When President Obama sits down morning at his Oval Office Resolute desk (Queen Victoria's gift named for a British frigate), he will have on hand $350 billion in just-pledged rescue money for the nation's financial system -- and the very likely prospect of a $825 billion-plus "economic recovery" package landing on his desk for signature within a month.
These hundreds of billions are largely the product of historic circumstance, not the fulfillment of campaign pledges. But how wisely this president directs emergency taxpayer dollars -- even as he handles an incoming barrage of surprise new spending needs in these fragile times -- will chart his administration's success in reviving the economy.
As Obama's repeated warning that "none of this will come easy" suggests, there is no pat formula for a federally-directed recovery.
It's become glib political conventional wisdom in Washington that a massive spending plan will provide a parachute rescue for a cliff-diving economy -- landing it safely and with strong enough legs to move toward a healthy future.
How an Obama Treasury Department chooses to spend the second half of the $700 billion TARP package will also affect the markets, though. The new administration is determined to spend a good chunk of that money to stem rising home foreclosures. "It was a big mistake not to directly confront the foreclosure crisis," says incoming CEA member Austan Goolsbee.
But that falls into the easier-said-than-done category: How to avoid the "moral hazard" question by distinguishing between deserving and undeserving homeowners; how to provide incentives to lenders who have sold off the loans they originated-and to the financial firms that now hold those securitized mortgages. (One option under consideration: Use the restructuring of Fannie Mae and Freddie Mac mortgages to create a new standard of industry practice that other lenders.)
Lots of opinions. Lots of options. But lots of problems. Problems that are getting worse by the day. And still require more corrections prior to stabilization. The biggest difficult will be implementing the right ideas at the right time. And understanding what the ideas are (unlike the first $350 billion spent so far).
We will be watching and documenting the procedures and their impacts to the foreclosure crisis.
Congratulations and good luck. We all need it now.