Wonkbook: Fed split on more action; new fees on mortgage lenders; school overhauls delayed
Dylan Matthews is writing Wonkbook while Ezra is on vacation.
The Federal Reserve's monetary policy body was split down the middle on its latest decision. Meanwhile, the Obama administration is leaning toward financing federal support for mortgages through fees on lenders. And despite the administration's push, school overhaul plans in many states are not being implemented in time for the new school year.
Welcome to Wonkbook.
The Federal Open Market Committee was split on its recent, mild quantitative easing measure, reports Jon Hilsenrath: "In one camp, Mr. Dudley, and the presidents of the Boston and San Francisco Fed banks, Eric Rosengren and Janet Yellen, were distressed that the Fed was far from its objectives of low unemployment and stable inflation. ... Fed governor Kevin Warsh, a former Wall Street investment banker who worked closely with Mr. Bernanke during the crisis and who attends many Washington Nationals baseball games with the chairman, worried that a decision to reinvest mortgage proceeds into Treasurys would confuse investors and lead many to believe the Fed was paving the way to resume major purchases before it had decided to do so."
The administration is considering levying fees on lenders to fund government support for mortgages, report Deborah Solomon and Nick Timiraos: "The industry appears prepared to pay some type of premium to get the government's backing. Under proposals floated by two trade groups, the Financial Services Roundtable and the Mortgage Bankers Association, new private-sector entities created to securitize and insure mortgages would pay a fee into a government-insurance fund. Researchers at the New York Federal Reserve Bank, writing on their own behalf, have proposed creating lender-owned cooperatives that would replace Fannie and Freddie."
The administration's pledge to overhaul 1,000 schools a year is not being met this school year, reports Sam Dillon: "Experts have been warning for months that the administration’s timetable was too tight, forcing schools and districts to create last-minute plans. 'To do this right, schools needed to know probably nine months ago that they’d be funded, but many are only finding out now,' said Robert Manwaring, an expert on school turnaround efforts at Education Sector, a nonprofit research center in Washington. In March, Mr. Manwaring wrote in his blog that the Education Department was pursuing a 'crazy timeline' and should postpone the initiative to allow better planning."
Indie rock on Broadway interlude: Ted Leo and the Pharmacists present "The Brutalist Bricks: The Musical."
Still to come: AIG pays back some of the funds used to bail it out; Feinberg under fire for fund claim rules; congressional Democrats are worried insurer regulations will be too lax; and a trombone that doubles as a flamethrower.
AIG is paying the government $4 billion in bailout debt, reports Brady Dennis: "The payment reduces AIG's outstanding balance on the Fed loans to about $21 billion, including interest and fees. If AIG fails to repay the loans in full, the Fed's losses will ultimately fall on taxpayers. The Fed also invested tens of billions of dollars more to help AIG rid itself of troubled derivatives contracts that were bleeding it dry. ... AIG must repay a total of more than $90 billion before the company can regain its full independence."
A fifth TARP-supported bank has failed.
House Democrats are redoubling to pass a small business lending bill today, reports Russell Berman: "The chairman of the Democratic Congressional Campaign Committee, Rep. Chris Van Hollen (D-Md.), and the chairman of the House Ways and Means Committee, Carl Levin (D-Mich.), will hold a conference call Tuesday to push the legislation and highlight small-business tax cuts included in other bills that have already passed. The bill before the Senate would provide more than $12 billion in tax breaks and create a $30 billion government lending program for small businesses, as well as expand other loan initiatives."
An appeals court has ruled again that the Fed must release documents from "last resort" lending programs.
The U.S. may retain a stake in GM beyond this year, reports Jeff Bennett: " 'I don't know if you get totally out of GM' by the end of this year, Mr. Biden told reporters during a tour of Chrysler Group LLC's Toledo, Ohio, assembly plant, where the Jeep Wrangler is made. 'I think that IPO will be successful.' ... The U.S. Treasury could sell some of its 61% ownership stake in GM when the company undergoes an initial public stock offering later this year, but just how much it will sell remains uncertain. U.S. officials have said details on timing and the number of shares the Treasury will sell will be determined largely by market conditions."
A panel of economists consider whether there is a bubble in government bonds.
Andrew Ross Sorkin argues the merger boom isn't a sign of economic strength: "While stock investors may take the recent spate of deals as a sign of confidence in the economy, they shouldn’t get too excited. With unemployment hovering near 10 percent, the latest wave of deals is unlikely to bolster the job market any time soon. Indeed, expect quite the opposite: Some of these deals are being driven by “savings,” an overused euphemism for layoffs. Moreover, many of the deals are being driven by a slowing of organic growth as companies with cash look to pump up their bottom lines."
