Progressive Breakfast: What's Not In The Dodd Bill

Just launched at OurFuture.org: "The Virtual Summit on Fiscal and Economic Responsibility for People Who Did Not Wreck the Economy." Kick-off posts from Rep. John Conyers, Dean Baker and Barbara Burt. More all month.

Can We Toughen Up Wall Street Reform?

W. Post's Harold Meyerson holds up Sen/ Blanche Lincoln's derivatives bill as the test of true reform, questions WH commitment: "[Sec. Geithner] has not embraced Lincoln's bill, and some senators fear he will craft a bill with Republican assistance that doesn't truly regulate derivatives. I have heard similar misgivings about Obama economic adviser Larry Summers, who as Treasury secretary in the Clinton administration blocked attempts to regulate derivatives ... The Lincoln bill is a clear test of the Democrats' ability to learn from their mistakes -- and it will make clear which side they are on."

Progressives push for clamp down on bank size. NYT: "In the sweeping legislation before the Senate, there is no attempt to break up big banks as a means of creating a less risky financial system. Treasury Department and Federal Reserve officials have rejected calls for doing so ... It sets up a procedure intended to allow big banks to fail, with the cost borne not by taxpayers ... a populist minority in both Congress and the Fed requested a revisit to the size issue ... 'By splitting up these megabanks, we by definition will make them smaller, safer and more manageable,' Senator Edward E. Kaufman Jr., Democrat of Delaware, said ... The president of the Federal Reserve Bank of Dallas, Richard W. Fisher, broke ranks with most of his colleagues within the central bank last week..."

Economist's View's Mark Thoma lists what is missing from the Dodd bill: "Senator Dodd’s proposal does allow regulators to set limits on leverage, but that is not enough. ... We need strict upper bounds on leverage — 15 to 1 for example — limits that are independent of the regulators put in charge under any particular administration ... The other place that the legislation could do better is in limiting the size of banks ... Reducing size is no guarantee of safety. But limiting bank size does limit the political power of financial institutions."

Is the resolution fund the public option of financial reform? Can we tell by how it dies?: "It seems like Republicans such as House Minority Leader John Boehner, insisting the resolution fund is 'a bailout slush fund,' are gunning for a political victory similar to the one they nearly notched on health care. But will the resolution fund go the way of the public option? Some key Democrats appear willing to let the resolution fund go in hopes of paving the way for bipartisan support."

Baseline Scenario's Simon Johnson worries President won't take a hard line in tomorrow's Wall Street: "The president is apparently lining up to give a fairly conventional 'support the Dodd bill' speech. This would be major miscalculation. The Democrats are afraid that if they truly take on the big banks, they will lose campaign contributions and be placed a major disadvantage for November 2010 and 2012 – 'don’t push it too far' is the message from the White House to the Senate. But this just shows the White House has not fully comprehended the modern nature of banking."

WSJ notes both parties are still actively fundraising on Wall Street: "Of the $34 million given by the securities and investment industry in the 2010 election cycle, 62% has gone to Democrats and 37% to Republicans, according to the nonpartisan Center for Responsive Politics. This year, major Wall Street firms have begun giving a larger share of their donations to Republicans. In January and February, political-action committees run by Citigroup Inc., Goldman Sachs, J.P. Morgan and Morgan Stanley donated twice as much money to Republicans than Democrats, a shift from 2009."

Sen. John Cornyn brags that Wall Street support is shifting to the GOP. Bloomberg quotes: "Wall Street has now been demonized and people are worried about what that might mean in terms of legislation. If they were happy with the Democrats, they’d be less likely to answer our calls."

LAT reports Senate GOPers backing down from opposition to Wall Street reform: "...they began striking a more conciliatory tone Tuesday that improves prospects for the bill ... a sign that they may have reached their limit for being portrayed as the 'party of no,'..."

Dems open to changes, if GOPers actually vote "yes." W. Post: "Democrats have been unwilling to alter the legislation without a guarantee that it would bring Republican votes. One potential GOP convert, Sen. Olympia J. Snowe (Maine), said Tuesday that she will wait for bipartisan talks to play out before deciding whether to back Democratic efforts to begin debate on the bill."

NYT shines light on the synthetic C.D.O.s at the heart of the Goldman Sachs fraud case: "Known as synthetic C.D.O.’s, they did not raise money for home loans or serve any other broad economic purpose. Instead, like a casino offering blackjack along with slot machines and Texas hold ’em, they were just one more way to bet against the housing market."

Was Robert Rubin for regulating derivatives before he was against regulating derivatives? HuffPost:: "'I thought we should regulate derivatives; I thought so when I was at Goldman Sachs and I thought so afterwards,' he told HuffPost during a break at an event for the Hamilton Project, a think tank he founded to support Wall-Street-friendly Democrats. ...Rubin can in fact point to a long paper trail suggesting that he supported regulating derivatives — at least in theory. But in practice, in 1998, Rubin was one of several top Clinton administration officials who quashed an attempt by Brooksley Born, then head of the Commodity Futures Trading Commission, to regulate them."

