JIM LEHRER: Government leaders, led by President Obama, defended their economic recovery plans today. They urged the public and the markets to be patient in the face of another daily barrage of bad news.
NewsHour correspondent Kwame Holman has our lead story report.
KWAME HOLMAN: The president acknowledged the here and now looks grim, a day after the stock market took another big dive. He told workers at the Transportation Department the economy shows little promise of improvement during the first quarter.
Later at the White House, joined by British Prime Minister Gordon Brown, he said his policies are built for the long term.
U.S. PRESIDENT BARACK OBAMA: I’m absolutely confident that they will work. And I’m absolutely confident that credit is going to be flowing again, that businesses are going to start seeing opportunities for investment. They’re going to start hiring again. People are going to be put back to work.
And, you know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day. And if you spend all of your time worrying about that, then you’re probably going to get the long-term strategy wrong.
KWAME HOLMAN: Still, amid freezing weather in Washington, the administration’s handling of the economy was a hot topic at the Capitol.
Treasury Secretary Timothy Geithner told a House hearing the president’s policies would help, not hurt. He sparred with Michigan Republican Dave Camp over taxes.
REP. DAVE CAMP, R-Mich.: The president’s budget increases taxes on every American and does so during a recession. And let me also point out that what the president gives in some tax relief he more than takes away in his new energy taxes. That means higher prices for Americans for food, for gas, for electricity and, in a state like Michigan, for home heating, pretty much anything that they buy.
TIMOTHY GEITHNER, Treasury Secretary: The overwhelming priority for the country today — and this is what the recovery act does — is to get people back to work and stimulate private investment.
And the recovery act does that by reducing in a very substantial way the overall tax burden on the American economy as we go through this recession. That’s good economic policy; it’s necessary economic policy. There is broad-based support for doing that. During this period, while we’re still going through a recession before recovery comes, we do not raise any taxes.
KWAME HOLMAN: Republicans also charged the economic forecasts in the budget are far too rosy.
REP. KEVIN BRADY, R-Texas: In fact, my worry is, looking at this, it looks like — and not you — looks like someone is cooking the books to hide a $2 trillion deficit for this year and much higher deficits in the future.
TIMOTHY GEITHNER: Now, it is true that in some ways it does predict a somewhat more rapid recovery than some private forecasters predict, and that’s because we are committed to and we are confident that the recovery act and the range of other measures we’re going to take to address this crisis are going to be effective.
AIG situation angers Bernanke
KWAME HOLMAN: On the Senate side, Federal Reserve Chair Ben Bernanke got an earful about giving another $30 billion to insurance giant AIG.
SEN. RON WYDEN, D-Ore.: I just hope that, in the days ahead, the Fed is going to come clean as to why this is so essential. I think this is setting a precedent.
I mean, AIG is not an investment company; it's an insurance company. Insurance companies in Oregon don't take these kinds of risks. And people want to know how we got into this situation and specifically what's being done to turn it around.
BEN BERNANKE, Federal Reserve chairman: I think if there's a single episode in this entire 18 months that has made me more angry, I can't think of one than AIG. AIG exploited a huge gap in the regulatory system. It's a terrible situation, but we're not doing this to bail out AIG or their shareholders, certainly. We're doing this to protect our financial system and to avoid a much more severe crisis in our global economy.
KWAME HOLMAN: Bernanke also warned again that any recovery hinges on stabilizing the financial system. And the Fed launched another new program, the TALF, or Term Asset-Backed Securities Loan Facility. It provides up to $200 billion for companies and investors to make loans for education, credit cards, and cars.
The announcement came as General Motors and Ford reported sales fell roughly 50 percent last month. Chrysler was off 44 percent.
Japanese auto sales in the U.S. were down nearly 40 percent. The slump drove Toyota to ask a Japanese government-backed bank for a $2 billion loan.
On top of the auto losses, sales of existing homes hit a record low in January. The National Association of Realtors said its index of sales fell nearly 8 percent.
After digesting the day's news, Wall Street ended with another loss: The Dow Jones Industrial Average slipped 37 points to finish at 6,726. The Nasdaq was down just under 2 points to close at 1,321. The Standard and Poor's 500 finished below 700 for the first time since 1996.