Obama: Economic Challenges ‘Will Be Met’

The eyes of the world were on Washington, D.C., on Tuesday for the U.S. government’s historic changing of the guard, but also for further clues about what the new administration will do to expedite economic recovery. Delivering his inaugural address as 44th President of the United States, Barack Obama soon touched on the sickly economy. “Homes have been lost; jobs shed; businesses shuttered,” the new president said early in his speech. “Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.” But true to his campaign’s emphasis on hope, President Obama did not dwell on the nation’s problems, but rather on recovery. “Today I say to you that the challenges we face are real,” he noted. “They are serious and they are many. They will not be met easily or in a short span of time. But know this, America–they will be met.” The words echoed in message, if not in its exact text, what Franklin Roosevelt said in 1933: “This great nation will endure, as it has endured. We will revive, and we will prosper.” But how? Inauguration addresses are typically big-picture speeches, not policy statements, but Obama nevertheless spoke indirectly, and forcefully, of the stimulus plan that’s been kicking around a while: “The state of the economy calls for action, bold and swift, and we will act–not only to create new jobs, but to lay a new foundation for growth,” he said. “We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.” And there were intimations of green-energy initiatives as well. “We will restore science to its rightful place, and wield technology’s wonders to raise health care’s quality and lower its cost,” the president said. “We will harness the sun and the winds and the soil to fuel our cars and run our factories…. All this we can do. And all this we will do.” The markets didn’t seem much interested in a message of hope. The Dow Jones Industrial Average dropped below 8,000 on Tuesday, a loss of just over 4 percent, while the S&P 500 was down 5.28 percent and the Nasdaq lost 5.78 percent. Key in driving the markets down seems to be the fresh problems in the banking sector, which came to the fore last week when Bank of America (BAC)–supposed one of the relatively healthy survivors of the crisis–turned out to be not so healthy, and begged for $20 billion in TARP money. Seems that BAC chairman Kenneth Lewis knew that Merrill Lynch was in extra terrible shape, but pushed ahead with the acquisition anyway, as a kind of public service to avoid another Lehman. Or maybe the government bullied him into it. Speculation on this point is likely to go on, but in any case BAC investors are voting with their feet, driving Bank of America shares down 50 percent since last Thursday. Likewise, investors dumped other bank stocks today: Citigroup was down 20 percent, JP Morgan Chase down a little more than 20 percent, Wells Fargo down 23.8 percent and PNC Financial down 41.4 percent.