Each morning, Bill Scher and Terrance Heath serve up what progressives need to affect change on the kitchen-table issues families face: jobs, health care, green energy, financial reform, affordable education and retirement security.
Obama Seeks To Summon Spirit Of Glass-Steagall
President Obama to propose new banking firewalls in the "spirit of Glass-Steagall" after meeting with Paul Volcker today. WSJ: "Mr. Obama's proposal is expected to include new scale restrictions on the size of the country's largest financial institutions. The goal would be to deter banks from becoming so large they put the broader economy at risk and to also prevent banks from becoming so large they distort normal competitive forces. It couldn't be learned what precise limits the White House will endorse, or whether Mr. Obama will spell out the exact limits on Thursday. Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. Administration officials say they want to place 'firewalls' between different divisions of financial companies to ensure banks don't indirectly subsidize 'speculative' trading through other subsidiaries that hold federally insured deposits.
NYT list the big banks hit by the proposal: "Only a handful of large banks would be the targets of the proposal, among them Citigroup, Bank of America, JPMorgan Chase and Wells Fargo. Goldman Sachs, the Wall Street trading house, became a commercial bank during this latest crisis, and it would presumably have to give up that status ... the concern is a new type of activity in which financial giants like Citigroup, Bank of America and JPMorgan Chase engage. They now operate on two fronts. On the one hand, they are commercial banks, taking deposits, making standard loans and managing the nation’s payment system. On the other hand, they trade securities for their own accounts, a hugely profitable endeavor. This proprietary trading, mainly in risky mortgage-backed securities, precipitated the credit crisis in 2008 and the federal bailout."
Slate's Big Money further explains how Goldman and others exploited "prop trading": "...investment banks, with Goldman being the prime example, used prop trading to bet against some of the very securities products they were selling to customers."
Baseline Scenario's Simon Johnson encouraged, wants to see some fight: "This is an important change of course that, while still far from complete, represents a major victory for Volcker – who has been pushing firmly for exactly this ... Push every Republican to take a public stand on this question, and you will be amazed at what you hear (if they stick to what they have been saying behind closed doors on Capitol Hill.) ... The major question now is – will the White House have the courage of its convictions and really fight the big banks on this issue? If the White House goes into this fight half-hearted ... they will not win."
Naked Capitalism wants more details: "This all sounds well and good, in fact, I’ve advocated prohibiting prop trading (you’d need pretty active monitoring of overnight positions to make sure it has not simply been moved back to order flow desks). It is not a socially productive activity and has no place in firms enjoying government backstops. But how do you 'limit' prop trading in firms that have international operations? Without the famed 'harmonisation' with the UK and EU, I’m curious as to how this can be implemented as to not be circumvented ... This is going to be very difficult to implement at this juncture, unless Team Obama has a purely regulatory solution."
Politico on the Glass-Steagall parallel: "That’s not quite the full-on reinstatement of the Depression-era Glass-Steagall separation between commercial and investment banks that some members of Congress – including Sens. John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) – and activists on the left and right, have called for. But its bust-up-the-banks essence is the same."
Congressional bailout watchdog and lead advocate for Consumer Financial Protection Agency Elizabeth Warren met with WH adviser David Axelrod yesterday. Marc Ambinder: "What did she and Axelrod discuss? 'There is no greater advocate for the financial interests of working people than Elizabeth,' Axelrod said in an e-mail. 'So I value her commitment and insights on issues like financial reform. There's never a doubt who's side she's on.'"
I.R.S. investigating derivatives tax loophole. NYT: "... equity swaps, mimic ordinary shares and give investors like hedge funds the benefits of stock ownership, including payments similar to dividends, without actually owning the shares. Big banks also benefit from the swaps because, under federal tax rules, the banks may avoid paying a 30 percent tax that is normally levied on stock trades. The Internal Revenue Service is examining whether banks are using the swaps to mask who really owns the shares underlying the instruments, thereby avoiding collecting dividend withholding taxes."
