Wonkbook: Dems threaten to filibuster FinReg; BP's new plan; GM's surprising profit
Financial regulation nears a cloture vote, but some Democrats haven't seen their amendments taken up, and they're threatening to filibuster if they don't get consideration. BP's latest plan to kill the leak makes a lot more sense than their previous plan to throw trash at it. The House of Representatives will take up resolutions to honor surfer Kelly Slater, golfer Phil Mickelson, and craft beer. Sounds, like, awesome. But it's not all fun and games over there: House Democrats will host Michael Lewis at their caucus lunch.
Welcome to Wonkbook.
BP's got a new plan to kill the leak, writes Bryan Walsh: "BP will next try what's called a 'top kill,' which involves pumping heavy drilling fluid — a synthetic compound that is heavier than both oil and water — into the blowout preventer, which sits over the well, smothering the leaking oil. If the maneuver, which is planned for sometime this week, works, the company will follow the drilling fluid with cement. 'That should stop the well,' said Suttles. 'We intend to fill it up with cement, and then we'll never produce from it.'"
GM is making a profit, report Peter Whoriskey and Dana Hedgpeth: "General Motors on Monday reported its first quarterly profit in nearly three years, as the automaker rescued last year by the U.S. government gained strength with the recovering economy. The company, which shed billions of dollars in debt in a bankruptcy last year, earned $865 million in the first quarter, compared with a $6 billion loss in the year-ago period." The company has paid back billions in government loans, but won't erase its debt until it buys back the feds' equity stake.
Senate Democrats are threatening to filibuster financial reform unless their demands are met, report Meredith Shiner and Carrie Budoff Brown: "Sen. Byron Dorgan (D-N.D.) has said he will filibuster the bill unless the Senate votes on his amendment banning a speculative financial instrument known as a 'naked' credit default swap. Sen. Maria Cantwell (D-Wash.) has done the same, saying she needs a vote on her amendment separating commercial and investment banking operations." Majority Whip Dick Durbin says he's confident all Democrats will get on board.
GIF interlude: Animated album covers.
Table of Contents: FinReg will allow consumers to see their credit scores (and other FinReg news); GM is finally turning a profit (and other economic news); one of the head offshore drilling regulators is resigning (and other energy news); Obama is clashing with Congress on transportation (and other domestic policy news); and health care stakeholders are creating a nonprofit to influence the reform bill's implementation (and other health care news).FinReg
Credit reports now have to include a credit score, reports David Herszenhorn: "The Senate, by a voice vote, approved a proposal by Senator Mark Udall, Democrat of Colorado, to require that credit reports include the numerical score, which by the most common measure ranges from 300 to 850. Obtaining a score from the major credit reporting bureaus that calculate them typically costs up to $15.95 for each score. 'This I believe will empower consumers, it will increase the financial literacy in our country,' Mr. Udall said. 'It’s a win-win.' His proposal would require the score to be provided if it was used to deny credit, required a higher interest rate on a loan, or prevented an applicant from being hired for a job." Read on for more amendments passed.
The NY Fed demanding systemic changes in the all-important repo market, reports Jon Hilsenrath: "Officials at the Federal Reserve Bank of New York are pushing Wall Street firms to ramp up efforts to stabilize an important corner of the financial system called the repo market, where securities dealers attain trillions of dollars of short-term financing every day. A working group of Wall Street firms on Monday recommended changes to this market that it said would make repo trading less prone to panics. But the New York Fed responded in a white paper that the proposed overhauls, while a step in the right direction, 'do not address all areas of concern in the tri-party repo market,' including the risk of fire sales of securities that could hurt the financial system."
Federal housing assistance is hurting some of its "beneficiaries", reports Jamse Hagerty: "The Treasury reported Monday that nearly one in four homeowners who were offered lower payments under the Obama administration's 15-month-old effort have been weeded out of the program. Many people were removed from the trials because they failed to make payments, didn't provide all the financial documents needed to qualify or were found to be ineligible." While waiting to learn they were ineligible, the homeowners continued to make bank payments that may have been in vain.
Senators passed an amendment curbing foreign bailouts, report Greg Hitt and Victoria McGrane: "The measure, adopted by a 94-0 vote as an amendment to the financial regulatory overhaul bill the Senate is considering, would require the Obama administration to certify that any future loans made by the International Monetary Fund would be fully repaid. Absent such as certification, U.S. representatives to the IMF would be required to oppose the lending. The U.S. is a major funder of the IMF, which provided loans to Greece as part of a larger support package." Banking committee chair Chris Dodd backed the proposal, while Treasury secretary Tim Geithner expressed concern.
