Wonkbook: Scott Brown may vote for cloture on FinReg; Susan Collins is scaring the banks; Obama talks immigration reform
After losing yesterday's cloture vote, Harry Reid is expected to take another shot at ending debate on the financial regulation bill today. This time Scott Brown may be on board, though Reid would still need one more vote. Left unanswered is why we should be accelerating the cloture vote on financial regulation rather than letting the amendments play out.
Who would've thought that after the largest financial crash since the Great Depression, the Senate would decide it just didn't have time for a vote on restoring Glass-Steagall and putting the Volcker rule into place? Next week's planned vote on the war supplemental and extending jobless benefits are both important votes, but doesn't it seem that their importance makes for a good argument that the Senate should work through Memorial Day, not finish financial regulation prematurely? Anyone? Bueller?
Welcome to Wonkbook.
Scott Brown voted to filibuster financial reform yesterday after promising Harry Reid he would not, but he may switch for today's vote, reports Brian Beutler: "'I'm confident that something will be resolved,' Brown told reporters tonight. He claims his last minute defection was based on remaining objections he has to rules restricting high risks trades by financial companies, which he says will adversely impact insurance companies and trusts in his state."
Treasury, the Fed, and Wall Street lobbyists are trying to kill a capital requirement in FinReg, reports Damian Paletta: "The amendment, written by Sen. Susan Collins (R,. Maine) with backing from Federal Deposit Insurance Corp. Chairman Sheila Bair, would force banks with more than $250 billion in assets to meet higher capital requirements, according to a summary provided by her office. The amendment was passed with little fanfare and attached to the broader financial-overhaul bill." Collins is holding fast, but there's always conference committee.
The New Republic releases the first installment of Jon Cohn's tick-tock of health-care reform: http://bit.ly/bd1LBa
Obama used Felipe Calderon's visit to push Republicans to back immigration reform, reports Sam Youngman: "Obama, joined in the White House Rose Garden by Mexican President Felipe Calderon, endorsed the current proposal put forth by Sens. Lindsey Graham (R-S.C.) and Charles Schumer (D-N.Y.), saying 'it can and should move forward.' The president said he is 'confident' he can get the majority of Democrats in the House and Senate to support a proposal like that, 'but I don't have 60 votes in the Senate.' 'I've got to have some support from Republicans,' Obama said, calling that prospect 'politically challenging.'"
Remember: If Obama is pushing for immigration this year, he doesn't even have Lindsey Graham. http://bit.ly/d9bXHY
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Janelle Monae interlude: Brentin Mock explains the singer's appeal.
Table of Contents: Chris Dodd abandons his effort to kill off Blanche Lincoln's derivatives proposal (and other FinReg news); Ken Salazar's getting specific on regulating offshore drilling (and other energy news); the Fed is divided on how to sell off its assets (and other economic news); and the House is considering legalizing online gambling (and other domestic policy news).
Chris Dodd abandoned his compromise derivatives proposal, report Damian Paletta and Victoria McGrane: "His amendment would have delayed for two years any ban on derivatives trading and given the Treasury Secretary the ability to quash the proposal outright. Liberal Democrats loudly voiced their opposition, claiming Mr. Dodd was trying to gut a central part of their effort to crack down on Wall Street banks. Wall Street banks complained almost as loudly, saying the two-year window would create uncertainty and make it nearly impossible for them to offer derivatives contracts. Mr. Dodd conceded in a brief interview that it was unlikely any other changes would be offered to the derivatives piece of the broader bill now, with debate expected to end later this week. He would have had a hard time finding support for his change, after many Democrats and Republicans slammed it immediately."
The Merkley-Levin proprietary trading ban will get a vote tomorrow, reports Victoria McGrane: "Sen. Jeff Merkley (D., Ore.) attached the controversial measure as a second-degree amendment to an already-pending financial-overhaul amendment by Sen. Sam Brownback (R., Kan.) to exempt auto dealers from a new consumer watchdog. The move is the latest salvo in the ongoing partisan gamesmanship over the financial bill. It ensures that the Senate will vote on an amendment that would ban most banks from using their own capital to make market bets, so-called proprietary trading. If lawmakers approve Mr. Merkley's amendment, however, the measure would only make it into the final bill if Mr. Brownback's amendment to which it is attached also succeeds."