Mortgage assistance not keeping up pace of foreclosures. W. Post: "The [State Foreclosure Prevention Working Group] report found that the number of borrowers falling into trouble on their mortgages exceeded the number of borrowers able to tap into a federal mortgage assistance program. The foreclosure relief process appears to be backlogged [because of] cumbersome documentation requirements. The program has slowed the tide of foreclosures, but 'implementation failures have hindered the program's ability to reach its full potential,' the report said."
AIG filings, by request of NY Fed, blacked out key info from regulatory findings. Bloomberg: " American International Group Inc., the bailed-out insurer, included the word 'redacted' more than 1,000 times in regulatory filings tied to agreements for paying banks that bought credit-default swaps from the company. The insurer, asked by the Federal Reserve Bank of New York to limit disclosure, excluded a list of banks and collateral postings from a pair of 2008 filings, and then sought confidential treatment for the document in 2009 before making redacted versions available to the public."
NY Fed chief defends Fed against calls for transparency. NYT: "The president of the Federal Reserve Bank of New York warned Wednesday against auditing the Federal Reserve’s interest-rate decisions and curbing its regulatory powers, as some in Congress have urged. It was his most detailed defense to date of the central bank’s conduct during the financial crisis. At the same time, the president, William C. Dudley, offered a candid assessment of the failings of regulators."
Mixed Messages Galore On Health Care Next Steps
Obama statement confuses Congress. W. Post: "Obama added to the confusion Wednesday when he seemed to endorse one option: having both the House and the Senate start from scratch, by voting on a scaled-back package of popular provisions that would crack down on insurance companies but provide health coverage to far fewer additional people ... That message alarmed House Democratic leaders who had been seeking to round up votes for the Senate bill -- Obama's first choice, they had believed. The White House quickly moved to clarify that the president still wants comprehensive reform."
Varied comments by WH press sec Gibbs. The Hill: "White House press secretary Robert Gibbs pushed back against the notion that Obama would now like Congress to pass a scaled-down version of healthcare reform ... But later in the day, Gibbs carefully avoided a question from CNN’s Wolf Blitzer of whether a scaled-back version of the bill, which would only require 51 votes, was an option." TPMDC adds: "White House Press Secretary Robert Gibbs tonight acknowledged that the House may pass the Senate health care bill word-for-word ... It was apparently the first time the White House directly acknowledged that as an option."
LAT suggests possible GOP support for scaled-back bill: "...some Democrats believe they could win Republican support for limited changes to the healthcare system, including restrictions on insurance companies and new initiatives to restrain costs. Obama appeared to endorse such an approach Wednesday ... While nearly all Republicans fought the Democratic healthcare legislation last year as too intrusive and too costly, some have indicated support for parts of the package, including ending the practice by some insurance companies of terminating consumers' policies when they get sick ... But moving incrementally has its own dangers, since so many parts of the healthcare system are interrelated. Requiring insurance companies to cover more people, for example, would likely push up premiums unless more healthy people are required to buy insurance. Such a mandate could create problems unless the government provides subsidies to help people buy insurance."
LAT notes passing Senate version as is, with tweaks later, still on the table: "Democratic leaders are still exploring whether the House could pass the healthcare bill that the Senate approved just before Christmas, obviating the need for another vote on major healthcare legislation in the Senate, where Democrats would no longer be able overcome a Republican filibuster. The two chambers could then take up a separate package of changes to the Senate bill through a process known as budget reconciliation, which only requires a simple majority in the Senate ... The strategy got an important endorsement from Service Employees International Union President Andy Stern..."
Politico also reports no decisions have been made: "...after a day of chaotic talks in Congress, sources insisted that the White House hasn’t gravitated fully to the stripped-down bill as the only path to saving reform. Democrats were also gauging support for passing the Senate bill through the House and immediately approving a 'cleanup' bill with key fixes, a move endorsed by two major labor unions."
