Congress Back To Work
CQ on congressional schedule for clean energy and health care: "House Energy and Commerce Chairman Henry A. Waxman, D-Calif., has said he expects to complete work on a climate-change bill, which will probably include a controversial cap-and-trade system to regulate emissions, before Congress leaves for its next break around Memorial Day. Waxman and other chairmen involved in the health care issue say they expect a bill on that topic to reach the House and Senate floors before Congress leaves for its long August recess."
AP on Senate health care plans for June committee vote: "Senators begin their work in public Tuesday at a Senate Finance Committee meeting on how to change the health care delivery system to make it more efficient. They will meet the following week in closed session to consider specific proposals that would affect doctors, hospitals and other medical providers. Similar sessions are scheduled on expanding coverage and paying for a revamped system. Leaders are hoping the committee can vote on a bill by mid-June. Separately, the Senate Health, Education, Labor and Pensions Committee is working on a complementary bill, with the goal of merging the two in the full Senate. It's unclear whether Senate Republicans will offer their own bill."
Congress to revisit voting procedure for health care and student lending. CQ: "The major [budget] differences are over discretionary spending levels and whether to use the fast-track approach on health care [and student lending]. The House wants to spend more on the fiscal 2010 appropriations bills and use the budget reconciliation process, which prevents filibusters in the Senate, to move legislation in September overhauling the health care system and student loan programs. Unless negotiators feel pressure from chamber leaders and the White House to resolve these issues quickly, it is possible a final agreement on the budget may not be reached until Memorial Day."
House Majority Leader Steny H. Hoyer will summon three committee chairmen and other pivotal players to his office this week to plot strategy on the sticky priority of health care," reports CQ, "the first time the majority leader will gather with the chairmen to discuss specifics of their proposals for health care legislation."
Politico deems Republicans outgunned on health care reform: "There’s no Republican plan yet. No Republicans leading the charge who have coalesced the party behind them. Their message is still vague and unformed. Their natural allies among insurers, drug makers and doctors remain at the negotiating table with the Democrats ... The void on the right has been so vast that a millionaire health care entrepreneur named Rick Scott stepped into it as the unlikely face of Republican opposition. His record isn’t spotless, having lost control of Columbia/HCA, then the country's largest hospital company, in 1997 amid a Medicare investigation ... But he is the only one so far to put up money."
FamiliesUSA and PhRMA teaming up on Medicaid expansion and pre-existing conditions, reports Politico, "but leave unaddressed the debate’s most controversial element: the creation of a public insurance plan. "
GEORGE STEPHANOPOULOS: How is he going to pay for the programs?
EMANUEL: ...it's not just the president. It's what we work with Congress. That process is beginning. I think, in this next five weeks, you'll see tremendous progress at the -- at the committee level, to getting that done. And he does not believe that's the first step. And what you have to do, as he believes, is make the cuts in the system that we have today because we're overpaying for a lot of things; and second, is change the incentives before you get to immediately going to a default position that you have to raise taxes.
STEPHANOPOULOS: But is he open to taxing employer benefits?
EMANUEL: He -- he has said he opposed that, as he said in the campaign. And that's what he believes, and believes is, before you get there, you have got to address the priorities.
STEPHANOPOULOS: So he won't sign a bill that includes that?
EMANUEL: George, I'm not going to do any absolutes on your show.
Emanuel confident of clean energy bill, not as confident on capping carbon, but still the "goal":
EMANUEL: At the end of this first year of Congress, there will be an energy bill on the president's desk.
STEPHANOPOULOS: That includes cap-and-trade?
EMANUEL: Our goal is to get that done. We will see.
Waxman draws lines, leaves room for compromise, on carbon cap in Bloomberg interview:
...we’re looking at the 20 percent cut [in greenhouse gas emissions by 2020], that’s part of our original bill. There are a lot of other areas where we’re going to negotiate, but I want to keep those caps in place [becuase] it’s based on the science...
...we’re looking to use some of the funds generated by the cap- and-trade program to redirect it to help consumers with higher energy costs, to help some of those industries that are going to be hard-hit and need assistance, especially the coal, so that we can get to that carbon sequestration....
