On the same day his Treasury secretary detailed a $2 trillion plan to stabilize the U.S. banking systems and the Senate narrowly passed an $838 billion economic stimulus bill, President Barack Obama said, "we are in a perfect storm of financial problems."
The Dow Jones industrial average dropped 382 points following today's news, and Obama said it's important to recognize that "there is no easy out" when it comes to the current economic crisis.
"Wall Street, I think, is hoping for an easy out on this thing, and there is no easy out," Obama told "Nightline" co-anchor Terry Moran in an exclusive interview in Fort Meyers, Fla. "I think that you have two choices in this situation: you can prolong the agony and shareholders will be happy until they're not happy, and that could be a year from now or two years from now or in the case of Japan, eight years later. Or you can just go ahead and acknowledge that yeah, there's, there's a lot of work that has to be done to put these banks back on a firmer footing."
Earlier today, the president held a town hall meeting in Fort Meyers, an area hit hard by foreclosures and unemployment.
After a rough week of criticism over his handling of several cabinet nominations and the stimulus package, Obama was clearly happy to be back on the road and energized by the almost 2,000 person crowd. During the town hall meeting he made several jokes, and took questions in "boy, girl, boy, girl" order.
Obama said he tries to be realistic but not alarmist when addressing the American people about the economy.
I'm constantly trying to thread the needle between sounding alarmist, but also letting the American people know the circumstances that we're in," he said. "And the fact of the matter is, is that we are in not just an ordinary recession, we are in a perfect storm of financial problems and now, a decline in worldwide demand that is resulting in huge numbers of jobs being shed, the lowest consumer confidence we've seen, credit locked up."
Obama stressed the value of the country's assets, work force, universities, companies and infrastructure, but said that while he believes the economy will turn around, "we're not going to get there by pretending that we don't have some very big problems, and I think the American people understand that."
"We've got to keep perspective. We're not going through the Great Depression."
Obama: '$100 Million Bonuses Are Not a Birthright'
Obama admitted it would be difficult to estimate how much the plan to assist the banking system, announced today by Treasury Secretary Timothy Geithner, would cost the American taxpayer.
"I can't say the ballpark figure," he said. "What happens is going to depend on how the markets respond over the long term, not today or the next day but a month from now or two months from now -- how effective we are in actually cleaning out some of these bad assets out of these banks."
The new plan replaces the Troubled Asset Relief Program, known as TARP, and the president echoed his Treasury chief's promise of transparency and accountability.
"What we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and, and ultimately that's going to be the key to getting credit flowing again."
Obama also said that bank executives receiving taxpayer funds should "be constrained in terms of how you give yourself compensation."
"I do hope that we're going to see a change in culture where everybody in the financial system starts recognizing that $100 million bonuses annually are not a birthright," he said. "We've got to recognize that if you're going to reward people for success, you've also got to punish them for failure, and that hasn't been happening."
Obama resisted the suggestion made by some economists that the best solution would be to nationalize the failing banks, pointing out differences between the U.S. economy and culture and those of other countries.
"[Sweden] took over the banks, nationalized them, got rid of the bad assets, resold the banks, and a couple years later they were going again. So you'd think looking at it, Sweden looks like a good model. Here's the problem -- Sweden had, like, five banks," he said, laughing. "We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the, the problems in terms of managing and overseeing anything of that scale, I think, would… our assessment was that it wouldn't make sense. And we also have different traditions in this country."
Nice Guys Finish First?
Obama traveled to Florida to discuss his economic recovery plans with ordinary Americans, and he said he's learned already from his time in the White House that "the bubble is powerful."
"I do think that the possibilities of thinking inwardly are very great," he said. "And you see it happening. You see it happening to presidents. You see it happening to members of Congress and the Senate."
The president has also learned quickly that achieving a spirit of bipartisanship in Washington may be easier said than done. Obama's economic stimulus bill, which passed the Senate today in a vote of 61-37, has been widely criticized by Republicans.
Obama stressed that, given the current economic climate, "not doing anything is simply not an option."
"I think there are a number of different arguments that have been leveled at, at this recovery package," he said. "There are a set of folks who just don't believe in government intervening in the marketplace, period. ... I think that fight's already been won; the American people certainly think so. That's not the argument that makes much sense to them."
He added that the Senate version of the bill did address some Republican concerns.
"Where there are good ideas for very effective job creation, I've adopted them," he said. "When the Republicans make suggestions about certain tax cuts that they think will work, some of them, you know, the evidence shows that they may be right."
When asked to respond to the fact that his first bill did not receive a single Republican vote in the House, Obama said, "I think that they made a decision that they want to continue the same fights that we've been having over the last decade.
"I think it's pretty clear that the American people would like to see a different way of doing business. But old habits break hard and, and you know, I, I understand that and so we're going to keep on reaching out and eventually, I have confidence that it's going to pay off."
Despite the difficulties of his first few weeks in office, the president said he still believes in trying "to get people to work together" and doesn't think he's been too nice.
"Well, I tell you what -- you know, that accusation, I think, if I'm not mistaken, was leveled at me a couple years ago and I'm going to be flying out on Air Force One in a little bit," he said, laughing. "So, people shouldn't underestimate the, the value of civility."
When asked if that's a sign that nice guys don't finish last after all, the president replied, "I haven't so far."