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Posted at 6:50 AM ET, 12/30/2010

Wonkbook: Elizabeth Warren looking for CFPB chief; Banks increasing lending; revolving door spinning faster; Republicans attack EPA regs as 'gas tax'

By Ezra Klein

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Top Stories

Elizabeth Warren is hunting for a chief to lead the Consumer Financial Protection Bureau, reports Damian Paletta and Victoria McGrane: "White House adviser Elizabeth Warren and a top lieutenant are quietly asking business and consumer groups for names of people who might run the new Consumer Financial Protection Bureau, people familiar with the matter said. The hunt suggests that Ms. Warren, a lightning rod for some bankers, might not be selected to lead the bureau... The feelers to business groups serve as a reminder that any nominee would likely need support from at least seven Republicans in the Senate to win confirmation. Among the names being discussed are Iowa's attorney general, Tom Miller; New York state bank regulator Richard Neiman; and former Office of Thrift Supervision director Ellen Seidman."

Big banks are stepping up their lending, reports Ruth Simon: "Some big U.S. banks are starting to increase their lending to businesses as demand for loans rises and healthier banks seek to grab customers from weaker rivals. After declining steadily for most of the past two years, the amount of commercial and industrial loans held by commercial banks inched upward during the past two months, according to the Federal Reserve. Moody's Analytics estimates that commercial and industrial lending in the fourth quarter has grown 0.2% from the third quarter, to $1.22 trillion, the first quarterly increase in two years. Moody's predicts such lending will rise 3% next year. An uptick in business lending is an optimistic sign for the economy and can help to make the recovery self-sustaining."

More government regulators are bolting to the industry they regulate, reports Zachary Goldfarb: "The president's recently departed budget director is joining Citigroup. The New York Federal Reserve Bank's derivatives expert is joining Goldman Sachs. And numerous investigators from the Justice Department and the Securities and Exchange Commission are joining Wall Street's top law firms. The vast overhaul of financial regulations and the renewed intensity of investigations into white-collar crime has been a boon for regulators, prosecutors and financial policymakers looking to cash in on their government experience and contacts...Lawyers making the move, who often were in the private sector before joining the government, can reasonably expect their income to go from less than $200,000 to $400,000 or more, legal recruiters say."

Republicans are seeking to characterize new EPA rules as a de facto "gas tax", reports Andrew Restuccia: "Sen. Kay Bailey Hutchison (R-Texas) is calling on the Environmental Protection Agency (EPA) to delay plans to implement new greenhouse-gas standards on oil refineries, arguing the regulations would amount to 'a new gas tax.' The new greenhouse-gas standards 'will hurt every American driver, trucker, farmer and flier with higher gasoline, diesel and jet fuel prices,' Hutchison said in a letter sent Wednesday to EPA Administrator Lisa Jackson. 'Higher prices passed on to consumers will feel like a new gas tax.' It's the latest example of Republicans criticizing EPA's plans to impose climate-change regulations. Republicans have made plans to attempt to block the agency's climate change authority next year."

Obama recess appointed six officials, report Jay Solomon and Jared Favole: "President Barack Obama, sidestepping Congress, named the first U.S. ambassador to Syria in nearly six years and a deputy attorney general in recess appointments after the nominations ran into trouble among Republicans...At the Justice Department, James M. Cole was appointed to the No. 2 post of deputy attorney general. The nomination of Mr. Cole, a partner at the law firm Bryan Cave LLP, was blocked by Republicans amid concerns over his role as an independent monitor at American International Group Ltd., the insurance giant the government bailed out."

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Dance video interlude: Neon Indian's "Mind, Drips".

Still to come: Government mortgage assistance is winding down; conservatives are upset about a recent FDA ruling; new House rules require bills to cite the Constitution; gas-guzzling SUVs are still the top-selling cars in America; and the world's youngest Scott Pilgrim fan.


Government mortgage assistance is tapering off, reports Alan Zibel: "The number of troubled U.S. homeowners receiving assistance with their mortgages fell in the third quarter as the government's foreclosure-prevention effort tapered off. Federal bank regulators reported Wednesday that about 470,000 homeowners received loan assistance in the July to September quarter, down 17% from the second quarter and down 32% from the same quarter a year earlier. Banks have largely sifted through a big pool of eligible borrowers who weren't getting any assistance before the Obama administration launched its effort to combat foreclosures in early 2009, officials said."

