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Obama and Geithner Continue to Sell the New Stimulus Plan; Sen. Dodd, Discusses the Financial Crisis; Treasury's Geithner Reveals Obama's Changes to the Bailout
Aired February 10, 2009 - 11:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN NEWS ANCHOR: It is Tuesday, February 10th, and here are the top stories right now in the CNN NEWSROOM. Live pictures now from Washington.
In a moment, the federal bailout program gets a major overall. The treasury secretary, putting the Obama imprint on the plan. The Senate heading toward a final vote on the president's ambitious plan to kick-start the economy. As for Mr. Obama, he is taking his stimulus hard sell straight to the people again today. He arrives at Ft. Myers, Florida, in just a few minutes. Live coverage straight ahead.
Good morning, everyone, I'm Tony Harris. And you are in the CNN NEWSROOM.
It is Washington's best reality show, how to spend the $350 billion taxpayer dollars, your dollars that remain in the bailout pot. Like any good reality show, this one includes a makeover. The treasury secretary is about to reveal the Obama administration's changes to the bailout, also known as the Troubled Asset Relief Program, or TARP. Live coverage when timothy Geithner speaks.
All right. Let's continue now. Let's get a preview and set the stage for you. Our White House correspondent, Suzanne Malveaux, and Suzanne, if you would, let's talk about the strategy here. The selling of this plan. President Obama and Timothy Geithner. What's the goal here of the two-pronged strategy?
SUZANNE MALVEAUX, CNN NEWS CORRESPONDENT: Tony, it's really about trying to regain confidence. President Obama wants American people to regain confidence in their government, financial systems, in their banks. That they are going to be confident that they'll get their homes back and their jobs. That's why you're seeing Barack Obama, the president, obviously, in Ft. Myers, Florida, making the trip, saying, look, I understand the kind of pain that you're going through. Selling his economic stimulus package, essentially saying, I believe that there is a way to fix this. And also, this announcement from the treasury secretary, which is all about accountability here, Tony, at least that's what they're emphasizing, that the second half of the $700 billion bailout plan, that at least half of that, there is some sort of strategy, a plan to follow those dollars.
So some of the things we expect he's going to talk about is obviously working with the Federal Reserve to commit $50 billion to help people stay in their homes. The Treasury is going to launch this new website called financialstability.gov to track the federal dollars, require banks to show how the government assistance will actually expand in their lending. That was the problem that happened last time. They held on no those dollars. And finally, Tony, limited compensation, golden parachutes, luxury trips, all of those things meant to try to instill confidence once again in the financial system, in the government, that there is a solution here, Tony.
HARRIS: OK. Our White House Correspondent Suzanne Malveaux for us. Suzanne, thank you.
Let's bring in our Susan Lisovicz at the New York Stock Exchanges.
Susan, great to see you. If you are a bank in trouble right now, what do you want to hear from the treasury secretary? What gets financial stocks flying today? If anything?
SUSAN LISOVICZ, CNN NEWS CORRESPONDENT: Well, financial stocks are under pressure ahead of this announcement. But there are so many problems in the financial system that they have been in trouble for a long time.
But to answer your question, Tony, I think what you want to hear from the treasury secretary is that the calvary is coming, but that when the calvary arrives, that you won't be put under house arrest. You know, you do want the funds. And it's understood that there will be provisions, because it's coming with taxpayers' money, but that to have the government so intertwined into the running of these institutions could make a situation even worse.
That's obviously a concern here on Wall Street. I mean, this is the private sector, after all, but then these are extraordinary times. We saw what happened with the first installment of TARP Funds. And the sense is that, yes, I mean, that there was reckless behavior that got us into this situation. but to -- for the government to be really telling these institutions what to do, to be -- for instance, changing who is running them, to have wholesale enforcement of what everyone will be earning, that kind of thing, could be destructive.
You know, at the end of the day, financial systems, Tony, they don't make cars. They don't make software. They don't make clothes.
HARRIS: Right, right.
LISOVICZ: It's really this. It's human capital. And the bottom line is that that capital is paid for, and that capital will leave. That human capital will leave. So it's a fine line. Timothy Geithner knew he would have to convince others in the administration that, you know, there would be strings attached. But not to have it so -- so heavily-weighted down that it could be destructive.
HARRIS: Susan, let's continue our conversation after we hear from the treasury secretary.
Right now, I want to bring in our Professor Rajeev Dhawan, he leads the Economic Forecasting Center at Georgia State University. And Professor Dhawan, thank you for being with us.
RAJEEV DHAWAN, PROFESSOR, GEORIGIA STATE UNIVERSITY: My pleasure.
HARRIS: Let me give you the same question. We have a minute until we get -- at least the indication is that the treasury secretary will begin his remarks. So the same question to you that I just posed to Susan. What is it that the financial markets want to hear today from the treasury secretary, in your view?
