With House Speaker Nancy Pelosi and Senate Majority Harry Reid pushing a measure to help automakers during the lame-duck session, they have a partner in ownership: Obama.

It’s a quiet kind of power play by a president-elect who’s seeking a delicate balance: Obama, insisting that the economy needs more help now, is showing action, not just talking about it.

If it works, Obama would notch a legislative victory even before he’s president — in a quick payoff for his union backers, and (just maybe) for a troubled industry and the economy as a whole.

But if it fails to pass, or if it passes and then fails to work, or even if it works but fails to impress, the president-elect owns an issue that helped get him here a bit earlier — and more completely — than he did before.

“Democratic leaders in Congress said Tuesday they will push legislation next week to use the $700 billion Wall Street rescue fund to bail out Detroit auto makers, and President-elect Barack Obama ordered his transition team to look at ways to aid the car industry even before his inauguration,” The Wall Street Journal’s Jonathan Weisman, Greg Hitt and John D. McKinnon report.

“For Mr. Obama, the crisis in Detroit is turning into an early test of his leadership. Organized labor, including the United Auto Workers, invested heavily in Mr. Obama’s campaign,” they continue. “It’s a situation Mr. Obama’s team had hoped to avoid, potentially giving the president-elect responsibility for an emergency before he has any real authority to deal with it. . . . For Mr. Obama, a public intervention on behalf of Detroit puts his political capital at stake on behalf of companies that have lost the confidence of investors and many consumers — reflected in the reluctance of banks to lend to the companies and their continuing loss of market share.”

“A senior Democratic official . . . said Ms. Pelosi had decided to challenge Mr. Bush to work with the Democrats or veto aid to the teetering auto companies — and take the blame if one of them fails,” David M. Herszenhorn and Carl Hulse write in The New York Times. “The White House has resisted calls by Congress to use the $700 billion to help the automakers, saying that money is better spent easing the credit crunch at the heart of the economic crisis.”

Key detail: “Congressional aides said Democratic leaders were coordinating their activities with [Obama's] transition team,” Herszenhorn and Hulse report.

What of his role? “Mr. Obama does not intend to play a leading role in the [lame-duck] session. Aides said he was focused on the economic packages he would offer as president, as well as working behind the scenes with Congressional Democratic leaders,” Herszenhorn and Hulse report. “But aides have not definitively ruled out the prospect of Mr. Obama casting his vote if it was needed. His Senate replacement will not be named by then.”

This qualifies as ruling it out: “When Congress convenes for a lame-duck session next week to confront an economic crisis and potentially provide new help for the ailing auto industry, Sen. Obama of Illinois will be noticeably absent,”

Reuters

Secretary Henry Paulson said the Treasury will seek ways to help strapped consumers. The government balked at rescuing car makers, while a GE unit sought U.S. debt guarantees.

In detailing the next phase of Treasury’s $700 billion Troubled Asset Relief Program, Mr. Paulson indicated the government would continue flooding financial institutions with cash, but would also try to increase the availability of student loans, auto loans and credit cards. He said he’s also examining ways to help prevent foreclosures.

The market supporting consumer finance “is currently in distress, costs of funding have skyrocketed and new issue activity has come to a halt,” Mr. Paulson said in remarks at the Treasury Department Wednesday.

The Dow Jones Industrial Average fell 411.30 Wednesday, or 4.7%, to close at 8282.66 — a sign that some investors, too, are worried about the perilous state of the economy. But investors attributed some of the decline to Treasury’s switch, as the bailout’s widening focus underscores the depth of the economy’s problems as well as new strains on the government’s rescue net.

“This is changing the rules in the middle of the game,” said Art Hogan, chief market strategist at Jefferies & Co. “It’s really thrown the market into a tizzy.”

Mr. Paulson’s move signals a new, albeit awkward second phase for Treasury’s rescue plan just weeks before a new administration is seated. While Mr. Paulson is designing new programs, they will take weeks and hundreds of billions of dollars to implement. Of the $350 billion made available by the government thus far, Treasury has just $60 billion left in its TARP fund. It may face a hostile reception by lawmakers if it tries to tap the second half of its promised $700 billion.

