New Lincoln penny designs unveiled

NEW YORK (CNNMoney.com) -- For the first time in 50 years, the penny is getting redesigned, with four versions coming next year to commemorate the 200th anniversary of Abraham Lincoln's birth, the U.S. Mint announced Monday.

While the coin will continue to depict Lincoln's likeness on the front, the reverse side will bear one of four new designs, the Mint said.

The designs show milestones in the life of the 16th president: the Kentucky log cabin of his birth, his youth working as an Indiana rail splitter, his service at the State Capitol in Illinois, and his effort to preserve the union during the Civil War as depicted by a half-finished image of the U.S. Capitol dome.

The first of the coins debuts Feb. 12, with the others following in three-month intervals. The release date, besides being Lincoln's birthday, comes a century after the production of the original Lincoln cent in 1909.

The Lincoln cent was the first circulating coin to feature a person's likeness, and also the first to depict a U.S. president.

A Lincoln commemorative silver dollar will also be released in 2009.

"These coins are a tribute to one of our greatest presidents...he believed all men were created equal, and his life was a model for accomplishing through honesty, integrity, loyalty and a lifetime of education," said U.S. Mint director Ed Moy.  


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Americans want bailout - worry over cost

NEW YORK (CNNMoney.com) -- Bail out the financial industry, but don't send me the bill.

That's what a majority of Americans are saying, according to a CNN poll released Monday. The poll showed that people are concerned about the economy, and a majority favor government action to help bail out the struggling financial institutions. But people are concerned that the proposed industry-wide bailout will burden taxpayers.

Of the more than 1,000 Americans surveyed in a national CNN/Opinion Research Corp. poll, 62% said they think in general the government should step in to try to address the problems facing struggling financial institutions. The margin of error was plus or minus 3 percentage points.

But the poll, conducted Sept. 19-21, showed that Americans think the cost of the $700 billion plan being debated in Congress is too high.

Though 55% said they favor the proposed bailout, 65% said it would probably treat taxpayers unfairly.

The drop off in support for the government's actions could stem from the fact that taxpayers may have to foot the bill for all these bailouts. The majority of CNNMoney.com readers voiced similar concerns in a Talkback blog over the weekend.

Still, 88% of 518 respondents said they are concerned or even scared by the tumult in the financial markets.

And 55% supported the government's actions taken so far - such as the $85 billion loan to insurer American International Group (AIG, Fortune 500) and hundreds of billions in backing for mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and Wall Street brokerage Bear Stearns.

Cost to taxpayers still unclear

Economists say that the cost to the taxpayer is not yet known - and probably won't be close to the headline number.

"For the average person, $700 billion sounds like a whole heck of a lot of money," said John Silvia, chief economist for Wachovia. "It's reasonable to look at that number and be scared about it, but in the end, the Treasury may actually make money from the deal."

That's because the government is proposing to buy up troubled assets that banks don't want, with the intention of selling them later when the market is better.

"There's a chance they could sell them at a decent price," Silvia said.

A necessary action

Furthermore, the cost of doing nothing may be much more severe.

"Because of the hit that capital took, there wasn't any lending going on, which created a lot of complications with people getting mortgages," said Silvia. "If these companies have to write down loans, they're going to make even fewer loans in the future."

Since the markets are all circular and related, failing companies can negatively impact people's ability to get a mortgage, finance a car or even save for retirement.

"A lot of people's IRAs, 401(k)s and pension plans had Fannie and Freddie in it," Silvia added. "And anyone with an S&P 500 index fund has a huge weighting on the financial sector." 


Rescue cost: The big unknown

Democrats push back

NEW YORK (CNNMoney.com) -- Democratic leaders on Capitol Hill said on Sunday that the Bush administration's $700 billion proposal to bail out the financial system lacked necessary safeguards for taxpayers and homeowners.

Democrats want the measure to include independent oversight, homeowner protections and limits on executive compensation, House Speaker Nancy Pelosi, D-Calif., said in a statement early Sunday evening.

"We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome," she said.