DHAWAN: They want to hear a clear direction, what are you going to do, to do with the bad toxic debt. Not just in theory, but how are you going to operationalize it, and where are you headed, how much money do you want to put down? It has to be something very clear because last time the criticism is that they were very wishy-washy.
HARRIS: Yeah. To operationalize it. That is new phraseology. What does that mean?
DHAWAN: It means, what are the steps you're going to take to take the debt off the books? Just talking about it, I want to take it off, won't do it. You have to come out and say this is the road map. This is what I want to follow. This is where I need your help.
HARRIS: Professor, you're the smart guy in the room. What do you think about the idea of this bad bank to sort of wall off these ill liquid assets?
DHAWAN: Somebody has to buy that bad debt, whether it's a bad bank or create a bank within a bank. But you have to then bring the in private sector, form a partnership with them, and try to take the stuff off the books.
HARRIS: Yes. Are why in the world would I as a private investor want anything to do with the bad assets on the balance sheets of these banks?
DHAWAN: Everything...
HARRIS: I mean, really?
DHAWAN: Everything is a price. If it's 20 cents to a dollar and you get some of the guarantees, you will come in.
HARRIS: Really. Is there any indication that you have heard that suggests to you that if this happens, if this bad bank, for example, is created that the CEOs of these troubled financial institutions will then all of a sudden decide now is the time to start lending? I don't recall hearing a CEO from any of these institutions saying, hey, look, give me this, give me this bad bank to take these assets of my books, and there you go, we'll start lending. I haven't heard it. Have you?
DHAWAN: No, I haven't. And, you know, this is a long process. Last time they formed the RDC, it took them three to five years to clear up the bad debt. This is going to take some time, but it has to be done. If we don't do it, it's going to be like Japan where they kept spending money on the government stimulus, but they never cleaned up their banks, and haven't had any growth in 15 years.
HARRIS: I also want to know why the banks, from your perspective, have sexually stopped lending. My goodness, I keep hearing stores of people with 700-plus credit scores, with money for down payment on their car, on their home that they want to purchase, and they're being turned down by the banks. Now, really? Why aren't the banks lending to those people? And if the banks aren't lending to those people, you're really not in the lending business anymore, are you?
DHAWAN: When you're in the survival mode, when you're worried about your survival three months from now, are you going to make any new loans? It's the management thing. You have only limited resources, and if you're worried about putting out a fire, you're not going to be building a new addition to the House when the fire is burning. You first have to put out the fire, clearly, and then go do something.
HARRIS: OK. Let me just sort of monitor the situation here.
Chris Dodd is speaking now, about to introduce the treasury secretary. Why don't we listen in?
Professor, appreciate it. Thank you.
SEN. CHRIS DODD, (D), CONNECTICUT: President Obama asked all of us to participate in a new era of shared responsibility and cooperation. Today, as the United States Senate votes on a bipartisan plan to stimulate our economy, create jobs and invest in our middle- class families, we're going to hear Treasury Secretary Tim Geithner lay out the administration's long-term, comprehensive framework to lead our nation back to economic recovery. This framework will require swift and concerted action by policy makers throughout our government using existing authorities. Elements that may require -- require new legislation, and certainly I look forward, along with my colleagues, to work with the secretary and his staff in that effort, to flesh out the details in the coming days and weeks.
Secretary Geithner understands the enormity of the challenges we all face as a nation. Regretfully, and for too long, his predecessors failed fully to realize the financial health and security of consumers is execrably linked to the success of the American economy. That without applying the same urgent focus to helping homeowners that we apply to our financial institutions efforts to restart lending, we are not able to break the cycle of rising for closures and rising credit that is damaging our economy so much. With nearly 10,000 families facing foreclosure and 19,000 Americans losing their jobs every day, we understand how much the economy rests on the financial well-being of American workers and small businesses.
So while it is important to know how we came to this, it is even more important, far more important, to understand how we move forward to recovery and prosperity. Today we will hear a new set of ideas about how the troubled assets weighing on our financial system should be valued, transferred and structured so that credit can start flowing again. In the coming days, we will hear about a way forward for American families, buckling under the weight of unaffordable mortgages, including more than 25,000 in my home state of Connecticut. We'll hear how focus must be simply -- not simply on our financial institutions, rather, but also on those who rely upon them, homeowners seeking options to keep their homes, small businesses that rely on payroll accounts and banks, and entrepreneurs who need access to capital to generate jobs of the future.
Today as the Senate casts an historic vote for an economic stimulus package that addresses the jobs and income losses facing American families, by investing in our future, we look forward to Secretary Geithner's announcement of a comprehensive plan to get credit flowing again. Together, saving jobs and unfreezing credit, our design to offer the opportunity for a fresh new start for American homeowners, consumers and businesses, a fresh new start for transparency and accountability, and how taxpayer dollars are going to be used. And a fresh new start for the public and private sectors, for all Americans, in fact, as we work together in partnership to stabilize our nation's economy.