Foreclosures jumped in the third quarter:

State and local tax revenues are on the rise:

Veterans are facing a tough job market, reports Michael Fletcher: "Some experts say the grim employment landscape confronting veterans challenges the veracity of one of the central recruiting promises of the nation's all-volunteer force: that serving in the military will make them more marketable in civilian life. 'That [promise] works great in peacetime,' said Lawrence J. Korb, an assistant secretary of defense for manpower under President Ronald Reagan who is now a senior fellow at the Center for American Progress. 'But that does not work too well in war.'...The unemployment rate for Iraq and Afghanistan war veterans was 10 percent in November, compared with 9.1 percent for non-veterans, according to the federal Bureau of Labor Statistics."

Obama signed a bil to help veterans with foreclosures:

The unemployment problem is not structural, writes James Suroweicki: "If the problems with the job market really were structural, you’d expect job losses to be heavily concentrated in a few industries, the ones that are disappearing as a result of the bursting of the bubble. And if there were industries that were having trouble finding enough qualified workers, you’d expect them to have lots of job vacancies, and to be paying their existing workers more and working them longer hours. As it happens, you don’t see any of those things. Instead, jobs have been lost and hiring is slow almost across the board. Payrolls were slashed by five per cent or more not just in the bubble categories of construction and finance but also in manufacturing, retail, wholesale, transportation, and information technology."

Corporations should cut their board size, writes Robert Pozen:

America's recovery will start in cities, writes Edward Glaeser: "America must stop treating its cities as ugly stepchildren, and should instead cherish them as the engines that power our economy. America’s 12 largest metropolitan areas collectively produced 37 percent of the country’s output in 2008, the last year with available data. Per capita productivity was particularly high in large, skilled areas such as Boston, where output per person was 39 percent higher than the nation’s metropolitan average. New York and San Francisco enjoy similar per capita productivity advantages. Boston also seems to be moving past the current recession, with an unemployment rate well below the national average of 9.8 percent."

Small children being awesome interlude: A little girl pretends to be Kim from Scott Pilgrim vs. the World.

Health Care

A recent FDA ruling is a warning of rationing to come, write Douglas Revkin and Elizabeth Foley: "Earlier this month, the Food and Drug Administration banned doctors from prescribing Avastin, a potent but costly drug, to patients with advanced-stage breast cancer. According to the FDA, the drug doesn't offer 'a sufficient benefit in slowing disease progression to outweigh the significant risk to patients.' Yet in some clinical trials Avastin has halted the spread of patients' cancer for months, providing respite to women and their families wracked by physical and psychological pain...The FDA made a crude cost calculation; as everyone in Washington knows, it wouldn't have banned Avastin if the drug cost only $1,000 a year, instead of $90,000."

A Republican Congressman who complained about not receiving government health care soon enough has been rejected from a committee with health care jurisdiction:

Domestic Policy

New House rules put more emphasis on the Constitution, report Philip Rucker and Krissah Thompson: "When Republicans take over the House next week, they will do something that apparently has never been done before in the chamber's 221-year history: They will read the Constitution aloud. And then they will require that every new bill contain a statement by the lawmaker who wrote it citing the constitutional authority to enact the proposed legislation. Call it the tea party-ization of Congress. 'It appears that the Republicans have been listening,' said Jeff Luecke, a sales supervisor and tea party organizer in Dubuque, Iowa. 'We're so far away from our founding principles that, absolutely, this is the very, very tip of the iceberg. We need to talk about and learn about the Constitution daily.'"

Meat packaging will have to include a calorie count come 2012:

Discipline is key to Shanghai's success on international education testing, reports David Barboza: "In Li Zhen’s ninth-grade mathematics class here last week, the morning drill was geometry...One by one, a series of students at this medium-size public school raised their hands. When Ms. Li called on them, they each stood politely by their desks and usually answered correctly. They returned to their seats only when she told them to sit down. Educators say this disciplined approach helps explain the announcement this month that 5,100 15-year-olds in Shanghai outperformed students from about 65 countries on an international standardized test that measured math, science and reading competency."

