Wonkbook: Oil containment threatened; Fannie cracks down; US alone on spending

In another example of machines rising up to destroy their human masters, a collision with an underwater robot knocked out the cap BP has siphoning oil from the leaking well in the Gulf. In other news, the US finds itself alone in urging spending rather than austerity at the G20 summit, five states are getting federal money for programs to help homeowners pay their mortgages, and Fannie Mae is taking action to punish homeowners who fail. But all that will be overshadowed because today is the final day of financial regulation's conference negotiations. Wait, I got that wrong. All that will be overshadowed because today is the day the iPhone 4 goes on sale.

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The leaking BP oil well is gushing oil into the Gulf again following a robot mishap, reports Susan Daker: "An underwater robot collided with a cap placed atop the leaking deepwater well on Wednesday morning, forcing the company to halt the operation of the Discoverer Enterprise, the larger of two vessels currently capturing oil in the Gulf of Mexico. The cap connects with the vessel via a mile-long pipe, helping siphon up to 18,000 barrels of crude a day. If the cap isn't replaced quickly, BP will be unable to stick to its plan of capturing 53,000 barrels a day by early next week, the U.S. Coast Guard said."

As the US urges stimulus spending, many other G20 nations are adopting austerity packages, reports Ian Swanson: "Germany, France and Great Britain have all launched austerity campaigns designed to reduce public debt. They’re motivated in part by the Greek debt crisis, which continues to scare countries across Europe."

Fannie Mae will not provide loans to borrowers for seven years if they default on a mortgage: http://bit.ly/aYBrV2

Five states are getting Treasury funds to help homeowners, reports Darrell Hughes: "State housing agencies in Arizona, California, Florida, Michigan and Nevada will receive a total of $1.5 billion from the Obama administration's 'Hardest Hit Fund.' 'These states have identified a number of innovative programs that will make a real difference in the lives of many homeowners facing foreclosure,' said Herbert Allison Jr., Treasury assistant secretary for financial stability."

But is it -- as many of the administration's housing programs have been -- too little, too late? http://bit.ly/9nugzL

The Onion interlude: "Obama's Weekly Video Addresses Becoming Increasingly Avant-Garde".

Still to come: Liberals not getting their calls returned by the White House; the Fed confirms it will have low interest rates into 2011 and even 2012; Canada's "quaintly, old-school" mortgage industry; doctors will start working more manageable hours; and a tiny kitten wearing a tiny hat eats a tiny ice-cream cone.Energy

Ken Salazar is considering a limited version of the deepwater drilling moratorium a judge recently struck down, reports Siobhan Hughes: "He said certain types of activities could be allowed if the government determines they are safe. 'It might be that there are demarcations that can be made based on reservoirs where we actually do know the pressures and the risks associated with that versus those reservoirs that are exploratory in nature,' Mr. Salazar told the Senate Appropriations Committee. 'The moratorium order that we will issue will include the criteria under which it is appropriate to take a look at the lifting of the moratorium.'"

The House Judiciary Committee passed a bill allowing Transocean to be held liable for rig worker deaths: http://bit.ly/dAm6c4

Liberal Senators are urging Obama to push harder for climate legislation, report Darren Samuelsohn and Manu Raju: "At a closed-door meeting of the Senate Democratic Caucus earlier this month, some of those frustrations came to a boil. Several Democrats complained that the administration needed to do a better job of communicating the problems facing the Gulf Coast and the solutions that Congress could provide for them. Reid urged his members to tell the White House about their concerns - only to have several, including Sheldon Whitehouse of Rhode Island, complain that their phone calls were not being returned."

The House passed a law giving the commission investigating the oil spill subpoena power by a vote of 420 to Ron Paul: http://bit.ly/9ZxIsv

Adorable animals being adorable interlude: Kitten Wearing a Tiny Hat Eats a Tiny Ice-Cream Cone.

Economy/FinReg

The Fed is cautious on the US' economic recovery prospects, and promises low rates through 2011/12, reports Jon Hilsenrath: "The Fed on Wednesday said the recovery from the deep recession is 'proceeding,' a departure from its April assessment that the recovery 'continued to strengthen.' Consumer spending is 'increasing but remains constrained,' the job market is improving 'gradually,' housing is 'depressed' and inflation-already low-has 'trended lower,' the central bank said."

German chancellor Angela Merkel is rebuffing the administration on stimulus spending: http://bit.ly/9tj7CL

Scott Brown's attempt to allow banks to invest in hedge and private equity funds is succeeding, reports Brian Beutler: "Brown for weeks has been seeking a carveout in the legislation--originally authored by Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR)--that would allow banks to invest a portion of their profits in hedge and private equity funds. And as the 60th vote for financial reform, his demands carry a lot of weight.…Multiple sources tonight say that in all likelihood the hedge fund loophole (known as a 'de minimis exemption') will be included in the offer that the conference committee considers this week."