Continuing the exchange of ideas between co-equal branches of government is the way this process should work, and all Americans, including my colleagues, want the process to work. And with that I'm very pleased to announce the secretary of our nation's treasury, Timothy Geithner.
TIMOTHY GEITHNER, SECERTARY OF THE TREASURY: Thank you, Senator Dodd.
And thanks to all of you for coming here today.
President Obama said, in his inaugural address, that our economic strength is derived from the doers, the makers of things, the innovators who create and expand enterprises, the workers who provide life to companies. This is what drives economic growth. The financial system, your banks, are central to this process.
Banks and the credit markets transform the earnings and savings of American workers into the loans that finance a first home, a new car, or a college education. And this system provides the capital and the credit necessary to build a company around a new idea. Without credit, economies cannot grow at their potential. And right now, critical parts of our financial system are damaged. The credit markets that are essential for small businesses and consumers are not working. Borrowing costs have risen sharply for state and local governments, for students trying to pay for college, and for businesses, large and small. Many banks are reducing lending, and across the country, they are tightening the terms of loans.
Last Friday, we learned that the economy had lost three million jobs last year, and an additional 600,000 jobs just last month. As demand falls and credit tightens, businesses around the world are cutting back the investments that are essential to future growth. Trade among nations is contracting sharply as finance dries up. Home prices are still falling, as foreclosures rise. And even credit- worthy borrowers are finding it harder to finance the purchase of a home, or refinance their mortgage.
Instead of catalyzing recovery, the financial system is working against recovery. At the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic and we need to arrest it. It's essential that every American understand that the battle for economic recovery must be fought on two fronts. We have to jump-start job creation and private investment, and we must get credit flowing again to businesses and to families.
Without a powerful economic recovery act, too many Americans will lose their jobs, and too many businesses will fail. And unless we restore the flow of credit, the recession will be deeper and longer, causing even more damage to families and businesses across the country.
Now today, as Congress moves to pass the economic recovery plan that will help create jobs and lay a foundation for a stronger economic future, we are outlining a new financial stability plan. Our plan will help restart the flow of credit, it will help clean up and strengthen our banks, and it will provide critical aid for homeowners and for small businesses. And as we do each of these things, we will impose new higher standards for transparency and accountability.
I'm going to outline the key elements of this plan today. But before I do that, I want to say a bit about how we got here. The cause of this crisis are many and complex. They accumulated over a long period of time, and they will take time to resolve. Governments and central banks around the world pursued policies that, with the benefit of hindsight, caused a huge global boom in credit, pushed housing prices in financial markets to levels that defied gravity. Investors in banks took risks they did not understand. Individuals, businesses and governments borrowed beyond their means.
The rewards that went to financial executives departed from any realistic appreciation of risk. There were systematic failures in the checks and balances in our system, by board of directors, by credit rating agencies, and by government regulators. Our financial system operated with large gaps in meaningful oversight, and without sufficient constraints to limit risk. Even institutions that were overseen by our complicated and overlapping system of multiple regulators put themselves in a position of extreme vulnerability. And these failures helped lay the foundation for the worst economic crisis in generations.
And when the crisis began, governments were slow to act. When action came, it was late and inadequate. Policy was behind the curve, always chasing and escalating crisis. And as the crisis intensified, and more dramatic government action was required, the emergency actions that were meant to reassure to provide confidence, too often added to public anxiety and to investor uncertainty. The dramatic failure or near failure of some of the world's largest financial institutions caused investors to pull back from taking risk. Last fall, as the crisis intensified, Congress acted quickly and courageously to give your government the emergency authority to help contain the damage. Your government used that authority to help pull the financial system back from the edge of catastrophic failure. And those actions were absolutely essential.
But they were inadequate. The force of government support was not comprehensive or quick enough to with stand the acute pressure brought on by a weakening economy. And the spectacle of huge amounts of taxpayer assistance provided to the same institutions that helped cause the crisis added to public distrust. And this distrust turned to anger, as board of directors at some institutions continued to reward rich compensation packages and lavish perks to their senior executives.
Our challenge is much greater today because the American people have lost faith in the leaders of some of our financial institutions, and they are skeptical that their government has used taxpayers' money in ways that will benefit them. This has to change. To get credit flowing again, to restore confidence in our markets, and to restore the faith of the American people, we are going to fundamentally reshape our program to repair the financial system.
Our work will be guided by the lessons of the last 18 months, and by the lessons of financial crises throughout history. And the basic principles that will shape our strategy are the following: we believe that policy has to be comprehensive and forceful. There is more risk and greater cost in gradualism than there is in aggressive action.
