Wonkbook: EU bailout cheers markets; Washington wonders about Elena Kagan; awe-inspiring lobbying from the banks
The White House had a good day yesterday, with the initial Kagan rollout going relatively smoothly. The day-two story is looking a bit tougher for them, however, as people begin to wonder whether we know -- or even can know -- enough about a nominee with such a sparse written record. That means we're looking at a high-stakes confirmation hearing. Meanwhile, the Gulf Coast is still a disaster, and BP's latest idea is to throw trash at the leak. Seriously.
Welcome to Wonkbook.
House: Not much happening on the floor, though they are voting on a resolution "expressing support for designation of the first Saturday in May as National Explosive Ordnance Disposal Day," which, you'll have to admit, is a pretty cool day. Lends itself to some good parties, I'd say. Over in committee land, the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing on: "The Stock Market Plunge: What Happened and What Is Next?"
Senate: Various financial regulation amendments coming to a vote today, starting with Sanders' modified 'Audit the Fed' amendment at 11:30. Meanwhile, the Energy and Natural Resources Committee are holding a hearing on "to examine current issues related to offshore oil and gas development" and the Finance Committee is looking at TARP.
White House: Nothing public, but after a strong first day on Elena Kagan, word is that it's back to trying to figure out the oil spill.
And! The Labor Department releases its monthly survey of turnover in the labor market and the Commerce Department posts data on wholesale inventories for March.
Markets leap on news of EU bailout: "Global financial markets roared back in response to the European Union's nearly $1 trillion plan to avert a public-debt crisis that has threatened to derail the worldwide economic recovery," report Marcus Walker, Charles Forelle, and David Gauthier-Villars. "Investors' apparent short-term relief was tempered by some economists' worries that in the longer term, the agreement's pledge to bail out troubled members will saddle the euro zone with gargantuan debts."
"Stocks surged in Europe and the U.S. after EU leaders agreed to a massive action to prevent Greece's financial troubles from spreading throughout the region. Assets from Portuguese and Greek bonds to oil and other commodities rose world-wide.
The euro, which has been battered in recent weeks, rose above $1.30 to the dollar before closing below $1.28. In the U.S., The Dow Jones Industrial Average logged its biggest gain in more than a year, rising 404.71 points, or 3.9%, to 10785.14."
SEIU, Campaign for America's Future, and Public Accountability release startling report on bank lobbying: "The report cites 243 government insiders turned lobbyists working for the industry. Of those, 202 used to work in Congress, and the rest served in the White House, Treasury Department or government agencies," writes Chris Frates. "The list includes 33 former chiefs of staff, 54 former staffers to the House Financial Services Committee or Senate Banking Committee and 28 former legislative directors."
"The report also estimates that six banks – Goldman Sachs, Bank of America, JPMorgan Chase, Citigroup, Morgan Stanley and Wells Fargo – and their trade organizations have spent about $600 million since the first major federal bailout of Bear Sterns in March 2008. Between 2008 and 2009, the six big banks spent about $69 million on campaign contributions and lobbying, according to the report."
Book-to-movie interlude: Cannot wait for Bill Buford's 'Heat' to hit the big screen.
Table of contents: Fannie Mae needs more money (plus more economic news); Elena Kagan appears to have lived a life free of incriminating -- or even telling -- documentation (and more Kagan commentary); fight brewing over the scope of the Consumer Financial Protection Agency (and more FinReg news); BP trying increasingly nuttier things to stop the oil spill (and more environmental news); health-care premiums could rise for families who try to keep older kids on their insurance plans.
Federal Reserve joining in European rescue: "The U.S. Federal Reserve's decision to reopen swap lines with the European Central Bank and central banks in Japan, Switzerland, England and Canada puts it in a delicate political position," reports reports Jon Hilsenrath. "The U.S. Congress is in the midst of writing a financial regulatory overhaul that could rein in the Fed's powers amid sharp criticism of its actions before and during the financial crisis. The overseas lending program it reopened Sunday has been among the programs lawmakers have criticized. Some suggest it is a bailout out of foreign banks and others say the Fed is too secretive about details of the program."
