Obama's Economics Grade So Far – "Charitable Incomplete"

With President Obama halfway through his first 100 days, CBS' The Early Show gathered a panel of economic experts to grade the president's handling of the financial crisis that has only intensified since he took the oath of office. The verdict? Not too good.

"A charitable incomplete, but in terms of a grade so far, not passing," Steve Forbes, president and CEO of Forbes, Inc., told anchor Harry Smith. "He's done nothing effective to deal with the financial crisis."

Chrystia Freeland, managing editor of the Financial Times, thinks "we haven't seen sufficiently bold action from the government" to combat the financial mess, but she does give Mr. Obama some credit, saying the passage of the $787 billion stimulus package "was actually really huge."

Peter Morici, a University of Maryland economist, said that while the stimulus package "will create a couple million jobs … it is terribly expensive for the impact it will have."

Morici was particularly critical of Treasury Secretary Timothy Geithner.

"He shows up in town with a terribly vague plan that frankly if a graduate student handed it in, I would tell him to leave the program. I'd tell him to register at the Baltimore Academy for Pastry Chefs."

Since Mr. Obama took office, key financial indicators have taken a beating. The Dow Jones industrials are down 18 percent. And unemployment has risen from 7.2 percent to 8.1 percent, reports CBS News correspondent Bill Plante.

Smith asked the panel what advice they would give President Obama.

Forbes said, "Three quick things: get rid of mark to market which is destroying banks and insurance companies. If he doesn't, this economy's not going to recover. Two, put in road bumps on short-selling like the uptick rule. Three, tell Mr. Bernanke at the Federal Reserve, get on the job and start pumping real money into mortgage-backed securities."

("Mark to market" is an accounting device which assigns value to assets based on their current market price, not potential future value. With the economy doing poorly, Forbes is arguing that mark to market unnecessarily weighs down the balance sheets of banks and insurance companies. The "uptick rule" is a pricing restriction on short-selling that was eliminated in 2007 by the SEC in order to evaluate its effectiveness.)

Freeland suggested President Obama use his "bully pulpit and your very effective communication skills to get a lot more money from Congress for the banks, maybe as much as $1 trillion and use that money once and for all to clean them up."

As for Morici, he said: "Create a bad bank, sweep all the questionable assets off. … At that point, Citigroup looks desirable. It's got 8 percent of the deposits, lots of branches with shiny offices. Fine, you can sell new stock into banks. That way the shareholders aren't rewarded for what's happened. … They get recapitalized. They can pay back their TARP money and we get new management and go forward."

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