We believe that action has to be sustained until recovery is firmly established. In this country in the 1930s, in Japan in the 1990s, and in many cases elsewhere around the world, crises lasted longer and they caused greater damage, because governments applied the breaks too early. We cannot make that mistake.
We believe that access to public support is a privilege, not a right. When our government provides support to banks, it is not for the benefit of banks. It is for the businesses and families who depend on banks. And it's for the benefit of the country. Government support has to come with strong conditions to protect the taxpayer, and with transparency that allows the American people to see the impact of those investments.
We believe that our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital, as soon as that is possible.
And we believe that the United States has to send a clear and consistent message that we will act to prevent the catastrophic failure of financial institutions that would damage the broader economy.
Guided by these principles, we will replace the current program with a new financial stability plan designed to stabilize and repair the financial system and to report -- to support the flow of credit that is necessary for recovery.
This new financial stability plan will take a comprehensive approach. The Department of the Treasury, the Federal Reserve, the FDIC, and all of the financial agencies in our country will bring the full force of the United States' government to bear to strengthen our financial system so that we get the economy back on track. Now, these agencies, each have different authorities, instruments and responsibilities, but we are one government, serving the American people. And we will work together as one.
Now, here's what we will do. Our work begins with a new framework of oversight in governance on all aspects of our financial stability plan. The American people will be able to see where their tax dollars are going, and the return on their government's investment. They will be able to see whether the conditions placed on banks are being met and enforced. They will be able to see whether board of directors are being responsible with the taxpayer collars, and how they compensating their executives. And they will be able to see how these actions are affecting the overall flow of lending, and the cost of borrowing. These new requirements, which will be available on a new website, financialstability.gov, will give the American people the transparency they deserve.
Now, these steps build on things we have already done. We have acted to ensure the integrity of the process that provides access to government support, so that it is independent of influence from lobbyists and from politics. We have committed to provide the American people with the information on how their money is spent, and under what conditions by posting these contracts on the internet. And importantly, we have outlined some strong conditions on executive compensation.
Now, under this framework, we are establishing three new programs to clean up and strengthen the nation's banks, to bring in private capital to re-start lending, and to go around the banking system directly to the markets, the consumers and is businesses depend on.
Let me describe each of these three steps. First, we're going to require banking institutions to go through a carefully-designed comprehensive stress test. This borrows the medical term. We want the balance sheets cleaner and stronger, and we're going to help this process by providing a new program of capital support for those institutions that need it.
To do this, we're going to bring together the agencies with authority over our nation's banks, and initiate a more consistent, realistic, forward-looking assessment about the exposures on bank balance sheets, and we're going to introduce new measures to improve disclosure.
Those institutions that need additional capital will be able to access a new funding mechanism that uses capital from the Treasury as a bridge to private capital. The capital will come with conditions to help ensure that every dollar of taxpayer assistance is being used to generate a level of lending, greater than what would have been possible in the absence of government support. And this assistance will come with terms that should encourage these institutions to replace public assistance with private capital as soon as that is possible. The Treasury's investments in these institutions will be placed in a new Financial Stability Trust.
Now, second, we will work together with the Federal Reserve, with the FDIC, and with the private sector to establish a public-private investment fund. And this program will provide government capital and government financing to help leverage private capital to help get private markets working again. This fund will be targeted to the legacy loans and assets that are now burdening many financial institutions.
By providing the financing, the private markets cannot now provide, this will help start a market for the real estate-related assets that at the center of this financial crisis. Our objective is to use private capital and private asset managers to help provide a market mechanism for valuing these assets.
Now, we're exploring a range of different structures, and we'll seek input from the public as we design this program. But we believe this program should ultimately provide up to $1 trillion in financing capacity, but we plan to start it on a scale of $500 billion, and we will expand it based on what works.
The third piece of this program -- working jointly with the Federal Reserve, we are prepared to commit up to $1 trillion dollars to support consumer and business lending. This initiative will help kick-start the secondary lending markets to help bring down borrowing costs and to help get credit flowing again.
In our financial system, roughly 40 percent of consumer lending has typically been made available because people buy loans, put them together, and sell them. And because this vital source of lending has frozen up, no financial recovery plan will be successful, unless it helps restart the securitization markets for sound loans made to consumers and to businesses, large and small.
This program will be built on the Federal Reserve's term, Asset- Backed Securities Loan facility, that was announced last November, with capital from the Treasury and financing from the Federal Reserve. We agree to expand this program to target the markets that are critical for small business lending for student loans, consumer and auto finance and for commercial mortgages.
Now, in addition, because small businesses are so important to our economy, we're going to take some additional steps to make it easier for them to get credit from community banks and from large banks. By increasing the federally-guaranteed portion of Small Business Administration loans, and by giving more power to the SBA to expedite loan approvals, we believe we can turn around the dramatic decline in SBA lending we have seen in recent months.
