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Wonkbook: Lobbyists feel FinReg going against them; Americans support racial profiling of Hispanics; Obama's corporate balancing act


The Agenda.

House: Happy House hearts science day! They've got resolutions honoring the National Science Foundation, the need for our kids to know math and science, the 50th anniversary of lasers and satellites, and the 400th anniversary of the telescope. No word yet on baking-soda volcanoes. Also going on: Dems are holding an economic forum. Education and Labor Committee is holding a hearing on supporting America's teachers, the newly-formed Congressional Caucus on Homelessness holds its first briefing.

Senate: The Finance Committee has Tim Geithner coming to testify on a bank tax. The Judiciary Committee is looking at Wall Street fraud (with Connecticut attorney general and Senate candidate Richard Blumenthal serving as a special guest star). The Senate itself is considering amendments on the financial-regulation bill.

White House: The president will talk economy and financial regulation before the Business Council, with a special focus on the need for strong consumer protections. And the White House will announce the winner of the Race to the Top High School Challenge, where the high school with the most promising reforms gets Obama as a commencement speaker.

Video interlude: A day in the life of a financial analyst.

Top Stories.

Financial lobbyists worries about FinReg amendments: "They were counting on Senate committee hearings and backroom negotiations among key lawmakers to remove or soften what the financial industry considers most objectionable in the bill," reports Brady Dennis. "That hasn't happened. And now, as early as Tuesday, the Senate will begin to consider populist amendments that spell even more heartburn for the banks."

"'You've got an environment, six months before an election, where politicians are acting like politicians,' said Sam Geduldig, a financial lobbyist and former Republican staffer. 'They are viewing any vote as a potential campaign ad. And that might not be good for any of us.'"

Obama's corporate balancing act: "From the time he took office, Mr. Obama’s juggling has made for a shifting and sometimes inconsistent record of rhetoric and policy. He has mixed, for example, condemnation of 'Wall Street greed' with opposition to government caps on financiers’ bonuses, and criticism of oil companies’ profits with a recent call (now in abeyance) to expand offshore drilling," writes Jackie Calmes. "It is enough to give rise to the equally contradictory criticisms he endures, from longtime enemies on the right crying socialism and from disillusioned supporters on the left who lament what they see as Mr. Obama’s pro-business bias."

Americans think Arizona law will lead to racial profiling; support it anyway: That's what the new NYT/CBS poll says, anyway. More than 80% of Americans think the new law is likely to lead to racial profiling. But more than 50% of Americans support it. And about 9% of those who don't support it would like to see it going further. Bright side: A plurality of Americans think illegal immigrants who're here should be able to apply for citizenship.

Restaurant interlude: James Beard food awards stiff DC, but the Washington Post wins for best food section.

Table of Contents: Economy (bad news, mainly), financial regulation, the oil spill (including some great comparative analysis of past oil spills), immigration (you hear what Sandra Day O'Connor said?), and some very Brooksian policy rules.


Consumers making less, saving less, spending more: "Personal income rose 0.3% in March as a weak labor market continued to keep a lid on wage growth, the Commerce Department said Monday," report Meena Thiruvengadam and Jeff Bater. "Meanwhile, consumer spending -- which accounts for 70% of demand in the U.S. economy -- increased by 0.6% from the prior month, likely lifted by government efforts to spur economic growth." Optimistic take: Consumer confidence returning! Pessimistic take: Economic pain driving irrational use of credit.

Credit remained tight in the first quarter: "A third of banks tightened terms and conditions on new credit-card accounts for small businesses, while more than a quarter of banks did so for existing accounts," reports Sudeep Reddy, "More than 40% of banks said they raised minimum required credit scores. Almost a third said they widened spreads—interest rates over the bank's cost of funds—on outstanding balances, and 15% reported charging higher annual fees."