Pelosi said that Congress will take action on the bailout this week but will act "to insulate Main Street from Wall Street."

Earlier on Sunday, Treasury Secretary Henry Paulson called on Congress to move swiftly.

"We need this to be clean and quick," Paulson said on ABC's "This Week."

Treasury spokespeople were not immediately available for comment on Pelosi's statement.

The legislative proposal is the centerpiece of what would be the most sweeping economic intervention by the government since the Great Depression. (Read the text here.)

Paulson, Federal Reserve Chairman Ben Bernanke and other officials have said in recent days that the lack of easy credit between banks and other financial institutions threatens to inflict serious damage on the economy if not addressed immediately.

The plan would allow the Treasury to buy up mortgage-related assets from American based companies and foreign firms with a big exposure to these illiquid assets. The aim is for the government to buy the securities at a discount, hold onto them and then sell them for a profit.

"What we're doing is first stabilizing the market," Paulson said Sunday morning. "Once we stabilize the market, we need to ask ourselves how did we get here and how do we avoid getting here again."

"We need a lot of reforms, and this is going to be something Congress and the next administration are going to be working on for some time," Paulson added.

Paulson also stressed that the administration has begun discussions with foreign governments to push them to institute similar action, though he stressed that none have made any commitments to do so yet.

Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, agreed with Paulson that speedy passage of the bill was necessary. "We need to do it quickly," Dodd said on "This Week." "We need to give the Secretary the authority to work."

House Minority Leader John Boehner, R-Ohio, said Sunday that fellow lawmakers should not try to load up the bill with amendments. "This is not a time for people to be playing games - we need to keep it clean and simple."

Experts liken the Treasury's plan to the Home Owners' Loan Corp., put in place in 1933 to stem foreclosures and help refinance defaulting mortgages and boost banks' liquidity.

The mortgage plan is part of an extraordinary effort by the federal government to contain a financial crisis that has forced a major realignment on Wall Street and has started rippling out to Main Street.

In the past week, two of the nation's most venerable investment banks - Lehman Brothers (LEH, Fortune 500) and Merrill Lynch (MER, Fortune 500) - have fallen and the Federal Reserve was forced to lend $85 billion to prevent the sudden collapse of insurance giant American International Group (AIG, Fortune 500).

Meanwhile, mainstay financial institutions are scrambling to raise cash and shore up their books as lending has frozen up and investor confidence has sunk.

"You can't describe how ugly it would look if we don't act," Boehner said.

Working out the details

The bill is being hammered out on Capitol Hill. The House Financial Services Committee has scheduled a Wednesday hearing to debate it.

Among the Democrats advocating that economic stimulus be part of the bailout package was Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

"It's kind of hard to tell the average American that we are going to continue to have foreclosures that destabilize neighborhoods and deprive cities of revenue they need, but we're going to buy up the bad paper," Frank said on CBS' "Face the Nation."

Frank advocated higher taxes on people with income exceeding $1 million a year. And the idea that the deficit would force tax increases even made it across party lines.

"When we add an additional trillion dollars to the debt, the burden of the taxpayer, sooner or later there's got to be a reckoning," Sen. Richard Shelby, R-Ala., ranking member on the Senate Banking Committee, told "Face the Nation." "This is the mother of all bailouts."

Protecting the taxpayers

The administration's proposal also requests that Congress authorize an increase to the nation's debt ceiling. Currently, it's set to rise to $10.6 trillion for fiscal year 2009 - which runs from October 2008 through September 2009. But the proposal requests that limit be increased to $11.315 trillion to allow for the purchases of mortgage-backed assets.

The debt limit is a ceiling on how much debt the federal government is allowed to take on. Budget experts say it acts as a break on spending mostly because of political pressure, because lawmakers don't like to vote to raise it. Lawmakers are free to change it if they have reason, however.

Paulson on Sunday acknowledged that the plan involves considerable risk for taxpayers, but said that the Treasury should recoup at least some of what it will spend on this bailout.