Now, finally -- and this is critically important -- we will launch a comprehensive housing program. Millions of Americans have lost their homes, and millions more live with the risk that they will be unable to meet their payments or refinance their mortgages. Many of these families borrow beyond their means, but many others fell victim to terrible lending practices that left them exposed, overextended and with no way to refinance. On top of that, homeowners around the country are seeing the value of their homes fall because of forces they did not create and cannot control. This crisis in housing has had devastating consequences, and our government should have moved more forcefully to help contain the damage.
As housing prices fall, demand for housing will increase and conditions will ultimately find a new balance. And you're seeing that happen in parts of the country today. But now we risk an intensifying spiral in which lenders foreclose, pushing house prices lower, and reducing the value of household savings, making it harder for all families to refinance.
The president has asked his economic team to come together with a comprehensive plan to address this crisis, and we will announce the details of this plan in the next few weeks. But our focus will be on using the full resources of the government to help bring down mortgage payments and to relationship reduce mortgage interest rates. We'll do this with a substantial commitment of resources already authorized by the Congress under the Emergency Economic Stabilization Act.
Now, I want to add that, looking forward, President Obama is committed to moving quickly to reform our entire system of financial regulation, so that we never again face a crisis of this severity. We are consulting closely with Chairman Chris Dodd in the Senate, Chairman Barney Frank in the House, and their colleagues on both sides of the aisle on the broad outlines of a comprehensive program of reforms. The president is working with financial markets and beginning to develop detailed recommendation recommendations, and we will start working closely with the world's leading economies on a set of broader reforms to the international financial system in preparation for the G-20 summit in London on April 2nd.
The success of this plan, the success of our Financial Stability Plan, is going to require an unprecedented level of cooperation here, in the United States, and around the world. Federal Reserve Chairman Ben Bernanke, FDIC Chair Sheila Bair, John Dugan, the comptroller of the currency, and John Rich, the head of the Offices through Supervision, I want to thank them for helping shape this plan. And I want to thank them for their commitment to making it work.
This program is going to require a substantial and sustained commitment of public resources. Congress has already authorized substantial resources for this effort, and we're going to use those resources as carefully and as effectively as possible. We're going to consult closely with the Congress as we move forward. And we're going to work together to make sure that we have the resources and the authority to make this work.
Later this week, I'm going to be traveling to meet with the G-7 finance ministers and central bank governors in Italy, and there, we will start the process of working with our international partners to ensure that we're working together to help strengthen the global economy and to help repair the global financial system. And we will work closely with the leadership of the IMF and the World Bank so that they can deploy resources quickly to help those countries around the world that are most at risk from this crisis.
Now, many of the programs I've discussed involve very large numbers. But it's important to recognize that these programs involve loans and investments with terms and conditions that will help protect the taxpayer, and help compensate the government for the risk we are taking. And because of these terms and conditions, the risks to the taxpayers will be less than the headline numbers. Our obligation is to design these programs so that we are achieving the largest benefit in terms of supporting recovery at the least cost to the taxpayer. And we take that obligation extremely seriously.
But I want to be candid. This strategy will cost money. It will involve risk. And it will take time. But as costly as this effort may be, we know that the cost of a complete collapse of our financial system would be incalculable for families and businesses and for our nation. We are going to have to adapt our program as conditions change. We will have to try things we never tried before. We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted. But we will be guided by these core principles of transparency and accountability, dedicated to the objective of restoring credit to families and businesses, and committed to moving our nation towards an economic recovery that is as swift and widespread as possible.
This is a challenge more complex than any challenge our financial system has faced. It's going to require new programs and extraordinary action. But the president and his entire administration are committed to seeing it through, because we know how directly the future of our economy depends on it.
Thank you very much. Thank you for coming.
(APPLAUSE)
HARRIS: OK. Treasury Secretary Timothy Geithner laying out the new strategy for TARP II, the remaining $350 billion in troubled asset relief funding. A lot to dissect here.
Let's reintroduce our team this morning. Susan Lisovicz is at the New York Stock Exchange, personal finance editor Gerri Willis listened to the speech as well from the treasury secretary. And particularly, I would imagine, Gerri, you were interested in the section where he discussed plans for a comprehensive housing program. We'll get your thoughts on that in a moment.
And professor Rajeev Dhawan is with me here in Atlanta. And Professor Dhawan leads the economic forecasting center at Georgia State University.
Susan, let's start with you. It sounds like the cavalry is, in fact, coming.
LISOVICZ: The cavalry's coming, and it's bringing an awful lot of ammunition. But there are a lot of questions that the treasury secretary didn't answer.
And one of them, which was the professor was talking about just before Mr. Geithner started speaking, was about this partnership between the government and the private sector to buy these toxic assets. The government -- the treasury secretary saying that the government would provide up to $1 trillion in financing capacity.