Congress is unhappy that Treasury isn’t forcing banks to make loans with funds they receive from the government. Another sore spot is that Mr. Paulson has resisted pressure to extend the bailout to Detroit’s struggling auto makers. The dissonance has sparked a debate over how exactly the fund should be used: to shore up the financial system alone or also the pillars of the broader economy?

House Financial Services Chairman Barney Frank (D., Mass.) said Wednesday he was disappointed Mr. Paulson was scrapping the asset-purchase plan. “I think he’s wrong not to use it that way,” Mr. Frank said.

Mr. Paulson acknowledged that Treasury hasn’t figured out how to satisfy Congress’s request that it use TARP to help distressed homeowners avoid foreclosure. Treasury initially planned to use its leverage — once it became the owner of residential loans and mortgage-backed securities — to encourage lenders to help troubled homeowners. Now that Treasury won’t be buying those assets, it needs an alternative plan.

“Using some of the TARP money to reduce foreclosures was not only contemplated in it, it was one of our major focal points,” Mr. Frank said. It’s unclear just what, if anything, the Bush administration will be able to do to help stem the tide of foreclosures.

In an interview, Mr. Paulson said that “there’s an obligation to use [the funds] in a way to get the most powerful effect and to meet the needs that we foresee.”

The market for consumer loans is incredibly tight as banks and other finance companies have virtually no success in selling those loans to other investors. The market for selling such loans — by packaging, or securitizing, them into bonds — had just one $500 million deal for all of October, according to Barclays Capital. A year earlier there were $50.7 billion worth of such deals, according to market-research firm Dealogic.

Reuters

Treasury Secretary Henry Paulson acknowledged that Treasury hasn’t figured out how to satisfy Congress’s request that it use Troubled Asset Relief Program money to help struggling homeowners avoid foreclosure.

Treasury is growing concerned about consumer access to credit, which has come under pressure amid the recent financial turmoil. Consumer spending is a key component of economic growth, yet access to credit — for cars, homes, and various installment loans — has all but dried up.

Mr. Paulson said he had set no timeline for going to Congress to request the second TARP installment. He also indicated he would move cautiously before establishing any new programs ahead of President-elect Barack Obama’s inauguration.

“I’m not looking to make anything more difficult by implementing programs that don’t need to be implemented before they’re here,” Mr. Paulson said.

He suggested Treasury may keep its remaining $60 billion on the sidelines for emergencies. Earlier this week, Treasury had to use $40 billion to help stabilize giant insurer American International Group Inc.

“There are no easy answers,” said Mr. Paulson during his Wednesday remarks. He said he was considering a foreclosure-mitigation plan floated by the Federal Deposit Insurance Corp. but noted it was problematic because it would require Treasury to spend money, rather than invest it, which Mr. Paulson said was a requirement.

With focus now shifting to consumers, Mr. Paulson said Treasury and the Federal Reserve are working to develop a lending facility that would encourage investors to buy securities backed by credit cards, auto loans or even mortgages. Details are still being worked out. Mr. Paulson said TARP would likely make an investment in the facility and the Fed would provide liquidity.

There are several possible models for a new program, including a commercial-paper lending program created by the Federal Reserve last month. The Fed could also help private firms by lending them money to acquire assets, a model already used to prop up the money-market mutual fund industry. Mr. Paulson said the loans would likely be nonrecourse, meaning investors wouldn’t have to pay the Fed back if the underlying borrower defaults.

A Fed spokeswoman said the “structure and the parameters” of the new program Mr. Paulson described are “under discussion and development.”

Mr. Paulson said he dropped the plan to buy assets because market conditions changed and also because it was no longer the most effective way to restart the credit markets. Instead, he plans to expand Treasury’s program to take equity stakes to other kinds of institutions, such as financial firms that aren’t banks.

Any new program would likely require companies to raise a matching amount of private capital in order to qualify for government assistance, Mr. Paulson said. Such an expansion would not begin until after Treasury finishes its capital purchase program.

Mr. Paulson said he would continue to resist efforts to force banks to lend the money they receive from Treasury.

“No one wants to push anyone to make a loan they don’t want to make,” he said, adding that “creating confidence in the banks and having the banks be well-capitalized is the most important thing you can do.”

He pointed to a move Wednesday by regulators, who prodded 8,500 federally insured banks and thrifts on Wednesday to step up their lending to creditworthy borrowers and warned against using federal money to boost dividends or executive pay. Still, the government statement stopped short of demanding that banks extend more credit.