Legendary currency investor shorts the Euro: "Greece now has its bailout but that has done nothing to lift the sense of impending gloom as to what lies ahead for Europe," writes Patience Wheatcroft. "Instead, the deal prompted legendary investor Jim Rogers to get off his motorbike and pronounce, not for the first time, that the euro would be a dead currency within fifteen or twenty years. Amidst the many voices now keen to sound the death knell of the euro, Rogers deserves some attention."

What the Greek, British, and American attitudes towards debt say about the countries: "The American response—to double down on government's obligations—reflects the national sense that the future's possibilities are still limitless, and that the U.S. can grow its way out of this problem as it's risen above others in the past," writes Brian Carny. "British belt-tightening emerges from a more cautious perspective. U.K. politicians may say the country is capable of anything, but they don't quite believe it anymore. Some sail-trimming is called for."

"But if America's attitude reflects aspiration and Britain's pragmatism, then Greece's rioters are the embodiment of political nihilism. The future is less bright than the past and is doomed to be so. Better, if that's true, to take whatever you can now and the future be damned."

Economics-of-sports interlude: The myth of the rational market (in soccer penalty kicks).


Criticism mounts of Blanche Lincoln's derivatives proposal: "Obama administration officials, industry groups, banking regulators and lawmakers from both sides of the aisle have taken aim at the measure proposed by Sen. Blanche Lincoln (D-Ark.), chairman of the Senate agriculture committee," reports Brady Dennis.

"Their main objection: If a central goal of regulatory overhaul is to make financial markets more transparent and accountable, Lincoln's provision would have the opposite effect. Barring banks from trading in derivatives would force those lucrative business into corners of the market where there's even less oversight, critics warn."

Lawsuits mount against Goldman Sachs: "Goldman Sachs said Monday that six private lawsuits alleging 'breach of fiduciary duty, corporate waste, abuse of control, mismanagement and unjust enrichment' have been filed against the bank since the government charged it last month with committing fraud," reports Zachary Goldfarb. "The rare announcement, in the form of a regulatory filing, underscores the widening legal assault that Goldman is facing as well as the firm's increasing sensitivity about telling investors any information that might be deemed pertinent."

Some members of Congress shorted the stock market during the crisis: "According to The Journal's analysis of congressional disclosures, investment accounts of 13 members of Congress or their spouses show bearish bets made in 2008 via exchange-traded funds—portfolios that trade like stocks and mirror an index," report Jason Zweig, Tom McGinty, and Brody Mullins. "These funds were leveraged; they used derivatives and other techniques to magnify the daily moves of the index they track...Some of these legislators have publicly criticized practices such as short-selling, or betting on a security to decline."

Why Fannie Mae and Freddie Mac aren't part of FinReg Part 1: "The mortgage market has come to be structured around Fannie and Freddie and powerful interests are allied with the status quo," writes Robert G. WIlmers. "I recall a personal conversation with a member of Congress who, despite saying he understood my concerns about the two GSEs, admitted he would never push for significant change because "they've done so much for me, my colleagues and my staff."

Why Fannie Mae and Freddie Mac aren't part of FinReg Part 2: "Washington was ready for the Dodd bill 18 months after the financial crisis," writes Annie Lowrey. "Consensus — whether good or not — had formed around the Dodd proposals. Washington is decidedly not ready for the housing bill — there are no proposals yet, and many on the Hill do not even know the parameters of what Congress might hope to accomplish. (Republicans should stop complaining about this. Their financial regulatory proposal hardly offered a disquisition on Fannie and Freddie. More like a sneeze.)"

The myth of the 'sophisticated investor.' "What Wall Street would like to ignore when it is taking bets in its casino is that a big pile of chips on the table come from regular consumers," writes Heidi Moore, "from their bank deposits, retirement accounts, credit-card balances, car loans and mortgages. That's why the distinction between these sophisticated investors and everyone else is nonexistent. When Wall Street banks omit information and draw profits from "institutional investors," that means they are taking money from your pension funds, your school endowments, and your city and state governments. Other sophisticated investors include hedge funds, which take money from those pension funds, or private-equity funds, which own companies that employ 10 percent of all Americans."