So basically, the government -- it's trying to encourage risk- takers to take risks, to buy these assets, which are very, very difficult to value. We're not sure how they're going to be valued, what pricing mechanism is going to be put in place, who exactly is going to do it, but that the government will back-stop them to a certain degree. And that will help the banks' balance sheets. That would be a huge factor in establishing a financial stability program, one of the -- one of the four major points of this program.
HARRIS: Well, Susan, let me jump in for a moment, and let me attempt to do here what you know I love to do, which is to have you and the professor talk to one another about this and maybe give us some insights.
And Professor Dhawan, I mean, I guess the question we asked going is, first of all, what is it that would lead a financial institution, let's say a hedge fund -- and Susan, you know where I'm going with this -- a pension fund manager, to say, hey, look, I just got a call from Tim Geithner, and he wants us to participate in this new public/private investment fund. I think it's a real good idea. I think there is an opportunity to make money here.
If I could, let me have you two smart people talk about whether or not this has a chance of working. Professor, let me start with you first. What are your thoughts on that?
DHAWAN: If I'm a hedge-fund manager and I want to buy those bad assets, my biggest worry is, the economy is slowing rapidly. How many more losses are going to come on the assets that I will buy? So I want to know what my floor is. If I think my floor is too low, I'm either going to walk away or buy for 10 cents to the dollar, whereas the real value may be 40 cents. So, somebody has to come and say, look, I'm going to backstop those losses, just like the deal jpmorgan got when they bought Bear Stearns, and that's going to bring in the people.
HARRIS: Well, let me try to break it down even further here. And Susan, jump in at any moment to help me here -- the president deplaning in Ft. Myers, Florida, a town hall meeting at the top of the hour. Of course, we'll bring it to you live on CNN.
Look, I've got -- as simply as I can put it here, I've got $10 at stake here. I want to know, what are my chances to make some money on the $10, maybe get 12 back, and how much am I on the hook here for the $10? Am I backstopped after a loss of $5, half of that? Are we guaranteed only to $3, maybe to $7? Break that out for me, here.
DHAWAN: That's exactly -- you're talking about, you know, Susan said the cavalry is coming, and we want to know, what are they bringing with them? What kind of armaments, what kind of horses, what kind of protection equipment? That's the whole problem. This was a speech had a little bit of everything.
I'm not criticizing it, I'm just talking about, there is a little bit of politics, a little bit of economics, a little bit of mea culpa, a little bit of reality, a little bit dose of caution. And it was a good speech, but it wasn't earth-shattering, the way the expectations have been built up in the Wall Street or over the media in the last few days, that they are coming out with something.
This was, I'm going to do a TARP plan, very carefully, very properly, with transparency. I've got everybody lined up with me. I know what the mistakes were done, and I know what I need to do. So it was kind of like continuation of the right process that he started, but with some execution problems they had in October and November.
HARRIS: Susan, jump in.
LISOVICZ: Yes, so, Professor, I mean, it's, you know, it's such a broad-based plan. Like, on the one hand, the financial institutions that are going to get a fresh infusion of capital, they're going to be under a lot of scrutiny. But with these toxic assets, the private equity and the hedge funds that would be theoretically buying this, they would not have the same scrutiny that it would seem to buy these assets, because they're essentially doing us a favor by taking this kind of risk, is that right? I mean, there would not be the same scrutiny involved here.
HARRIS: And before -- Professor, before you answer that, Susan, take a look at the big board. What's happening with the big board?
LISOVICZ: Well, the market is selling off. I mean, you know, even before Tim Geithner started speaking, we were seeing, you know, a moderate sell-off. And then around 11 a.m. Eastern time, we saw vertical drops. You know, he was a little bit late coming to the podium.
You know, sometimes there is this trend that we see in the marketplace many times, buy on the rumor, sell on the news. We saw the market go higher on anticipation Friday that we were going to have a stimulus package passed this week, and that we were going to have, you know, a new plan for the remaining TARP funds.
But we are seeing -- we're seeing a sell-off escalate, quite frankly, now, and that may be, you know, one of the things that the professor was just referring to. There's a lot of questions that remain. It's impossible to answer it in a ten-minute speech. But there are a lot of questions that are out there. But my question is about the toxic assets. The government is going to play the auctioneer in essence, in assets? Is that what it's going to do?
DHAWAN: That's what they did last time during the RTC after the savings and loan crisis. So they will have to do something like that. And it's going to take time. And he was very clear about that, that this is going to involve risk and time, and it will take some efforts. So I would say one thing. It's the same question. If the hedge funds come in, they're not doing us a favor. They're buying it at the right price. But they're a little bit worried, so if they give them some help, how are we going to do it, and what are we going to demand in return? With every lender, focus on the terms when they give you the money. And that, they should know it. And that is why the market is saying, if you want to put terms and conditions on us, maybe we don't want to come in.