Liberals should work to add to Obama's achievements, not to minimize them, writes E.J. Dionne: "Too often progressives have spent more time complaining about what wasn't done than in finding ways to build on what has been achieved. It took decades to complete the modern Social Security system and years to move from tepid to robust civil rights laws and from modest to comprehensive environmental regulation. Impatience is indispensable to getting reform started; patience is essential to seeing its promise fulfilled. And both the liberals and Obama need to escape the bubbles of legislative and narrowly ideological politics and re-engage the country on what can only be called a spiritual level. Modern American liberalism is not some abstract and alien creed."

Adorable animals makin' pictures interlude: The first film directed by cats.


SUVs still lead US car sales, reports Peter Whoriskey: "If U.S. consumers are in the midst of a green revolution, the news hasn't reached car buyers. With the end of the recession, bigger vehicles have made a comeback, sales figures show, and it has come at the expense of smaller, more-efficient cars. Leading the growth were sales of midsize sport-utility vehicles, which jumped 41 percent through the first 11 months of the year, led by vehicles such as the Jeep Grand Cherokee and the Honda Pilot, each of which get about 18 miles per gallon. Sales of small cars, by contrast, remained flat despite otherwise surging demand for automobiles."

The House Natural Resources subcommittee chairmen have been announced:

Congressional Republicans are split on nuclear energy, reports Darius Dixon: "Signs point to a nuclear power surge on Capitol Hill: A newly empowered House Republican majority and several influential senators ready to make a push for the climate-friendly source of energy. But the tea-party-led charge to cut spending and pull back the hand of the government could stand in the way. Although several tea-party-supported winners in the House espoused an 'all of the above' approach to energy policy that included nuclear energy during their campaigns, it remains to be seen how new members will react to the sticker shock from new reactors and the massive role the federal government plays throughout the industry."

House Energy and Commerce Committee Chairman Fred Upton has announced the committee's new staff:

China's coal consumption voids the US' duty to act on climate change, writes George Will: "China, which imported about 150 million tons this year, was a net exporter of coal until 2009, sending abroad its low-grade coal and importing higher-grade, low-sulfur coal from, for example, the Powder River Basin of Wyoming and Montana. Because much of China's enormous coal reserves is inland, far from coastal factories, it is sometimes more economical to import American and Australian coal...A climate scientist told Fallows that stabilizing the carbon-dioxide concentration in the atmosphere would require the world to reduce its emissions to Kenya's level - for America, a 96 percent reduction. Nations with hundreds of millions of people in poverty would, Fallows says, have to 'forgo the energy-intensive path toward wealth that the United States has traveled for so many years.'"

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Photo credit: Susan Walsh-AP.

By Ezra Klein  | December 30, 2010; 6:50 AM ET
Categories:  Wonkbook  
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Next: Will Gene Sperling replace Larry Summers?


Hey, isn't convicting anyone of murder unconstitutional? Based on the new GOP rules, we're gonna have to repeal all these laws that make murder a crime because the constitution doesn't mention murder.

Posted by: lauren2010 | December 30, 2010 7:30 AM | Report abuse

George Will is not a climate scientist.

Yet, his comments above are curious for several reason.

First, he apparently believes the planet is warming and that C02 is a prime cause; otherwise, why say that we need to reduce our emissions by 97% ? So ggod on him for admitting the planet is warming and that Co2 is a prime cause.

Second, he has apparently concluded that clean coal is a myth; otherwise, why not point out that China could simply use clean coal technology to reduce its emissions?

Also, Will is wrong about the claims of 97%. That may be true if the US alone was to battle emissions, but the fact is if every country was to battle emissions the entire world would need to reduce emissions by only 50%.

Scientists say our technology is sufficient to stabilize our emissions. Read all about it at the below link.

Posted by: lauren2010 | December 30, 2010 7:47 AM | Report abuse

We need to dissolve the EPA. Useless organization.

Posted by: krazen1211 | December 30, 2010 9:00 AM | Report abuse

Oh, and in the funniest news of the day, crazy liberal Dennis Kucinich is starting to cry.

My district is going to be crunched! Waaaahhh!

Posted by: krazen1211 | December 30, 2010 9:03 AM | Report abuse

The EPA saved America's forests and rivers and lakes and streams and skies.

