File photo of Austan Goolsbee, President Obama's new chairman of the White House Council of Economic Advisers. (Photo Credit: CC BY/Samantha Appleton/Wikipedia)

President Obama has taken a political beating from all sides over how he has dealt with the economy. In the recent jobs speech he delivered in Cleveland, he appeared to be somewhat disconnected when it comes to understanding “the plight of the middle class,” as Arianna Huffington puts it. Obama said “Not everything we’ve done over the last two years has worked as quickly as we had hoped, and I am keenly aware that not all our policies have been popular.” In large part, this appears to be what prompted the president to nominate longtime adviser Austan Goolsbee to the position of chair of the White House Council of Economic Advisers, reports the Wall Street Journal. Goolsbee’s nomination has already cleared the Senate.

Austan Goolsbee: University economist and advisory board member

Austan Goolsbee is currently an economist at the University of Chicago business school, as well as the executive director of Obama’s Economic Recovery Advisory Board. The WSJ says popular speculation is the president elevated Goolsbee to the White House Council of Economic Advisers chairmanship due to their personal friendship and association within the administration’s inner circle. Goolsbee will replace former Economic Advisers chairwoman Christina Romer.

The WSJ reports that Goolsbee assisted in drafting policies during Obama’s first year, including expanded health care access, higher education aid and an energy push to generate jobs. These areas have been part of the president’s “New Foundation” for middle-class economic security – at least in theory, says the Huffington Post.

Austan Goolsbee may not be the change for which critics are calling

Unemployment continues to plague America, and economic recovery during the current recession has been sluggish at best. Outrage has been palpable, even in Democratic circles, where the potential firings of Treasure Secretary Tim Geithner and National Economic Council Director Larry Summers have been discussed openly by lawmakers. But placing Austan Goolsbee in charge of the White House Council of Economic Advisers isn’t a sign of new policies to come, writes the WSJ.

Sources:

Chicago Sun-Times

Huffington Post

Wall Street Journal

Austan Goolsbee on CNN’s “Late Edition,” Sept. 21, 2008

Treasury Secretary Geithner in a meeting with President Obama. Image from Wikimedia Commons.

At a recent press conference, Treasury Secretary Timothy Geithner called for changes to be made to the way the mortgage market does business. He did not issue a hard and fast deadline. However, it is expected that he will tell Fannie Mae and Freddie Mac to get their houses in order within the next year. Geithner also made it clear that the U.S. cannot afford to have to bail them out again and that they were too aggressive in taking on risk.

Geithner unclear on how to proceed

As of now, there is no real plan in place for what to do about Freddie Mac and Fannie Mae. However, Geithner did make a few things perfectly clear. First, Fannie and Freddie will not be resuming business in the manner they were conducting it before the market meltdown. He also pinpointed irresponsible practices, including the two mortgage houses trying to take the bulk of the market from the private sector. He was adamant that the current mortgage industry, as it stands, is untenable, according to Reuters.

Little consensus on how to go about it

There is not much in the way of a consensus among industry insiders or economists on how to best reform the housing industry. Geithner did support retaining some of the government backing of mortgages, as the richest industrial nations all have something akin to Freddie and Fannie for insuring mortgages against loss. Some, such as Bill Gross, the co-founder of the Pacific Investment Management Co., argue full nationalization is necessary. According to Businessweek, the investment guru contended that the private market cannot make a comeback at this point.

Something has to be done regardless of strategy

Despite the wide range of opinions that exist about what to do about Fannie Mae and Freddie Mac, all agree something has to change. According to NPR, the government is already on the hook for $150 billion for the mortgage houses. For the first half of this year, 89 percent of all mortgages granted in America were backed by Freddie Mac, Fannie Mae and Ginnie Mae. Ginnie Mae, unlike Freddie and Fannie, is wholly part of the U.S. government, sells mortgage backed securities only if they meet specific standards and doesn’t lend mortgages.

Further Reading

Reuters

Business Week

NPR

General Motors makes $6 billion payment

General Motors wired the final payment Tuesday night on $6.8 billion in installment loans from U.S. and Canadian governments. More than $1 billion went to the Canadian government, and $4.7 billion went to the U.S. Treasury. According to Reuters, the U.S. Treasury has confirmed that General Motors has paid its loan obligation a full five years before the maturity date of the loan.  The loans made to General Motors and Chrysler were part of the TARP program.

General Motors to begin mass production of Chevy Volt

Production has already commenced on the Chevy Volt, the plug in hybrid.  It is being manufactured at the Hamtramck plant near Detroit.  General Motors Chief Executive Ed Whitacre has also, according to CNN, announced they will invest $136 million into the Fairfax, Kansas and $121 million into the Hamtramck, Michigan plants for production of the next generation Malibu. The Fairfax plant also produces the Buick LeSabre, and the Hamtramck plant produces the Buick LaCerne and Cadillac DTS models, among others.

Not out of the woods just yet

The U.S. and Canadian governments are still majority shareholders of General Motors.  Currently, according to this article in The Guardian, the US and Canadian governments collectively hold 73 percent of GM stock, the U.S. holding 60 percent.  General Motors received about $50 billion from the U.S. Treasury in TARP funds, and the plan is that once GM is allowed to go public for stock purchases again, the taxpayers will get back something on their investment. Chrysler is still struggling, though it has begun to make positive steps.  The Wall Street Journal reports that Treasury Secretary Tim Geithner will be meeting with Whitacre soon.

So is it ok to buy GM again?

Many people were dissatisfied with the involvement of the Treasury, and also the fact that one of the largest manufacturers of domestic automobiles slipped so badly.  The car manufacturing industry is also one of the largest employers in the US, and thousands were laid off in the wake of the General Motors and Chrysler bankruptcy.  This is proof that GM is returning to not only solvency, but perhaps to profitability, and with the upcoming release of the Chevy Volt, Detroit may soon see the dawning of a new day.

(Photo Credit: http://www.flickr.com/photos/jm3/ / CC BY-SA 2.0)