Mr. Paulson remains steadfastly against offering assistance to auto makers. He said the car industry is important to the economy but that TARP isn’t the proper vehicle to help those companies. The intent of TARP, he said, is to deal with financial institutions.

Some readers think my continuing attempt to expose all the lies and flim-flam and bizarre behavior of Sarah Palin is now moot. She’s history – they argue. Move on. I think she probably is history. Even Bill Kristol and his minions in the McCain-Palin campaign may not be able to resuscitate her political viability now. But even if she is history, she is history that matters.

Let’s be real in a way the national media seems incapable of: this person should never have been placed on a national ticket in a mature democracy. She was incapable of running a town in Alaska competently. The impulsive, unvetted selection of a total unknown, with no knowledge of or interest in the wider world, as a replacement president remains one of the most disturbing events in modern American history. That the press felt required to maintain a facade of normalcy for two months – and not to declare the whole thing a farce from start to finish – is a sign of their total loss of nerve. That the Palin absurdity should follow the two-term presidency of another individual utterly out of his depth in national government is particularly troubling. 46 percent of Americans voted for the possibility of this blank slate as president because she somehow echoed their own sense of religious or cultural “identity”. Until we figure out how this happened, we will not be able to prevent it from happening again. And we have to find a way to prevent this from recurring.

It happened because John McCain is an incompetent and a cynic and reckless beyond measure. To have picked someone he’d only met once before, without any serious vetting procedure, revealed McCain as an utterly unserious character, a man whose devotion to the shallowest form of political gamesmanship trumped concern for his country’s or his party’s interest. We need a full accounting of the vetting process: who was responsible for this act of political malpractice? How could a veep not be vetted in any serious way? Why was she not asked to withdraw as soon as the facts of her massive ignorance and delusional psyche were revealed?

The Palin nightmare also happened because a tiny faction of political professionals has far too much sway in the GOP and conservative circles. This was Bill Kristol’s achievement.

It was a final product of the now-exhausted strategy of fomenting fundamentalist resentment to elect politicians dedicated to the defense of Israel and the extension of American military hegemony in every corner of the globe. Palin was the reductio ad absurdum of this mindset: a mannequin candidate, easily controlled ideologically, deployed to fool and corral the resentful and the frightened, removed from serious scrutiny and sold on propaganda networks like a food product.

This deluded and delusional woman still doesn’t understand what happened to her; still has no self-awareness; and has never been forced to accept her obvious limitations. She cannot keep even the most trivial story straight; she repeats untruths with a ferocity and calm that is reserved only to the clinically unhinged; she has the educational level of a high school drop-out; and regards ignorance as some kind of achievement. It is excruciating to watch her – but more excruciating to watch those who feel obliged to defend her.

Her candidacy, in short, was indefensible. It remains indefensible. Until the mainstream media, the GOP establishment, and the conservative intelligentsia acknowledge the depth of their error, this blog will keep demanding basic accountability.

My point is not to persecute or hound some random person. I wish I had never heard of Sarah Palin. I wish this nightmare had never happened. I wish totally innocent by-standers, like Bristol Palin and Levi Johnston and Heather Bruce and Trig Palin, had not had their lives disrupted by this circus. It’s distressing to everyone, which is why most journalists left many aspects of this charade alone. But Palin is claiming vindication, is on every cable show, is at the National Governors Association Conference, and is touted as a future leader of the GOP. There comes a point at which you have to simply call a time out and insist that this farce cease and some basic accountability and transparency be restored to the process. Since no one else seems willing to do so, the Dish will stay on the case. So where are those medical records anyway?

Federal criminal probes into mortgage lending will likely produce many indictments under Barack Obama‘s presidency, legal experts said on Wednesday.

“I think the momentum has already started,” said Arthur Culvahouse, a White House counsel under President Ronald Reagan and chairman of the O’Melveny & Myers law firm in Washington.

“I expect that we will have plenty of indictments,” he told a Brookings Institution seminar on the outlook for President-elect Obama’s legal policy.

Culvahouse noted the FBI has assigned scores of agents to investigate the fallout of the mortgage industry collapse, and federal grand jury probes were under way in New Hampshire and New York.