Fannie Mae needs (yet more) money: "Fannie Mae asked the U.S. government for an additional $8.4 billion in aid after posting an $11.5 billion net loss for the first quarter, the latest sign that the bailout of the mortgage investor and its main rival, Freddie Mac, is likely to be the most expensive legacy of the U.S. housing-market bust," reports Nick Timiraos. "Fannie's losses reflected continuing weakness in the housing market and would have been worse without accounting changes that reduced its deficit. The quarterly loss was an improvement from the $23.5 billion loss for the year-ago quarter and marked the 11th consecutive quarterly loss for the Washington-based firm."
What about the Republican proposal to dismantle Fannie and Freddie? "Housing market experts describe the Republicans’ proposal as disastrous," reports Annie Lowrey. "Analysts from both sides of the aisle contend that the proposal would unwind Fannie and Freddie so quickly and precipitously that it would destabilize the entire housing market: pushing mortgage prices up, pulling support from low and middle-income Americans and ending the nascent — if at all extant — housing recovery."
A new study looks at the motivations for strategic defaults: "It turns out that many of the Americans defaulting on their mortgages are doing so out of anger, fear or despair," reports James Hagerty, "rather than making a purely sensible decision about their best financial interests, a new study found. Though small—covering just 350 people—the study spotted a notable trend. Some of these people have stopped paying because they are anxious about their financial situation; others are furious that banks or the government won't help ease their load while other people are getting assistance."
A look at Kagan's political path: Just after Election Day the fall of her senior year at Princeton, Elena Kagan published an opinion piece in the campus newspaper recounting how she had wept and gotten drunk on vodka at a campaign gathering for a liberal Brooklyn congresswoman who had unexpectedly lost a race for the Senate," report Amy Goldstein, Carol Leonnig, and Peter Slevin."
"Ronald Reagan was heading to the White House, and Rep. Elizabeth Holtzman -- a champion for women's causes for whom Kagan had toiled 14-hour days as a campaign press assistant -- was leaving Capitol Hill. Kagan, then 20 and imbued with the liberal principles on which she had been raised, said she was flirting with despair that 'there was no longer any place for the ideals we held'...Her piece for the Daily Princetonian on Holtzman's 1980 defeat was a rare moment, then and since, in which Kagan publicly described her emotions and politics in such strikingly personal tones."
Kagan's lack of written record comes to dominate talk of her record: "Ms. Kagan’s paper trail is scant, her academic writings painstakingly nonideological," report Sheryl Gay Stolberg, Katharine Seelye, and Lisa Foderaro. "And while Justice Sonia Sotomayor, a fellow New Yorker and Princeton graduate, has written and spoken extensively about her childhood, Ms. Kagan, the daughter of a lawyer and a schoolteacher, the granddaughter of immigrants, is more private. During her academic and public life, she has rarely spoken of her political beliefs. When Mr. Dellinger interviewed her recently for a forum at Georgetown Law, he prodded her to talk about her past, and the influences that shaped her. She obliged, somewhat reluctantly, serving up only some bland details about her admiration for her parents."
Liberals confront their 'Scalia envy.' "Liberals have had Scalia envy for nearly a quarter-century," reports Peter Baker, "only to be let down. They considered President Bill Clinton’s selections of Ruth Bader Ginsburg and Stephen G. Breyer to be satisfactory but not satisfying, much like the nomination of Sonia Sotomayor last year. While Justice Ginsburg came closest to what they were looking for, given her record of advocacy for women’s rights, she does not go far enough for them on capital punishment and other issues."
"Richard Primus, a professor at the University of Michigan Law School, said conservatives did more to influence Republican nominations because the energy on court advocacy is on the right, which still resents rulings that barred school-sponsored prayer, legalized abortion and upheld some affirmative action programs. 'It still lives off of that anger, and nothing of that sort of fire has really taken hold on the other side,' Professor Primus said. The left, by contrast, focuses on guarding the status quo, a less animating mission. 'The quote-unquote liberals are defending the New Deal and Warren court inheritances,' said Bruce Ackerman, a constitutional scholar at Yale Law School."
David Brooks can't get a read on Kagan: "One scans her public speeches looking for a strong opinion, and one comes up empty. In 2005, for example, she delivered a lecture on women and the legal profession. If ever there was a hot-button issue, it’s the mommy wars, the tension between professional success and family pressures. Kagan deftly summarized some of the research showing that while women do well in law school, they are not as likely to rise to senior positions at major firms. But she didn’t exactly take a stand. 'What I hope to do is start a conversation,' she said.
