Federal Aid

The Obama administration is threatening to rescind billions of dollars in federal stimulus money if Gov. Arnold Schwarzenegger and state lawmakers do not restore wage cuts to unionized home healthcare workers approved in February as part of the budget. Schwarzenegger's office was advised this week by federal health officials that the wage reduction, which will save California $74 million, violates provisions of the American Recovery and Reinvestment Act.

President Obama is venturing out of the White House today for a Western swing that will see him sign into law the $787-billion stimulus package and roll out a plan meant to keep struggling families from losing their homes. The two-day trip to Denver and Phoenix reflects a decision by the president to escape the Beltway at least once a week in hopes of staying in closer contact with ordinary Americans.

A massive spending bill expected to be approved by Congress this week is filled with more than 8,500 earmarks -- those pet projects that lawmakers love -- costing $7.7 billion. Despite the tough economy, mounting federal budget deficit and pledges by President Obama and members of both parties to crack down on the practice, a number of lawmakers have defended their earmarks as important to the nation's economic recovery.

The Obama administration on Monday gave Chrysler Corp. an ultimatum: join forces with Italy's Fiat within 30 days or prepare to enter Bankruptcy Court. Over the weekend, the president's automotive task force concluded that Chrysler couldn't survive on its own, despite the $4.3 billion that taxpayers have pumped into the company since December. The Auburn Hills, Mich., firm, which announced in January that it was in merger talks with Fiat, had asked for a $5-billion loan.

Mortgage finance company Fannie Mae said Tuesday that it had adopted a policy allowing renters to remain in their homes even if their landlords entered foreclosure. The policy would allow residents of about 4,000 properties to sign new leases with Fannie Mae while the properties are up for sale. Michael Williams, Fannie Mae's chief operating officer, said the change should "help bring a measure of stability to communities impacted by high foreclosure rates."

President Obama billed it as an adrenaline jolt -- a $787-billion stimulus package that not only would put people back to work, but also underwrite construction and energy projects the country had long neglected. But with the economy still sputtering and some experts doubting the program was meeting its goals, Obama vowed Monday to accelerate stimulus spending with the goal of creating or saving 600,000 jobs by summer's end.

The economic stimulus package congressional leaders are drafting would wipe out nearly a quarter of California's budget shortfall, a potential windfall that could help end the impasse over how to close the nearly $42-billion gap. The House bill, which is likely to be voted on next week, would bring the state more than $11 billion in healthcare and education money that could go directly to reducing the deficit through mid-2010, state officials learned Thursday night.

A congressional watchdog has concluded that the federal government gave financial institutions a $78-billion subsidy last year by overpaying for stocks and other assets as part of its massive Wall Street rescue plan. In a report scheduled for release today, the congressional oversight panel for the bailout funds found that in some cases the government paid dramatically more than the value of the stocks at the time of the transactions. Ailing insurance giant American International Group Inc.

To rid banks of their toxic loans, the Obama administration apparently wants to rely on purchases of those assets by private investors -- but with the government's help. Whether investors will step up depends on how favorable Uncle Sam makes the terms. And the better for them, conceivably, the worse for taxpayers. Today, Treasury Secretary Timothy F. Geithner is set to announce the administration's plan for Phase 2 of the $700-billion financial system bailout enacted in the fall.

This week on Wall Street will be largely shaped by events in Washington, with investors anticipating the passage of an economic stimulus bill while awaiting more details on how the Obama administration plans to save the nation's ailing financial system.