Could Obama's Change Run Out of Cash?

Much has been made of President Obama’s desire to fundamentally restructure large portions of the federal bureaucracy—but what if he runs out of money first? The Washington Post reported that the federal budget deficit, at $1.4 trillion for this fiscal year, is, “unequaled in the postwar era.” Democrats, the paper notes, are defending Obama’s budget, believing George W. Bush and the financial collapse left him no choice but to spend his way out of an economic death spiral. Still, the startling figure casts a shadow over the administration’s attempts to spur job creation, economic recovery, and expansion of the social safety net, all of which would likely require more outlays and thus even larger deficits. 

Speaking of safety nets, the administration did receive the good news from the Congressional Budget Office. Two of the health care proposals floating around Congress are near the $900 billion mark, a figure all sides have agreed on. The Post notes that both plans include forms of the much-debated public option.

The SEC has charged Raj Rajaratnam and five others in a vast insider-trading ring, reports the Wall Street Journal. One of his own employees clued the agency in to how Rajaratnam used information from industry executives to execute trades on stocks including IBM (IBM), Akamai (AKAM), and Hilton. Rajaratnam’s lawyer proclaimed his innocence, but federal wiretaps exposed the ring’s conspirators as fearing jail time and leaks—in essence, it seems, proving they understood the illegality of their actions.  The investment firm Rajaratnam founded and leads, Galleon, said it was shocked by the arrest and is still in business.

The hydrogen car won’t die. The Post reports the Senate has restored funding for the controversial program, which the Obama administration had removed. The funding, just $187 million, is a drop in the federal bucket. But with its worldwide focus on electric and fuel-cell technology, critics believe the program will distract from the real goal of developing a single alternative-fuel platform. Despite the Senate restoring the funding against his wishes, Obama will likely sign the bill.

How did big banks make so much money last year? The answer we’ve all been waiting for, from the New York Times: bailouts. The paper cites studies and economists who say the massive capital outlay by the government allowed banks like Goldman Sachs and JPMorgan Chase to take big new risks and consolidate power in the securities industry. But in a curious twist, as earnings this week have made clear, banks focused on consumer banking, like Citibank, Bank of America, and a slew of regional banks, are still having a tough time, despite government funding, digging themselves out of this mess.

Aides to Bernard Madoff may have known about the frauds perpetrated by him and Frank DiPascali Jr., according to new charges against them by the bankruptcy trustee, Irving Picard. As the Times put it, “a basic assumption about Bernard L. Madoff’s enormous Ponzi scheme was that the trades shown in his clients’ account statements were fictional,” an assumption that is no longer the case. The story also notes that victims are suing Picard, because he rejected claims made by some who had taken out more money from their investments than they had ever put in. They argue those withdrawals, though based on completely fictitious earning statements, should be honored as if the returns Madoff generated were real after all.