Progressive Breakfast: Banks Grade Grubbing Stress Tests
By Bill Scher
May 1, 2009 - 7:06am ET
Banks Grade Grubbing Stress Tests
Bloomberg reports: "The Federal Reserve is postponing the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials. The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as today, they said. Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices."
Naked Capitalism reacts: "...in a real test, you don't get to score it yourself and then argue the grade. The banks fundamentally don't seem to accept that they are regulated entities and expect to be treated as equal partners. Given the likely decay in employment given the weakening fundamentals, all the Treasury is doing is getting the banks to face the music perhaps six months ahead of time, which is something they should be doing on their own. But the flip side is this is yet another Geithner miscalculation. He wants to look tough on the banks, yet starts waffling when the banks get in a tizzy and presumably invoke images of market mayhem. But the use of the word 'test', meant to reassure that there was indeed a method, led to demands for transparency. As much as I am a fan of disclosure in general, this is an area where less would have been more (although leaks make that a tough approach to maintain). "
Support Grows, Talks Slow, on Carbon Cap
Fossil fuel Dems complain about carbon cap to WSJ: "House Democratic leaders appeared to still be short of the votes needed to pass climate-change legislation out of a key subcommittee, but a spokeswoman for one of the lawmakers leading the talks said negotiations were continuing. Several moderate Democrats on the House Subcommittee on Energy and the Environment said Thursday that fundamental issues such as how to soften the impact of the legislation on constituents and industries in their regions are still unresolved and that the panel might not be ready to vote on the measure by next week as Democratic leaders have called for ... 'I don’t think the votes are there in the subcommittee,' Rep. G.K. Butterfield (D., N.C.) said ... 'What do I tell a single mom making eight dollars an hour?'"
Tell her she will be fine. NYT's Paul Krugman: "...Americans would consume only 2 percent less in 2050 than they would have in the absence of [greenhouse gas] emission limits. That would still leave room for a large rise in the standard of living, shaving only one-twentieth of a percentage point off the average annual growth rate ... there are many who insist that the costs would be much higher. Strange to say, however, such assertions nearly always come from people who claim to believe that free-market economies are wonderfully flexible and innovative, that they can easily transcend any constraints imposed by the world’s limited resources ... So why don’t they think the economy can cope with limits on greenhouse gas emissions? Under cap-and-trade, emission rights would just be another scarce resource, no different in economic terms from the supply of arable land."
Climate Progress' Joe Romm on the flurry of polls showing strong support for capping carbon: "the public supports strong climate action in spite of aggressive and widespread Republican fear-mongering about energy prices ... Our side has been weaker and less consistent on messaging, which makes these poll results even more remarkable. The public seems to have absorbed the Republican arguments and not been persuaded."
Wonk Room's Brad Johnson criticizes' Sen. Byron Dorgan's naysaying: "It’s legitimate to have a concern about the regulatory structure of a carbon market, about one-tenth the size of the fossil-fuel commodity markets, and Sen. Dorgan has the expertise to design the legislation. But he seems to be letting a policy detail obscure the real issue — that global warming pollution is completely unregulated, allowing corporate polluters to make astronomical profits while destroying the atmosphere."
Nelson Opposes Obama on Health Care
Confirming Jonathan Cohn''s earlier reporting, Sen. Ben Nelson announces opposition to public health plan option. CQ: "...he may try to assemble a coalition of like-minded centrists opposed to the creation of a public plan, as a counterweight to Democrats pushing for it. He said he does not believe a majority of the Senate supports the idea ... Nelson’s announcement came the day after 16 Democratic and independent senators wrote the leaders of committees crafting an overhaul, urging them to include what supporters call a 'public plan option' in the legislation ... without Nelson’s support, Democratic leaders have little hope of garnering 60 votes for a health care overhaul, the number required to break a filibuster. But they may not need to. The fiscal 2010 budget resolution (S Con Res 13) adopted Thursday would allow Democrats to pass a health care overhaul through the Senate with just 51 votes..."
NYT looks at the political implications to the health care debate of President's Obama struggles caring for his ill grandmother.
Chrysler Moves Towards Bankruptcy Battle
FT: "Facing off against the administration will be a group of senior Chrysler debt holders who rejected a last-minute offer ... Four leading banks, holding 70 per cent of Chrysler’s debt, agreed to take 29 cents on the dollar. The dissident creditors argue that the proposed restructuring plan championed by the administration is unfair because it places their claims – which are secured on Chrysler’s assets – below the unsecured claims of the United Auto Workers trade union. The first skirmish between the two sides could take place today when Chrysler is expected to ask its bankruptcy judge ... for the use of a special bankruptcy procedure that would pave the way for a rapid settlement of claims. Chrysler’s dissident creditors are expected to argue against the expedited process..."
