Progressive Breakfast: Power to the Fed

Fed To Get More Reg Power Under WH Plan

W. Post receives WH white paper for market reform: [1] "The administration's plan leans heavily on the Fed, expanding its role as the regulator of the nation's largest banks ... to include other giant financial firms ... The agency, which has greater independence from the political process than other regulators, would have broad authority to impose special requirements on those companies, such as mandating that they set aside a larger percentage of their assets against possible losses than smaller firms. Such a requirement could limit large companies' appetite for risk, but also their profit and growth. The plan calls for a council of regulators to consult with the Fed ... to recommend which large, globally interconnected firms are too big to fail and should be subject to more rigorous oversight. But the council will not have the authority to oppose decisions made by the central bank."

FT on what the Fed didn't get: [2] "...not all systemic risk powers will be concentrated in the Fed. Mr Obama will propose giving the Federal Deposit Insurance Corporation special resolution powers to wind down important financial institutions. These powers will extend its capacity to manage the orderly failure of a complex financial company, which policymakers hope will mitigate the moral hazard created by recent bail-outs. Nonetheless, the plan represents a big bet on the Fed and this is likely to prove controversial in Congress, with critics charging that the US central bank failed to exert its existing regulatory powers over banks and mortgage lending."

McClatchy highlights new consumer commission: [3] "Among the sweeping changes in government regulation that President Barack Obama will propose Wednesday is the creation of an independent and powerful Consumer Financial Product Safety Commission to regulate financial products such as mortgages and credit cards With an eye toward protecting consumers and ordinary investors, the Federal Reserve and other bank regulators would lose their oversight over mortgages, credit cards and other financial products that are sold to consumers. It's a radical shift in approach and a tacit acknowledgment of federal failure."

Wonk Room's Pat Garofalo: "Already, the banking lobby ... is voicing its displeasure" [4] at the new commission.

NYT details some of the winners and losers: [5] "...some insurance companies sought a law that would enable them to get a single federal charter instead of multiple state charters. The insurers lost. Consumer groups argued against the banks in favor of a consumer financial protection agency with broad new authority to protect homeowners from unsuitable loans. The consumer groups prevailed. The mutual fund industry successfully argued against a proposal by some banks — which are competitors to mutual funds — to give the Securities and Exchange Commission’s authority over mutual funds to the new consumer agency. Hedge funds and dealers in derivatives sought to minimize the extent to which the government will intrude into their businesses. They partly won; the administration will leave many of the details of that authority to lawmakers and regulators. Savings and loan associations argued unsuccessfully against a proposal by the administration to eliminate federal savings and loan charters, which have been subject to less regulation than bank charters."

Bloomberg on the legislative prospects: [6] " Much of the plan will require approval in Congress, where jurisdictional battles and ideological clashes may delay and alter the legislation. Obama aims to sign a bill by the end of the year. "

Baseline Scenario's Simon Johnson assesses the possible political dynamics: [7] "There are three views on who exactly is behind financial regulatory reform package ... The first view is that Tim Geithner and Larry Summers have genuinely become radical reformers ... The second view is the consensus: Geithner and Summers want a minimal degree of reform with a great deal of window dressing ... The third view is more interesting and also controversial: Geithner-Summers have exercised an effective veto over measures that would have constrained large firms directly, but they are not at this time strong enough to prevent sensible consumer protection measures from also going forward."

CBO Analysis Of Partial Health Care Bill Sparks Cost Cut Push

Sen. Baucus looks to appease cautious CBO bean-counters with fewer consumer subsidies. Politico: [8] "Stung by Republican criticism of the $1.3 trillion price-tag on Sen. Ted Kennedy’s health bill, Democrats involved in Senate Finance Committee negotiations pledged Tuesday night to release a plan that keeps costs lower – but still about $1 trillion over 10 years ... Baucus confirmed Tuesday night that he and Sen. Chuck Grassley (R-Iowa) will introduce a budget-neutral bill that comes in around $1 trillion. The committee had planned to release a draft bill Wednesday, but Baucus said it isn't likely to come until later in the week, at the earliest, and possibly early next week ... Lawmakers have proposed federal subsidies for lower-income families with incomes 500 percent above the poverty line to purchase coverage through a government exchange. But since generous subsidies might encourage people to bolt employer-based insurance policies and go into the exchange, the committee could reduce the amount of subsidies, Conrad said. Baucus said his committee was looking at dropping the subsidy below 400 percent poverty."

[9]

CQ gets Sen. Chuck Grassley's take: [10] "Grassley told reporters Tuesday that people with incomes of up to 300 percent or 400 percent of the federal poverty level would likely be eligible. 'Some of us would prefer it would be 300 percent of poverty,' he said, meaning an income of $66,150 for a family of four."

