Targeting The Obstructionists
Hotline On Call previews next stage in Campaign for America’s Future effort to pressure obstructionists to support Obama budget: “Campaign for America’s Future co-director Robert Borosage and USAction president William McNary will join progressive blogger Jane Hamsher tomorrow to launch a media campaign against conservative Democrats who they believe could block Pres. Obama’s budget. Sources say the targeted Democrats are: Sen. Evan Bayh (D-IN); Sen. Blanche Lincoln (D-AR); Sen. Ben Nelson (D-NE); Sen. Mary Landrieu (D-LA); and Sen. Mark Pryor (D-AR).”
Politico on Health Care for America Now pushing for a simple majority vote: “An umbrella group of progressive organizations is pressing congressional budget leaders to keep the option of using expedited budget procedures to move President Barack Obama’s healthcare initiatives through the Senate – a move that would allow Democrats to pass a bill without Republican votes. But at least one major group, AARP, disagrees, saying it believes a bipartisan approach is needed.”
TPMDC: Bayh-affiliated Third Way defends Bayh’s obstructionists.
Budget Negotiations Ramp Up
Swap spending cuts for major policy reforms? W. Post: “President Obama will go to Capitol Hill this week to try to persuade skeptical Senate Democrats to support the administration’s first budget request … Obama will address Senate Democrats on Wednesday … [Senate Budget Cmte Chair Kent] Conrad said his proposal would trim Obama’s spending request across the board to dramatically reduce future deficits. In 2014, for example, when the CBO predicts that Obama’s request would produce a $750 billion deficit, or 4.3 percent of the nation’s overall economy, Conrad said his proposal would generate a deficit of less than $600 billion, or just under 3 percent of the economy. … Administration officials signaled that the White House may be willing to accept significant spending cuts so long as the president’s signature initiatives on health care, education and clean energy are preserved.”
Politico on obstructionist demands for a supermajority: “Sen. Orrin G. Hatch (R-Utah) said Monday that using budget reconciliation to obviate the need for 60-vote supermajorities ‘would be a mess.’ Sen. Bob Bennett (R-Utah) said doing so would ‘sour’ relations in the Senate. Senate Minority Whip Jon Kyl (R-Ariz.) said the White House risks turning legislation into a ‘purely partisan exercise.’ And a senior Republican Senate aide said the GOP could respond to such a move by going ‘nuclear’ — essentially shutting down the Senate through the use of parliamentary maneuvers … Sen. Robert C. Byrd (D-W.Va.), the Senate’s longest-serving member and father of reconciliation, has tried to drum up opposition to the idea …. And Sen. Tom Carper (D-Del.) warned Monday that Democrats could do ‘serious damage to our bipartisan effort’ if they start talking ‘in earnest about putting [health care reform] in reconciliation.’”
Wonk Room catches Sen. Gregg called out on MSNBC for reconciliation hypocrisy.
TPMDC’s Brian Beutler spots WH proposing clean energy tax credits for budget reconciliation: “It’s admittedly a smaller item than health reform and cap-and-trade … But there are a number of Democrats in the Senate who are, shall we say, lukewarm to the idea of clean energy investment projects…”
American Prospect’s Ezra Klein details the reconciliation hurdles.
EPA Moving To Cap Carbon
EPA finding could prod Congress on global warming. W. Post: “[The EPA] submitted a finding that will force the White House to decide whether to limit greenhouse gas emissions under the nearly 40-year-old Clean Air Act … ‘This is historic news,’ said Frank O’Donnell, who heads the environmental watchdog group Clean Air Watch. ‘It will set the stage for the first-ever national limits on global-warming pollution. And it is likely to help light a fire under Congress to get moving.’ … Daniel J. Weiss, a senior fellow at the Center for American Progress … said the EPA’s proposal would allow the administration to tackle climate change if Congress does not limit carbon emissions through legislation … ‘…in case of legislative gridlock, break open the Clean Air Act,’ Weiss said.”