The FBI said in September it was probing 26 cases of possible corporate fraud related to the collapse of the mortgage industry. The investigations are said to include major mortgage lenders as well as insurer American International Group Inc.

During the campaign, Obama blamed the mortgage debacle and resulting financial crisis on lax government oversight, and promised to establish stiff penalties for mortgage fraud. As a senator, he has proposed spending more on state and federal law enforcement and imposing new penalties for mortgage fraud.

However, prosecutors may be asked to follow more uniform standards in deciding whether to bring cases.

Robert Litt, an Obama fundraiser and former senior Justice Department official, said there needed to be “national decision-making” on prosecution of mortgage crimes, as opposed to relying on a patchwork of standards.

“You don’t want individual United States Attorneys making decisions about certain things in a vacuum. I don’t want the Middle District of Tennessee applying its own standards as to whether they’re going to indict AIG people as opposed to the Southern District of New York,” he said.

Litt, a prominent white-collar defense attorney, has been identified in media reports as a Obama campaign activist. He declined to discuss any role he has had with the campaign or transition, and said his comments reflected his own views.

He said he thought Obama’s administration would show “a greater openness” to work with other countries on legal issues.

Litt said he expected the Obama White House to decide how to proceed with enforcing congressional subpoenas of Bush White House officials over the firings of U.S. Attorneys. The officials have refused to comply. “Personally I don’t think you can blow off subpoenas,” Litt said.

“Historically those sorts of issues get worked out by negotiation.”

“I think the momentum has already started,” said Arthur Culvahouse, a White House counsel under President Ronald Reagan and chairman of the O’Melveny & Myers law firm in Washington.

“I expect that we will have plenty of indictments,” he told a Brookings Institution seminar on the outlook for President-elect Obama’s legal policy.

Culvahouse noted the FBI has assigned scores of agents to investigate the fallout of the mortgage industry collapse, and federal grand jury probes were under way in New Hampshire and New York.

The FBI said in September it was probing 26 cases of possible corporate fraud related to the collapse of the mortgage industry. The investigations are said to include major mortgage lenders as well as insurer American International Group Inc.

During the campaign, Obama blamed the mortgage debacle and resulting financial crisis on lax government oversight, and promised to establish stiff penalties for mortgage fraud. As a senator, he has proposed spending more on state and federal law enforcement and imposing new penalties for mortgage fraud.

However, prosecutors may be asked to follow more uniform standards in deciding whether to bring cases.

Robert Litt, an Obama fundraiser and former senior Justice Department official, said there needed to be “national decision-making” on prosecution of mortgage crimes, as opposed to relying on a patchwork of standards.

“You don’t want individual United States Attorneys making decisions about certain things in a vacuum. I don’t want the Middle District of Tennessee applying its own standards as to whether they’re going to indict AIG people as opposed to the Southern District of New York,” he said.

Litt, a prominent white-collar defense attorney, has been identified in media reports as a Obama campaign activist. He declined to discuss any role he has had with the campaign or transition, and said his comments reflected his own views.

He said he thought Obama’s administration would show “a greater openness” to work with other countries on legal issues.

Litt said he expected the Obama White House to decide how to proceed with enforcing congressional subpoenas of Bush White House officials over the firings of U.S. Attorneys. The officials have refused to comply. “Personally I don’t think you can blow off subpoenas,” Litt said.

“Historically those sorts of issues get worked out by negotiation.”

“I think the momentum has already started,” said Arthur Culvahouse, a White House counsel under President Ronald Reagan and chairman of the O’Melveny & Myers law firm in Washington.

“I expect that we will have plenty of indictments,” he told a Brookings Institution seminar on the outlook for President-elect Obama’s legal policy.

Culvahouse noted the FBI has assigned scores of agents to investigate the fallout of the mortgage industry collapse, and federal grand jury probes were under way in New Hampshire and New York.

The FBI said in September it was probing 26 cases of possible corporate fraud related to the collapse of the mortgage industry. The investigations are said to include major mortgage lenders as well as insurer American International Group Inc.

During the campaign, Obama blamed the mortgage debacle and resulting financial crisis on lax government oversight, and promised to establish stiff penalties for mortgage fraud. As a senator, he has proposed spending more on state and federal law enforcement and imposing new penalties for mortgage fraud.

However, prosecutors may be asked to follow more uniform standards in deciding whether to bring cases.