CBO chief offers suggestions to squeeze spending. W. Post: [11] "In addition to pressuring hospitals and doctors to reduce costs, Elmendorf suggested "significantly limiting" the tax-free treatment of health coverage that millions of Americans obtain through employers. Both 'approaches could directly lower federal spending on health care and indirectly lower private spending on it as well,' he wrote."

The User's Guide to the Health Reform Galaxy chides the cautious CBO: [12] "CBO operates within the necessary constraints of what has been, and what is, rather than what will be ... reports did not end up illuminating the economic and budgetary impacts of comprehensive health reform initiatives, because the estimates were not based on what the future could become, they were based on what existed already."

Robert Borosage on HuffPost excoriates Senators for hesitating on lowering costs via the public plan option: [13] "We shouldn't let cynicism lower our expectations. Soaring health care costs and the human tragedy of those without insurance can no longer be ignored. Reform can't be postponed. It is a stunning disservice that Republicans have taken themselves out of serious discussion. And it is an open scandal that Senators are catering to the private insurance industry that has profited from the problem rather than helping to solve it. We must expect more and demand more from those given the privilege to represent us."

President and HHS Sec. give oxygen to Conrad co-op compromise. Obama on CNBC: [14] "the cooperative idea that Kent Conrad has put forward, if that is a better way to reduce costs and help families and businesses with their health care, I'm more than happy to accept those good ideas." AP interviews Sec. Sebelius: [15] "She spoke positively of a compromise idea that envisions consumer-owned nonprofit cooperatives, like rural electricity or agriculture co-ops. They would get started with seed money from taxpayers but then compete without government control."

Daschle and Dole to offer proposal today, including a tax on employer benefits. W. Post: [16] "...a mix of tax increases, spending cuts and new mandates guaranteed to annoy virtually every major player in the health-care debate. The proposal, which is being studied by Senate Finance Committee leaders, calls for the majority of individuals and businesses to contribute to health insurance costs and would for the first time tax some benefits provided through the workplace."

Blue Dogs looking to undermine public plan option? The Hill: [17] "Members of the centrist GOP 'Tuesday Group,' the New Democrat Coalition and the 52-member Blue Dog Coalition have been discussing both the policies and politics of moving their middle-of-the-road ideas in a body of Congress usually dominated by liberal or conservative ideology. Those centrist factions are wary of the proposals their respective leaders will introduce this month. Blue Dogs are leery of the so-called public option in the healthcare reform bill that is expected to hit the House floor this summer. Meanwhile, GOP centrists opted to release their own healthcare plan a day before House GOP leaders are scheduled to unveil their reform package. Noting that some members could be retaliated against by their leaders, some lawmakers declined to mention to whom they were talking. Rep. Patrick Tiberi (R-Ohio) said that he wouldn’t 'throw [Blue Dogs] under the bus' by revealing the identities of his Democratic colleagues."

Climate Talks Continue As New Report Ups Urgency

CQ on remaining criticism from Ag Chair Colin Peterson: [18] "Rural Democrats are calling for changes to a House energy bill even as the leadership tries to bring it to the floor next week ... One sticking point is the distribution of pollution allowances, which companies would buy and sell to meet a cap on greenhouse gas emissions. According to Peterson, rural electric cooperatives and other Midwestern electric utilities would not receive enough allowances compared with utilities in coastal states ... Peterson also sent Waxman a proposal Tuesday to change how the bill would handle special projects giving the agricultural sector credit for lowering emissions — for example, by planting trees on farmland. He wants the Agriculture Department to be in charge of approving these projects, while the bill would give the EPA that responsibility."

Peterson displays climate ignornace to WSJ: [19] "He also challenged the White House's latest climate warnings, saying farmers in his district would welcome warmer temperatures after a recent cold spell."

Time on that warning, from a new WH climate report: [20] "Even as Congress belatedly tackles legislation that would cut U.S. carbon emissions and international negotiators have bickered over a global climate deal in Bonn, a new report by several federal agencies underscores the truths that too often risk getting lost in politics: global warming is real, it's happening now and if we don't act soon, the consequences are likely to be catastrophic. "

Grist's Kate Sheppard adds: [21] "Hey, remember the Florida Keys? You might have to, considering they won’t be there much longer if we continue pumping greenhouse gases into the atmosphere at current rates. Have plans to check out the Lone Star State? Well, you might want to get there soon, as Texas can expect up to 100 days of temperatures over 100 degrees by the end of century."

Change.org's Emily Gertz on regional impacts: [22] "Heavy rains are becoming more intense and frequent all over the country, although annual rainfall is decreasing in the Southwest. Both make it more difficult to manage water supplies for crops and communities. Winter snow pack is decreasing, and melting off earlier in the year, in the West and Pacific Northwest. This is putting stress on fish that depend upon cold, ample stream and river flows for spawning; making hydroelectric power generation more difficult; and imperils fresh water supplies for people and agriculture. Warmer winter temperatures have pushed the nexus of winter maple syrup production northward, from Vermont into Canada."

Terrance Heath contributed to the making of this Breakfast