GE is fighting for an amendment that would exempt it from financial regulation, reports Jia Lynn Yang: "The amendment, which the Senate might vote on early this week, could make it difficult for federal regulators to address threats to the global financial system posed by such companies as the industrial giant General Electric, which extends tens of billions of dollars a year in customer loans through a subsidiary. In recent days, GE and other manufacturers have ramped up their efforts to draw attention to how the Senate legislation affects industrial companies." The amendment would exempt companies making more than 85% of their revenue outside finance from strict regulation. Opposition to it says as much about the creeping-financialization of companies that used to make their money by producing things as about the amendment itself.
FinReg passage is still unlikely, writes Michael Grunwald: "It's mostly an Occam's razor thing. Every House Republican voted against the bill the House passed last year. Every Senate Republican signed a letter opposing the bill the Senate is debating now. Big Finance is spending $1.4 million a day to fight reform, with a lobbying army that includes 70 former Congressmen and just about everyone who ever staffed a congressional banking committee. It's certainly possible that Congress would resist all that pressure, and the same Republicans who marched in lockstep against health reform would stop blasting President Obama's socialism long enough to hand him another huge victory before the 2010 elections. It just doesn't seem all that likely."
Noise-pop interlude: Sleigh Bells plays "Rachel".
An IMF report shows that we can make up the revenue to solve the debt crisis, writes Diane Lim Rogers: "They examine a variety of specific revenue measures (VAT, excise tax increases, and carbon fees/taxes-as shown in Table 11 on page 47) that for the U.S. could contribute a total of over 6 percent of GDP, or just about half the 12 percent of GDP adjustment needed over the next couple decades to stabilize debt/GDP to around 60 percent. That doesn’t even include any possible base broadening of the current federal income tax...Age-related spending may be driving most of the longer-term problem but it can’t be all of the solution, because it’s doubtful we could damp down such spending enough, and even if we theoretically could, would we really want to (as a compassionate society)?"
A Greek default would help the Euro, writes John Cochrane: "A currency union is strongest without fiscal union. Then countries are no different from companies. If they borrow and cannot pay back, investors lose money. The currency is unaffected...But the euro will be a disaster as a monetary union with loose fiscal controls and constant speculation about will-they-or-won't-they (or can-they-or-can't-they) trillion-euro bailouts and ECB financing. The Europeans have found the worst possible combination."
Left-wing deficit Pollyannas don't understand deficit dynamics, writes Len Burman: "Galbraith is wrong. To start, he doesn’t understand debt dynamics. He says that when interest payments hit 20 percent of GDP, government borrowing will create inflation, which will make the debt go away. He doesn’t account for the fact that a growing share of government spending is in the form of indexed benefits (Social Security, explicitly, and other entitlement programs like Medicare, implicitly). Also, higher expected inflation translates directly into higher nominal interest rates, since lenders demand a hefty premium so their investment is not eroded by inflation. The higher nominal interest rate applied to an enormous debt would cause nominal debt levels to explode. Sudden inflation can devalue the debt, but only temporarily unless there are draconian cuts in real spending levels (to reduce deficits and convince financial markets that inflationary pressures will not persist). And, of course, high inflation entails huge economic costs."
The Euro is still in free fall, reports Anthony Faiola: "The euro clawed back from a deep spiral in Asian trading Monday, closing down 0.2 percent at 1.239 against the dollar. But after its slide of almost 4 percent against the greenback over the past week, analysts say the euro's continued fall over the coming months may be inevitable given the economic turmoil gripping the region. Assuming there is no full-blown run, the decline may not be all that bad for Europe -- a weaker currency, after all, would make German BMWs and Spanish wines cheaper overseas, heightening demand. By the same token, a surging dollar would make U.S. products less competitive." A continually falling currency could result in countries pulling out of the Euro-Zone.
Graduation season interlude: Eugene Mirman returns to his high school to give a commencement speech.
Obama will create a commission to investigate the BP oil spill, reports Kendra Marr: "One official likened the new panel to one ordered by President Jimmy Carter to examine the partial meltdown at the Three Mile Island nuclear plant in 1979." The announcement comes after the introduction of a bill in Congress to establish a commission; the Homeland Security and Interior Departments are already investigating the incident. We will not lack for reports.
A top oil regulator is resigning, reports Stephen Power: "The top federal official who led regulation of offshore oil drilling at the Minerals Management Service will retire at the end of the month, according to people familiar with the situation. The departure of Chris Oynes, associate director for offshore energy and minerals management at the MMS, comes as the agency faces growing criticism from Congress and the White House following last month's deadly explosion of the Deepwater Horizon oil rig." House Natural Resources Committee chairman Nick Rahall praised the resignation as a sign of change.
Janet Napolitano defended the response to the spill before the Senate, reports Jake Sherman: "Homeland Security Secretary Janet Napolitano, the first of several cabinet officials scheduled to testify on Capitol Hill this week, admitted the government has 'limited capability and expertise' in dealing with such disasters in very deep water. And she said nobody would have predicted that a blowout preventer wouldn’t work. 'I think before the blowout, it is clear that there was an assumption that a (blowout preventer) would never fail,' Napolitano said." Still, Napolitano faced sharp criticism from Government Reform & Homeland Security chairman Joe Lieberman and ranking member Susan Collins.