Klein-fantasy interlude: In the future, we will all have sous-vide machines.

Oil spill.

How bad is the spill? "The Deepwater Horizon blowout is not unprecedented, nor is it yet among the worst oil accidents in history," write John Broder and Tom Zeller Jr. "And its ultimate impact will depend on a long list of interlinked variables, including the weather, ocean currents, the properties of the oil involved and the success or failure of the frantic efforts to stanch the flow and remediate its effects. As one expert put it, this is the first inning of a nine-inning game. No one knows the final score."

"The ruptured well, currently pouring an estimated 210,000 gallons of oil a day into the gulf, could flow for years and still not begin to approach the 36 billion gallons of oil spilled by retreating Iraqi forces when they left Kuwait in 1991. It is not yet close to the magnitude of the Ixtoc I blowout in the Bay of Campeche in Mexico in 1979, which spilled an estimated 140 million gallons of crude before the gusher could be stopped."

Oil cleanup technology hasn't kept pace with spills: In 1969, when people still used manual typewriters and rotary telephones, a Union Oil well blew out five miles off the coast of Santa Barbara, Calif," writes Steve Mufson. "People attacked the oil washing ashore by skimming it off the surface, dispersing it with chemicals, and soaking it up with straw and other materials."

"Forty-one years and many generations of technology later, BP is attacking the oil spill in the Gulf of Mexico with techniques similar to those used in Santa Barbara. And just as in those days, choppy water and strong winds can make it impossible to use those tools to bottle up oil once it has leaked into open seas."

BP begins work on a relief well: "To succeed, BP must drill a hole through 13,000 feet of rock a mile under the ocean's floor to intercept the leaking well," Jeffrey Ball reports. "The company can then pump in cement to try to plug the leaks. The operation is highly complex, in part because the drills must precisely hit the leaking well. In addition to trying to essentially cap the leaking oil well, BP is trying to minimize damage from the oil slick in the water by applying chemical dispersants to break up the oil."

Big government looking better to Gulf State conservatives: "There is something exquisite about the moment when a conservative decides he needs more government in his life," writes Dana Milbank. "About 10:30 Monday morning, Sen. David Vitter (R-La.), an ardent foe of big government, posted a blog item on his campaign Web site about the huge oil spill in the Gulf of Mexico. 'I strongly believe BP is spread too thin,' he wrote."

"The poor dears. He thinks it would be a better arrangement if 'federal and state officials' would do the dirty work of 'protecting and cleaning up the coast' instead of BP."

Art interlude: How much would you pay for a portrait of Charlie Crist? Probably not this much, right?


Arizona native Sandra Day O'Connor speaks out: "Retired Supreme Court Justice Sandra Day O'Connor said a tough new immigration law passed in her home state of Arizona 'may have gone a little too far' and predicted it would be the subject of extensive litigation," reports Jim Carlton. The big question, she says, is whether the law "does too much to allow officers to arrest people because they look Hispanic. It might not read that way, but it might work that way."

The 'secure-the-border-first' crowd ignores the fact that the border is pretty secured: "Anyone who thinks [immigration] extremism could be quelled if the federal government would just secure the border' really ought to visit Arizona and take a look," writes Eugene Robinson. "Or at least consult a map. Or even just read up on what is happening at the border -- which, according to Pima County Sheriff Clarence Dupnik, has never been more secure.'"

"Border crossings by undocumented immigrants have declined sharply over the past decade. With more Border Patrol agents on duty than ever before, apprehensions of would-be immigrants along the 2,000-mile border have dropped from a peak of 1.8 million in fiscal 2000 to 556,000 in fiscal 2009."

Illustrated interlude: A brief history of voting.

Closing credits.

David Brooks proposes some very Brooksian rules for policy making: "The first rule of policy-making should be, don’t promulgate a policy that will destroy social bonds," he writes. "If you take tribes of people, exile them from their homelands and ship them to strange, arid lands, you’re going to produce bad outcomes for generations. Second, try to establish basic security. If the government can establish a basic level of economic and physical security, people may create a culture of achievement — if you’re lucky. Third, try to use policy to strengthen relationships. The best policies, like good preschool and military service, fortify emotional bonds."

