TALF) program helped restart the ABS markets at a crucial time, supporting the availability of credit to millions of American households and businesses,” Nelson said, adding that of the more than 2,000 loans worth $70 billion that were extended through the Fed’s facility, 1,400 totaling $49 billion were repaid early.  Remaining loans are current, and the collateral backing the loans is retaining its value, “significantly reducing the likelihood of borrower default.”

“As a result, we see it as highly likely that the accumulated interest will be sufficient to cover any loan losses that may occur without recourse to the dedicated TARP funds,” Nelson said.  Europe, by contrast, did not act as aggressively to apply stimulus with the result that financial crises occurred in countries like Ireland and Greece.