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Wonkbook: Obama backs Fed; South Korea trade deal; courts block foreclosures

By Dylan Matthews
Obama and Singh
President Obama spoke while meeting with Indian Prime Minister Manmohan Singh in New Delhi. (Prakash Singh/AFP/Getty Images)

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President Obama supports the Fed's quantitative easing plan, reports Neil Irwin: "Speaking at a news conference in New Delhi with Indian Prime Minister Manmohan Singh, Obama stressed that the Fed acts independently from his administration but left little doubt that he has Chairman Ben S. Bernanke's back. 'The Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole,' Obama said Monday. 'The worst thing that could happen to the world economy ... is if we end up being stuck with no growth or very limited growth. And I think that's the Fed's concern, and that's my concern as well.'"

The U.S. is trying to conclude a free trade agreement with South Korea, reports Howard Schneider: "By the boatload, South Korea ships half-finished flat-panel televisions and other gadgets to Korean-owned factories in China, where they are assembled by lower-paid Chinese workers and sent abroad to the United States and elsewhere. This pattern helps run up the U.S. trade deficit with China while taking international pressure off South Korea to revamp its trade practices. ... For the United States, an agreement could represent the most-promising chapter in a long effort to recalibrate the balance of trade between the Western developed world and the world's manufacturing center in Asia."

Courts are ruling in favor of homeowners in cases with faulty foreclosure paperwork, reports Ariana Eunjung Cha: "A year ago, Long Island Judge Jeffrey Spinner concluded that a mortgage company's paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so "repugnant" that he erased the family's $292,500 debt and gave the house back for free. The judgment in favor of the homeowner, Diane Yano-Horoski, which is being appealed, has alarmed the nation's biggest lenders, who say it could establish a dramatic new legal precedent and roil the nation's foreclosure system."

Swedish pop interlude: Air France's "Collapsing at Your Doorstep".

Still to come: Most reject the World Bank president's gold standard proposal; an investigator says cost-cutting didn't cause the BP oil spill; the Supreme Court rejects a challenge to health-care reform; and if you want your cat to paw at your iPhone, there's an app for that.


Economists and policymakers are dismissing World Bank President Robert Zoellick's call to revive the gold standard, reports Robin Harding: "'I think [Mr Zoellick] is living in the past, in particular in the period from 1980-92, when there was a periodic flirtation with gold,' said Edwin Truman, senior fellow at the Peterson Institute. 'It’s not constructive and it’s inappropriate.' Jean-Claude Trichet, president of the European Central Bank, said that central bankers meeting in Basel had not discussed the use of gold. 'We did not discuss the gold standard,' he said. 'In my memory such an idea was mentioned a long time ago by Jim Baker when he was a [US] secretary of the Treasury in the 1980s. I have no particular comment.'"

International backlash to the Fed's quantitative easing plan is growing.

A World Bank study shows that Western countries have targeted China with protectionist measures, reports John Miller: "Ahead of the G-20's meeting in Seoul on Thursday and Friday, a World Bank-backed study released Monday shows the U.S., European Union and G-20 allies have recently outpaced other countries in measures that have defended domestic producers, from France's $2.3 billion payout to its farmers in October to a South Korean program that is giving export subsidies to 100 hand-picked companies. China has been the biggest target of these measures, the study said."

Some Democrats are urging a compromise on extending tax cuts for under-$500,000 earners.

Low business demand for loans is casting doubt on the Fed's quantitative easing plan, reports Robin Harding: "Twenty-nine per cent of banks said that demand for loans from companies with sales below $50m had fallen, compared with only 7.1 per cent of banks that reported a rise, according to a Federal Reserve survey of senior bank loan officers. The tepid demand for loans from small businesses reduces the chance of a strong rebound in growth in 2011 and suggests that even rock-bottom interest rates and easier borrowing conditions may not persuade them to invest...Every bank reporting a decline in small business loan demand said that its customers had cut back on their investment in plant or equipment."

The sole Fed dissenter on quantitative easing will address House Republicans.

Congress will leave hundreds of thousands without aid if it doesn't extend unemployment insurance, writes Chad Stone: "Full federal funding will expire along with the EUC program on November 30 -- even though over two-fifths of the unemployed have been looking for a job for more than 26 weeks. If that happens, all federal unemployment insurance benefits will end in 40 states, and the number of weeks available in the rest of the states will shrink significantly, as the map below shows.  Most of the several hundred thousand workers who exhaust their regular state benefits each month would receive no further help, and many of the 5 million workers now receiving federal emergency benefits would lose their remaining weeks."

We cannot return to the gold standard, writes Martin Wolf.

The G-20 is not just split between the U.S. and China, writes Gideon Rachman: "The G20 nations face a fundamental philosophical issue -- should they be looking for legally binding new agreements or should they proceed on a voluntary basis? For once, America and China - as big countries that care a lot about national sovereignty -- tend to be on the same side. They are both wary of agreeing to new international legal regimes. The countries of the European Union, however, adore new international treaties and were hoping that the G20 might one day develop into the 'planetary' government that Mr Sarkozy spoke of. The Europeans are liable to be disappointed."

