Obama to Talk Health Care on FOX But Conservatives Won't Be Swayed

Obama will take to FOX News tonight to talk health-care reform. "Many of the falsehoods and myths about health reform gained traction with Glenn Beck and others on FOX, so the president is returning to the scene of the crime to make the final sale," a White House official explained to Politico earlier today.

It sounds like a sensible calculation: dismantle arguments about government takeovers and death panels, up popular support. In fact, NEWSWEEK tested out that idea in our most recent poll. We wanted to know: when Americans learn more about health-care reform, do they support it more? Turns out, while that is indeed the case for liberals, conservatives are not likely to support health-care reform when they know what it actually does.

More from the poll: in late February, we asked Americans if they supported Obama’s health-reform plan and got a pretty predictable response: only 15 percent of self-described conservatives supported the plan versus 72 percent of liberals.

We then dug a little deeper. We explained eight specific proposals to change the health-care system, things like requiring all Americans to have health insurance and barring insurer discrimination against those with preexisting conditions. After getting through the list, we revealed that these eight proposals were the main components of the Democrats' plan. We asked our question again: do you support Obama’s plan to reform health care?

Liberals were a whole lot more likely to favor health-care reform after hearing information: 72 percent support prior to learning about health reform shot up to 83 percent afterward.

Conservatives, however, were a completely different story: they moved from 15 to 18 percent support. This shift, I should point out, was within the poll’s 3.6 percent margin of error, meaning that, statistically speaking, conservatives did not change their opinions at all.

Why don’t conservatives support health-care reform? Perhaps the myths—which are indeed plentiful—have gotten too much traction for the Democrats to dispel at this point. Conservatives may have soured on health-care reform because of the drawn-out political battles and have philosophical objections to Obama’s plan. My bet is it's some combination of these elements. Taken as a whole, they mean Obama is battling a pretty formidable opponent tonight.

Obama Administration Tries to Reassure China on Treasury Debt

The U.S. sought to ease Chinese Premier Wen Jiabao’s concern about the security of his country’s investments in U.S. government debt, reiterating pledges to cut the budget deficit in half in four years.

“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said yesterday at a briefing in Washington.

Gibbs was responding to comments from Wen that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said at a press briefing in Beijing.

President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of U.S. debt sales to fund a $787 billion stimulus package and a deficit this year forecast to reach $1.5 trillion. Investors abroad own almost half of all U.S. debt outstanding, and China last year overtook Japan as the biggest foreign buyer.

Wen’s comments contributed to a decline in Treasuries yesterday. Yields on benchmark 10-year notes rose as high as 2.96 percent, from 2.85 percent a day earlier, and closed at 2.89 percent.

White House National Economic Council Director Lawrence Summers, asked yesterday about Wen’s remarks, said overseas “confidence” in Treasuries would be hurt without the administration’s steps to end the economy’s decline.

Japan, China

China held $696 billion in U.S. Treasury debt as of Dec. 31, more than Japan’s holdings of $578 billion. Foreign holdings of U.S. Treasury debt at the end of last year totaled $3.1 trillion.

The Treasury also offered a response that sought to reassure investors.

“The U.S. Treasury market remains the deepest and most liquid market in the world,” Treasury spokeswoman Heather Wong said in an e-mailed statement. “President Obama is committed to taking the steps necessary to restore growth and put this country on the path of fiscal sustainability, including cutting the long-term deficit in half over the next four years.”

During the first five months of fiscal 2009, which began Oct. 1, the U.S. budget deficit swelled to a record $764.5 billion for the period, compared with a $265 billion shortfall during the same period a year earlier. The shortfall this year already has exceeded the record $459 billion gap for all of 2008.

‘Stronger Position’

The administration is “tackling many long-ignored problems, ensuring that the U.S. will be in a stronger position than ever,” Wong said. “We are facing whatever challenges come up and will continue to do so.”

Treasuries have handed investors a loss of 2.7 percent in yuan terms this year, according to Merrill Lynch & Co.’s U.S. Treasury Master index. Chinese holdings of the securities surged 46 percent last year, according to Treasury Department data.

“Of course we are concerned about the safety of our assets,” Wen said after an annual meeting of the legislature. “To be honest, I am a little bit worried.”

Diversifying Reserves

China should seek to “fend off risks” as it diversifies its $1.95 trillion in foreign-exchange reserves, Wen said. Yu Yongding, a former adviser to the central bank, said in an interview on Feb. 10 that the nation should seek guarantees that its Treasury holdings won’t be eroded by “reckless policies.”

Treasuries have benefited from demand as a haven in the past two years as financial companies reported $1.2 trillion in credit losses. China boosted holdings of government debt as it lost more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007.