Lack of preparation for leaks is industry-wide, report Ben Casselman and Guy Chazan: "It's a problem that spans the industry, whose major players include Chevron Corp, Royal Dutch Shell and Petróleo Brasileiro SA. Without adequately planning for trouble, the oil business has focused on developing experimental equipment and techniques to drill in ever deeper waters, according to a Wall Street Journal examination of previous deepwater accidents. As drillers pushed the boundaries, regulators didn't always mandate preparation for disaster recovery or perform independent monitoring."
Choose-Your-Own-Adventure Interlude: How would you solve the oil spill?
House transportation chairman Jim Oberstar is frustrated with the White House, reports Elana Schor: "It was supposed to be a career-defining moment for Rep. James Oberstar (D-Minn.). He finally held the gavel of the House Transportation and Infrastructure Committee, after four decades of waiting and had a like-minded president in office to help enact his sweeping vision for highways and public works. But Oberstar was cut down before he even got started. Hours after he began circulating his plan last spring for a six-year, $500 billion investment in roads and rail, Transportation Secretary Ray LaHood simply called for an extension of the 2005 highway bill — effectively cutting off long-term expansion plans." The Obama administration rejected Oberstar's proposed gas tax increase as a non-starter in an election year.
Obama is losing his hands-off attitude toward Congress, report Glenn Thrush and Kendra Marr: "After watching congressional Hill Democrats squander months — and perhaps their majorities — on health reform and a grab-bag stimulus package, the White House is taking a more hands-on approach with its highest priority bills before this fall’s midterm elections. 'The clock is running out, and they realize they need to provide a much more specific idea of what they want,' a senior Senate Democratic aide said. 'We like it. We can use the sense of direction.'”
Bob Herbert wants more high schools to offer college degrees: http://nyti.ms/aoS4cn
David Leonhardt explains the wage benefits of a college education: "I think the answer lies in the most straightforward data of all: the relative pay of college graduates and everyone else. Imagine for a minute that the gap between the pay of college graduates and everyone else had been shrinking in recent years. In that case, you can be certain that Professor Vedder and the other skeptics would be pointing to these numbers as a sign that college degrees were losing their value. But the skeptics tend not to talk very much about the pay gap." And there are graphs!
Food producers are pledging healthier products, reports Jane Black: "In a direct response to Michelle Obama's declared war on childhood obesity, an alliance of major food manufacturers on Monday pledged to introduce new, more healthful options, cut portion sizes and trim calories in existing products. The Healthy Weight Commitment Foundation, a coalition including Campbell Soup, Coca-Cola, General Mills, Kellogg, Kraft Foods and PepsiCo, will slash 1 trillion calories by the end of 2012 and 1.5 trillion calories by the end of 2015. The 16 members make 20-25 percent of food consumed in the United States."
Long-form interlude: Rebecca Mead profiles Andrew Breitbart.
Health-care companies and advocacy groups are coming together to maximize enrollment in the health-care law, reports Chris Frates: "With health reform in the books, some of the most powerful industry groups that battled against each other during the epic debate have now teamed up and raised $450,000 to explore the idea of creating a national nonprofit that would help implement key parts of the law. PhRMA, the drug manufacturers’ trade group, donated $100,000 to the effort, while the American Hospital Association is in for $50,000. Health insurers and other stakeholders in the new law are also contributing to the effort that is aimed at ensuring the millions of people newly eligible for Medicaid and insurance subsidies are able to easily apply and receive those benefits." The idea was hatched by Families USA, a liberal health care advocacy group.
Many health care reform provisions are taking effect soon. Jennifer Haberkorn recaps them: http://politi.co/aktfS1
Health care reform is already interfering with patient choice, writes Scott Gottlieb: "One of the few remaining ways to manage expenses is to reduce the actual cost of the products. In health care, this means pushing providers to accept lower fees and reduce their use of costly services like radiology or other diagnostic testing. To implement this strategy, companies need to be able to exert more control over doctors. So insurers are trying to buy up medical clinics and doctor practices. Where they can't own providers outright, they'll maintain smaller 'networks' of physicians that they will contract with so they can manage doctors more closely. That means even fewer choices for beneficiaries. Insurers hope that owning providers will enable health policies to offset the cost of the new regulations."
We need to get patients out of emergency rooms, writes Jennifer Brokaw. Here are four ways how: http://bit.ly/c9f6GL
Closing credits: Wonkbook compiled by Dylan Matthews. Photo credit: John Moore/Getty Images
Maria Cantwell - United States Senate - Byron Dorgan - Phil Mickelson - Kelly Slater