FinReg's cloture vote failed due to opposition from the left, report Carrie Budoff Brown and Meredith Shiner: "In an unusually dramatic vote, a measure to cut off debate on the Wall Street bill failed 57-42. Democrats Maria Cantwell of Washington and Russ Feingold of Wisconsin voted no, and Democrat Arlen Specter of Pennsylvania was not in the chamber. Cantwell said she wanted votes on two amendments and made clear she wouldn’t go along with Reid’s schedule without it. Feingold said the bill failed the test of preventing another financial crisis." (Oh, that test.)
Consumer advocates are adamant that auto dealers should not be exempt from financial regulation, reports Stephen Gandel: "Rosner, an expert in auto finance fraud, says dealers routinely use tricky finance arrangements to get consumers to spend more than they have to when buying a motorcycle or car. He says private-label credit cards, which are currently subject to few regulations, are a increasingly popular way auto dealerships get around state and federal regulations meant to curb abusive lending practices. In the next few days, the Senate is expected to vote on a bill to reform the financial services industry. Among the many aspects of the bill is a proposal to form a Consumer Financial Protection Bureau. Auto dealers have argued that they should be exempt from the new organization that is focused on the lending industry. A broad coalition of consumer advocates, economic policy experts, financial industry players and top U.S. military officials, though, disagree."
Annals of Parenting Interlude: Stuff My Kids Ruined.
Ken Salazar is providing details about the Minerals Management Service breakup, report David Fahrenthold and Joel Achenbach: "About 700 of the agency's 1,700 employees would be shifted to the new Office of Natural Resources Revenue, which would take over the job of collecting royalties from energy projects on federal land and the ocean floor. Those royalties, from energy projects both on-shore and off, come to about $13 billion per year. About another 700 employees would go to the Bureau of Ocean Energy Management, which would oversee the leasing of parcels of the ocean floor for oil or gas rigs, or for renewable energy projects like wind farms. And 300 employees would go to the Bureau of Safety and Environmental Enforcement: 'This will be the police of offshore oil and gas operations,' Salazar said."
The National Academy of Scientists is urging action on climate change, reports Gautham Naik: "The new report also urges the U.S. to take bold steps to cut fossil-fuel use, calling for a carbon tax on such fuels—mainly oil and coal—or a cap-and-trade system, which offers monetary incentives to cut emissions of pollutants. Those recommendations are a big step up from the less-sharply-worded prescriptions issued by the academy in the past. 'The charge we got from Congress was not just to tell them what the science says but what to do about the problem,' said Robert Fri, a visiting scholar at the nonprofit Resources for the Future, who helped compile the report."
Transocean is detailing just how the leak happened, reports Siobhan Hughes: "Mr. Newman also said that a blowout preventer, which is a last-resort mechanism to shear off a well in the event of a catastrophic pressure surge, had been 'fully tested,' most recently on April 10 and April 17. But he said that those tests didn't occur in the presence of the Coast Guard or the Interior Department's Minerals Management Service. 'Those tests are conducted by Transocean under the watchful eye of BP,' Mr. Newman said. He said that regulators 'aren't present on the rig when those tests are conducted.'" Will Salazar's regulatory reshuffle prevent this kind of negligence?
The initial drilling permit urged "caution", reports Matthew Wald: "The permit issued to BP by the Minerals Management Service for the well that blew out on April 20 in the gulf carried a notation: 'Exercise caution while drilling due to indications of shallow gas and possible water flow.' But natural gas was one element of the blowout, experts say."
BP is running a propaganda campaign in the Gulf to defend its reputation, writes Rick Outzen: "'Government agencies and local municipalities are working around the clock to protect the region’s economy and ecology. And we’ll continue working as long as it takes…,' the announcer continues before the logos for the tourism boards of Florida, Alabama and Mississippi fly up on the screen." One logo that wasn’t anywhere near the commercial: British Petroleum’s. Which is odd, because BP quietly paid to produce the ad, and will spend $70 million airing it and other commercials to lure tourists to the Gulf Coast."
