WASHINGTON — On a single day filled with staggering sums, the Obama administration, Federal Reserve and Senate attacked the economic crisis Tuesday with actions that could throw as much as $3 trillion more in government and private money into the fight against frozen credit markets and rising joblessness.
“It’s gone deep. It’s gotten worse,” President Barack Obama said of the recession at an appearance in Fort Myers, Fla., where unemployment has reached double digits. “The situation we face could not be more serious.”
Meanwhile, Wall Street investors sent stocks plunging because they thought the new rescue details from the government were too sparse. The Dow Jones industrials dropped 382 points.
The president spoke shortly after Senate passage of an $838 billion emergency economic stimulus bill cleared the way for talks with the House on a compromise. White House chief of staff Rahm Emanuel traveled to the Capitol for meetings that stretched into the night with Democratic leaders and moderate senators whose votes will be key to a deal.
Separately, Treasury Secretary Timothy Geithner outlined plans for spending much of the $350 billion in financial bailout money recently cleared by Congress, and the Federal Reserve announced it would commit up to $1 trillion to make loans more widely available to consumers.
Taken together, the events marked at least a political watershed if not an economic turning point: the day the 3-week-old administration and its congressional allies assumed full control of the struggle against the worst economic crisis since the Great Depression.
The vote was 61-37 in the Senate to pass the stimulus, with moderate Republican Sens. Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania joining Democrats in support.
As they had announced previously, Sen. Harry Reid, D-Nev., voted for the stimulus bill while Sen. John Ensign, R-Nev., voted against it.
Ensign said the bill contained too much spending that will not translate into creating jobs. And, he said, it overlooked housing problems at the root of the economic crisis.
“The so-called stimulus bill … will result in higher taxes and a tremendous amount of debt with little to show toward the broader goal of helping our economy,” he said.
By not addressing housing, “we’re not treating the disease that took down our economy. Government has a role to play, but Americans deserve a better effort than this bill.”
Reid, who guided the bill as the Senate majority leader, applauded passage as a big step toward finalizing Obama’s strategy to address the crisis.
“We must move swiftly with our colleagues in the House of Representatives to complete work on this legislation and send it to the president’s desk as soon as possible,” Reid said.
“The legislation’s fairly simple,” he said. “It creates millions of jobs, cuts taxes for the middle class and invests in America’s future.”
Even before the vote, Reid and House Speaker Nancy Pelosi met with Obama at the White House to go over the task ahead.
The Democratic leaders have pledged to have legislation on Obama’s desk by mid-month, and some Democrats mentioned an informal target of today for agreement on a bill, which probably would wind up in the range of $800 billion.
The House measure includes roughly $70 billion more spending than the Senate’s version, but it lacks Senate-approved tax breaks totaling more than $100 billion for new car buyers, home purchasers and upper middle income families.
Also, Collins and other Senate moderates in both parties signaled they will work to hold the cost of the final bill below $800 billion. That is less than the $820 billion in spending and tax cuts combined in the bill that cleared the House and the $838 billion legislation the Senate wrote.
And Obama has campaigned to include money for school construction in the bill. At the insistence of Collins, the Senate measure omitted money for that purpose.
Investors, meanwhile, are frustrated with the government’s latest bank bailout plan and showed it by unloading stocks.
The major stock indexes fell more than 4 percent Tuesday, including the Dow, which tumbled 382 points. Financial stocks led the market lower, a sign of how concerned Wall Street is about the government’s ability to restore the health of the banking industry. Demand for safe havens such as Treasury notes and gold rose.
Traders and investors complained about what they saw as a lack of specifics from Geithner on how the government will direct more than $1 trillion in public and private support to the financial system.
The plan is aimed at restoring credit markets, which seized up over worries about bad debt after the September bankruptcy of Lehman Brothers Holdings Inc.
The latest plan calls for a partnership between government and the private sector to help remove banks’ soured assets from their books. The plan also would boost an effort to unclog the credit markets, which govern loans to consumers and businesses.
“The good news is they are going to spend a trillion dollars; the bad news is they don’t know how,” said James Cox, managing partner at Harris Financial Group.
“They built this up as being a panacea,” he said. “There was so much hope pinned on them to do a good job. The expectations have been so high. It’s hard to live up to.”
But Peter Jankovskis, co-chief investment officer at OakBrook Investments, said the government was right to outline a broad plan rather than putting something together hastily.
“They are doing the right thing by taking their time and not rushing through with bad policy,” Jankovskis said.
Geithner outlined some of the details, but he and aides left several questions unanswered.
He pledged to “fundamentally reshape” the financial industry bailout that began last fall under the Bush administration, and he announced that at least $50 billion would be spent helping homeowners facing foreclosure. He said new steps would hold banks accountable for their use of bailout funds.
One element of the administration’s approach calls for using as much as $100 billion in federal bailout money to give banks, hedge funds or other investors the incentive to buy toxic assets carried on the books of other financial institutions.
The Federal Reserve announced it would commit up to $1 trillion to buy bonds or other assets backed by consumer loans.
The Treasury Department will guarantee a part of the Fed investment by putting up $100 billion, an increase from a $20 billion commitment that Bush administration had announced.
The goal of the effort is to help consumers buy cars or obtain student loans, small-business loans or other types of credit that have dried up in recent months.
Stephens Washington Bureau Chief Steve Tetreault contributed to this report.