...The part that we have not yet resolved is what do we do with the allowances to allow people to pollute carbon, which will be shrinking, but it will be valuable and they can trade it. And we want to figure out, do we auction them all? Do we auction them all and then direct the money in certain areas? Do we direct to certain areas even without an auction? These are the issues we’re going to be deciding in the next two, three weeks...
...The president proposed in his budget that a huge amount of [the revenue from auctioning allowances], maybe all of it, go to help pay for his middle class tax cut. I disagree with that. I think we’ve got to look at making this whole system work. You know, we’re trying to accomplish three big things: We’re trying to protect our national security and reduce our dependence on foreign oil; we’re trying to avert the calamitous results of global warming; and we’re going to transform our economy in a major way. People look at the costs but they forget the huge benefits -- the whole new economy that will be evolving around the efforts to meet the carbon emission deadlines and caps -- limits -- and all of the industries that are going to grow up around that. So we are trying to accomplish those three goals and the president was going to use the money for the tax cut. I don’t think that’s the best use of it.
Bloomberg indicates carbon cap compromise possible: "[Michigan Rep. John] Dingell and [Virginia Rep. Rick] Boucher may be willing to accept the higher reductions in part because of Waxman’s proposal for allocating the permit revenue."
Anonymous Officials Give Unclear Answers on Bank Bailouts
Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times. "Our general objective is going to be what is good for the system," the senior official said. "We want the system to have enough capital." ...
...The official, meanwhile, said banks that had plenty of capital and had demonstrated an ability to raise fresh capital from the market should in principle be able to repay government funds. But the judgment would be made in the context of the wider economic interest. He said the government had three basic tests. It needed first to “make sure the system is stable”. Second, to not create “incentives for more deleveraging which would deepen the recession”. Third, to make sure the system had enough capital to “provide credit to support the recovery”.
The official said former Treasury Secretary Hank Paulson was right to treat all the banks the same way in late 2008 at the peak of the crisis but it was now necessary to differentiate more between institutions. Stronger ones should be encouraged to raise more capital, while the government would target its interventions to support weaker ones.
“What we want is for the differentiation to be more based on knowledge rather than some big uncertainty.” He said the bank stress tests reaching completion would provide that basic information.
LA Times quotes official on what stress test info could be made public: "The tests are expected to be finished by the end of the month, with release of some information on May 4 from regulators and possibly by the banks themselves, according to a federal regulatory official, who requested anonymity because he was not authorized to speak publicly about the tests. Exactly what kind of information will be released is 'under active discussions,' the official said ... To avoid misinterpretations, the administration plans to release details about the testing process Friday to give the public and investors a grounding for whatever data are released May 4, the regulatory official said."
Time on what the stress tests are expected to reveal: "a senior Administration official says the Treasury Department has indicated that there is substantial value in the banks tested and that there are no big shocks coming ... But the most surprising result from the stress tests and related discussions may be this: bankers continue to appear oblivious to the nation's insistence that regulations be put in place to keep banks from ever again putting the economy at such risk. 'I just don't think they get it,' the official says, referring to bankers' unwillingness to take responsibility for past behavior."
WH Chief of Staff Rahm Emanuel says, "I think we will be able to avoid" temporary bank nationalization, on ABC's This Week.
NYT on plans to convert loan money to common stock:
In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock. Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return.
While the option appears to be a quick and easy way to avoid a confrontation with Congressional leaders wary of putting more money into the banks, some critics would consider it a back door to nationalization, since the government could become the largest shareholder in several banks ... Taxpayers would also be taking on more risk, because there is no way to know what the common shares might be worth when it comes time for the government to sell them.
Beat The Press' Dean Baker notes: "The article does not discuss the very important issue of the rate of [common stock] conversion. At the time the government converted its preferred shares in Citigroup to common shares, the conversion ratio was far below the market value. By accepting a ratio below the market value, the government was essentially just giving money to Citigroup and its shareholders. It will be important to examine the price for any future conversions to determine if they are also government giveaways to the banks."