Scientists are growing still more concerned about the leak, writes Bryan Walsh: "At the same time, some scientists have intensified warnings that part of the oil slick could enter the Gulf's loop current, which curls around Florida, and put some sections of the coastline and the Florida Keys at risk. Federal officials have also raised alarms about the damage that has already been done to turtles, seabirds and marine mammals. And in response to concerns about the impact on undersea species, the National Oceanic and Atmospheric Administration (NOAA) on Tuesday expanded the no-fishing zone; nearly one-fifth of the Gulf, more than 47,000 square miles, is now off-limits for fishing. Far from having a 'very, very modest' effect, the Gulf oil spill will linger for a very long time. 'Make no mistake,' said Rowan Gould, the acting director of the U.S. Fish and Wildlife Service. 'This spill is sufficient to affect wildlife in the Gulf and across the region for years and perhaps decades.'"
Democrats are pushing hard to eliminate the liability cap for the oil spill, report Meredith Shiner and Jake Sherman: "For the second time in two weeks Tuesday, Democrats in the Senate asked for a quick voice vote — with no debate — on a bill to raise the cap on oil-spill damages from $75 million to $10 billion. Majority Leader Harry Reid upped the ante just a couple hours later, saying he would go even further and ditch liability caps altogether so oil companies could be on the hook for unlimited sums of money."
Hundreds of lawsuits about the leak may be centralized, reports Curt Andersen: "Louisiana lawyer Daniel Becnel on Wednesday asked a federal judicial panel in Washington state to order the lawsuits in five Gulf Coast states centralized in New Orleans or a federal court elsewhere in Louisiana, the state so far hit hardest by the spill. There are currently about 130 lawsuits, although that list grows each day."
Louisiana fishermen have no problem with oil, reports Joel Achenbach: "Fish and oil have mixed here for decades. Even now, in this hour of crisis, the shrimpers by and large do not rail against the oil industry. Nor do the crabbers. Or the oystermen. These men are the epitome of small businesses -- in most cases just a fellow with a boat, and maybe a deckhand, heading out into the marsh at dawn or into the open gulf -- and BP is one of the largest companies in the world's biggest industry. This is a mismatch, Big Oil vs. small fish. And yet no one should expect to find a classic narrative of populist rage here, at least not yet, with the worst possibly still to come."
Sixties rock interlude: The Kinks' "King Kong".
Men are back in the majority of the American workforce: http://nyti.ms/aNKDCu
The Fed is split on unloading assets bought to stimulate the economy, report Meena Thiruvengadam and Luca di Leo: "A majority of Fed board members last month wanted to hold off on selling the assets until after the central bank lifts its interest rate target, minutes of its April meeting released Wednesday show. 'Such an approach would postpone any asset sales until the economic recovery was well established and would maintain short-term interest rates as the Committee's key monetary policy tool,' the minutes said. Others at the Fed, however, want the central bank to move more quickly in unloading the mortgage-backed securities it has acquired, perhaps without linking sales to an interest rate hike. Under that scenario, the Fed would announce a general schedule for future asset sales 'soon.'"
Alan Blinder argues we need a push for Social Security reform to keep the bond markets happy: "Here in the U.S. Social Security reform, once considered the third rail of American politics, is now the low-hanging fruit of deficit reduction. Fixing Social Security's finances is easy, technically. And the timing is perfect because promising deficit reduction now but delivering it later is exactly the right thing to do. After all, no one wants to raise payroll taxes now or reduce retirement benefits without giving people many years of advance notice."
Mortgage delinquencies are tapering off, reports James Hagerty: "The Mortgage Bankers Association, a trade group, reported that 14% of mortgage loans on one- to four-unit homes were 30 days or more delinquent or in the foreclosure process as of March 31. That represents about 7.3 million households. The rate was 12% a year earlier. But the portion of households that are between 30 and 60 days overdue - mostly representing newly delinquent borrowers - declined to 3.45% as of March 31 from 3.77% a year earlier. Jay Brinkmann, chief economist of the MBA, said that the number of borrowers falling behind has declined modestly but that a huge number remain in what has become a very slow foreclosure process."