Robert Litt, an Obama fundraiser and former senior Justice Department official, said there needed to be “national decision-making” on prosecution of mortgage crimes, as opposed to relying on a patchwork of standards.

“You don’t want individual United States Attorneys making decisions about certain things in a vacuum. I don’t want the Middle District of Tennessee applying its own standards as to whether they’re going to indict AIG people as opposed to the Southern District of New York,” he said.

Litt, a prominent white-collar defense attorney, has been identified in media reports as a Obama campaign activist. He declined to discuss any role he has had with the campaign or transition, and said his comments reflected his own views.

He said he thought Obama’s administration would show “a greater openness” to work with other countries on legal issues.

Litt said he expected the Obama White House to decide how to proceed with enforcing congressional subpoenas of Bush White House officials over the firings of U.S. Attorneys. The officials have refused to comply. “Personally I don’t think you can blow off subpoenas,” Litt said.

“Historically those sorts of issues get worked out by negotiation.”

The debate may not be resolved until President-elect Barack Obama takes office on Jan. 20 and pursues policies for administering the rescue program that are likely to be more closely aligned with his Democratic allies in Congress.

In anticipation of the change of administrations, Democrats were holding hearings in both the House and Senate on Thursday examining various aspects of the most serious financial crisis to hit the country in 70 years.

The House Oversight Committee was examining the role that hedge funds may have played in recent market turbulence. Among those scheduled to testify was billionaire investor George Soros, chairman of Soros Fund Management.

Meanwhile, the Senate Banking Committee will hear from executives of a number of financial institutions including Bank of America, JPMorgan Chase and Wells Fargo on the issue of how the government’s $700 billion rescue effort is operating and particularly whether the government should be requiring more commitments on the use of the money to address rising mortgage foreclosure problems.

Treasury Secretary Henry Paulson announced Wednesday that the administration had decided to scrap what had originally been the centerpiece of the program — a proposal to buy troubled assets to get them off the books of banks as a way of promoting increased lending.

Instead, Paulson said the administration will proceed with an alternative plan to spend $250 billion to buy stock in the banks as a way of bolstering their financial situation and accomplishing the same goal — getting the institutions to return to more normal lending.

However, critics contend the administration should be imposing more restrictions on the stock purchases as a way of insuring that the banks will use the government resources to increase lending rather than just hoarding the cash or using it to acquire other banks or boost dividends for stockholders.

Sen. Charles Schumer, D-N.Y., said even with the changes in the rescue plan he was still disappointed in the administration’s unwillingness to issue strict guidelines to ensure that participating firms use the funds to increase lending.

“In these difficult times, fear is still overwhelming confidence,” Schumer told reporters on Tuesday.

More reports detailing the difficulties facing the economy were expected on Thursday with the Labor Department releasing its latest look at weekly applications for unemployment benefits, the Commerce Department reporting on the trade gap for September and the government reporting on the budget deficit for October.

The level of jobless claims was expected to remain at levels indicating the labor market is under severe strains, reflecting what many economists fear could be a deep and prolonged recession.

The government reported last Friday that the unemployment rate soared to a 14-year high of 6.5 percent in October as businesses cut another 240,000 jobs.

The trade deficit was expected to show some improvement, declining to $57 billion in September, compared to $59.1 billion in August, reflecting a big drop in the price of imported oil and a weakening economy, which is dampening demand for other imports.

The budget deficit, however, was expected to show a big increase in October, the first month of the new budget year, rising to $101.5 billion, compared to $57 billion in October 2007. The soaring costs of the bank rescue and the weak economy are expected to put the country on track to run up a record deficit for the current budget year of between $700 billion and $1 trillion, a staggering sum for a single year.

Despite its new flexibility, the administration said Wednesday it remains opposed to using the rescue fund to bail out the ailing auto industry or to provide guarantees for home loans, an idea that supporters contend offers the greatest hope for helping legions of Americans who are facing foreclosure.

Congressional Democrats felt otherwise on autos, and strongly. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were pressing for quick passage of a major package for carmakers during a postelection session that begins next Tuesday, and one key House Democrat was putting together legislation that would send $25 billion in emergency loans to the beleaguered industry in exchange for a government ownership stake in the Big Three car companies.