NYT on how government shareholder reps to AIG act independently with no oversight: "the trustees are legally independent of the Treasury and the Federal Reserve. They cannot be fired or replaced simply because their votes clash with the positions of policy makers. And though they are not supposed to get involved in day-to-day management or set A.I.G.’s broad strategy, they have full power to vote the government shares."
WSJ analysis paints worse picture of TARP results than Treasury: "According to a Wall Street Journal analysis of Treasury Department data, the biggest recipients of taxpayer aid made or refinanced 23% less in new loans in February, the latest available data, than in October, the month the Treasury kicked off [TARP] ... The Journal's analysis paints a starker picture of the lending environment than the monthly snapshots released by the government and is a reminder of the severity of the credit contraction. One reason for the disparity: The Treasury crunches the data in a way that some experts say understates the lending decline."
"Citigroup Inc.’s credit losses are growing at a 'rapid rate,' undermining Chief Executive Officer Vikram Pandit’s efforts to stabilize the U.S. bank, according to Goldman Sachs Group Inc.," reports Bloomberg.
The Stash's Noam Scheiber on cooked bank books: "You don't have to read very far into the coverage of the recent bank earnings announcements to see that there's a lot of dodginess involved. First Goldman reported a $1.8 billion profit, which was great until we learned that they conveniently left December out of their quarterly numbers--December being the date of some enormous losses. Now, Citigroup is touting its $1.6 billion profit--except that, once you read a little further, you notice that what drove it was a $2.7 billion one-off gain that's entirely an artifact of accounting alchemy ... it sounds like Pandit is so concerned about his own job that he's casting his lot with these transparent shenanigans."
"Two Federal Reserve policy makers defended the central bank’s emergency lending, saying it won’t cause an inflationary surge or create 'significant' risk for U.S. taxpayers," reports Bloomberg. WSJ adds: "There's a risk, in fact, that if the economy weakens much more, the opposite of inflation -- deflation -- could become a serious threat. That's why the Fed's goal for now is to get inflation higher, not lower ... [but if] the Fed is too slow to mop up, the economy could theoretically overheat and lead to an inflation comeback."
Credit Card Crackdown?
Larry Summers previews new credit card rules on Meet The Press: "[The president is] going to be very focused in the very near term on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew they were getting themselves into. He's going to be pushing on issues relating to what's known as systemic risk, the, the concern that an institution gets itself into a situation where it becomes itself a source of risk to the whole, to the whole financial system. "
Reuters adds: "Mr Summers and other officials are scheduled to meet Thursday at the White House with top executives of credit card companies. The meeting comes as lawmakers in the Democratic-led Congress have vented anger that banks with big credit card operations charging high interest rates and fees are the same institutions getting government bailouts from US taxpayers who use these credit cards. The House and Senate are considering a credit card 'bill of rights' that would limit the ability of credit card companies to raise interest rates on existing balances and require greater disclosure of terms."
Breakfast Sides
ataxingmatter challenges Peterson Foundation CEO David Walker's fuzzy tax math:
Walker claims that American's tax bill will double over time, due to the federal debt burden, and tries to "put things in perspective" by using a calculation of the federal day as of September 30, 2008 to conclude that "every man, woman and child in the country" will have to pay off that debt with $184,000. Of course, that calculation--besides averaging, again, the high bracket incomes with the low, also fails to consider the fact that debt is paid off over time, and so may be paid off with much higher incomes than those currently enjoyed, thus appearing to be less of a burden than when stated in 2008 dollars. In other words, the campaign appears to be intent on making all Americans resent entitlement spending because, it is claimed, every American's taxes will have to double to pay for it. While he includes tax increases in the list of things that need to be done, he doesn't specify whose taxes need to increase the most. But he makes clear that he thinks we need to cut spending on entitlements...
...slanting the playing field with drivel about "average taxes" and "doubling your taxes" is not the way to go about informing Americans. It's scare tactics, nothing more or less.
Home, care and life Insurance premiums are rising, reports USA Today.
Terrance Heath contributed to the making of this Breakfast.
