Paper: Obama faces worse problems than expected

Source: Xinhua | 01-22-2009 08:09

LOS ANGELES, Jan. 21 (Xinhua) -- The plummeting of banking stocks served as a signal that the problems facing President Barack Obama could be even worse than expected, the Los Angeles Times said on Wednesday.

As Obama finished the oath of office on Tuesday, the crisis in the financial services industry sent banking stocks plummeting, indicating that the inauguration party didn't reach the Wall Street, said the paper.

The Dow Jones industrial average turned in its worst Inauguration Day performance in its century-plus history, losing 4 percent of its value, while the Bank of America lost nearly 30 percent of its value despite receiving 45 billion dollars in federal bailout funds.

This raised investor fears that the institutions could be in even worse shape than previously thought, the paper said in an analysis.

"For a nation weary of war and racked by economic anxiety, it was a signal that Obama's problems could be even worse than expected," the paper said.

In his inaugural speech, the new president offered few details of the path to prosperity beyond calling for shared sacrifice and cautioning that finding a fix will not be easy, said the paper.

Rather, he spent a surprising amount of time drawing connections between today's problems and political leaders who he said had become consumed with "protecting narrow interests and putting off unpleasant decisions," the paper noted.

In promising a clean and dramatic break from the past, Obama elevated his own role in guiding the nation from its problems, rather than diminishing expectations, said the paper.

Obama wants to focus his early efforts on winning congressional approval for an 825-billion-dollar economic stimulus plan widely seen as aimed at helping ordinary Americans, according to the paper.

"But the eruption of new financial troubles Tuesday will probably force him to take steps to save the banking sector, a problem that federal officials hoped had been resolved," the paper said.

Indeed, the Bush administration's 700-billion-dollar bailout program for the financial services industry proved so unpopular that Obama and his top aides had to personally lobby lawmakers even before they took office to ensure that Congress did not blockuse of the program's remaining 350 billion dollars, according to the paper.

"Obama may need to take more drastic action -- possibly seizing troubled big banks, which could avoid drawing on more taxpayer money but risk spooking investors," the paper said.

In a less extreme option, the administration would take over the mortgage-backed securities and other toxic assets of banks, an effort to shore up their finances and rekindle the kind of lending needed to revive the economy, said the paper.

"People are willing to exercise some patience here as long as they see him taking steps to address the problem," Democrat Chris Van Hollen, a member of the House leadership, said in remarks published by the paper.

But Van Hollen added, "How long that can go on before people are overtaken with frustration -- the jury is still out on that."

Editor:Zhang Pengfei