Posted by: Jane Sasseen on October 05
Some vague sense of calm returned to Washington this weekend, as exhausted staffers from the Treasury Dept, the Fed and Congress — not to mention the packs of lobbyists who have been closely tracking Washington’s repeated efforts to rescue the financial sector virtually every Sunday since late August — finally got a weekend off. Now, all eyes are turning to how the Treasury will go about implementing the $700 billion program to buy up toxic mortgage assets that was finally approved and signed into law on Friday.
The key questions: how quickly can they get it set up? Who will they hire to oversee the program? What types of assets will they buy first? And which types of institutions will they target? In this businessweek.com story, is a more detailied look at where things stand and how the Treasury plans to proceed, though a few more details have emerged since we posted it on Saturday morning.
Treasury has said, for example, that it will hire 5 to 10 asset managers over roughly the next month to oversee the purchase of the troubled mortgage-related assets, with each managing a portfolio of up to $50 billion. The Treasury is expected to put out the detailed requirements for participating firms interested in bidding for those contracts -- known as "requests for proposals, or RFPs" -- by Monday or Tuesday. The RFPs are expected to outline the basic services and contract requirements that the asset managers would be expected to perform, though it's unclear yet whether they will include information on what the government may be willing to pay for such services or how long the contracts might last. Detailed conflict of interest rules intended to prevent the firms Treasury hires as asset managers for the program from benefitting when they sell their own toxic mortgage assets to the government are also in the works, though one source familiar with Treasury's progress says they are unlikely to be ready by the time the RFPs are released. The Treasury is targetting later this week for those rules to be established.
Already, giant bond manager Pimco has said it would be interested in applying. Other key financial players such as Blackrock or Legg Mason are also said to be looking as well.
Meanwhile, both presidential candidates are trying to turn the nation's attention back to their race, rather than on the economic crisis and the debate in Washington over what to do about it. Senator John McCain is most eager to shift the debate away from the economy, which has been a losing issue for him. Fear over the economy, and questions about McCain's ability to get the US out of the crisis, has been a key factor in the Republican candidate's slide in the polls and his and his decision to pull out of Michigan. It also appears to be shifting the electoral battleground, as this New York Times story describes. Despite a strong debate performance, Sarah Palin appears to have done little to turn that around--she may have stopped the slide, but the continued focus on the economy is making it tough for McCain to regain momentum. So he wants to change the subject and refocus the campaign back to questions about Senator Barack Obama's character. His ads have now gone almost all negative, and his advisors are pledging to pull out all the stops as the race goes into the final months with heavy attacks on Obama's character and judgement. His advisors have said they plan to begin advertisements following the next debate, set for Tuesday night, assailing Obama for his connections to the 1960s radical Bill Ayers, who is now a professor and educational reformer in Chicago, and convicted money launderer Tony Rezko.
Obama, meanwhile, is hoping to leverage his advantage on dealing with the economy's problems to build his lead, though he too would like to move away from the constant focus on the credit crisis and the implications of the Treasury rescue package. It may have been necessary to keep the economy from sliding into the abyss, but many voters remain deeply unhappy about it and it's not much of an electoral winner. So he's hammering home the notion that John McCain "doesn't get it" on the economy and will provide little relief to middle class voters on the problems that really matter to them.
That's one reason the campaign has focused more in recent days on the differences between the two candidates on Social Security and on their health care plans. Obama is arguing on the stump that McCain's support for allowing private accounts within Social Security would have left many retirees vulnerable to losses on Wall Street. He is also hitting hard, both on the campaign trail and in newly released ads, with claims that many voters would lose their health care or be forced to pay more for insurance under McCain's plans. McCain's advisors have sharply disputed those claims and argued Obama is misrepresenting their plans. But Obama's advisors clearly believe that by focusing on health care and Social Security they can reinforce in voters minds that they've got better solutions in the works for the daily economic woes that plague voters.
Nor is Obama laying back on the advertising hardball. Even as McCain is preparing the ads focusing on his character and questionable connections, web site Politico.com reported that Obama plans to place ads on national cable outlets that accuse McCain of being erratic amidst the financial crisis. According to Politico, the ad copy will read: “Three quarters of a million jobs lost this year. Our financial system in turmoil. And John McCain? Erratic in a crisis. Out of touch on the economy. No wonder his campaign wants to change the subject.
“Turn the page on the financial crisis by launching dishonorable, dishonest ‘assaults’ against Barack Obama. Struggling families can't turn the page on this economy, and we can't afford another president who is this out of touch.”
Washington Bureau Chief Jane Sasseen and other BusinessWeek writers cover the run-up to the Nov. 4 presidential election, paying close attention to how the candidates will handle issues such as housing, the economy, unemployment, and immigration.