Treasury Secretary Timothy Geithner testifies today at the Senate Budget Committee before heading to London for this weekend’s G20 meeting in London with finance ministers from the world’s biggest economies.
Geithner warned lawmakers on Capitol Hill this week of a deepening global recession if countries do not pull together and take action.
The bottom line: the secretary and his team think the economy is a mess right now. They see a deepening global recession with unemployment likely to rise for several more months.
But there are small signs of good news.
Mortgage rates are reaching record lows and retail sales have ticked up a bit. I was told that when Federal Reserve chairman Ben Bernanke met with the president this week, he said there has been some improvement in consumer spending, and inventories are coming down.
But everyone in the government concludes that the recession is likely to last at least until the end of this year.
There is a lot of pressure on the administration now to finalize their plan for the nation’s struggling banks. We can expect to see something in the next week or two.
President Barack Obama met with his economic team late into the night past 10p.m. on Tuesday and he signed off on a final part of the bank plan whereby the government will partner with, and finance, hedge funds and other investors to buy up toxic assets from the banks.
The government thinks this is the best alternative to temporary bank nationalization.
They hope to unveil it in the next couple weeks. But there is no doubt that Congress will have to put in new money to these old banks.
And many economists believe a second stimulus plan is absolutely necessary as well, with the unemployment rate surging to 8.1 percent in February and a loss of about 4.4-million jobs since December 2007.
A lot of economists argue the first $787-billion stimulus was just too small. We heard House Speaker Nancy Pelosi, D-Calif., Tuesday say she is open to the idea of a second stimulus.
On Capitol Hill, key committee chairs are drafting some plans for a potential second stimulus package.
But everyone across the administration that I have spoken with — from the White House, Treasury Department and Office of Management and Budget — are saying that it’s much too early for that. They want to give the first stimulus a chance to work.
The administration also knows that politically now, they could not get Congress to pass several hundred billions more for a second stimulus.
Today in the Senate Budget Committee hearing, senators are planning to push Geithner to get other countries to pass their own stimulus plans. It’s a message Geithner will take with him to London today.