Grist’s Kate Sheppard reviews the legislative fallout: “The completion of the endangerment finding will kick-start the process of figuring out how to regulate greenhouse gases, but it’s not clear how rapidly that will progress. During the presidential campaign, an Obama adviser indicated that the administration would allow about 18 months for Congress to act on the issue first. [Sierra Club's David] Bookbinder estimates that there could be regulation of at least the two biggest sources of greenhouse-gas emissions — coal-fired power plants and automobiles, which together account for more than half of all emissions — by early 2010. Green argued that a new bill might actually work faster than regulation under the Clean Air Act, since the latter would almost inevitably get tied up in litigation. Either way, regulation looks to be coming — and relatively swiftly, in Washington terms.
AP reports on WH strategy: “The White House acknowledged Monday that the EPA had transmitted its proposed finding on global warming to the Office of Management and Budget, but provided no details. It also cautioned that the Obama administration, which sees responding to climate change a top priority, nevertheless is ready to move cautiously when it comes to actually regulating greenhouse gases, preferring to have Congress act on the matter… But several congressional officials … said the transmission makes clear the EPA is moving to declare carbon dioxide and other greenhouse gases a danger to public health and welfare and views them as ripe for regulation under the Clean Air Act.”
President Barack Obama acknowledged the current flood emergency in the Red River Valley on Monday, and warned that global warming could lead to similar disasters in the future.
Considering how bad the flooding is now in North Dakota, imagine what it could be if global warming exacerbates the issue, Obama said. “I actually think the science around climate change is real. It is potentially devastating,” said Obama, who sat down Monday afternoon for a sit-down interview with six hand-picked journalists from around the country. “If you look at the flooding that’s going on right now in North Dakota and you say to yourself, ‘If you see an increase of 2 degrees, what does that do, in terms of the situation there?’ that indicates the degree to which we have to take this seriously,” he said.
Obama talked about flooding while answering a question about North Dakotans being concerned how a “cap-and-trade” greenhouse gas reduction policy could hurt the state’s coal and power-generating industries.
And the opposing view? ThinkProgress quotes pro-violent uprising Rep. Michelle Bachmann: “… the science indicates that human activity is not the cause of all this global warming … I want people in Minnesota armed and dangerous on this issue of the energy tax because we need to fight back.” Brilliant at Breakfast: Where’s the Secret Service?
Health Care Update
Wonk Room’s Igor Volsky on GOP opposition to public plan option: “Gloomy news, but certainly not a death sentence. Part of the problem is that nobody has spent much time sketching out the details for how to foster fair private/public competition. Republicans have hijacked the concept and confused it with socialist medicine, and progressives are only now starting to push back against their rhetoric.”
Politico on health care activity: “Conversations are taking place all over Washington. But for the best clues about what proposals have traction, watch the progress of these five groups over the next few weeks…”
Toxic Assets Plan Cheered by Wall Street, Not By Economists
…this is a plan that treats a fairly minor symptom of the problem. You know, that maybe some of these toxic assets — I guess they’re now toxic legacy assets, whatever — are being under-priced in the market. And maybe there’s a problem there.
But the fact of the matter is that the banks made a huge bet. They made a bet that the housing bubble was nonexistent, that, you know, historically unprecedented levels of consumer debt were not a problem. They lost that bet.
And this plan does almost nothing to rescue them from the consequences of that bad debt. So I’m kind of saddened. It’s kind of a punt. They’ve decided to sort of not really take on the critical issue of fixing the banks and instead hope that a little bit of rearranging of the financial furniture will solve the problem.
There are three reasons for concern. First, the subsidy may not be sweet enough to close the deal. According to one analysis, a specific mortgage-backed security was held on a bank’s books at 97 cents, while its market price was about 38 cents. Even if you limit the buyer’s potential loss to the capital he put in, it’s unlikely he will raise his bid from 38 cents to anything near 97 cents.
