Wednesday, November 19, 2008

CEO's Call for a $300 Billion Stimulus; Lewis Backs Auto Bailout but Someone Must Go

Chief executives of leading U.S. companies called for a fiscal stimulus package worth at least $300 billion and urged president-elect Barack Obama to swiftly name his economic team.

Dozens of chief executives met at The Wall Street Journal CEO Council event in Washington D.C. to identify what they think should be priorities for the Obama administration and the new Congress.

Wachovia's Robert Steel and pension fund TIAA-CREF CEO Roger Ferguson were among those calling for a fiscal stimulus package to encourage consumer spending in the short term.

Overall, chief executives agreed that the U.S. economy could not recover independent of the rest of the world, and they urged the international community to coordinate stimulus plans.

Leaders of industry emphasized investment in infrastructure and programs with long-term benefits, and said the United States should favor permanent tax cuts over tax rebates.

However, a broad economic stimulus bill, which Obama wants Congress to pass promptly, is opposed by many Republican lawmakers and is unlikely to be approved by the current Congress during its short legislative session this week.

Obama's chief of staff, Rep. Rahm Emanuel of Illinois, later told the conference that key components of a stimulus package would include tax cuts and what he called investments in "green" infrastructure. "The economy needs it, the American people need it," Emanuel said.

CEOs lamented lack of young talent in science, technology and math, and called for a partnership with the private sector to promote a more competitive workforce. Improving education was the group of executives' second-highest priority after a global economic stimulus plan.

New York Sen. Charles Schumer told the executives, "I see lots of businesses, and they come in and lobby on everything and rare is the business that comes in and lobbies on education."

A subgroup of chief executives said the Treasury Department should use funds remaining from the $700 billion financial services rescue plan, and possibly additional funds, to buy illiquid assets from financial institutions, the original intent of the plan.

"These are assets that need to get moving," said Wachovia CEO Steel, who until early July was under secretary for domestic finance and a close advisor to Treasury Secretary Henry Paulson. But buying the troubled assets was the lowest on a wish list of 18 priorities voted on by the larger group of chief executives present at the conference.

The finance subgroup, that included Steel and Time Warner's Jeffrey Bewkes, also called for creation of a panel to consider changes to financial regulations.

Sen. Maria Cantwell, a Democrat from Washington state, urged the CEOs to be more specific on all fronts. In terms of financial regulation, Cantwell said she only had three words: "Transparency, transparency, transparency. If you don't work hard on transparency, you will get another Sarbanes-Oxley (corporate reform law)," she told the conference.

A sub-group of CEOs voted to support "comprehensive reform" of the U.S. healthcare system. About 47 million Americans lack health insurance, and the group backed universal access to affordable care, with a requirement that individuals buy their own health insurance, known as an "individual mandate."

Lewis Backs Auto Bailout, But Someone Must Go

Bank of America's CEO, Kenneth Lewis, said on Tuesday that he would support a bailout for the U.S. auto industry if the American public backs it, but added that not all of Detroit's Big Three should survive.

"The first thing would be that they (the U.S. automakers) acknowledge that there is one too many auto companies and that consolidation needs to take place," Lewis said in comments made to reporters at a Detroit Economic Club event.

"I'm just trying to make sure the (U.S. auto) industry survives," he added, but stressed that any bailout package must be based on viability and sustainability to make the three U.S. automakers competitive against their German and Asian rivals.

Top executives from General Motors, Ford and Chrysler -- which is owned by private equity firm Cerberus Capital Management -- were in Washington on Tuesday to plead their cases for an industry bailout at a Senate Banking Committee hearing.

The three automakers have seen their sales plummet to levels not seen in a quarter of a century, as consumers have either shunned their once-popular gas-thirsty, sport-utility vehicles, trucks and minivans, or have found it impossible to obtain auto loans as the credit crisis has taken hold.

GM and Chrysler in particular are bleeding cash and questions have been raised about their ability to survive without an infusion of government aid.

Source: Reuters

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