The Weekly Strike-3/23-3/29

Good morning and welcome to the Weekly Strike, where we preview another busy week in Washington.

THE WHITE HOUSE: The White House has probably already had its most important event of the week. At 8:45 this morning, Tim Geithner briefed reporters on the administration's plan to buy up toxic assets as part of a public-private partnership. Geithner's previous attempt to articulate his banking plan was a total air ball, so today's announcement carries extra weight. If the market tanks this morning, every Republican in the country, as well as every mainstream political commentator, will be gunning for Geithner's head again. Geithner outlined the basic tenets of the plan in an op-ed in the Wall Street Journal this morning. Basically it works like this:

-A public-private coalition (the federal government + some private firms) will purchase real-estate related loans (read: subprime mortgages). Banks will have the opportunity to sell groups of these loans to dedicated funds. Investors will then bid to buy these loans, taking advantage of the favorable financing from the government. The funds established in this program will be unique because a) they'll have the resources of capital from the treasury and financing from the FDIC and federal reserve, b) the private companies will share the risk (and potential profit) with the taxpayers and c) these funds will be open to all different types of investors.

Is it just me, or does this sound like exactly the types of transactions that got us in trouble in the first place? Where's the wealth going to come from in this scenario? As Paul Krugman said, we're just throwing money at trash right now. I'm no financial analyst, but I have serious doubts about taking an approach, that (again, in the words of Krugman, who I trust more than anyone on these issues) represents what the Bush administration tried and failed. The plan, Krugman notes, would only worked if we believed that the only problem with our financial system was lack of confidence. In this alternate universe, these "troubled assets" are actually worth a lot, but on one has enough confidence to take a risk on them. It seems pretty clear that assets are actually NOT worth anything, and this plan is just an extension of the bubble market Obama himself has criticized. The Big Picture reminds us that Paul Krugman has doubted Obama from the beginning. But, you can still count me as a skeptic.

So far the market likes it, it's up 250 points this morning. Problem solved, right?

The other big task for the White House this week is to drum up grassroots support for the President's budget. Next week, the House will take up a non-binding budget resolution that sets spending targets for the next fiscal year. The Democratic House will likely use Obama's budget proposal as the basic blueprint of the resolution, with some changes here and there. Senate Budget Committee Chairman, budget-hawk Kent Conrad, has said he wants to cut about $28 billion from the President's blueprint in the Senate version of the budget resolution.

If he can't change Conrad's mind directly, hopefully he can get the American people to apply some pressure. The President holds another prime time news conference tomorrow night. Obama will try as much as he can to focus on his budget proposal, but you can bet the media will want to ask him about AIG and the banking plan. Stay tuned.

THE SENATE: The Senate this week will take up a bill expanding public service jobs to 250,000. The bill passed the House two weeks ago with overwhelming bipartisan support. The first vote will be this evening, on a motion to invoke cloture on the motion to proceed. This is a test vote to see whether Democrats can get to the magic 60 on the underlying bill. I'm almost certain that they will. The bill in the Senate is sponsored by Democrat Ted Kennedy and Republican Orrin Hatch. I expect a series of amendments to be voted on tomorrow and Wednesday, with final passage later in the week.

The more interesting work this week will be when the Senate takes up a revised version of the House-passed bill that imposes a 90 percent tax on bonuses to bailed-out companies. Many Republican Senators have expressed constitutional concerns about the bill, and they may have an unlikely ally. Last night on 60 Minutes, President Obama implied that he had doubts about the bill. He said that he would rather not use the tax code to punish particular companies (The Big Picture and the Strike write about this in the next post). I expect some version of this bill to pass the Senate by the end of the week. This would trigger a House-Senate conference, which could become pretty contentious. I expect the Senate bill to be a watered-down version of the House bill. Seems like the Founding Fathers would approve: The House reflects the angry whims of the public and passes a far-reaching bill, and the Senate takes the longer view and tempers the bill down. Obama may secretly hope that the Senate Republicans kill the bill so that he doesn't have to issue an unpopular veto. I can't bring myself to believe that Obama would veto this if it came to his desk, but that remains to be seen.

THE HOUSE: The House has a bit of a calm-before-the-storm week. After dealing with various suspension bills today and tomorrow, the House will vote on Senate amendments to the "Tomnibus" public lands bill. This is a bill comprised of various measures blocked in the previous Congress by Senator Tom Coburn. The Senate attached this bill as a rider to an unrelated House-passed bill. This way, the House can vote directly on the Senate amendment, and doesn't have to worry about poison pill amendments (special rules generally prohibit amendments or motions to recommit when the House votes on Senate amendments to a bill).

The House will then consider the brilliantly-acronymed FLAME Act (Federal Land Assistance, Management and Enhancement Act). The bill adds supplemental funding to efforts to protect against the spread of wildfires. I assume this bill will pass rather easily. You can bet, though, that the Republicans will complain vociferously that the House is taking up a wildfires bill during an economic crisis.

Please let us know your thoughts in the comments section! See you tonight for the Daily Strike!