Sen. Kent Conrad opens door to budget reconciliation. The Hill: "Senate Budget Committee Chairman Kent Conrad (D-N.D.), who opposed using reconciliation for the entire healthcare bill, said, 'If the House passed the Senate bill, could reconciliation, that process, be used to fix things that might be improved upon? Yes. Would I support it? I can’t know that without knowing what would be included in the package.'" FDL's Jon Walker sees opening for public option: "...the question is what will be put in the reconciliation bill. The best political move would be to include a public option. The public option is very popular, and it would also save money. "
W. Post reminds that Massachusetts' own health care reform, backed by Sen.-elect Scott Brown, remains popular: "'Massachusetts's reforms continue to be popular in Massachusetts -- sufficiently popular that Brown did not repudiate them,' said Paul Starr, a Princeton public affairs professor. 'Here is a state that has enacted a similar reform and it is popular. That should encourage people that if it's done at the national level, that it would work as policy, and that it would be popular.'"
Michael Tomasky sees a way forward with what remains of the Democrats' majority: " If they let healthcare die, they completely demoralize their base. They look weak and afraid of Republicans. Remember, they have already cast these votes. If they kill it, they are flip-floppers. If they pass it, they risk alienating the majority -- and it is a majority, not a huge one, but one all the same -- that is against the bill ... It's a tough one. But you know what? The right thing to do in substantive terms is pass the damn bill. Healthcare will get worse and more expensive in this country without some kind of intervention. Anywhere between 18,000 and 45,000 people a year die for lack of good healthcare in America. If you're any kind of Democrat, from Maxine Waters to Ben Nelson, you are supposed to care about this, however imperfect the bill is."
Booman suggests that progressives are fooling themselves if they think killing health care reform will lead to something better in the next round: "It pains me to say it, but any progressives who think we will get more progressive outcomes in this Congress by allowing the Republicans to completely kill health care reform are just plain wrong. On the other side, any moderates who think the Senate health care plan is more popular than the progressive alternatives simply cannot read polling data. The path should be clear. Pass the Senate version and then make it more populist through the reconciliation process, and whip that vote like your presidency and your majorities depend upon it. "
Dems Debate Strategy As Obama Pivots To Jobs, Deficit
NYT on revamp WH strategy: "...administration officials ... said Mr. Obama would put more emphasis on issues like deficit reduction and job creation. He already was assembling a bipartisan budget commission and officials acknowledged that some proposals would probably take a back seat now, like a market-based cap on greenhouse gas emissions and liberalized immigration rules ... [However,] David Axelrod, made clear in media appearances Wednesday that the president would eschew the incremental, small-bore initiatives Mr. Clinton favored in the 1990s. And Mr. Axelrod’s public rhetoric in recent days has favored populist language about standing up to banks and insurers."
Congress split over agenda. Politico: "'We have to realize that the American people don’t like to drink from a fire hose,' said Louisana Sen. Mary Landrieu. 'We’re going to have to trim our sails a bit.' But liberal Democrats warned that independent voters would not be won back if Democrats shy away from hard issues. 'People want us to act,' said Maryland Sen. Ben Cardin. 'People in our states want us to deal with the economy, with jobs and the problems of America — including health care, including energy.'"
Sen. Bob Casey suggests jobs bill should now come before health care. AP quotes: "I don't think we have to wait for health care to be resolved one way or the other before we move to jobs. We need to put a jobs bill on the table very soon, certainly in the next few weeks."
Dana Millbank, at WaPo, notes that the Scott Brown's victory seems to have given conservatives a reason to continue being "The Party of No," and the Democrats seem to be falling for it: "What the American people don't hear is any offer by the Republicans to compromise with Democrats on health care, climate-change legislation, fiscal matters or much of anything else ... Even if Republicans were inclined to cooperate with Democrats, there's little political incentive for them to do so. Only 24 percent of Americans have a good amount of confidence in congressional Republicans, according to this month's Washington Post-ABC News poll. With that lowly standing — even worse than the Democrats' — Republicans' best hope is that Democrats achieve nothing this year and are punished by voters in November as do-nothing legislators. Yet the Democrats, predictably, are falling into the GOP's trap and trimming their ambitions."
