US President Barack Obama’s administration was readying a plan to unblock credit markets and cut mortgage rates, he said on Friday, vowing that chief executives would be stopped from siphoning money intended for economic recovery.
‘Soon my treasury secretary, Timothy Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,’ Obama said in his weekly radio address, without providing specifics.
‘We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs,’ Obama said.
‘We’ll ensure that [chief executives] are not draining funds that should be advancing our recovery.’
He expressed outrage last week after the New York state comptroller reported that Wall Street firms had disbursed US$18,4 billion (N$188 billion) in bonuses last year.
While the figure represented a 44 per cent decline from 2007 amid record losses in the securities industry, the bonus pool was the sixth-largest in history, the comptroller said in a yearly report.
Geithner would ‘have something to say about’ bonuses as early as this week, David Axelrod, Obama’s senior adviser, said in an interview on Thursday on Bloomberg Television’s Political Capital with Al Hunt.
Axelrod did not embrace a ban on bonuses for firms receiving bailout funds. He said the administration would take steps towards ‘limiting some of this executive compensation’ to help rally public support for financial rescue efforts.
‘It’s very hard for the American people to understand how a bank executive should get a multimillion-dollar bonus at a time when he’s asking the government to essentially bail out his institution,’ Axelrod said.
Senator Claire McCaskill last week introduced legislation to restrict compensation at firms receiving bailout money to US$400 000, the equivalent of the US president’s salary.
‘We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer’ by accepting multimillion-dollar bonuses, said McCaskill.
Axelrod said the administration was crafting a plan that would ‘set up new rules of the road’ for spending the remaining US$350-billion of the financial rescue package, known as the Troubled Asset Relief Programme, approved by previous president George Bush.
The administration was committed to ‘a strong, private financial sector’ in the bailout, Axelrod said when asked whether there were talks to partially nationalise US banks.
‘Obviously, we’re trying to help these institutions on a temporary basis, but that’s our goal,’ he said. ‘We’re going to provide assistance to these institutions and hope that they – hope and expect – that they’ll get back on their feet and that credit will flow.’
Axelrod defended Geithner, who had sparked controversy during his confirmation hearings two weeks ago by saying Obama believed China was ‘manipulating its currency’.
Axelrod said: ‘What Tim said was akin to what the president said during the campaign. These are issues that we have to work through …We weren’t blazing new ground there.’
Obama spoke with President Hu Jintao of China last week following Geithner’s testimony. Axelrod would not say whether Obama had reassured the Chinese leader on this issue.
– Bloomberg
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