Former Bush NEC director Keith Hennessey defends the Bush tax cuts against Paul Krugman's criticisms.
Ill-advised invention interlude: A (playable) combination flamethrower/trombone.
State officials are attacking oil spill fund head Kenneth Feinberg's rules for claimants, reports Neil King: "Critics complain that the time table is unrealistic, and allows ailing businesses little time to assess the long-term damages potentially caused by the spill. State officials are also raising alarms over Mr. Feinberg's plans to base payment decisions, at least in part, on how close a business is to the oil-slicked coastline. Florida Attorney General Bill McCollum cited the proximity question in a letter to Mr. Feinberg on Friday, saying that the federal Oil Pollution Act laid out less stringent restrictions for liability than Mr. Feinberg was looking to impose."
Gas prices are at an eight-month low.
BP is still working on a "bottom kill" to end the oil spill permanently, reports Mark Peters: "Bringing to the surface about 3,000 feet of pipe is the latest step as BP works to permanently end the deepwater spill. The well stopped leaking oil in mid-July when a sealing cap was place on top of it, and then a cement plug was put into place in early August. The pipe and blowout preventer need to be fished out of 5,000 feet of water before BP can execute what's known as a 'bottom kill.' The operation is meant to permanently kill the well by injecting mud and drilling cement into it through a freshly drilled relief well."
Climate change is causing plant growth to fall.
Even extreme "geoengineering" policies would not stop sea levels from rising, writes David Biello: "Nor would drawing down the carbon dioxide in the atmosphere yield better results. Replanting trees on all the lands that have been cleared of forests during the past 200 years only ends up lowering atmospheric concentrations of greenhouse gases by 45 parts per million (current levels are roughly 390 ppm, 110 ppm above pre-industrial levels). Biochar nets even less: 35 ppm, though it has other benefits."
Robert Bryce questions the emissions savings from wind: "The U.S. Energy Information Administration (EIA) has estimated the potential savings from a nationwide 25% renewable electricity standard, a goal included in the Waxman-Markey energy bill that narrowly passed the House last year. Best-case scenario: about 306 million tons less CO2 by 2030. Given that the agency expects annual U.S. carbon emissions to be about 6.2 billion tons in 2030, that expected reduction will only equal about 4.9% of emissions nationwide. That's not much when you consider that the Obama administration wants to cut CO2 emissions 80% by 2050."
Travel efficiency interlude: How one driver can break up a traffic jam.
Congressional Democrats are worried medical loss ratio regulations drafted by state insurance commissioners will be too lax, reports Jennifer Haberkorn: "Sebelius is waiting for the National Association of Insurance Commissioners to suggest rules surrounding how much insurance companies must spend on medical costs versus administrative expenses or profits. The report, expected in weeks, isn’t likely to be as strict on insurers as top Democrats have hoped...In the case of the Medical Loss Ratios, top House and Senate chairmen want to include as many items as possible on the administrative side of the ledger, which would make the quota harder to reach."
A judge has blocked Obama's executive order expanding stem cell research.
The salmonella outbreak has given new life to the House-passed Food Safety Modernization Act, reports Alicia Mundy: "On Monday morning, FDA Commissioner Margaret Hamburg hit the network shows to stump for the bill. It would make imported foods subject to the same safety standards as food produced in the U.S. and establish for the first time a mandatory frequency of FDA inspections. From the perspective of FDA officials, the most important part of the bill is the one giving the agency the power to order a recall of tainted food. However, small farmers say they are concerned that the recall power and other new regulations will raise costs and slice profits."
The FDA will run hundreds of inspections to ensure recent egg regulations are being enforced.
Ben Miller and Phuong Ly examine colleges that fail to graduate the vast majority of their students: "As a percentage of their student bodies, these college dropout factories enroll twice as many part-time students, nearly twice as many from low-income families, and around 50 percent more blacks and Hispanics than the average American college or university. They mainly serve local communities, admit most of their applicants, and have much less money than colleges that are higher in prestige. Most upper-middle-class parents would never send their kids to these schools -- nor have they generally even heard of them. Not surprisingly, the worst of the dropout factories are allowed to roll along in dysfunction, year after year."
The Obama administration is toughening medical privacy rules.
Dylan Matthews is a student at Harvard and a researcher at The Washington Post.
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