"We're talking about hundreds of billions of dollars, but remember this is not an expenditure, this is money that is being used to purchase illiquid mortgage assets that are very difficult to value," Paulson said on NBC's "Meet the Press."

"They will be held [by the Treasury] and they will be resold at some time. And so we can't determine what the cost is today," Paulson said. "That's going to be based on how quickly the economy recovers, what happens in the mortgage market."  


Big bailout: Where things stand

Gas prices: Down 10 cents in 4 days

NEW YORK (CNNMoney.com) -- Gas prices fell another 2 cents, marking the fourth straight decline after rising more than 18 cents in 8 days following Hurricane Ike, according to a nationwide survey of credit card swipes at gasoline stations.

The average price of unleaded regular dropped 2 cents to $3.757 a gallon, from $3.777 a gallon, according to the survey released by motorist group AAA.

While prices have remained under $4 for some time, they are still much higher from a year ago, when gas was selling for less than $3 a gallon.

Current prices are about 34% higher from a year earlier at this time. Still, prices are 54 cents, or 13%, down from the record high price of $4.114 a gallon set on July 17

Gas prices had been moving higher following the devastation left behind by hurricanes Ike and Gustav.

More than 30 refineries, which convert crude oil into usable gasoline, had shut down or were operating with reduced capacity in the Gulf region after the storms hit. The number has since fallen by more than half, restoring gasoline supply to retailers and easing consumer prices.

Many crude pipelines in Texas and Louisiana had also shuttered ahead of the hurricanes. Those are slowly coming back on line.

Lower oil prices have also helped lower the cost of retail gas. Crude has been moving lower since mid-July amid weakening demand, losing more than a third of its value since it reached a record of near $150 just two months ago.

But oil prices rallied back above $104 a barrel Friday amid growing optimism that the government's various rescue plans will help ease the credit crisis currently stifling the U.S. economy.

Meanwhile, only three states now continue to report gas prices above $4 a gallon: Alaska, Hawaii and Illinois. Alaska continues to be the state with the most expensive gas prices, at $4.339 a gallon. The cheapest gas can be found in New Jersey, where gas cost $3.468 a gallon, according to AAA's Web site. 


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Will it work?

NEW YORK (CNNMoney.com) -- Experts are cautiously optimistic that the massive federal bailout of the nation's financial sector will solve the credit crisis that hit Wall Street this week.

But questions remain about whether it will prevent more failures of banks and Wall Street firms and many doubt this will lead to a quick turnaround for the battered housing market.

The plan, sent to Congress by the Bush administration late Friday, calls for the federal government to buy as much as $700 billion worth of mortgage assets held by banks, Wall Street firms and other financial institutions.

Those securities were backed by home loans, many made to buyers with bad credit or without proof of income. As housing values fell and foreclosures shot to record levels in the past two years, the value of those securities plunged. That in turn caused massive losses in the financial sector.

Comment on the bailout plan

This past week it reached a crisis situation. Banks and investment firms stopped making the loans to each other as they hoarded cash to protect against any sudden liquidity crunch as well from unknown problems on their partners' balance sheets.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke won support for the bailout plan from Congressional leaders in a meeting Thursday night.

Congress began working on the legislation Saturday, and there could be a vote as soon as the coming week.

"I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said Friday. "I believe many members of Congress share my conviction."

Word of the plan first leaked Thursday afternoon, causing a massive rally in stocks at the end of the day that carried over into Friday. Several economists also praised the move.

"I'm confident this will work," said Mark Zandi, chief economist with Moody's Economy.com. "The federal government is committed to backstopping the nation's financial system and will do whatever is necessary to make sure the system does not unravel. The details are important but secondary."

The plan also won support from presidential candidates John McCain and Barack Obama. Zandi is an informal economic advisor to the McCain campaign.

Other experts said that while there are obviously big risks to taxpayers, the federal government has little choice but to provide the assurance to financial markets.

"If this doesn't work, we're in trouble, because there's not much more the government can do," said Jaret Seiberg, a financial services analyst at the Stanford Group. "They've left very few arrows in the quiver."

