White House Tries To Sell Bank Bailout

Now that the economic stimulus bill has cleared Congress, the White House is preparing for another big economic challenge: fixing the nation's troubled banking system.

Speaking to a group of business leaders at the White House on Friday, President Obama said the stimulus was "only the beginning" of what he called a "long and difficult process" to turn the economy around.

"To truly address this crisis, we will also need to address the crisis in our financial sector to get credit flowing again to families and businesses," he said.

Treasury Secretary Timothy Geithner made the same point to the Senate banking committee. While the stimulus bill may be helpful at creating jobs temporarily, Geithner said, a lasting recovery will depend on restoring the flow of credit.

"Without credit, economies cannot grow at their potential," he said. "And right now, critical parts of our financial system are damaged."

That damage is not as visible to the average voter, though, as a wave of pink slips, boarded-up businesses or foreclosed houses. So the Obama administration is trying to put a more human face on the credit crunch.

Real People, Real Problems

The White House Office of Public Liaison has begun soliciting stories from people who are affected by the squeeze. An e-mail distributed through community groups asks for volunteers who'd be willing to put out a statement or speak to the media about how fixing the credit problem would help their business make payroll, for example, or hire additional staff.

The idea is to back up the point Geithner tried to make in his Senate testimony: that the government isn't spending hundreds of billions of dollars on the banking system simply because it likes bankers.

"When our government provides support to banks, it's not for the benefit for banks," he said. "It is for the businesses and families who depend on banks. And it is for the benefit of the country."

Breaking The Spiral

It shouldn't be too hard for the administration to find compelling personal stories.

Campbell Harvey, a finance professor at Duke University, recently surveyed chief financial officers around the country and found almost nine out of 10 companies are passing up valuable opportunities because they simply can't get funding. Harvey says that's making it harder for the country to pull out of recession.

"We need to break the spiral somehow. And I don't think the spiral can be broken without having a viable financial sector and credit being available to finance good projects," he said. "Those projects are not being financed right now."

And it's not just banks tightening the credit taps. Before the crunch, non-bank lenders were a huge source of funds for car loans, student loans and other forms of credit. Part of Geithner's plan is designed to get that cash flowing again, with seed money from the Treasury and a big boost from the Federal Reserve.

As for Geithner's plan, the administration is preparing to add some details. The president himself will outline a proposal to stem foreclosures on Wednesday.

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