Second, there is a “lemons” problem, also known as adverse selection. Even with a reasonable degree of disclosure, the selling banks will still know more about their assets than the buyers. The banks will be trying to dump their most toxic assets (their lemons); the buyers, fearing exactly this behavior, will reduce all their bids accordingly. This will make it harder for buyers and sellers to meet.
Third, there are political pressures, which have multiplied recently. For this plan to succeed, it has to offer private investors both upfront subsidies (cheap loans) and the long-term prospect of high returns. Both of these will be broadly unpopular with the public, especially given general attitudes toward hedge funds and private equity firms. Any attempt to limit the upside for the private sector has, apparently, been vetoed by potential investors. And that will make it look and feel like a taxpayer shakedown.
Naked Capitalism: “Clusterstock is of the view the complexity is deliberate, to confuse the chump taxpayer. Agreed completely. ”
Portfolio.com’s Felix Salmon: How Treasury’s Bank Bailout Could Make Things Worse: “The big hope of the Treasury plan is that the private sector will be willing to pay a higher price for leveraged assets than it would for unleveraged assets. The returns on private capital are being leveraged by five or six to one in this scheme, if not more, which means a high chance of them making lots of money, and also a high chance of the capital being wiped out entirely. During boom years, that was a wager that many investors were willing to take. But now? I’m not sure. Chalk it up as yet another thing-which-has-to-go-right in order for this scheme to work. There are far too many of those for comfort.”
Lukewarm support from Economist’s View’s Mark Thoma: “I am willing to get behind this plan and to try to make it work. It wasn’t my first choice, I still think nationalization is better overall, but I am not one who believes the Geithner plan cannot possibly work … There’s still time for minor changes to improve the program as we go along, and it will be important to implement mid course corrections…”
Calculated Risk also lukewarm: “The Geithner plan is suboptimal, but it is probably the best we can get in the current environment. I’d add a caveat: this plan is easy for the banks to game or arb – and if a bank is caught gaming this plan, the AIG bonus flap will seem like a light Summer breeze.”
More Calculated Risk: “‘Obama econ adviser Austan] Goolsbee claims ‘if the private guy makes money, the government makes money. If the private guy loses money, the government loses money.’ Goolsbee is correct on an individual pool, but investors can buy multiple pools and Nemo has an excellent example of how the investors can make money, and the government lose money.”
Matt Yglesias: “How much of its gains will go back into the pockets of finance? Shifting from a ‘years of depression’ scenario to a ‘deep recession followed by swift recovery’ scenario generates a lot of extra wealth and well-being for everyone. But how much of it will actually go to ‘everyone’ and how much will go to the owners and managers of large financial firms? A plan can work and help restore growth while still being unduly favorable to the interests of finance.”
D-Day: “…good grief. This notion that the stock market is any kind of predictor of economic policy should have been tossed out long ago. It doesn’t take a genius to realize the existence of a very visible hand at work – the biggest money in the market wants a bailout, and a bailout they’re getting, essentially.”
Oxdown Gazette’s Scarecrow: “The Obama Administration’s position is that if you set up this speculative looting scheme to occur in broad daylight, and claim it will unclog bank lending, it’s okay. And private investors who take advantage of the looting scheme should be regarded as ‘the good guys,’…”
Bloomberg looks ahead, to another bailout request: “Treasury Secretary Timothy Geithner’s plan to remove banks’ distressed assets cleared its first hurdle, triggering the fourth-best day for U.S. stocks since the 1930s. The next hurdle: showing results soon enough to convince a skeptical Congress to approve more money. With regulators scheduled to complete their review of banks’ capital needs by the end of next month, the Treasury may need to seek $750 billion or more to offset writedowns on the loans and securities, analysts say. The Obama administration’s task will become even more difficult if the Geithner plan isn’t perceived to be working by then.”
