More than a month before he officially takes his seat in the Oval Office, President-Elect Barack Obama’s already towering economic to-do list is still growing by the minute.
As anticipated, people are looking to him as the go-to guy now more than anybody else. Even the upward and downward swings of the financial markets are largely dependent on Obama’s moves, rather than on what the current president has to say in his final days in office.
Key people who will be working with him in his administration have already been named and expectations are rather high. Let’s see what the President-Elect has had to contend with so far.
Banking Industry Continues to Struggle
Last Oct. 14, the Treasury Department “released” to Wall Street banks some $250 billion in exchange for government equity in these banks. The capital injection funds were later made available to small, private banks too on Nov. 14.
While these funds were generally known as “bailout” money, technically, the money is intended to stimulate activity in banks’ credit departments in areas as credit cards, mortgage lending, auto loans, and student loans.
Sadly however, it appears that none has translated to increased consumer activity. Moreover, more banks are in need of pure bailout money simply to recover from losses incurred from defaulted mortgages.
Last month saw the rescue of one of the biggest giants in the banking industry, Citicorp, to the tune of $326 billion. If Citicorp is hit this badly, can we expect any less from the other much smaller banks?
On the Mortgage Front
Notwithstanding the millions of dollars that have already been poured into banks and financial institutions to ease up the crisis in home mortgages, the future remains bleak for many homeowners facing foreclosure.
Even those who just want to apply for home refinancing to experience a measure of relief in the monthly payments are often left frustrated because of the red tape that they would have to contend with.
Earlier this month, Obama has given his assurance that his administration would take more assertive steps in slowing down the tide of foreclosures that is threatening to push even more Americans out of their homes in the coming months.
As a matter of fact, about 3.6 million homeowners are likely to lose their homes in the next two years unless the government takes a more concrete approach in finding specific solutions to this problem than merely pouring in more and more taxpayers’ money into banks and lending institutions.
Uncertain Future for the Auto Industry
The fate of the extremely distressed auto industry is still doubtful up to this point. For almost two months now, lawmakers have been indecisive about whether or not Detroit’s big three should be given a slice of the pie that is the bailout fund.
True, the country’s leading automakers have been providing millions of jobs to Americans for decades now. However, Congress still needs more convincing that this industry is indeed worth saving amid reports of mismanagement and a workforce, who despite being one of the highest paid in the country, refuse to take pay cuts even facing possible closure of their companies.
While the White House is still not closing its doors on a possible federal rescue package for Detroit’s Ford, General Motors, and Chrysler, nobody’s rushing into anything just yet. Concessions from all parties involved would have to be made to ensure that good money will not be invested in an industry that’s fast on the road to nowhere.
Massive Layoffs Contribute to Rising Level of Unemployment
Gone is the taboo of companies laying off people between Thanksgiving and New Year.
Claims for the jobless rose further this month according to reports released by the Labor Department. Soaring to a level which is the highest seen in 26 years, unemployment figures continue to tell the story of an economy battered by businesses closing shops and leaving thousands jobless.
For the week ending December 6 alone, applications for jobless benefits reached 573,000 – a huge leap from the previous week’s figure of 515,000. While this development is rather expected, it is still a big blow to the country’s current economic state especially since more job cuts are revealed by various companies.
Connecticut-based toolmaker Stanley Works announced Thursday plans of cutting 2,000 jobs and closing down three manufacturing facilities. Earlier this month, AT&T, the country’s biggest telephone company, had also disclosed that it would be letting go of as many as 12,000 employees or 4% of its total workforce, unable to keep up with the strain the recession was causing.
Consumer Spending at its Lowest
Retailers are also facing very desolate prospects ahead if consumers’ spending habits do not improve drastically in the next few weeks. Despite the fact that stores are trying to attract more consumers to let go of part of their hard-earned money by giving discounts they cannot actually afford, the buying public remains resistant to these offers.
November figures show that consumers are cutting back on discretionary spending and stocking up more on the necessities. Overall, average retail sales of all categories fell to a rate of -7.41%, with car dealer sales suffering the worst setback with a performance of -27.41%. Only general merchandise and grocery stores posted positive sales performance.
Fed Cuts Rates to Record Lows
In hopes of providing some cushion to the many struggling Americans deeply feeling the effects of a continuing recession, the Federal Reserve decided to slash key rates even further last Tuesday.
The latest cut in the interest rate which was set at 0 to 0.25% is the lowest known rate ever to be reached by the Fed, an indication that the government is willing to take more aggressive steps into doing what needs to be done to get the country out of this sorry situation.
This unprecedented move served as a silver lining in an otherwise struggling economy, bolstering Wall Street confidence, and paving the way for a surge in the stock market. The Dow Jones industrials rose by 360 points or 4.2%.
Moreover, with the Fed significantly cutting down key rates, banks borrowing from the Central Bank and other banks would also be more affordable and within the range of 0 to 0.25%.
Getting Past the Challenges
With inauguration day getting closer, we see more and more of the Obama team coming into focus and the Bush administration slowly fading away.
While preparations for his inaugural are going under way, the President-Elect obviously has much more to be ready for even before he takes oath as the 44th president of the United States. He strongly believes that America and its people have what it takes to rise above the divisions and the difficulties and get past this crisis.
“It is time to act. As the next president of the United States, I will”, Obama said.