Krazen is too young/dishonest to remember/admit how sad our environment was 40-50 years ago. I have vivid memories of filthy bodies of water and dark, hazy skies near all our cities (much worse than today).

Europe adopted many of the EPAs rules in order to save their own forests, which were inexplicably and rapidly dying many decades ago until they figured out emissions were the cause.

America would be a cesspool of chemical filth right now had it not been for the EPA and other similar institutions. China is already starting to awaken to this realization and is quickly adopting their own pollution controls, though probably not fast enough.

krazen yearns for a lawless land where taxes are banned. To him I say move to Somalia if you don't want to live in a civilized society.

Posted by: lauren2010 | December 30, 2010 9:12 AM | Report abuse

"any nominee would likely need support from at least seven Republicans in the Senate to win confirmation"
How's that now? Over the last few years the press has completely internalized the idea that all nominees need 60 votes- a naive reader would see that statement and think the Dems were seven votes short of a majority. I look forward the whiplash and rewriting of all the style guides if the Senate rules are returned to majority rule.

Posted by: _SP_ | December 30, 2010 9:46 AM | Report abuse

What's really crazy is that we just need a higher gas tax. The negative externalities are clear, and it should be priced in.

The back side EPA regulations are much stupider, as they punish American companies without punishing foreign refineries. It's just asking for new business in that realm to be offshored.

On the one hand, this shows the general fear of the immature American public understanding taxation. On the other hand, if the money from the gas tax was kept in a separate account that was actually used to improve air quality, instead of just going to make medical care more expensive, maybe we would have the immaturity.

Posted by: staticvars | December 30, 2010 10:10 AM | Report abuse

"The unemployment problem is not structural, writes James Suroweicki: "If the problems with the job market really were structural, you’d expect job losses to be heavily concentrated in a few industries, the ones that are disappearing as a result of the bursting of the bubble. And if there were industries that were having trouble finding enough qualified workers, you’d expect them to have lots of job vacancies, and to be paying their existing workers more and working them longer hours. As it happens, you don’t see any of those things. Instead, jobs have been lost and hiring is slow almost across the board. Payrolls were slashed by five per cent or more not just in the bubble categories of construction and finance but also in manufacturing, retail, wholesale, transportation, and information technology."

The *entire economy* was in a bubble.

The credit boom led to tons of activity being redirected around housing and finance. That activity in turn generated patterns of activity in other industries, sustained by the bubble levels of activity in housing and finance.

To think of it in terms of a world without money, construction workers were building homes and trading them for retail services and manufactured goods. When people bought far fewer new homes, the construction workers no longer had much to trade for retail services and manufactured goods.

Most recessions in post war history could be thought of in simple terms as manufacturing workers producing more than they could trade for, leading to a large inventory of unsold goods. Manufacturing workers had a small period where they had nothing to do until the unsold inventories were worked down, and then they could go back to producing and trading. In this case, the amount of inventories produced (this time, primarily by construction workers) was so great that it would take years to let the inventories work though. The crash was so intense that you had a lot of secondary effects going on as well, and particularly money-related effects.

One of the primary money effects was the illusory creation of wealth as asset prices were bid up, which caused a sudden change in consumption patterns - a change that is difficult to adjust to - when it became obvious the new wealth wasn't real. There are also issues with nominal debt and post bubble asset deflation.

There are secondary structural factors, such as people being stuck in underwater homes, unable to move for new work.

Of course, not everything is structural - if you increased the supply of money, output and employment will rise in some industries, but not enough to make up for the losses in the bubble industries. That increase in the supply of money might also have unwanted consequences (higher commodity prices, another misallocation of resources [new bubble], reduced real wages, etc).

Posted by: justin84 | December 30, 2010 11:41 AM | Report abuse

Great catch by David Henderson over at Econlog:

Even Jacob Hacker thinks that the excess money the government would have claimed without the Bush tax cuts should go to private charity rather than government, if one has a choice in the matter.

In particular, consider this part:

"GiveItBackforJobs will begin to replicate good government policy, outside the government and free from the grip of Senate Republicans."

If only we all had the option to contribute to our own causes, free from the grip of politicians with whom we disagree?

Posted by: justin84 | December 30, 2010 12:03 PM | Report abuse

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