NYT reports Goldman Sachs may give back TARP funds, argues that’s bad: “Goldman Sachs is planning to give back its TARP money soon. Very soon, actually — ideally within the next month … we should be thrilled that Goldman is going to quickly pay back the $10 billion it was given last October, right? … here’s the asterisk, and it’s a big one. If Goldman succeeds in returning our money, it could put pressure on other banks to give their money back, too, lest they appear weak … The problem now is that many of them may still need the money. And yet they may try to follow Goldman’s lead.”
Washington Monthly’s Hilzoy on Wall Street resistance: “Both the stress tests and the attempts to get credit flowing again are essential parts of our attempt to solve the enormous economic problems we now face, problems that these very firms are largely responsible for. If the banks are ‘slow-walking’ the stress tests and threatening not to help get credit flowing, that just is threatening not to help get the country out of the economic crisis.”
Is The WH Planning Takeovers?
W. Post reports: “The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document. The government at present has the authority to seize only banks … The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux. Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill…”
Angry Bear’s Robert Waldmann reacts: “Sounds a bit like Bush and Iraq frankly. Asking for the authority while saying they don’t want to use it, and going through the motions of trying something else. I didn’t like Colin Powell’s speech at the security council, but now I notice its strong point — it didn’t cost a hundred billion dollars. Oh well you go to nationalization with the Senate you have not the Senate you want.”
Bonus Tax Bumped In Senate
W. Post reports Senate delaying House bonus tax bill: “Senate Majority Leader Harry M. Reid (D-Nev.) announced last week that the Senate would move ahead with the legislation as soon as possible, and he attempted to bring the bill to the floor Thursday night. But he revised that timetable yesterday, saying that the chamber will spend this week debating a national-service bill before turning to a long-scheduled showdown over the budget for fiscal 2010. With just two weeks to go until Congress departs for a spring recess, action on the tax measure would be unlikely before late April. ”
$50M of the $165M in bonuses has been returned by AIG staff.
OpenLeft’s Chris Bowers: “…the delay in the legislation might mean all the bailout money is spent before the bonus tax becomes law in late April. Dang.”
HuffPost’s Art Levine: “The Crack-Up of Business’s United Front Against Employee Free Choice Act”
Mother Jones’ Jesse Finfrock rips Whole Foods: “…surely we can agree that employees should be able to choose how they decide to form a union, right? Well, Whole Foods CEO John Mackey thinks it’s un-American … if [CEO] Mackey thinks that binding arbitration isn’t the way we do things in the US, then perhaps he should try reading a copy of Mother Jones… after all, they’re sold at Whole Foods markets. ”
WH continues pushing for global stimulus. Bloomberg: “President Barack Obama urged fellow Group of 20 leaders to provide a ‘robust and sustained’ fiscal stimulus, saying that ‘much more’ action is needed to fight the global recession. In an article published today in newspapers including Germany’s Die Welt and the Paris-based International Herald Tribune, Obama also urged increased funding for international lenders and a ‘common framework’ of steps to restore the world economy’s flow of credit.”
Newshoggers’ Steve Hynd on China’s currency move: “Could the dollar be sidelined as the world’s reserve currency? It will, if China’s head banker gets his way … Although the FT says that the current system with the dollar as reserve currency isn’t going to change anytime soon, Bernhard at Moon of Alabama is reading other sources that say China plans to bring up a plan to change the system at the forthcoming G20 meeting – possibly with support from European nations, Brazil, Russia , India and even the IMF, who have all recently backed the same alternative as the Chinese are proposing … The G20 summit is on April 2nd and if President Obama doesn’t have a better plan than buying up toxic zombie assets and issuing a feel-good communique then he and his British ally might find themselves outvoted on a far more radical possible solution.
Newsflash: NAFTA Didn’t Work!
NYT gets around to reporting that damage NAFTA has done to Mexico: “…domestic industries were dismantled as multinationals imported parts from their own suppliers. Local farmers were priced out of the market by food imported tariff-free. Many Mexican farmers simply abandoned their land and headed north.”
Terrance Heath contributed to the making of this Breakfast.