Here at The Wonk Room, we’ve been arguing that building new highways with stimulus dollars would be a counterproductive use of the funding. Today, President Barack Obama agreed:

I’d like to see high-speed rail where it can be constructed. I would like for us to invest in mass transit because, potentially, that’s energy efficient, and I think people are a lot more open now to thinking regionally in terms of how we plan our transportation infrastructure. The day’s where we’re just building sprawl forever, those days are over. I think that Republicans, Democrats, everybody recognizes that that’s not a smart way to design communities.

Watch it:

Not everybody recognizes it, though. The Senate trimmed $3.6 billion — almost a third — of the mass transit funding out of the stimulus bill, relative to the House’s version. Of course, the House started by pairing $30 billion for highways with just $12 for transit. While some of this could be legitimately used to fix old and imperiled roads, it shows the extent to which Congress has equated “job” with “highway construction worker.”

Admitting that previous actions were “inadequate”, and “not comprehensive or quick enough to withstand the deepening pressure brought on by the weakening economy,” Treasury Secretary Timothy Geithner unveiled a restructured plan to aid the ailing financial system today:

[The plan] would more closely scrutinize the risks banks are facing and offer public and private capital to those that need it; create a fund, with a starting value of $500 billion, to buy up toxic real estate loans; and commit up to $1 trillion to reopen lending markets for consumer, student, small business, auto and commercial loans.

This plan gets back to the original intent of the financial rescue, which was purchasing toxic assets off of banks’ books, freeing the banks up to boost lending — in theory, since banks will no longer be worried about having to cover losses from toxic assets, and hoarding money accordingly, they will lend more.

To purchase these assets, Treasury is planning a new public-private investment program, the details of which have not yet been finalized. As Globe Street reported:

Fittingly called Public Private Investment Fund, the program will leverage the Federal Reserve Bank’s balance sheet to loan money for the purchase of these assets. FDIC, for its part, will provide guarantees that their value will not drop below a certain level.

It is a good step for the Obama administration to acknowledge that the first incarnation of this bank rescue did not work out as well as it could have (though it likely did avert a larger catastrophe). However, that still leaves the question of return to the taxpayer on the purchase of these assets.

The first tranche of public investments in banks has not yielded much of a return, and while the new programs “are designed to ultimately return money to taxpayers,” it is not totally clear how that is going to happen. Geithner has included more provisions aimed at transparency and accountability — which were sorely needed — but that still doesn’t address the ultimate return on a dollar for the taxpayer. Will it be a dollar? Two? Fifty cents? How will we know and how soon will we know it? It’s too early to tell, but as more details are solidified within Treasury, and these answers become clearer, they should be announced and amplified, to assure everyone that this is not simply TARP II.

The Chamber of Commerce and the National Association of Manufacturers (NAM) were adamant in their belief that the stimulus package needed a healthy dose of ineffective business tax cuts. Both groups are reportedly pleased with the bill that emerged from the Senate:

Business groups that had been pushing for additional tax cuts in the stimulus bill are now urging lawmakers to support a package negotiated by Senate centrists from both parties…In a letter to senators last week, NAM highlighted a number of tax provisions, including a one-year patch of the Alternative Minimum Tax, research and development tax credits and a temporary tax credit for homebuyers.

The business groups may sense victory, but the measures they are cheerleading would have very little stimulative effect. The AMT patch is a yearly Congressional ritual that provides no stimulus, while the home-buyers credit amounts to a “house-flipping subsidy.” These are ill-advised tax changes that were rightfully eschewed in the House’s stimulus. Incidentally, the Senate bill would create between 430,000 and 538,000 fewer jobs than its House counterpart. But, hey, who’s counting, as long as big-business groups get what they’re looking for?