Student Loan Market Rate Plan Heads To Vote
Senate leaders announce student loan deal, vote next week. AP: "A bipartisan compromise on student loans promises better deals for students and parents over the next few years but could spell higher rates as the economy improves ... it was clear the negotiations were dicey ... Democratic Sen. Tom Harkin of Iowa ... said he would revisit the whole agreement this fall, when his panel takes up a rewrite of the Higher Education Act ... A Harkin ally, Sen. Jack Reed of Rhode Island, said he would vote against the bill ... 'inevitably, mathematically those rates will go beyond 6.8 percent...'"
Warren criticizes. Roll Call: "Sen. Elizabeth Warren, D-Mass., expressed frustration with the compromise that’s now expected to hit the Senate floor next week, noting prior proposals offered by Democrats wouldn’t have raised interest rates. 'All three proposals had two features in common: They cut costs for students, and they gave us some short-term breathing room to take on bigger problems ... We could have kept rates low, but the Republicans, every single one of them, voted to block that."
Detroit Threatens Public Pensions
Detroit files for bankruptcy. W. Post details why: "Since 2000, Detroit’s population has declined 26 percent ... The official unemployment is now 18.6 percent ... Low tax revenue, in turn, means that city services are suffering [and] Detroit owes around $18.5 billion to its creditors."
Bankruptcy move targets public sector worker pensions. Detroit News: "Public-sector unions could see a cornerstone of their reason for being — the defined-benefit pension — eroded by rulings that could pierce the constitutional protection of pensions as a contractual right. And general obligation bond holders could be treated as unsecured creditors, overturning the assumption that a cash-strapped city can meet its obligations simply by raising taxes ... The arc of the bankruptcy is likely to reverberate nationwide, determining whether cities in financial distress could use Chapter 9 to jettison the legacy burden of pensions for public-sector employees, even those whose payouts appear to be protected by state constitutions."
NYT adds: "'If you end up with precedent that allows the restructuring of retirement benefits in bankruptcy court, that will make it an attractive option for cities,' [Bankruptcy lawyer Karol] Denniston said. 'Detroit is going to be a huge test kitchen.'"
Will Wall Street take responsibility? ThinkProgress: "...while much of borrowing the city engaged in under corrupt, jailed former Mayor Kwame Kilpatrick was ill-advised, the city also got swindled by Wall Street. Detroit paid nearly half a billion dollars in fees to firms for engineering financial products that were bound to hurt the city, because the world’s biggest banks were manipulating a key interest rate underlying those products. Similar bank manipulation in Alabama eventually forced JP Morgan Chase to cancel billions of dollars of debts the city of Birmingham never should have owed. Because bankruptcy proceedings are effectively a zero-sum game, the financial firms and pension funds owed vast sums by Detroit are at odds."
Moody's upgrades US rating. Bloomberg: "The U.S.’s Aaa credit-rating outlook was revised to stable from negative by Moody’s Investors Service, which said the government’s debt trajectory has steadied with budget deficits narrowing."
EPA Chief Confirmed
EPA chief confirmed. W. Post: "McCarthy, who headed the EPA’s air and radiation office during Obama’s first term, has played a key role in the administration’s efforts to address global warming as well as curb traditional pollutants such as soot and mercury. Environmentalists see her as a key ally in efforts to limit greenhouse gas emissions from power plants over the next few years, but she has also won praise from business officials who view her as open to compromise."
EPA now in position to advance climate regs, utility industry praises. Bloomberg: "'Gina’s confirmation and experience bring greater certainty to the agency at this critical time,' Tom Kuhn, president of the Edison Electric Institute, a Washington-based group representing utilities, said in a statement after the 59-40 vote yesterday. 'Gina has a keen understanding of the challenges facing our industry, and we have had a long and constructive relationship.'"
Federal energy regulator cracks down on Wall Street. WSJ: "A federal regulator established in 1920 to oversee hydropower projects is sending shock waves through Wall Street. The Federal Energy Regulatory Commission moved this week to fine Barclays PLC a record $435 million over its trading activities in California's electricity market. The regulator is negotiating with J.P. Morgan Chase on a settlement in a similar case that could be even bigger ... Some people familiar with its enforcement operations think the commission is just getting started as it scrutinizes the once obscure world of electricity trading. The commission's objective is to stop bad behavior 'before it becomes chronic and pervasive,' said Nancy Saracino, general counsel of the California Independent System Operator..."