More losses, failures expected

But Seiberg added that the bailout won't completely end the recent turmoil on Wall Street, a crisis that began with the Treasury's seizure of mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) earlier this month and escalated this week with the bankruptcy of Lehman Brothers (LEH, Fortune 500) and the $85 billion loan to American International Group (AIG, Fortune 500), the world's largest insurer, by the Federal Reserve.

"What the government is doing now is not suddenly going to make institutions profitable," he said. "What we're talking about is trying to make them stable. That means removing the risk from their balance sheet and putting it on the taxpayer. The government has a much better ability to hold onto that risk for an extended period of time."

Still, Seiberg is optimistic that the bailout will help home prices finally start to recover since it should lead to lower mortgage rates and improve consumer confidence.

But others say that there are still enough fundamental problems in housing, including a huge glut of homes for sale and the likelihood of more foreclosures in the pipeline.

"It should help housing prices find a bottom but I still think it will be about a year from now -- and after prices decline another 10%," said Stuart Hoffman, chief economist for PNC Financial Services Group.

Nonetheless, even if home prices don't stabilize soon, one expert said the bailout could be a success if it allows bank to stop hoarding cash and once again begin lending to each other, consumers and businesses.

"The one thing you don't want is to have the economy grind to a halt because people can't get credit," said Dean Baker, co-director of the Center for Economic and Policy Research.

Baker predicts home prices will fall another 20% even with the bailout but said the decline could become even more severe without passage of the rescue plan.

"Housing prices were a bubble and you can't stop them from deflating," Baker said. "But [the bailout] might stop an uncontrolled plunge."

Will Congress pass the bailout?

Despite the support being voiced by Democrats and Republicans for the plan on Friday, Seiberg said its chance of passage is by no means certain.

"The odds of this passing are probably around 80% - and those are pretty good odds for Washington," he said. "But it's not a slam dunk."

Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, questioned the plan Friday morning, telling CNNMoney.com that he doubts it will be the last federal bailout in the sector that will be needed.

"Secretary Paulson and Chairman Bernanke have not said ...this is going to contain everything," he said. "They're hoping it is. What they're doing is jumping from crisis to crisis. I haven't seen a comprehensive plan yet."

He wouldn't commit to supporting the measure.

"This is too big to just accept without knowing what it does, who pays for it and is this the end of it," he said. "It's true that there's stress in the financial markets. But should we bail out everybody? We know it's important to the financial system, but at what price?"  


Big bailout: Where things stand

'Sobering moment'

NEW YORK (CNNMoney.com) -- Somber. Sobering. Warnings of an economic "meltdown."

That's how participants described an emergency meeting held Thursday night between leaders of Congress and Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

The meeting was followed by an announcement from Paulson thathe was preparing a far-reaching program - on a scale seen rarely in American history - to intervene in the shaky financial markets.

Paulson gave few details, although the plan's broad outline is for the federal government to buy hundreds of billions of dollars' worth of mortgage assets held by banks, Wall Street firms and other financial institutions. The Bush administration sent its proposal to members of Congress late Friday, according White House spokesman, Tony Fratto.

"Secretary Paulson and his team will continue their discussions with Congress and staff throughout the weekend, and we're hopeful that good progress will be made," Fratto said.

What did emerge clearly, however, was a surprising public show of unity by many lawmakers from both sides of the aisle who pledged cooperation to work on a solution with Bush administration officials with whom they often spar.

Official Washington - administration officials and legislative leaders alike - was clearly spooked by the events of the past week and what they heard from Paulson and Bernanke.

"I've never been in a more sobering moment in my 28 years with the language that was used - careful language - by the financial leaders of the ... country," Senate Banking Committee Chairman Christopher Dodd, D-Conn. told reporters on Friday.

Added House Financial Services Chairman Barney Frank, D-Mass., in an interview on C-SPAN: "We're not just talking about somebody on Wall Street losing money. ... We were in danger of there being enormous damage to the financial system."

One major concern: Wall Street firms were in danger of not being able to meet requests for redemptions from normally safe money market funds in which investors expect to get back at least as much as they put in.