Are the Democrat's becoming "The Party of Never Mind"? Never mind our agenda? Never mind our base? Ezra Klein: "...the reaction congressional Democrats have had to Coakley's loss has been much more shattering. It has been a betrayal. The fundamental pact between a political party and its supporters is that the two groups believe the same thing and pledge to work on it together. And the Democratic base feels that it has held to its side of the bargain ... It swallowed tough compromises on the issues it cared about most. It swallowed concessions to politicians it didn't like and industry groups it loathed. But it persisted. Because these things are important. That's why those voters believe in them. That's why they're Democrats ... If Democrats let go of health care, there is no doubt that a demoralized Democratic base will stay home in November. And that's as it should be."
Salon's Michael Lind rips "Obama's minimalist caution": "The tragedy of Obama is that his kind of cautious minimalism would be a virtue in an era of peace and prosperity, but is a vice in an age of national and global crisis. Our times call for determined and, if necessary, crude leaders willing to knock down rotten structures that can no longer be patched up. It remains to be seen whether Obama’s tragedy is America’s as well."
If the Democrats let go of health care reform and a demoralized base stays home, it may well be because they come to believe, as Harvey Wasserman puts it, "The Democratic shtick is to market the PROMISE of change while making sure it doesn't happen."
And that may mean the base is sending a message like the one Lance Simmens summarizes: "And let this be a warning to our elected leaders that it is not the dream that died but rather the faith that they would be able to make it come true that took a beating this week. So get to work and deliver lest you also suffer a similar fate soon."
Slate's Bruce Reed tells Democrats to "Cowboy Up" instead of surrendering the field in the first quarter: "...Democrats should remember that a party willing to take voters' lessons to heart has the chance to build a strong, more enduring bond with the electorate because of it. In 1994, Bill Clinton took the voters' message as a directive to govern the way he campaigned and be the president he was elected to be, not the president Congress wanted him to be. The country didn't change teams on Tuesday. Americans still want Obama to succeed, and still trust him to run the country far more than the other guys. As Curt Schilling might say, the Massachusetts race was more of a brushback pitch – a warning to those in power without regard to party that an electorate in a foul mood is always a force to be reckoned with."
Conrad Holds Out on Debt Commission Deal, Gregg Lambastes It
Sen. Gregg and GOP trash White House debt commission proposal, Sen. Conrad still talking. W. Post: "[Sen. Conrad] said he was still waiting for written assurances that Congress would give the commission's recommendations an up or down vote by the end of this year. 'Without a credible commission, there's not going to be a vote on a long-term extension of the debt,' Conrad said. Some congressional Republicans, meanwhile, said they would refuse to participate in a commission appointed by the president, calling it political cover for Democrats who want to appear as though they're taking action to rein in skyrocketing budget deficits. 'I wouldn't serve on it and I would strongly recommend to my leadership that they not put people on it,' said Sen. Judd Gregg (R-N.H.), who with Conrad has pressed lawmakers to establish a budget commission by law..."
Wonk Room's Pat Garofalo mocks Gregg: "...if you thought Gregg would be pleased with this development, you’d be wrong: 'It’s a fraud among anyone interested in fiscal responsibility to claim an executive order could structure something that would actually lead to action.' This is pretty amusing coming from Gregg, whose 'precedent for success' in this matter is the 1983 Greenspan Commission ... But the Greenspan Commission was created by executive order."
NYT reports GOP leaders uninterested in assisting Obama on deficit: "Top Republicans on Wednesday were hostile toward President Obama’s plan to create a bipartisan commission on cutting projected deficits, raising doubts about the prospects of a main piece of his budget strategy ... 'This sounds like political cover for Washington Democrats who are starting to realize that their out-of-control spending is scaring the hell out of the American people,' Mr. Boehner said of the tentative deal between the White House and Congressional Democratic leaders on Tuesday night."
Progressive coalition draws line what constitutes an acceptable commission. OurFuture.org: "At today's press conference, Campaign for America's Future Co-director Roger Hickey said the united progressive front 'can been taken as a warning' for any proposal that undemocratically subverts the normal legislative process and recklessly targets Social Security and Medicare. Speakers at the conference were willing to wait and see what compromise is reached before passing judgment. Hickey drew a line, explaining that 'a forum to talk about deficits is one thing,' but 'if it's undemocratic ... or focused on illegitimate targets like Social Security' which is not contributing to any long-term fiscal problem, then the White House and congressional leaders can expect tough criticism."