The FDIC is getting more private-sector support with failed banks, reports Eric Dash: "A spate of recent banking takeovers and investments suggests that stronger financial institutions and private investment firms see value in the detritus of American banking. That is good news for the F.D.I.C., which has had to shoulder the cost of failures through its deposit insurance fund, causing the fund to sink into the red. 'We are seeing light at the end of the tunnel,' Sheila C. Bair, the head of the F.D.I.C., said in a recent interview. Now that some troubled banks are being taken over by private investors, rather than closed by the government, the pressure on the F.D.I.C. is beginning to ease. On Thursday, the agency, which administers the fund protecting savers’ deposits, is expected to announce that it lowered the amount of money it set aside to cover future losses by more than $3 billion during the first quarter - the first reduction since the second quarter of 2007."
Consumer credit is finally recovering, writes Daniel Gross: "Take the biggest component of consumer debt: mortgages. The Mortgage Bankers Association today released its data on the first quarter of 2010. It found the delinquency rate for residential mortgages rose to 10.06 percent in the first quarter, up substantially from the fourth quarter of 2009 and from the first quarter of 2009. But other measures suggest that the mortgage clouds have begun to break. TransUnion, the credit-data firm, reported last week that the mortgage-loan delinquency rate—defined as the percentage of borrowers who are two or more months late—fell in the first quarter of 2010 after three straight years of increases."
Investors are running far away from the Euro, report Mark Gongloff, Alex Frangos, and Neil Shah: "Mutual-fund data show that in recent weeks, European and U.S. investors have shifted out of euro-zone equity funds. Asia's largest bond fund, Kokusai Asset Management's Global Sovereign Fund with $40 billion under management, lowered its euro allocation from 34.4% in March to 29.6% on May 10, according to a company manager. And portfolio managers with huge money pools, such as Allianz SE's Pacific Investment Management Co., or Pimco, and Baring Asset Management, expressed caution on the euro in interviews with The Wall Street Journal. To be sure, not all money managers are selling euros, and some see the currency's weakness as a buying opportunity. An adviser to China's central bank, the biggest player in currency markets with more than $2 trillion in reserves, said this week it planned to keep diversifying its vast dollar holdings, which has in the past involved buying euros."
The IMF is urging greater European centralization, reports Howard Schneider: "European nations might need to surrender some control over public spending and other policies to resolve a crisis in the 16-nation currency union that uses the euro, the managing director of the International Monetary Fund said Tuesday. 'The idea that you can build a single currency and just let everybody do what they want is wrong,' said Dominique Strauss-Kahn, who called for closer coordination among the eurozone's governments at a time when the stresses in the common currency are at a peak."
Europe will conquer its debt, writes Stefan Theil: "That process is already underway, thanks to the twin pressures of bond markets and fellow European governments, which have attached tough conditions to the bailout. Greece is cutting government spending, lowering pay and benefits in the bloated public sector, and deregulating tightly controlled professions (like accountants, lawyers, and architects). Many more such steps are needed for Greece to claw back its competitiveness. But before the crisis, politicians would never have been able to muscle through these changes. Now they have cover from their creditors to make hard choices and infuriate constituencies like unions and pensioners. Multiply this all over Europe. This week, Italy was debating budget cuts worth $31 billion over the next two years, in a move to convince markets (and fellow Europeans) that it was serious about getting its government finances in order. Spain and Portugal—which have similarly lost competitiveness during their debt-inflated booms—are also beginning to balance budgets, limit public sector wages, and introduce pro-growth reforms."
EU hedge fund restrictions may backfire, writes Leo Cendowicz: "The measures might also miss their target. Hedge funds are widely blamed for both the financial crisis of 2008 and for supposedly dumping and short-selling Greece's euro government bonds, but Ciaran O'Hagan, an analyst at Société Générale in Paris, says this is scapegoating. "Hedge funds have not been big drivers of sovereign bond markets. Indeed they have been marginal players on the whole," he says, pointing out that it's banks rather than hedge funds that bear much more of the blame for the credit crunch."