IMF Gives Momentum To Bank Tax

IMF urging G-20 to coordinate new tax on banks to deal with bailouts. Bloomberg: "The International Monetary Fund is recommending the Group of 20 nations tax financial institutions’ non-deposit liabilities and the sum of profit and compensation to help pay for future bailouts of the industry ... Heading into this week’s meetings in Washington of the IMF, World Bank and G-20 nations, there is growing acceptance of a financial risk levy, a U.S. Treasury official told reporters in Washington yesterday."

Senate Republicans attack Baucus bank tax proposal. NYT: "The top Republican on the committee, Charles E. Grassley of Iowa, called the fee a thinly disguised excise tax. 'The Congressional majority is so strapped for money to pay for out-of-control spending that they’re looking to the banks and other financial institutions for money,' he said."

Kerry, Graham Preview Concessions In Climate Bill

Sen. Lindsey Graham previews climate compromise bill: "The energy reform bill to be released next week will include $54 billion in government-backed loan guarantees for the nuclear industry, roughly a threefold increase, as well as regulatory reforms to ease legal and permit issues that slow new plant construction ... The measure will put a price on carbon emissions through penalties tailored to specific economic sectors, which is 'far more business friendly' than a nationwide emissions cap-and-trade system that was in the energy bill passed by the House ... The bill would also expand offshore drilling and — for the first time — permit states to share revenue from it, offer tax breaks for big manufacturers to make their facilities more energy efficient and encourage development of more hybrid automobiles and trucks fueled by natural gas. Finally, the proposal would remove the Environmental Protection Agency’s authority to regulate carbon..."

Sen. Kerry shoots down reports of a gas tax or carbon fee on Big Oil. Reuters: "In recent weeks, government and industry sources have said the bill that Kerry and Senators Joseph Lieberman and Lindsey Graham plan to unveil on Monday would contain a 'linked fee' in the transportation sector ... linked to a mechanism for pricing carbon dioxide pollution permits in the electric power sector as part of a global warming bill ... But speaking to reporters, Kerry said: 'There is not even a linked fee. There's not a tax, there's nothing similar.' Pressed for clarification about the fee, Kerry then said, 'certainly not the way it was described previously, nothing like that.' The Massachusetts Democrat refused to elaborate."

Big Oil still airing misleading anti-climate bill ads. Mother Jones' Kate Sheppard: "The Senate authors of pending climate and energy legislation have been heavily courting industry groups like the American Petroleum Institute to support their bill ... But has API declared a cease-fire on the as-yet-non-existent Senate legislation while senators and the Obama administration bend over backwards to please them? Far from it."

Two GOP senators move away from Kerry-Graham. CQ: "Two moderate Republicans long courted by authors of a Senate climate change bill have disengaged from talks ahead of next week’s unveiling of the legislation and are working on a narrower competing bill. George V. Voinovich of Ohio and Richard G. Lugar of Indiana are developing an energy-only bill that would mandate new renewable and nuclear power production without imposing cuts on carbon emissions ... Ohio Democrat Sherrod Brown, said many important questions remain about a similar cap-and-trade scheme for manufacturers that would launch in 2016. 'I don’t expect to pledge my support within the week,'..."

Possible split between big and small power companies. ClimateWire: "[Kerry, Lieberman and Graham] are expected to give the power companies that account for about 40 percent of annual U.S. greenhouse gas emissions more free allowances compared with the House cap-and-trade bill and impose a 'hard price collar' that gives the industry greater certainty on what its costs will be over the environmental program's four-decade lifespan ... industry officials familiar with the legislation like what they see when it comes to perhaps their biggest ask: more free allowances for the state-regulated local distribution companies ... [But a] possible change in the allocation formula has prompted guarded praise from the smaller power companies that have been lobbying for a better split."

Grist's David Roberts lists the ways a strengthened climate bill can improve the economy: "Utility reform ... Removal of subsidies ... Efficiency, efficiency, efficiency ... Improvement of the electricity grid ... Sprawl busting"

Conrad Budget Kills Jobs

Senate Budget Cmte chair Kent Conrad proposes deep cuts. W. Post: "While Obama would freeze non-defense spending for three years, Conrad would cut deeper, trimming an additional $9.5 billion from those programs in 2011 -- about half of it from Obama's signature Pell Grant expansion ... While middle-class tax cuts enacted during the George W. Bush administration would be extended past their scheduled 2010 expiration, lawmakers would have to pay for lowering the estate tax and protecting millions of taxpayers from the AMT after 2012..."

