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Residents should brace for continued economic agony


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POSTED: Saturday, February 21, 2009

FEDERAL help in coping with the global economic crisis is about to reach Hawaii's shores, but the rescue plans are less than complete. Stimulus money to the state is expected to total as much as $3 billion, but an effective method of reviving credit has yet to be explained in detail. Sen. Daniel Inouye is right in urging Hawaii residents to be patient.

Inouye, a key player in last week's congressional approval of the $787 billion stimulus package, estimates that Hawaii will receive $678 million for highway and transit improvements, education, social services and the environment. In addition, extended unemployment benefits will bring $30 million into the state. Gov. Linda Lingle was quick on Wednesday to use the measure to increase monthly jobless checks by $25 each.

Lingle expects to learn more in her current visit to Washington, meeting with Inouye's staff and members of Obama's Cabinet. She awaits additional reimbursements for Medicaid expenditures made by the state, which Inouye says could average $400 million a quarter over 27 months, totaling $3.6 billion.

Inouye is banking on the multipronged Keynesian approach to jump-start the economy to achieve the desired result, but he says the effects are not likely to be noticeable in the next six months. The stimulus is projected to save or create 15,000 jobs in the state, but other legislation—“;stimulus No. 2”;—might be needed, he added.

This week, President Obama announced a $75 billion plan to help homeowners avert foreclosure. The plan is to take effect March 4 by executive order except for the plan's proposed changing of bankruptcy laws to give judges the power to allow controversial changes in mortgages; that change needs congressional approval.

Foreclosures have escalated wildly across the mainland but less so in Hawaii. More than 2 percent of all U.S. households but only 0.7 percent in Hawaii—about one in 1,500 homes—were in some stage of foreclosure in January. Housing values have plummeted in areas where foreclosure rates are at the highest levels.

The Obama administration has yet to provide details of its plan for bailing out banks where credit has remained at a virtual standstill since Congress authorized the flawed Troubled Asset Relief Program in the fall. TARP lacked adequate transparency and oversight, and the bailout money was misdirected to bank holding companies instead of banks. As a result, the holding companies spread most of the TARP money to their other subsidiary businesses or in deposits, not their banks.

Treasury Secretary Timothy Geithner told Congress last week that the administration was weeks away from deciding upon the particulars in what might be the most crucial element of the bailout plan's second stage.