W. Post: "...administration officials said they hoped [bankruptcy] could be done in 30 to 60 days, [but] many in the field warned that it could take much longer because of the size and complexity of the case. Each passing day could weaken the company's prospects if customers and suppliers shun the brand. Chrysler announced yesterday that it is stopping production across the country for 30 to 60 days to reduce inventories. Because the United Auto Workers renegotiated its contract, cutting supplemental unemployment benefits, workers affected by the shutdown will receive a portion of their regular pay."
CNN/Money.com on mortgage cramdown defeat in Senate: "The Obama administration lost a bid to add a powerful weapon in its fight against foreclosure Thursday, after the Senate voted down a proposal to allow bankruptcy judges to modify mortgages ... experts say they won't be able to judge [Obama's foreclosure prevention] program until the fall at the earliest. By then, hundreds of thousands of borrowers could lose their homes. 'If it's not working, it's kind of too late then,' said Adam Levitin, an associate law professor at Georgetown University. Cramdown was designed as 'a backstop to protect homeowners if modifications didn't work. It's supposed to be a safety net to catch homeowners.'"
LA Times captures Durbin's anger at bank lobbyists: "...Democratic leaders were furious to see bankers lobbying against consumer protection measures after Congress had approved enormous sums to shore up the financial services industry. 'I am sick and tired of being asked to give billions to these banks,' said Senate Democratic Whip Dick Durbin (D-Ill.), who threatened to oppose any further industry bailouts. 'If they have no sympathy for homeowners facing foreclosure, I don't have any sympathy for them.'"
More from W. Post: "'I'll be back. I'm not going to quit on this,' said Senate Majority Whip Richard J. Durbin (D-Ill.) ... 'At some point the Senators in this chamber will decide the bankers shouldn't write the agenda for the United States Senate. At some point the people in this chamber will decide the people we represent are not the folks working in the big banks, but the folks struggling to make a living and struggling to keep a decent home.'"
CNN/Money.com on the "mixed bag" of foreclosure stats for March:"Approximately 134,000 mortgages were rewritten by Hope Now members, which is nearly 20,000 more than the average since September. Another 115,000 at-risk borrowers were granted repayment plans, for a total of nearly a quarter of million troubled mortgages addressed for the month ... Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000 ... On the other hand, completed foreclosure sales, transactions in which lenders have actually taken back homes from defaulting borrowers, dropped by 39% in March."
Salon's Glenn Greenwald: "Nobody even tries to hide this any longer. The only way they could make it more blatant is if they hung a huge Goldman Sachs logo on the Capitol dome and then branded it onto the foreheads of leading members of Congress and executive branch officials."
Baseline Scenario's James Kwak on kowtowing to banks: "I know the main legitimate argument against bankruptcy cramdowns: it increases the riskiness of mortgages, and therefore mortgage rates would have to go up a little for everyone. (Which sounds fine with me.) But the way this issue played out had nothing to do with what would be best for the country as a whole; it had everything to do with what the banks wanted. Instead of bankruptcy cramdowns, the Times reports that the banks got a reduction in the insurance premiums they will pay the FDIC for deposit insurance - which is like a group of car owners voting themselves lower premiums on their auto insurance. But because there is zero chance the government will let insured depositors lose money, any shortfall in the premiums paid by banks to the FDIC will be made up by the taxpayer."
Credit Card Crackdown Advances
Bloomberg: The U.S. House of Representatives passed a so-called credit-card bill of rights after adding a provision requiring banks to apply consumers’ payments to balances with the highest interest rates first."
CQ on upcoming Senate fight: "...exactly what comes next depends on the Senate, where Banking Chairman Christopher J. Dodd, D-Conn., has written a tougher measure (S 414) that only narrowly made it out of committee. Senate Majority Leader Harry Reid, D-Nev., said that the Senate would take up credit card legislation next week, but that it was unclear whether there would be 60 votes to choke off debate ... The key difference between the House and Senate bills — and the major sticking point for some Senate Republicans — is language in Dodd’s bill that would more severely limit card companies’ ability to raise interest rates on consumers who turn out to be a bad credit risk."
Politico's Glenn Thrush: "The DCCC is targeting House Republicans who voted against today's credit card reform bill --sending out a raft of press releases to local media claiming the reps 'voted to protect big credit card companies at the expense of responsible consumers who play by the rules,'"
Huffington Post reviews possible replacements for outgoing Supreme Court Justice David Souter
CQ on plans to increase transportation funding: "The ink was barely dry on the fiscal 2010 budget resolution before authorizers were looking to exceed the $325 billion baseline for the next six-year surface transportation bill. Transportation advocates have been pressing for a $500 billion to $1 trillion bill, and an aide to House Transportation and Infrastructure Chairman James L. Oberstar said Thursday that a $450 billion figure has been used in staff discussions. The catch, however, remains how to pay for any transportation spending increase at all."
Insufficient stimulus funds harming states' ability to conduct stimulus oversight. Stateline.org: "In some cases, with key deadlines looming, budget shortfalls have forced states to furlough the very people needed to prevent fraud and waste of the federal windfall."
Terrance Heath contributed to the making of this Breakfast
Help us spread the word about these important stories...
Email to a friend
Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future