"Kent Conrad Calls for Throwing Millions of People Out of Work," explains Beat The Press' Dean Baker: "Conrad's plan would reduce the projected 2015 deficit by approximately 1.6 percentage points of GDP more than President Obama's budget. Since most projections still show the economy to be well below full employment levels of output by this year, the cuts in spending and higher taxes in Senator Conrad's plan will reduce the level of output. If we assume an average mulitplier of 1, then output will be 1.6 percent lower in 2015 than would otherwise be the case. If employment falls by the same amount, then Senator Conrad's plan would throw roughly 2.3 million people out of work."

Conrad's budget proposal includes limited reconciliation instructions. HuffPost's Ryan Grim: "'If we're going to go forward and create the kind of jobs we need, we can't wait for 60 votes,' said [Sen. Bernie] Sanders, citing the public option, energy policy, transportation and school construction as projects that could be done through reconciliation ... Reconciliation is mentioned twice in Conrad's summary. The plan includes a reconciliation instruction for jobs legislation and reserve funds that 'facilitate passage of other bills promoting job growth.'"

Public schools face massive layoffs unless federal government injects aid. W. Post: "From coast to coast, public schools face the threat of tens of thousands of layoffs this year in a fiscal crunch likely to result in larger class sizes and fewer programs to help students in need ... Last week, Sen. Tom Harkin (D-Iowa) proposed a $23 billion bailout to help states avert education layoffs, a potential sequel to last year's economic stimulus law. The Democratic-led Congress will consider the proposal this spring ... Education Secretary Arne Duncan estimated that education layoffs could total from 100,000 to 300,000 unless Congress acts."

New bill would assist unemployed vets find work. McClatchy: "Sen. Patty Murray introduced legislation Tuesday that would provide expanded training, job placement and small business assistance ... The Labor Department said the unemployment rate for veterans ages 18 to 24 was 21.1 percent in 2009, up from 14.1 percent a year earlier..."

Renewed Effort To Block Health Insurance Rate Hikes

Senate health cmte chair Tom Harkin backs bill to give HHS authority to block unreasonable insurance rate hikes. NYT: "The White House offered a similar proposal in the weeks leading up to approval of the health care legislation last month ... Reviving the proposal on Tuesday, Mr. Harkin said: “... Protections must be in place to ensure that companies do not take advantage of current market conditions before health reform fundamentally changes the way they do business in 2014 ... about 22 states in the individual market and 27 states in the small group market do not require a review of premiums before they go into effect..."

Leading Republicans side with insurance lobby. LAT: "Republicans, meanwhile, are urging less regulation, which they say will foster greater competition and control premiums."

Wonk Room's Igor Volsky debunks insurance lobbyist claim of weak profits necessitating rate hikes: "Within the context of overall health care spending, insurers’ profits seem small. But within the context companies’ revenues, insurers skim off approximately 15-20 percent of premium dollars for administrative costs and profits and make a good penny..."

CBPP's January Angeles reminds the health reform is a good deal for state governments: "State and local governments spend more than $10 billion a year to care for the uninsured in hospitals and around $15 billion a year to provide the uninsured with mental health services. Those costs will drop considerably under health reform, offsetting part of the increase in state Medicaid spending ... the Medicaid expansion will enable states to cover millions of low-income residents who haven’t been able to afford coverage — and the federal government will pick up 96 percent of the tab."

Conservative Senate candidate in NV, Sue Lowden, literally believes health care system should be based on barter. TPM's Josh Marshall: "[Earlier,] I mocked her with the headline: 'I bid three chickens for that MRI!' But I sort of figured she'd rethink that plan after her advisors sat her down for a moment and explained the concept of a cash economy or maybe if she found out what 'barter' meant. But it turns out that she was serious ... Yesterday she told a local news program: 'I'm telling you that this works. You know, before we all started having health care, in the olden days, our grandparents, they would bring a chicken to the doctor.'"

Breakfast Sides

India and Brazil pressure China on currency. Business Week: "Central bank governors in India and Brazil backed a stronger Chinese yuan, siding with U.S. President Barack Obama before a meeting of the Group of 20 nations this week."

GM pays back government loans. AP: "General Motors Co. has repaid the $8.1 billion in loans it got from the U.S. and Canadian governments, a move its CEO says is a sign automaker is on the road to recovery. GM CEO Whitacre will formally announce the loan paybacks Wednesday at the company's Fairfax Assembly Plant in Kansas City, Kansas, where he will also announce that GM is investing $257 million in that factory and the Detroit-Hamtramck plant, both of which will build the next generation of the midsize Chevrolet Malibu ... During the financial crisis that led to GM filing for bankruptcy protection last year, the automaker closed 14 factories and shed more than 65,000 blue-collar jobs in the U.S. through buyouts, early retirement offers and layoffs. The company now employs about 40,000 hourly workers in the U.S."

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