"Finally, we should all probably calm down about politics. Most of the proposals we argue about so ferociously will have only marginal effects on how we live, especially compared with the ethnic, regional and social differences that we so studiously ignore."

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Photo credit: Derick E. Hingle/bloomberg Photo.

By Ezra Klein  |  May 4, 2010; 7:27 AM ET
Categories:  Wonkbook  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Reconciliation
Next: The administration's FinReg scorecard


Thanks Ezra! I was more convinced by today's version - and 45 minutes early, no less!

One minor thing - can we delete the periods at the end of every header going forward?! Not to be a grammar nerd (like those profiled in the NYT last week...) but if it's not a sentence, it doesn't need a period.

Posted by: phantasypunk | May 4, 2010 8:18 AM | Report abuse

"Americans think Arizona law will lead to racial profiling; support it anyway"

I'm not sure that's consistent with Brownstein's contention that future voters are going to punish Republicans in 20 years for what they're doing in Arizona now.

I think Americans' support of Arizona's strategy has a lot to do with the Federal Government not having been serious about immigration reform that secures the borders. Bottom line. If we had the same high immigration rates through a legal system (plus a legal migrant worker program) it would be impossible for Arizona to be doing what it's doing, even if legalized immigration was very open and easy. And the way to do that is secure the borders, and give illegals a path to legality with seeming to coddle them. Then come back later and easy up on immigration quotas.

If you can study enough American history to pass the test, and you know enough English to get by, then you should get to become an American citizen. In my humble opinion.

Posted by: Kevin_Willis | May 4, 2010 8:24 AM | Report abuse

Ezra - Why do you consider it on the "bright side" that a plurality of Americans support enabling current illegal aliens to apply for citizenship -- people who have broken into the country. Yes, the vast majority of them work and contribute to the economy. But ALL of them, by definition, are also criminals, who, in any case, should have no expectation of being able to stay.

If tens of millions of Americans snuck into, say, Canada (as tens of thousands did actually during the Vietnam War), would critics like you accuse Canadian citizens of racism (er, racial profiling) if the Canadian Mounties started asking people w/ American accents for ID cards? Would you say things were looking "bright" if a plurality of Canadian citizens indicated such invaders should be allowed to apply to stay (by which, I take it, one means that most would indeed become citizens)?

More to the point, do you believe in international borders or not? If so, there's hardly any reason you can come up with for the most popular country in the world (i.e., the U.S.) not to defend it's most porous border.

To be more precise, there's no legitimate reason to advocate your position. Of course, there are is one huge political reason to do so, which is that Democrats want to woo hispanic voters. But in that case, why don't you just go all the way and say that the Democratic party should support UNLIMITED illegal immigration as long as it results in net strengthening of Democratic Party rolls.

As yourself: would my positions on immigration change if most illegal immigrants ended up voting Republican?

I'm a Democrat and quite "liberal" on most issues, as my donations to MoveOn, candidates, the DCCC etc. surely indicate. But in this case, I really think that you and lots of other Democratic spokespeople are wrong. What is more, most Independents think you're wrong.

Posted by: paul65 | May 4, 2010 8:48 AM | Report abuse

I was going to lambast Ezra for this stupid, stupid post, but paul65 beat me to it.

And he is correct, it's simply a ploy for expansion of Democrats' power and little else.

