Obama walks tightrope of hope on economy

WASHINGTON — President Barack Obama, walking a fine line between optimism and caution, said Friday that there were "glimmers of hope" for the economy but warned that substantial, potentially difficult government action is still necessary to assure a healthy recovery.

"We are starting to see progress," Obama said after meeting with senior members of his economic team. But he said the country must not flinch at the difficult steps yet to come.

Behind the president's words was a growing consensus among economists in and out of government that — even though the economy is no longer in free fall — major new government aid is still needed if the nation is to avoid a long period of economic anemia.

As the rescue effort stretches to include banks, auto companies and insurance companies, it will require many billions of dollars more in bailout funds, especially for the financial system, these experts say, funds Congress and an angry public seem to be in no mood to approve.

The backdrop for the meeting was the still-fragile economy that has begun to show hints of recovery, including a strong profit forecast from Wells Fargo & Co., a drop in claims for unemployment benefits and predictions of solid April sales from retailers.

Other promising signs: less jittery stock investors, shoppers and homebuyers, slowly thawing credit markets and stabilizing economic indicators.

Obama noted a significant uptick in the number of home­owners seeking to refinance mortgages, which will put money back into their pockets. He said a 20 percent increase last month in the Small Business Administration's largest program means small companies, often prized as the backbone of the economy, "are starting to get money."

But he also pointed to the high rate of joblessness — which climbed to a 25-year high of 8.5 percent in March — and acknowledged that "we've still got a lot of work to do."

Obama's top economic adviser sounded a note of cautious optimism, as well.

"The sense of a ball falling off a table… I think we can be reasonably confident that that is going to end within the next few months, and we will no longer have that sense of a free fall," Larry Summers said.

Bank moves

Closures: Regulators shut down Cape Fear Bank on Friday, the first North Carolina bank to collapse since 1993 and the 22nd U.S. bank to fail this year, and New Frontier Bank of Greeley, Colo., the second Colorado bank to collapse this year.

U.S. funds returned: Sun Bancorp Inc. of Vineland, N.J., became the sixth bank to repay emergency aid it received from the U.S. government. About $442 million has been returned so far, with some banks trying to avoid restrictions in areas such as executive pay.

Obama walks tightrope of hope on economy 04/10/09 [Last modified: Friday, April 10, 2009 11:17pm]

    

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