HARRIS: Professor, appreciate it. Thank you, so much. And Susan, as always, thanks for the help. I want to get to Gerri Willis in New York. And Gerri, what are your thoughts on the section of the speech that talked about the comprehensive housing program that is to come?
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, Tony, you know, this was a six-page speech. You pretty much had to wait near the tail end to get to housing, where this crisis started in the first place. And even then there were really only six paragraphs on what this comprehensive plan would be.
You know, the broad brush we've sort of heard before from the administration. President Obama has said he would commit $50 billion to $100 billion to backing up, modifying these loans that people are in trouble with all over the country. As you know, Tony, 3.1 million Americans fell victim to foreclosure last year. Another 3 million possibly falling victim this year.
So, not many details. We already know they want to commit money to modifying these loans. But how, I have to tell you, I got a little more detail last week when I spoke to the Department of Housing and Urban Development secretary, Shaun Donovan. Here's what he had to say.
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SHAUN DONOVAN, HUD SECRETARY: Sheila Bair has been a real leader on this issue. Has developed a program through Indymac at FDIC that uses a range of tools, but particularly the guarantees. That's something that we're looking very closely at. And there are many different aspects of the plan that we think really work well. And I think what you'll see is that that is a model for the kind of efforts that we're looking at.
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WILLIS: So, yes, that is the model. The question is, the most controversial part of the Sheila Bair plan, of course, is that the government stands behind these mortgages, if they redefault. And that means the government's on the hook for a lot of money. So, we'll have to wait and see what the details of this plan are.
But we are getting glimmers of information, really not from this speech but from other administration officials as they start to work through these details. But yes, fascinating speech today. And we'll be going over these details for some days to come, I'm sure. HARRIS: As you always remind us, the devil's in the details. Gerri, appreciate it as always.
WILLIS: My pleasure.
HARRIS: Thank you. Professor, thanks for your time. Come back and help us through this any time. And Susan, thank you, as well.
We are within 30 minutes of President Obama's scheduled town hall meeting in Fort Myers, Florida. When the event begins, of course, we will take you there. You are watching CNN, the most trusted name in news.
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HARRIS: Fort Myers, Florida has a list of projects ready and waiting for some federal dollars. The mayor sees the president's visit today as an opportunity to push for those projects. Mayor Jim Humphrey is live with us from Fort Myers.
Mr. Mayor, thanks for your time. And I promise I'll be brief with you. The president will be speaking in your city shortly. What would you like to hear from him today?
MAYOR JIM HUMPHREY, FORT MYERS, FLORIDA: Well, first, we are, of course, very excited in the city of Fort Myers to have the president visit us and discuss the stimulus package. And so, what we hope, we are a city that really is ground zero for -- and actually southwest area for foreclosures.
And we also, of course, have unemployment that exceeds 10 percent. So, we have families and people here today that can share with the president their issues. And we believe that particularly if they would move forward, and we urge Congress to move forward quickly, to adopt this stimulus -- this package, so that we can put people to work. And we believe that particularly in local government, we can put them to work within 120 days.
HARRIS: Well, that's terrific. All right, so, Mr. Mayor, my understanding is you have a list of projects ready and waiting for some money. Can you give us an idea of maybe just a couple of the projects that are ready to go, in your estimation, and how much you would need and how many jobs those projects would create?
HUMPHREY: Yes. I had a meeting with the mayors of this region yesterday to formulate and prepare the data and the list of projects. And we have quite a few, particularly infrastructure -- roads, our water and sewer system, that as I said, we could star immediately. We have some of these roads that operate at level of service "f", meaning failure. And so if the funds could be coming in, we we'd have that.
We have already listed homes that we could start doing the repairs and working with the grants that we would receive to be able to put people back in their homes, and we believe that we could exceed over 400 jobs in just a matter of months, if they could move forward and adopt this program, and we can start having some assurance that we will be able to move forward and bid and commence construction.
HARRIS: Mr. Mayor, thanks for your time. We know you have to get seated, and we appreciate you borrowing some time out of your busy day to be with us. We appreciate it. Thank you, sir.
HUMPHREY: Thank you.
HARRIS: Our pleasure.
President Obama on the road again, selling the economic stimulus plan. He holds a town hall meeting next hour, about 12:05 p.m. Eastern time in Fort Myers, Florida. An area, as you just heard from the mayor, hit hard by mortgage foreclosures.
White House correspondent Dan Lothian is traveling with the president. And Dan, you know, here's -- an interesting moment is shaping up here for the president. And as I sort of read the information that's coming in, the president is actually poised, potentially, to get word of a passage of the Senate version of this stimulus bill during this town hall meeting.
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right, Tony. And how ironic, you know, that the president would be facing what would be sort of a major hurdle here that has been crossed with passages of this in the Senate. But then again, the real work begins as the House and the Senate will have to sit down and begin negotiations for that final bill.
