By BRIAN KNOWLTON
Published: March 15, 2009 www.nytimes.com
WASHINGTON — Top administration economic advisers walked a careful line Sunday, saying that despite a few hopeful indicators and President Obama’s call to investors to consider returning to the share markets, that it would “take some time” to turn a corner.
Has the Economy Hit Bottom Yet? (March 15, 2009)
Mr. Obama and his senior aides also sought over the weekend to quell Chinese concerns about the long-run security of U.S. Treasury notes, which had brought a rare expression of high-level concern last week from Prime Minister Wen Jiabao.
“Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the U.S.,” Mr. Obama said Saturday after a White House meeting with President Luiz Inacio Lula da Silva of Brazil.
But despite the recent attempts of the president and others to buck up investor confidence, and a week in which American share markets registered their best performance in months, the message Sunday from one of the administration’s top economists, Lawrence H. Summers, director of the National Economic Council, was essentially one of caution.
Asked on ABC’s “This Week” whether a bottoming of the economy was in sight, Mr. Summers said, “No one can make that judgment.” Job losses were likely to continue for some time, he suggested, noting: “We’ve got an economy that’s losing 600,000 jobs a month. It’s probably not going to stop imminently.” And queried about whether the unexpected profit reports for this year from Citibank and some other major banks meant that they were “out of the woods,” he replied, “I wish I could say that.”
“It’s going to take some time” for the administration’s rescue efforts to gain serious traction, he said.
But Mr. Summers insisted that the administration economic team was moving expeditiously to flesh out its financial rescue efforts.
“On Monday, you’re going to see the details of one key component of the plan,” he said. Mr. Obama is expected to propose offering hundreds of millions in federal lending aid to help struggling small-business owners, and to move aggressively to boost bank liquidity.
According to The Associated Press, the package will include $730 million from the stimulus plan to immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration loans to 90 percent. The government also will take steps to boost bank liquidity with more than $10 billion aimed at unfreezing the secondary credit market, according to officials briefed on the plan who sought anonymity to avoid pre-empting the president’s announcement.
Concerns have risen that the administration is moving too slowly, and perhaps too opaquely, to shore up banks and deal with so-called toxic assets weighing on many banks’ books.
“There’s a lack of confidence because this administration has not come forward with a plan on how to take these impaired assets out of the market,” Representative Eric Cantor of Virginia, the House Republican whip, said on NBC.
But Ms. Christina D. Romer , another administration adviser, indicated that a plan was near: “I can tell you that that kind of a blueprint is top on our agenda, and I expect it to come out very soon.”
One topic the administration was united on was its response to China’s concerns about the safety of its $1 trillion investment in U.S. government debt.
Mr. Summers said it was striking how foreign capital had continued flowing into the United States despite all the financial problems. U.S. U.S.sury bills, he said, “are the asset of choice for people around the world.”
Mark Zandi, a closely followed economist, was rather less sanguine.
“We should be worried,” he said on Fox. “Half of all our Treasury debt is purchased by foreign investors.” He said that this underscored the need to aggressively trim deficits once the economy stabilizes.
Mr. Obama and top aides last week issued some of their most optimistic remarks since the new president took office, concerned that a grim outlook among investors or the public at large might become part of the problem.
Mr. Summers said that low stock prices offered “the sale of the century,” and the White House spokesman, Robert Gibbs, said that “there is no safer investment in the world than in the United States.”
Administration officials remained cautious Sunday about whether a second economic stimulus package might be needed. The impact of the first was only beginning to be felt, they said.
Mr. Zandi agreed and called the current stimulus plan “quite well-designed.” But he also put the odds that another would be needed as “quite high.”