Posted by: WrongfulDeath | May 4, 2010 9:01 AM | Report abuse

"The ruptured well, currently pouring an estimated 210,000 gallons of oil a day into the gulf, could flow for years and still not begin to approach the 36 billion gallons of oil spilled by retreating Iraqi forces when they left Kuwait in 1991. It is not yet close to the magnitude of the Ixtoc I blowout in the Bay of Campeche in Mexico in 1979, which spilled an estimated 140 million gallons of crude before the gusher could be stopped."

maybe it wont approach the magnitude of the other oil spills, but so what.
did those areas have the same kind of economic infra-structure as the coastal areas of the united states?
and if this continues, and comes near the keys and gets into waters of the eastern seaboard and all of our sensitive coral colonies, and marshes and rivulets....what will the effects be for all of us?
and does anyone yet know how it started?
there is not enough centralized information coming on this.
a lot of the reports seem to be conflicting.
this is not a second tier story to the car bomb in nyc, and it is being treated as such.
this spill should be treated like the president, the secretary of energy, secretary of the interior and homeland security.
and we arent hearing from any of these people.
this is not good.
we arent getting the information we need at the highest levels.
and how did it really start in the first place?
we need a primetime press conference, and we need to know if any of the containments procedures are working, and details of what to expect to the environment and the economy....and what are the true estimates of how much oil is seeping out?
who is giving the estimate....BP?
we need information that we can trust on this.
where are our highest government officials? they should be treated this as the crisis and concern that it is , to all of us.

Posted by: jkaren | May 4, 2010 9:03 AM | Report abuse

I wonder if the same liberals who encourage illegal citizens to ignore our immigration laws will join the charge I'm leading to encourage doctors, hospitals, and insurance companies to ignore the new health care reform bill.

Nancy Pelosi hails from San Francisco, which bills itself as a 'sanctuary city' for law-breaking illegal immigrants. Inspired by Nancy, I'm encouraging cities to consider making themselves "sanctuary cities" against the new health care law. You know, cities which will:
- refuse to implement the new health care regulations
- provide sanctuary for hospitals and insurance companies who do not want to comply with the new regulations
- and actively thwart attempts by federal and state authorities to enforce the new health care bill.

Of course I'm being facetious; but you do see don't you, mindless liberals, the slippery slope you walk when you start picking and choosing which laws should be enforced and which should be ignored. Of course to liberals, passion for adherence to law has an inverse correlation to the number of votes they might garner by pandering to the law-breakers....

Posted by: dbw1 | May 4, 2010 9:20 AM | Report abuse

Ezra, your link on the financial crisis included this statement:

Stepping back, nowadays the popular narrative is that this economic crisis was caused by Wall Street and derivatives. It was not.

The housing bubble was created partially by the desire of large banks to invest in MBSs and CDOs. The wall st meltdown was all wall st. If investment banks weren't leveraged 40 to 1 the housing crisis might have triggered a recession, but it would be confined to the banks that owned the loans, and not destroyed the larger investment industry. Housing bubbles and crashes in cycles. The wall st meltdown had everything to do with exotic financial products and overleveraged betting by institutional investors.

Posted by: srw3 | May 4, 2010 9:29 AM | Report abuse

So, DBW1, how do you feel about those in the Bush Administration who ordered the use of waterboarding & other forms of "coercive interrogations", despite the fact that torture is explicitly illegal under both international & American law? Were they showing "passion for adherence to the rule of law"?

Posted by: PeterH1 | May 4, 2010 11:08 AM | Report abuse

First, I have to admit that I'm really liking getting this email in my box. The agenda is one of the best parts. And the TOC is useful.

But I have to say...ending on David Brooks? That's just cruel. At the very least follow that up with some video of a bunch of kittens on a Roomba. Some vacuums have more value than others.

Posted by: slag | May 4, 2010 11:27 AM | Report abuse

Ezra! The second edition of wonkbook didn't arrive in my inbox until 1:17 pm! Luckily, I'm an avid reader of the blog, so I caught it here this morning.

Posted by: abwrig | May 4, 2010 1:27 PM | Report abuse

abwrig, just keep in mind: it's always before 8:15 AM somewhere. Clearly, you need to move.

(Actually, I find this whole 8:15 AM thing amusing - but then, I've never been an early riser, my work has flexible hours, and I just moved to the West Coast).

Posted by: WarrenTerra | May 4, 2010 2:35 PM | Report abuse

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