Jeannine Aversa takes you inside the Federal Reserve's Open Market Committee: http://bit.ly/9k2ett

The US could look to Canada's "quaintly, old-school" mortgage industry as a model, reports Howard Schneider: "With U.S. home sales and prices still shaky, Fritz bought in a Canadian market that already has rebounded beyond pre-crisis levels. Without the key tax advantages available to U.S. home buyers, he amassed as much as possible for the down payment, and he expects to pay off his 15-year mortgage with the same bank that gave him the loan -- a rarity in the United States, where finance companies typically resell mortgages."

Neil Irwin reports on the European Central Bank's desperate effort to save the euro -- and the Union: http://bit.ly/av9XVp

Chuck Schumer is under pressure to kill his China currency bill, reports Ian Swanson: "The White House has pressed Sen. Charles Schumer (D-N.Y.) not to offer his China currency legislation as a floor amendment, where it would almost certainly be approved, according to two sources. White House Chief of Staff Rahm Emanuel is one of several figures in the administration to have contacted Schumer to pressure him to hold back."

The Business Roundtable is clarifying its complaints with the White House's economic policy, reports Lori Montgomery: "The final straw, said Roundtable president John Castellani, was the introduction of two pieces of legislation, now pending in Congress, that the group views as particularly bad for business. One, a provision of the administration's financial regulation overhaul, would make it easier for shareholders to nominate corporate board members. The other would raise taxes on multinational corporations."

Former SEC chairman Arthur Levitt says FinReg is not nearly strong enough: http://bit.ly/bEqzWq

Shimmery pop interlude: Magic Kids' "Hey Boy".

Domestic Policy

Medical residency programs are cutting hours to reduce doctor fatigue, reports Shirley Wang: "Amid continued concern about errors by overworked medical residents, hospitals would be forced to curtail shifts and increase supervision of some doctors-in-training under proposed new guidelines for residency programs released Wednesday. The plan from the Accreditation Council for Graduate Medical Education, which certifies residency programs, goes well beyond previous efforts to limit work hours. Many patient advocates and physicians hailed it as a step in the right direction, but it would likely pose logistical and financial challenges for teaching hospitals."

A vote on the DISCLOSE Act could happen Thursday: http://bit.ly/cfBXIX

Peter Orszag's potential successors show administration divisions on deficit reduction, reports Jonathan Weisman: "Of the leading contenders to succeed Mr. Orszag, two have proven deficit-reduction credentials. Treasury adviser Gene Sperling was an adviser to President Bill Clinton, who focused on deficit reduction, and former Deputy White House Budget Director Rob Nabors has been the senior aide to Mr. Orszag. But a leading contender, former Clinton White House economist Laura Tyson, has been heralded more for her communications skills than her dexterity with a budget knife. Other names include Stan Collender, a budget expert at the public-affairs firm Qorvis, and John Berry, director of the U.S. Office of Personnel Management."

The GOP will seek to paint Elena Kagan as a "political operative": http://nyti.ms/d9w2Hy

GOP House members are threatening to withhold support for a war supplemental if it includes other funding, reports David Rogers: "Republican leaders warned Wednesday that their House members will withhold support by voting 'present' on the war funds if Democrats attempt to add new domestic spending, including $10 billion to help local school boards avert teacher layoffs in the fall."

David Broder argues a better campaign finance approach is possible: "Michael Malbin, executive director of the nonpartisan Campaign Finance Institute, argues for abandoning the regulatory response to the Supreme Court decision in favor of an empowerment strategy.…Malbin's model is the New York City system, with a 6-to-1 match for the first $175 of any contribution, making it worth $1,225 to the candidate. With that kind of payoff, he says, candidates would have every reason to go after small contributors -- and pay less attention to the fat cats."

GOP calls to cut Medicaid now put states and the poor in jeopardy, writes Derek Thompson: "Take New Jersey, where Gov. Chris Christie has proposed to cut $11 billion (that's 25%!) of the state budget for its fiscal year 2011, which begins in two weeks. The states are looking to the federal government to determine how much money they'll need to allocate toward Medicaid and education. If cut our new Medicaid crutch in half, the states' Medicaid burden grows and in a zero-sum budget, that means something else goes."

Closing credits: Wonkbook compiled with the held of Dylan Matthews and Mike Shepard. Photo credit: Derick E. Hingle/Bloomberg Photo

Gulf of Mexico - United States - BP - United States Coast Guard - Fannie Mae