W. Post edit board, after partnering with debt commission advocates The Fiscal Times, unsurprisingly backs commission: "Our advice would be to push for a statutory commission but, failing that, give the executive order a chance -- while hedging against the possibility that Mr. Gregg is correct."
Climate Bill Prospects Uncertain
Climate bill negotiators suggest scaling back. Politico: "Climate bill advocates admit they may have to refocus the legislation on renewable energy, tax incentives for cutting emissions and expanding nuclear power. 'Cap and trade is a tainted term,' said South Carolina Sen. Lindsey Graham, the lead Republican working to draft climate legislation. 'The bills overreach.' Sen. Joe Lieberman (I-Conn.), who’s also working on the bill, noted that the legislation will require serious bipartisan support to pass. 'What we do has to be affected by what happened yesterday,' said Lieberman. 'I think it can happen, but the way it happens has to change.'"
NYT reports WH possibly lowering climate ambitions: "White House officials continued to insist that a cap-and-trade measure ... remained a top priority of President Obama. But administration officials and Senate Democratic leaders have been quietly negotiating a scaled-back package focusing more on job-creating technologies than on limiting climate-altering pollution in hopes of keeping Democratic votes and perhaps attracting a few Republicans. Senator Byron L. Dorgan, Democrat of North Dakota, earlier this week declared cap-and-trade “dead” for this session of Congress. He predicted the Senate would consider a more limited energy bill that provides incentives for nuclear power and oil drilling, sets energy efficiency standards for buildings and appliances and forces utilities to shift to renewable power sources. Senator John Kerry, Democrat of Massachusetts and co-sponsor of the Senate cap and trade bill, said that the hostile political climate does not change the need to deal with global warming and the nation’s dependence on foreign sources of oil. He said he would continue to seek bipartisan support for his broad energy and climate measure."
Copenhagen Accord in trouble. NYT: "Facing a Jan. 31 deadline, major countries have yet to submit their plans for reducing emissions of climate-altering gases, one of the major provisions of the agreement, according to Yvo de Boer, the Dutch official who is executive secretary of the United Nations Framework Convention on Climate Change, which organized the climate meeting. Fewer than two dozen countries have even submitted letters saying they agree to the terms of the three-page accord. And there has been virtually no progress on spelling out the terms of nearly $30 billion in short-term financial assistance promised to those countries expected to be hardest hit by climate change. Still unresolved are such basic questions as who will donate how much, where the money will go and who will oversee the spending."
US climate envoy tells Grist "Life needs to be breathed into the Copenhagen Accord.": "The formal adoption of this accord by the COP was blocked by Cuba, Nicaragua, five or six countries, and the ultimate decision was to take note of the thing as opposed to adopt it. So there’s a process going on now where countries need to associate themselves, affirmatively tell the UNFCCC secretariat that they want to be part of this. Step No. 2 is that the major developed and developing countries decide to list or inscribe their targets or actions. That’s supposed to happen by the end of the month. If a month from now all of that’s happened, the plane will have taken off from the runway. In addition, the Copenhagen Accord includes a number of important elements that need to get fleshed out more. There’s a provision to set up a new global climate fund [to help vulnerable developing nations]. There’s a provision to set up a new technology body. There’s some good language on transparency and verification, and a provision for that to be further spelled out in guidelines. I would hope that gets worked on this year. And there will be efforts to press forward toward a legal treaty..."
Wonk Room reports Landrieu, not Webb, working on anti-EPA amendment: "Today, Sen. Mary Landrieu (D-LA) has announced that she is the Murky Dem supporting the lobbyist-directed effort to prevent action by President Obama to slow global warming. Because she 'believes the Clean Air Act is not meant to be applied to carbon dioxide emissions,' Landrieu is collaborating to craft what environmentalists are calling the Dirty Air Act."