Paulson told reporters Wednesday that the administration was exploring the possibility of setting up a program in conjunction with the Federal Reserve that would provide support for the $1 trillion market in securities that fund such vital consumer products as credit cards, auto loans and students loans. About 40 percent of consumer credit is supplied through the sale of these securities that are backed by payments consumers make on their credit cards and other loans.

The administration has already spoken for all but $60 billion of the initial $350 billion supplied by Congress, including the $250 billion for direct stock purchases from banks and $40 billion for a new loan supplied on Monday to help stabilize troubled insurance giant American International Group.

“To some, it said, well, `Bush thinks the war in Iraq is over,’ when I didn’t think that,” he said in a CNN interview today. “It conveyed the wrong message.”

The sign was hung on the U.S.S. Abraham Lincoln on May 1, 2003, when Bush landed on the carrier wearing a flight suit to declare that major combat operations in Iraq were over. That speech has since served as a rallying point for critics of Bush’s policies in Iraq.

Bush also cited other regrets in the CNN interview, which was conducted aboard the U.S.S. Intrepid in New York after a Veterans Day ceremony.

“I regret saying some things I shouldn’t have said,” Bush said. He cited comments he made after the Sept. 11 attacks, when he said of al-Qaeda leader Osama bin Laden: “I want justice. There’s an old poster out West that said, ‘Wanted, dead or alive.”’

Legislation

See also: List of bills sponsored by Barack Obama in the United States Senate

Senate bill sponsors Tom Coburn (R-Okla.) and Obama discussing the Coburn–Obama Transparency Act.^[71]

Obama voted in favor of the Energy Policy Act of 2005 and cosponsored the Secure America and Orderly Immigration Act.^[72] In September 2006, Obama supported a related bill, the Secure Fence Act.^[73] Obama introduced two initiatives bearing his name: Lugar–Obama, which expanded the Nunn–Lugar cooperative threat reduction concept to conventional weapons,^[74] and the Coburn–Obama Transparency Act, which authorized the establishment of USAspending.gov, a web search engine on federal spending.^[75] On June 3, 2008, Senator Obama, along with Senators Thomas R. Carper, Tom Coburn, and John McCain, introduced follow-up legislation: Strengthening Transparency and Accountability in Federal Spending Act of 2008.^[76]

Obama sponsored legislation that would have required nuclear plant owners to notify state and local authorities of radioactive leaks, but the bill failed to pass in the full Senate after being heavily modified in committee.^[77] In December 2006, President Bush signed into law the Democratic Republic of the Congo Relief, Security, and Democracy Promotion Act, marking the first federal legislation to be enacted with Obama as its primary sponsor.^[78] In January 2007, Obama and Senator Feingold introduced a corporate jet provision to the Honest Leadership and Open Government Act, which was signed into law in September 2007.^[79] Obama also introduced Deceptive Practices and Voter Intimidation Prevention Act, a bill to criminalize deceptive practices in federal elections^[80] and the Iraq War De-Escalation Act of 2007,^[81] neither of which have been signed into law.

Obama and Richard Lugar visit a Russian mobile launch missile dismantling facility.^[82]

Later in 2007, Obama sponsored an amendment to the Defense Authorization Act adding safeguards for personality disorder military discharges.^[83] This amendment passed the full Senate in the spring of 2008.^[84] He sponsored the Iran Sanctions Enabling Act supporting divestment of state pension funds from Iran’s oil and gas industry, which has not passed committee, and co-sponsored legislation to reduce risks of nuclear terrorism.^[85][86] Obama also sponsored a Senate amendment to the State Children’s Health Insurance Program providing one year of job protection for family members caring for soldiers with combat-related injuries.^[87]

Committees

Obama held assignments on the Senate Committees for Foreign Relations, Environment and Public Works and Veterans’ Affairs through December 2006.^[88] In January 2007, he left the Environment and Public Works committee and took additional assignments with Health, Education, Labor and Pensions and Homeland Security and Governmental Affairs.^[89] He also became Chairman of the Senate’s subcommittee on European Affairs.^[90] As a member of the Senate Foreign Relations Committee, Obama made official trips to Eastern Europe, the Middle East, Central Asia and Africa. He met with Mahmoud Abbas before he became President of Palestine, and gave a speech at the University of Nairobi condemning corruption in the Kenyan