“China won’t sell the U.S. debt now as that will only drive down Treasury prices, hurting not only the U.S. but also the value of its own investments,” said Shen Jianguang, a Hong Kong-based economist at China International Capital Corp., an investment bank partly owned by Morgan Stanley.

U.S. Secretary of State Hillary Clinton urged China, while visiting officials in Beijing on Feb. 22, to continue buying U.S. debt, which she called a “safe investment.”

Obama’s $75 Billion Foreclosure Plan Spells Relief for Bankers

President Barack Obama offered $75 billion of relief yesterday to homeowners facing foreclosure. He also gave bankers a reprieve.

Some lenders, including New York-based JPMorgan Chase & Co., have worried that proposed “cramdown” legislation giving judges the power to modify mortgages of those who file for bankruptcy would increase the number of filings. Obama, who said yesterday he supports a cramdown law, signaled that it would only be a last resort for struggling borrowers.

“Allowing cramdowns is a bad idea,” said Andrew Sandler, a partner in the Washington office of law firm Skadden, Arps, Slate, Meagher & Flom LLP, whose clients include mortgage companies. “Obama’s program has the potential to reduce the number of bankruptcies. The fewer loans that go to bankruptcy and are subject to cramdowns the better.”

Lenders that have large amounts of other types of consumer loans, such as home equity and credit cards, could suffer further losses because bankruptcy judges are likely to wipe out that debt, Paul Miller, analyst at Friedman, Billings, Ramsey Group Inc., said in a Jan. 26 research note.

“That’s what scares a lot of people, especially anybody that has second liens,” he said in an interview yesterday. “The mortgage industry does not want cramdowns because it’s going to open up a Pandora’s box.”

The foreclosure plan is part of a broader $275 billion proposal announced by Obama. The $75 billion would reduce monthly payments for borrowers, help homeowners with loans owned or backed by Fannie Mae and Freddie Mac to refinance at lower rates, and provide incentives to the industry. The government committed to buy up to $200 billion of preferred stock in each of the two housing lenders, twice as much as previously pledged.

Jamie Dimon

JPMorgan Chase Chief Executive Officer Jamie Dimon said in an interview that modification in bankruptcy will be “the last resort, not the first resort.” He called Obama’s plan an “elegant” way for homeowners to have recourse if they’re unable to change loan terms by any other means. JPMorgan held $352.4 billion in consumer loans on its books in the retail bank at the end of the fourth quarter.

Obama’s support for changing the bankruptcy rules is intended to help “borrowers who have run out of options,” according to a White House fact sheet released yesterday.

“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair-market value -- as long as borrowers pay their debts under a court-ordered plan,” Obama said yesterday in Mesa, Arizona.

Instability

The bankruptcy change has come under criticism from investors and analysts who say modifying loan terms would add more instability to the market for debt packaged into securities.

“Cramdowns encourage more people to consider bankruptcy,” said Andrew Harding, who helps manage $20 billion as chief investment officer for fixed income at Allegiant Asset Management in Cleveland. “It might sound good to the politicians, but it’s certainly not something that behooves the securitized market.”

Mortgage securities that are rated AAA were sold with the expectation they would be the last to suffer losses, said Gerard Cassidy, a banking analyst at RBC Capital Markets in Portland, Maine. Once those securities take losses, their value will have to be marked down, he said.

Lenders may also pass on higher rates to consumers as risk increases, said David Olson, president of Wholesale Access Mortgage Research, a research firm based in Columbia, Maryland, and a former Freddie Mac economist. “You are saying that contracts can be broken, which is a dangerous concept,” he said.

Foreclosures

U.S. foreclosures reached 274,399 in January, the 10th straight month in which more than a quarter-million filings were processed, according to RealtyTrac Inc., the Irvine, California- based provider of real estate data. Last year, more than 2.3 million homeowners faced foreclosure proceedings, an 81 percent increase from 2007, and analysts say that number may soar to as many as 10 million in coming years.

The Obama plan would cut mortgage payments for as many as 9 million struggling homeowners and work with banks to reduce payments to 31 percent of a borrower’s monthly income.

“The refinancing pieces of the plan open up a new tool or opportunity for many consumers across America who really didn’t have refinancing as a viable option before,” said Mike Heid, co- president of Wells Fargo Home Mortgage in Des Moines, Iowa. “It’s a very comprehensive, very thoughtful plan that will go a long way towards helping stabilize housing in America.”

Bank of America Corp. and Citigroup Inc. said in statements they supported the government’s initiative. Citigroup, which has taken $45 billion in government funding and a $301 billion backstop on assets, said in January it supported giving bankruptcy judges the ability to alter loan terms.

In a Feb. 11 hearing before the U.S. House Financial Services Committee, chief executives of seven large banks said that while they supported modifying loans, they didn’t share Citigroup’s view that bankruptcy courts should have the leeway to change payments.