"Kagan’s sole display of passion came during her defense of her decision to reinstate a policy that banned the military from using Harvard Law School’s main career office for recruiting. But even here, she argues that her position was not the product of any broad opinions. She was upholding the antidiscrimination regulations of Harvard University. She told the Senate in written answers to questions during her confirmation hearings for solicitor general, 'The position I took does not entail a view on the exclusion of R.O.T.C. from college campuses, and I never expressed a position on the exclusion of R.O.T.C. from Harvard.'" http://nyti.ms/9nET8R
Linda Greenhouse has a question for Kagan: "Last October, in her second appearance before the Supreme Court, she defended the federal government’s position on the validity of a Congressionally authorized land swap in the Mojave Desert that left a Latin cross standing on land that had once been federal property, but was now privately owned. The question in the case, Salazar v. Buono, was whether this extremely odd real estate deal was a proper response to a decision that a private citizen had won in a lower court, which ruled that it was unconstitutional for the cross to be displayed on federal land."
Ms. Kagan argued that the plaintiff, Frank Buono, no longer had standing to pursue his challenge because he had testified earlier that as a Catholic, he had no general objection to crosses, just to crosses on government property. But the cross was now on private land; ergo, ran the government’s argument, no standing...Only Justices Antonin Scalia and Clarence Thomas agreed with Ms. Kagan’s argument, and Justice Anthony Kennedy’s plurality opinion dispatched it in a few sentences. I would like to know what Solicitor General Kagan really thought of that argument. The answer matters because, although that case is over and done with, the question of whether to foreclose access to court for citizens seeking to vindicate their rights is very much alive and is almost certain to be a continuing pressure point within the Roberts court." http://nyti.ms/8ZgYa9
Stoner interlude: Ever wish your favorite album covers could move?
Jeff Merkley and Carl Levin propose Volcker rule amendment: "The pending Senate legislation also would restrict proprietary trading, but it would give regulators the flexibility to waive restrictions under certain circumstances," report Damian Paletta and Michael Crittenden. "The [Levin-Merkley] amendment would essentially remove that regulatory flexibility...The amendment has the backing of the Treasury Department and Senate Banking Committee Chairman Christopher Dodd (D., Conn.), which could make it more difficult for the banks to defeat."
Payday lenders trying to dodge financial reform: "The bill is particularly significant for payday lenders and check cashers because it could bring the bulk of their operations under the eye of a federal watchdog for the first time," reports Ylan Mui. "According to a study by the Federal Deposit Insurance Corp. released in December, about a quarter of American households have little or no access to banks or other traditional financial services; many rely instead on payday lenders and check cashers."
What does the word "significantly" mean? "The Senate bill exempts businesses that don’t provide significant consumer financial products or services from being regulated by the new agency," reports Chris Frates. "Democrats argue that most businesses would not be hit by the regulations and have charged the GOP with misrepresenting the bill. Republicans say the bill doesn’t define 'significantly' and have used that argument to stoke fears among small businesses, like dentists and florists, that the bill will regulate the payment plans and credit they offer customers."
Olympia Snowe and Mary Landrieu propose three-part test to exempt businesses from consumer financial regulation: "1) The business must sell nonfinancial products. 2) It must not securitize its consumer debt. 3) And it must fall within the North American Industry Classification System code’s definition of a 'small business.'" http://bit.ly/azmdeI
SEC demands rules for slowing trading in markets that are crashing: "Federal regulators on Monday gave U.S. stock exchanges 24 hours to devise a market-wide plan to stop or slow trading in stocks that are falling rapidly, in an effort to avoid a repeat of last Thursday's violent swings in the financial markets," reports Zachary Goldfarb. "During a meeting Monday with the heads of six U.S. exchanges, Securities and Exchange Commission Chairman Mary Schapiro demanded quick action on developing industry rules governing when trading should be stopped in markets as well as individual stocks."