Child prodigy interlude: The world's best 6-year-old skateboarder.


The chief counsel of the commission investigating the BP oil spill says cost-cutting didn't cause the spill, reports Steven Mufson: "The comments about cost run counter to those of other panels investigating the accident that triggered the massive oil spill in the Gulf of Mexico. Those inquiries have alleged that bad decisions by BP were driven by a desire to save money because the rig and its contractors were costing about $1.5 million a day and the exploration well was running behind schedule. 'To date, we have not seen a single instance where a human being made a conscious decision to favor dollars over safety,' said Fred H. Bartlit, Jr., general counsel for the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling."

Bartlit also wants the committee to have subpoena power.

A majority of senators will back legislation blocking EPA action on climate change, report Robin Bravender and Darren Samuelsohn: "At least 56 senators next year are likely to support efforts to block the Environmental Protection Agency’s plans to regulate greenhouse gas emissions, a POLITICO analysis shows. That’s just short of the 60 they’d need to overcome a filibuster, but a slew of moderate Democrats facing reelection in 2012 could put that number within reach. Democratic senators including Sherrod Brown of Ohio, Bob Casey of Pennsylvania, Debbie Stabenow of Michigan and Jon Tester of Montana haven’t supported past efforts to stall climate rules, but they could change their minds with an eye on their 2012 races."

Oil has made its way through the gulf's food chain.

The ranking Republican on the House climate change committee wants to preserve it, reports Patrick O'Connor: "Back in 2007, Rep. James Sensenbrenner (R., Wis.) didn’t want Congress to create a special panel to study global warming. But now that his party will control the House, he’s lobbying colleagues to keep it. His pitch: It’s the best vehicle for fighting any new rules issued by the Environmental Protection Agency. He’s also in line to be the committee’s chairman. 'Electing a Republican House of Representatives is not enough to stop some of the administration’s most economically damaging environmental proposals,' Mr. Sensenbrenner said in a brief statement circulated by his office today."

Green jobs programs are training workers for positions that don't exist, writes Monica Potts: "The American Wind Energy Association says the industry as a whole lost about 1,500 manufacturing jobs last year, leaving the number of manufacturing jobs at 18,500. Turbine installations are dropping, too, and the industry projects they will return to 2007 levels by the end of the year. That means the 40 or so facilities that produce primary turbine parts, like blades or towers, are operating below capacity, and there will be less demand for wind technicians in the near future because there will be fewer turbines for them to work on."

Adorable animals playing with electronics interlude: An iPhone app designed as a toy for cats.

Domestic Policy

The Supreme Court rejected its first challenge to health-care reform, reports Robert Barnes: "There is no indication that Justice Elena Kagan sat out the decision on a challenge brought by a former California legislator. That could be an indication she sees no conflict in hearing cases involving health-care reform, despite her role in the Obama administration. During her confirmation hearings, Kagan said that as President Obama's solicitor general, she had not been involved in legal strategy sessions about how to defend the health-care plan against charges that it is unconstitutional. She declined to say whether she would recuse herself if the issue reached the Supreme Court."

States are slashing anti-smoking programs.

State governments will be able to affect health-care reform's implementation significantly, reports N.C. Aizenman: "Although the law requires states to review 'unreasonable' premium increases, it will largely be up to each state to determine what that review process entails. ... States will also be in a position to exert pressure on the federal government when it comes to the law's requirement that insurers spend 80 to 85 percent of the premiums they collect to pay medical claims or otherwise improve their customers' health. If a state thinks the requirement would cause too many insurers to drop out of its market, it can ask the Department of Health and Human Services for a waiver. Iowa and Maine have already done so, and other states are likely follow."

House Democrats are trying to quiet the race for minority whip.

A Senate earmarks ban could pass, reports Janet Hook: "South Carolina Sen. Jim DeMint on Monday was collecting signatures on a letter calling for a vote by his fellow Senate Republicans to ban earmarks, in which spending is channeled to projects favored by individual lawmakers, outside the competitive federal funding system. House Republicans and President Barack Obama have endorsed such a ban, and a wave of Republicans who oppose earmarks were elected to the Senate last week. But Mr. DeMint's move puts him at odds with Senate Minority Leader Mitch McConnell, a Kentucky Republican who has defended earmarking as a legitimate exercise of Congress's power of the purse."

Sen.-elect Mark Kirk could back the Disclose campaign finance bill.

A rivalry between Elena Kagan and Sonia Sotomayor would be good for the Supreme Court, writes Noah Feldman: "Once a new appointee has fulfilled every lawyer's ambition by making it onto the court, the next step is to become a great justice. In an insular group of highly intelligent people sentenced to work together for life, the question of leadership can be vexing. Sometimes, a justice makes his case for leadership by defining himself in subtle opposition from a colleague. The potential jockeying for position between Sotomayor and Kagan is foreshadowed by the relationship between two of the most interesting justices of the 20th century, Felix Frankfurter and Hugo Black. Their intense rivalry pushed each to heights of constitutional greatness."