Slovenian philosopher interlude: Slavoj Zizek hangs out at a dump.
The House is considering an online gambling ban, reports Martin Vaughan: "Under companion bills from Rep. Barney Frank (D., Mass.) and Jim McDermott (D., Wash.), most of that revenue would come from income taxes collected on individuals' winnings. But Mr. McDermott's bill would also impose an 8% tax on online gambling deposits, paid by the operators of gaming websites. 'We are sending a multi-billion dollar industry offshore and underground. As a result, we are making tax criminals of Americans who can't declare their online winnings to the IRS,' Mr. McDermott told the House Ways and Means Committee during a Wednesday hearing. The bills would legalize and regulate online poker, but would continue a ban on some other forms of online gambling, including betting on professional sports. The banking and gaming industries support the legislation. Conservative groups, professional sports leagues and state attorneys general oppose it." There goes the Antiguan economy.
Democrats in the House and Senate are scrambling to get a spending bill together, reports David Rogers: "Unable to win over Republican moderates in the Senate, Democrats are resigned to scrapping much of an ambitious five-year, $90 billion-plus plan to provide Medicare physicians with a little more certainty as to their reimbursements. But in their own ranks, Democratic tax writers must also battle back-channel efforts to weaken reforms aimed at wealthy investment fund managers who shelter their income at the lower 15 percent rate afforded capital gains. The draft bill envisions a blended approach where each year a greater portion of the managers’ income would be taxed as ordinary income subject to higher rates. Venture capital interests are still pressing for a more preferable rate for themselves, but how long they—and their Senate allies— can hold out is a delicate question given the risk any stalemate poses for the unemployed."
Alexander Bolton explains the intra-Democrat dispute over venture capital taxes: http://bit.ly/aC2w81
Democrats are watering down a campaign finance bill in response to corporate PAC complaints, reports Susan Crabtree: "The groups don’t specify the corporate PACs that would be affected, but privately say PACs run by Anheuser-Busch, Shell Oil, Miller Brewing Co., John Hancock Financial Services and Food Lion, all foreign-owned corporations with large U.S. subsidiaries, would be affected, according to several sources on K Street and Capitol Hill. The provision is just one piece of a larger measure of the Disclose Act, which aims to blunt the impact of the Supreme Court’s landmark Citizens United case, issued earlier this year. The high court’s decision lifted limits on corporate and union funding of political advertisements, and critics, including President Barack Obama, warned of an avalanche of corporate-funded campaign ads in its wake." Aren't these guys supposed to not like the bill?
Senator Kyl's proposal to allow "prepaid" estate taxes would increase the deficit, writes Bob Williams: "As my colleague Joe Rosenberg points out, the prepayment option would benefit people with liquid assets who could pay the capital gains tax on assets put into the trust. But small businesses and family farms—the groups for whom opponents of the estate tax express greatest concern—would be hard pressed to pay the tax on their illiquid assets. And, as long as the top tax on long-term capital gains is less than 35 percent, the wealthy could realize gains on their assets, pay the gains tax, and transfer the assets tax-free to a prepayment trust. TPC colleague Eric Toder notes that the way around that problem is to raise the tax on gains to 35 percent. Doing so would deal with lots of tax problems—but that’s a topic for another day. Keep in mind, too, that Kyl only has to pay for part of the lost revenue. Congress has already agreed to ignore any cost of extending the 2009 rules for two years—a tab topping $30 billion."
Schools need a bailout, writes Randi Weingarten: "The short-term solution to ensure kids start the next school year without major disruption is federal legislation to provide a $23 billion infusion to states to avert educational and economic disaster. The U.S. House of Representatives has passed the Local Jobs for America Act. A similar measure, the Keep Our Educators Working Act, is pending in the U.S. Senate. President Obama has thrown his support behind this emergency legislation. And there is no doubt that this is an emergency. School districts finalizing their 2010-11 budgets are making tough decisions right now about drastic steps such as whether to cancel summer school, shift to a four-day school week, or issue layoff notices to teachers."
Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Gerald Martineau-The Washington Post.
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