President-elect Barack Obama ran on a message of change. And voters responded to that message this week by electing him to the Commander in Chief and removing more Republicans from Congress.
However, Obama is not yet the president. And he spoke to that in his first press conference as
"The United States has only one government and one President, and until January 20th of next year, that government is the current administration. I have spoken to President Bush, and I appreciate his commitment to ensuring that his economic policy team keeps us fully informed as developments unfold."
The market will have to accept the fact that Obama cannot yet take action in terms of policy reform. He requested that President Bush help work with the Congress on an economic stimulus plan, saying "it should come sooner, rather than later."
Obama, who met with his
today, made clear his focus once he comes into office. "Immediately after I become President, I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families and restore growth and prosperity."
Turning to the immediate issues in the economy, Obama suggested some sympathy for the auto industry. He said:
"The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil. I would like to see the Administration do everything they can to accelerate the retooling assistance that Congress has already enacted."
announced earnings Friday. In particular,
has experienced significant problems with cash flow and may not be able to continue without help beyond next spring.
The stock market sold off as Obama spoke. The
traded at $93.20 as he started his speech and traded down to $91.60. It has slowly recovered since. The market may have reacted to two notions.
First of all, Obama is not the current president and thus cannot effect immediate change. President Bush remains in charge. Bush has offered minimal leadership during this financial crisis. His administration slowly responded to the unfolding crisis -- starting with ineffective voluntary programs last winter -- and then reluctantly issued tax rebates as a stimulus. The stimulus had little effect on consumer behavior. The economy continued to weaken and eventually the financial crisis forced his hand.
The $700 billion rescue plan was passed weeks ago. The injection of funds into banks has started have an effect on credit spreads as both LIBOR and TED spreads have improved significantly, though they continue to demonstrate elevated strain.
Second, Bush's lame-duck status ensures he will not be able to instill confidence. He has rejected the idea of a second stimulus packaged aimed at generating job growth, despite calls from a Democrat-controlled Congress.
Nevertheless, Obama tried to allay the market fears about his transition. He made it clear that he has spoken with Bush and the transition will go forward smoothly. He also understands that the problem is global requiring coordination with global leaders.
Obama knows who elected him and closed with his immediate focus:
"Finally, as we monitor and address these immediate economic challenges, we will be moving forward in laying out a set of policies that will grow our middle-class and strengthen our economy in the long-term. We cannot afford to wait on moving forward on the key priorities that I identified during the campaign, including clean energy, health care, education and tax relief for middle class families."
Obama reminded America that he campaigned on an aggressive policy agenda and plans to move forward with reforms.
Until then, the market will have to live with President Bush, Treasury Secretary Henry Paulson and
Chair Ben Bernanke.
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