But that's why the president is here. He's really selling that stimulus plan. And as you heard from the mayor of Fort Myers, this is a very difficult place, and it's a reason that the president is highlighting Fort Myers and Coral -- Cape Coral, rather, which is part of Lee County. It's really known as the foreclosure capital of the United States.
And part of the reason is because during the boom of the real estate market, there was a lot of speculation that took place here. And when the bottom fell out, well, there were a lot of these homes that people could not sustain. There are a the lot of investors who pulled out.
And that's what really created this problem here. In addition to that, you heard the mayor point out again that the unemployment rate has just taken a spike -- 6 percent over last year, from 6 percent to 10 percent. And another reason for that unemployment rate is because the construction jobs have really dried up. There was so much boom, so much development here. Those people are out of work.
And the situation is only getting more dire here. So what the president wants to tell folks here in Fort Myers and in areas around here is that this stimulus plan will be able to provide money to these cities so that they can create the jobs and start turning their economy around -- Tony.
HARRIS; Our White House correspondent, Dan Lothian. Dan, appreciate it. Thank you. All right, from the TARP plan to the stimulus package, U.S. senators are expected to vote within the next hour. Will more than three Republicans cross the aisle this time?
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BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Despite all of this, the plan's not perfect. No plan is. I can't tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis, as well as the pain felt by millions of Americans.
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HARRIS: President Obama at his news conference last night defending his stimulus package and making the case for immediate action. The Senate expected to vote next hour on the now-$838 billion economic stimulus bill. It survived a procedural vote with support from just three Republicans, and it is likely to pass the Senate today.
But tough negotiations are still ahead. Our congressional correspondent, Brianna Keilar, live on Capitol Hill. And Brianna, if you would, talk us through what happens next, provided the Senate bill passes. Reconciling the two bills, you've suggested it will mean some difficult negotiations.
BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Yes. This is expected to be possibly tough because when you look at the two different bills, Tony, assuming, as you said, that this does pass in the Senate, when you look at the Senate version and the House version, at first glance, the price tags, they seem pretty similar -- $838 billion in the Senate, $819 billion in the House.
But the composition is different. Roughly, there is about $100 billion more spending in the House bill. This includes spending on education, aid to states for things like health care. And then what you have in the Senate is a more tax-cut heavy package. And so, that could create some difficulties as House Democrats move forward.
But let's highlight again that here in the Senate, this vote we're expecting today is expected to be similar to what we saw yesterday in that key test vote on the compromise Friday between Democrats and a few Republicans. Most Republicans still not on board, as you can see by some of the debate that we've been seeing on the Senate floor leading up to this vote here in the next hour.
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SEN. MITCH MCCONNELL (R), MINORITY LEADER: Americans are asking themselves, where does all this end? They want to know how we're going to pay for all this. They're worried. And they should be worried about a bill so big that it's equivalent to spending more than $1 million a day for more than 3,000 years. SEN. MAX BAUCUS (D), FINANCE COMMITTEE CHAIRMAN: The bill before us would create or save 3 to 4 million jobs. The fate of millions of mothers, fathers, sisters and brothers, wives and husbands depends on what we do here today. Every generation must face up to its own challenge. Responding to this economic emergency is ours.
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KEILAR: Tony, this vote have just minutes ahead of us here is expected to be drama-free. As I said, it's expected to be the same breakdown that we saw yesterday with those three Republicans on board. That said, you never can quite tell, so we're going to be keeping an eye on things in case someone does switch their vote. But if they do, Tony, that is a big deal. That will be a bit of an upset.
HARRIS: All right. Our congressional correspondent, Brianna Keilar for us on Capitol Hill. Brianna, thank you.
And very quickly now, let's get a quick of weather now. Rob Marciano's in the Weather Center. Rob, if you would give us an update on the severe weather. You are sort of monitoring in Arkansas, Louisiana, Texas, do I have those states correct?
ROB MARCIANO, AMS METEOROLOGIST: Yes, those areas. Nothing happening right now. But we expect things to pop later on today. We're getting a buildup of heat. Temperatures, if you live anywhere east of the Mississippi and certainly east of -- well, yes, in the mississippi, you've been feeling the warmup. That's from this storm that's popping up some heat. We've got another storm that's coming on the back end of it, and that's going to really bring in some energy. So, be aware of that.
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HARRIS: Rob, thank you.
And I think we're going to get to live pictures now of the president. He hasn't arrived yet at the convention center where he will be speaking.
But we're just getting word that the president has accepted an invitation to speak before Congress. That will take place on February 24th. So a bit of a late-breaking development there.
Your money, your job, it is what President Obama plans to talk about in his town hall meeting starting shortly. We are really just moments away. And we will of course bring it to you live right here in the CNN NEWSROOM.