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

By Dylan Matthews  | November 9, 2010; 8:55 AM ET
Categories:  Wonkbook  
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Next: What would Hillary have done?


I think it should be easy to reach bi-partisan agreement on banning earmarks.

Just look at recent years...earmarks have nothing to do with going to the areas with biggest needs, they go to the areas with the most tenured politicians. You can rank the size of earmarks by district, and oddly enough they match the seniority ranking of politicians....of both parties. Earmarks are simply a tool long-serving politicians use to bring pork back to their home states/districts to solidify their power and prestige.

Posted by: dbw1 | November 9, 2010 9:51 AM | Report abuse

Dylan, I think you're falling into the same trap as your mentor Ezra. Namely, you only interview and link stories from people who write about business, never from anyone who actually engages in it.

Major businesses, especially Wall Street firms employ thousands of superior economists. However the economist who has been most often cited in EK's column is Paul Krugman, who has never held any job outside the think tank/university world and who has absolutely no influence in the business world.

You think it doesn't matter, but it does. Take the story you cited by Monica Potts. I will quote a paragraph:

" The unfulfilled promise of stable, well-paying green jobs is probably best represented by the wind turbine: The United States has the capacity to both build the turbines in unused factories and get as much as 30 percent of our power from wind -- but we aren't doing either. Yet a wind turbine graces the cover of nearly every think-tank report on green jobs, and it's a favorite prop of politicians who want to convince Americans that they're ready to redeploy a beaten-down workforce into a new, exciting field of the future. Lawmakers and eternally hopeful progressives herald the green sector as the new source for working-class stability: jobs that can't be outsourced and are relatively recession-proof."

Had Ms. Potts made even one phone call to someone actually in the business it would not have been so mystifying. Boone Pickens supplied the answer on CNBC.

The renewable energy market is keyed to the natural gas market. Techs like solar and wind only become profitable at about a $6.00 nat gas price. Nat gas is trading today at $4.10, and is only that high because of the inlfationary efects of QE2. Before that, it was as low as $3.70.

Pickens was asked in an interview if he wasn't going to lose money on his big investment in turbines, given market conditions. He said no, because every megawatt he produces was already contracted out before he put a shovel in the ground.

Many governmnets have passed laws mandating a certain percentage of renewables be required from their public utilites. These companies have to buy their energy from people like Pickesns in a very limited supplier market. He got those contracts tied up before he put one dollar to the project. Pickens is a brilliant businessman, who you will never see interviewed in Ezra's column. Does it matter that ultimately consumers will pay about 60% more for electricity generated that way than by using nat gas? That's for another column.

Had Potts actually talked to business people she would know that her goal of 30% turbine energy in the US is not only financially impossible, environmentally damaging, and in world trade undesirable it's completely TECHNICALLY impossible.

Wind is not "always on" tech. Every megawatt generated that way, has to be backed up by fossil fuel based capacity. A utility can't say "no wind, no power today" to it's customers!

Posted by: 54465446 | November 9, 2010 10:49 AM | Report abuse

@54465446: ultimately consumers will pay about 60% more for electricity generated that way than by using nat gas

All this means is that the natural gas price is subsidized by the uncompensated externalities that nat gas causes, including but not limited to greenhouse gas emissions. Actually nat gas is cleaner than coal and oil, but it still has lots of negatives, particularly extraction by frakking, which is poisoning ground water all over the east coast where gas is extracted from shale...The fact that the drillers won't tell what's in the stuff they pump down there is a tip off that it is not a health food.

Posted by: srw3 | November 9, 2010 12:16 PM | Report abuse


Thanks for the reply. How does that change my comment though?

Talking subsidies in energy is a brain killing exercise. They all benefit from them but of course in different ways and different amounts.

If you think renewable energy is environmentally friendly does that mean you don't care that it takes anywhere from 15-25 times the amount of land to generate the same megawatts in these as in nat gas or coal? How about the fact that it takes literally thousands of miles of high power transmission lines to bring the energy from the places where solar and wind are most viable to the places where the energy is used? Does that despoiling count?

I am only trying to show the variables are much different than oil and gas bad, solar and wind good. We haven't even discussed the havoc to the land that will take place when mining begins again next year in the US for lanthanides without which there is no such thing as renewable energy.

My point was really that the people who Ezra and now Dylan use are like sportswriters who never talk to the athletes and coaches, and who only see the game on tv, not in person.

Thanks again for the reply though. We talk about really important things in some of the threads, with little comment because most people are unequipped by their American education to discuss or understand them.

Posted by: 54465446 | November 9, 2010 12:58 PM | Report abuse

It is fantastic time to refinance home mortgage. As Clark Howard says it is very tough to find these low rates for long time. Search online for "123 Mortgage Refinance" they found me THE lowest possible rate.

Posted by: alexpablo | November 10, 2010 4:42 AM | Report abuse

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