This week alone, investors took out $210 billion from money market funds, with the bulk of those withdrawals coming on the heels of news that one fund had "broke the buck" - meaning its shares fell below $1.

On Friday morning, the Treasury said it would insure up to $50 billion in money-market fund investments at financial companies that pay them a fee to participate.

And on Friday, a conference call in which Paulson and Bernanke briefed House GOP members struck a similar tone, according to GOP aides who were on the call.

"The call was very sober, very strong on seriousness and very vague on details," one aide said.

The potential cost of the plan - as high as $500 billion according to leading Republican Senator Richard Shelby, R-Ala. - has raised a lot of concern. But apparently not as much as the concern raised by not doing anything.

"Chairman Bernanke made all too clear the cost of inaction. When I heard his description of what might happen to our economy if we failed to act, I gulped," said Sen. Charles Schumer, D-N.Y. "Everyone put aside their partisan differences and agreed to work together to pass something to address the state of our economy."

Schumer told CNN that while the rescue will be expensive, "the only salvation is it would cost even more" to do nothing.

Senate Budget ranking member Judd Gregg, R-N.H., told the National Journal's Congress Daily that when it came to the potential cost of plan, the choice is to "either put up the money now, or allow the [financial] system to unwind."

"The economy is slowly being strangled," said Lyle Gramley, a former Federal Reserve governor. The administration's case-by-case handling of the crisis so far hasn't worked, he said, "because it hasn't dealt directly with the principle problem, which is a lot of bad mortgage debt."

Banks are having a hard time raising capital because no one knows how to value the mortgage assets on their books. So they're reluctant to lend. Indeed, the flow of credit to consumers and businesses fell 40% in the first quarter and another 35% in the second quarter, Gramley said.

"We've been in a credit crunch that's getting worse," Gramley said. "Businesses can't borrow, which means they can't invest." And if they can't invest, they can't keep people employed.

In the end, the chaotic events in the market this past week convinced President Bush that it was time to act.

"Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary," Bush said. "Given the precarious state of today's financial markets - and their vital importance to the daily lives of the American people - government intervention is not only warranted, it is essential."

CNN's congressional producers Ted Barrett and Deirdre Walsh and correspondents Kate Bolduan and Kathleen Koch contributed to this report. 


Lawmakers promise fast action

Gas prices sink 5 cents in 2 days

NEW YORK (CNNMoney.com) -- Gas prices fell for the second-straight day Friday, after rising for eight consecutive days following the refinery-battering Hurricanes Gustav and Ike, according to a nationwide survey of credit card swipes at gasoline stations.

The average price of unleaded regular dropped 2.8 cents to $3.807 a gallon, according to the survey released by motorist group AAA.

That decrease followed eight days of increases totalling 18.7 cents. Sunday's jump of 6.2 cents marked the biggest one-day spike for gas prices since Hurricane Katrina hit the Gulf Coast in 2005.

As many as 33 oil refineries, which convert crude oil into usable gasoline, had been shut down or operating with reduced capacity in the Gulf region in the wake of the recent hurricanes. That number dwindled to around 18 Friday, restoring the supply of gasoline to retailers and helping bring down the price for consumers.

While prices have remained under $4 for some time, they are still much higher than a year ago, when gas was selling for just $2.79 a gallon. Current prices are about 36% higher from a year earlier at this time.

Still, prices are 30.7 cents, or 7.5%, down from the record high price of $4.114 a gallon set on July 17.

Retail gas prices have benefited from lower oil prices. Crude has been trending lower since mid-July amid weakening demand, losing more than a third of its value since it reached a record of near $150 just two months ago.

Six states reported gas prices above $4 a gallon in the AAA survey: Alaska, Georgia, Hawaii, Illinois, Indiana, and Michigan.

Alaska continues to be the state with the most expensive gas prices, at $4.334 a gallon. The cheapest gas can be found in New Jersey, where gas cost $3.50 a gallon, according to AAA's Web site. 


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