How financial regulation is playing out in the Arizona Senate race: "Democratic Sen. Blanche Lincoln is fighting to shake off the nickname 'Bailout Blanche,' bestowed by her more-liberal rival in the May 18 primary campaign," report Stephanie Simon, Damian Paletta, and Greg Hitt. "Her main weapon: a provision she wrote in the financial-overhaul bill that would trim the sails of Wall Street banks by strictly limiting their derivatives trading."
"Ms. Lincoln's provision, unveiled in April, could transform U.S. finance. It also stripped Bill Halter, the state's lieutenant governor and Ms. Lincoln's main opponent in the primary, of a potent talking point. He had been blasting Ms. Lincoln for close ties to Wall Street. Now he found himself supporting her provision, though his campaign credited Mr. Halter for Ms. Lincoln's tough language."
French finance minister Christine LaGarde argues that financial crises require a female touch: "When women are called to action in times of turbulence, it is often on account of their composure, sense of responsibility and great pragmatism in delicate situations. Audur Capital, an Icelandic private equity fund wholly managed by women, is the only such fund to have made it through the crisis without a hitch. And in February 2009, Iceland’s citizens chose a woman, Johanna Sigurdardottir, as prime minister in the midst of the country’s financial crisis.
"At the other end of the spectrum, Muhammed Yunus first turned to women to promote micro-lending. They now account for 97 percent of his 8 million borrowers in Bangladesh. When he launched that revolution in 1976, he knew that women would use their loans to advance projects or purchase tools, while he was wary of what men might do with the money." http://nyti.ms/brxnDW
Cameo interlude: A bunch of famous chefs get a guest spot on David Simon's 'Treme.'
BP is going to come out of this just fine: "Even though most investors have soured on BP, driving down its stock price by 19 percent and wiping out $36.7 billion of its market value since the explosion, the firm is still a behemoth," reports Steve Mufson. "The company has a market value of $152.6 billion, bolstered by a global marketing network, a lucrative oil venture in Russia, a promising contract to boost production in a giant Iraqi field and scores of other large interests from Angola to Azerbaijan to Alaska. It remains the largest oil producer in the Gulf of Mexico. Measured by revenue or assets, it is among the world's five largest companies."
"Citigroup analysts said that stockholders' reactions seem 'disproportionate to the likely costs to the company.' It noted that punitive damages against Exxon for the 1989 Exxon Valdez oil-tanker spill were originally set at $5 billion in 1994 but were reduced on appeal. The company in 2009 agreed to pay less than $1 billion, including interest...On Monday, BP said it spent $350 million in the first 20 days of the spill response, about $17.5 million a day. It has paid 295 of the 4,700 claims received so far, for a total of $3.5 million. By contrast, in the first quarter of the year, the London-based oil giant's profits averaged $93 million a day."
Can we stop the spill with trash? "Engineers will use golf balls and shredded automobile tires in what they call a 'junk shot' to try to clog the oil well that has been leaking crude at the bottom of the Gulf of Mexico since the sinking last month of the drilling rig Deepwater Horizon," report Joel Achenbach and Steve Mufson. "'We'll be pumping pieces of tire. We'll be pumping knots in ropes,' Kent Wells, senior vice president of exploration and production for BP, said in a news briefing Monday. 'There's a little bit of a science in this, even though it sounds odd.'"
It's like Russia vs. Germany: "Top executives from BP PLC, Transocean Ltd. and Halliburton Co. began turning on one another Monday over who bears ultimate responsibility for the April 20 oil-rig explosion that took 11 lives and is causing a huge spill in the Gulf of Mexico," report Stephen Power, Neil King, and Guy Chazan. "The question of who shoulders the blame will loom large Tuesday at the first set of congressional hearings on the disaster. Testifying will be Lamar McKay, chairman of BP America, Inc.; Steven Newman, chief executive of Transocean, which owned and operated the Deepwater Horizon rig; and Tim Probert, a top official at Halliburton Inc., which was brought in to cement the well."
TED talk interlude: The hidden influence of social networks.
Premiums could rise for families who keep their children on their insurance: Some families could pay a price if they seize the chance offered by the new health-care law to keep children up to age 26 on their insurance policies, regulations drafted by the Obama administration show," reports David Hilsenrath. "Until 2014, when health plans will be prohibited from charging higher premiums based on preexisting conditions, insurers in the individual market can take into account the young adult's medical condition when setting the family's premium."
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Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: University Of Chicago Law School Photo.
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