The Senate finally passed a financial reform bill, 59-39 (5/20). Democrats Maria Cantwell and Russ Feingold opposed the bill from the left after amendments to strengthen the bill were blocked. Four Republicans Chuck Grassley (Iowa), Susan Collins (Maine), Olympia Snowe (Maine) and Scott Brown (Mass.) ended up supporting the bill. Robert Byrd (D-W.V.) and Arlen Specter (D-Pa.), did not vote.
Paul Krugman, the Nobel laureate economist, scored the financial regulation bill a qualified win in remarks at krugman.blogs.nytimes.com (5/21).
Whats good? Resolution authority, which was sorely lacking last year; consumer protection; derivatives traded through clearinghouses; ratings reform, thanks to Al Franken; tighter capital standards for big players, although with too much discretion to regulators.
Whats missing? Hard leverage limits; size caps; not much in the way of restoring Glass-Steagall. If you think that too big to fail is the core problem, its disappointing; if you think that shadow banking is the core, as I do, not too bad.
Krugman added, Now, the truth is that we wont know how good a reform this is until the next crisis (which is very different from health care, where there will be ample opportunities to learn from experience.) And the new system clearly wont be robust to really bad leadership: once President Palin appoints Ron Paul as Treasury Secretary, all bets are off.
AFL-CIO President Richard Trumka said the Senate vote was sweet victory for the tens of millions of working families who lost jobs, homes and income at the hands of the big Wall Street banks. But he said the conference committee must strengthen the bill, particularly when it comes to regulating derivatives along with private equity and hedge funds which function as a huge, unregulated shadow financial system.
Elizabeth Warren, head of the Congressional Oversight Panel and an advocate of the new consumer watchdog, said, No bill that deals with big issues is ever perfect, but the Senates Wall Street reform package will go a long way toward preventing the kinds of abusive practices that brought our economy to its knees.
Heather Booth, director of Americans for Financial Reform, a coalition of progressive groups that promoted reforms to protect Main Street, said the bill will begin the process of reining in the unchecked speculation of the casino economy that caused the Great Recession and protecting consumers from fraud and abuse by financial institutions.
Americans for Financial Reform (ourfinancialsecurity.org) listed the key provisions that would provide Americans with economic stability:
Real consumer protection: Credit cards and mortgages will offer terms in language we can all understand. It will also offer help for those abused by predatory lenders.
Mortgage reforms: For the first time lenders are prohibited from making loans that borrowers cannot repay, and bans kickbacks for steering people into high rate loans when they qualify for lower rates.
Ending the casino economy and bringing sunlight to shadowy derivatives market: The $600 trillion derivatives market will now have the light of day shining on the market (with exchange trading) and be held accountable with capital requirements (with clearing).
Putting the brakes on risky speculation to prevent future crises and tax payer bailouts: Unregulated shadow banks like AIG will face strict oversight for the first time and our biggest, riskiest banks will have tougher leverage and capital requirements. When a financial firm does run into trouble, it will face a new liquidation regime so that we dont need to bail it out or prop it up it will be put out of business.
Strong investor protections: Enhanced shareholder rights will allow for a say on pay of executives and give long-term shareholders a meaningful voice in holding corporate directors accountable. Additionally credit ratings agencies will not be just the handmaidens of the biggest financial institutions. Better controls at rating agencies hold them accountable for the reliability of their reporting.
Booth said she would still like the conferees to include Sen. Cantwells language on derivatives and the Reed-Grassley language to make sure private equity managers are regulated.
As much as Wall Street fought the reforms, financial executives are relieved that the regulations wont affect their core business. If you talk to anyone privately, theres a sigh of relief, a veteran investment banker told the New York Times. Itll crimp the profit pool initially by 15 or 20 percent and increase oversight and compliance costs, but theres no breakup of any institution or onerous new taxes.
And while profits would drop, analysts expect it to rebound as firms adapt to the changes and figure out ways to get around the regulations.
PUBLIC CITIZEN: BANK REFORM GOOD, SHOULD BE STRONGER. Robert Weissman, president of Public Citizen, said (5/21): The Senate bill contains several strong, positive elements among them, the creation of a Consumer Financial Protection Bureau, restrictions on swipe fees at the cash register, useful regulation of credit rating agencies and an audit of the Federal Reserve and we welcome its passage.
But after all the damage inflicted by Wall Street, the bill should be much stronger. Even though it plunged the nation into the worst recession since the Great Depression, Wall Street has enough power on Capitol Hill to thwart reforms that would prevent it from doing the same all over again.
The bill leaves the mega-banks intact, so that they will continue to maintain a vise grip over the financial system, the economy and our democracy. And the bill fails to clamp down sufficiently on the casino economy.
Importantly, however, the bill does contain significant derivatives reform language from US Sen. Blanche Lincoln (D-Ark.). By forcing derivatives trading out of the shadows, the Lincoln provision would with one vital fix significantly reform a sector with major responsibility for the financial crisis. The strong derivatives regulation contains one major, accidental loophole no enforcement that must be remedied in conference. The Lincoln provisions would also force commercial banks out of the derivatives speculation business, an important step to redirect banks to provide credit to Main Street, rather than engage in speculative betting.
A vital measure of the ultimate significance of the Senate action is whether the derivatives reform measures can be protected from the swarm of Wall Street lobbyists who will seek to eliminate, eviscerate, defang or otherwise undermine the measures purpose and effect.
This legislation is not the end of the Wall Street reform effort. Just as there were multiple rounds of reform in the 1930s, we should look now to further reform efforts, fueled by more revelations about conflicts of interest, self-dealing, deception and fraud.
FARMERS WELCOME FUTURES REGS. The Senate bill would help curb excessive speculation on agricultural futures contracts, the Institute for Agriculture and Trade Policy said. The bill requires that previously unregulated over-the-counter (OTC) trades be traded on public exchanges. Currently, OTC trades are exempt from regulatory oversight by the Commodity Futures Trading Commission (CFTC). IATP is part of the Commodity Markets Oversight Coalition that is working to close regulatory loopholes that allow OTC trading and excessive speculation to continue unabated.
The Senate bill helps make the market function like a market should in an open and transparent way, instead of like a casino where only five big financial firms know what is going on, said IATP analyst Steve Suppan. Excessive speculation has hurt US agriculture by undermining the original purpose of commodity exchanges to help commodity sellers and buyers manage price risk. We dont want a repeat of 2008, when prices were so volatile that US grain elevators couldnt hedge their own risks on commodity exchanges. Some elevators refused to contract to buy farmers grain in advance, leading to a cash-flow crisis on many farms.
The extreme price volatility not only affected US agriculture, but ultimately contributed to increased hunger in many of the two-thirds of developing countries that are food-import dependent and that rely on US markets for predictable purchase prices. The Senate Permanent Subcommittee on Investigations and the United Nations Commission on Trade and Development (UNCTAD) have reached similar conclusions on the role of excessive speculation in creating extreme volatility in agricultural and non-agricultural commodity prices. (See iatp.org.)
The National Farmers Union applauded Sen. Lincolns language on derivatives regulation as a step toward common-sense oversight to the derivatives market helping to ensure farmers, ranchers and rural Americans are not hampered by the unregulated activities of market speculators and financial institutions.
NFU President Roger Johnson said market speculation had always been a part of commodity trading but after repeal of the Glass -Steagall Act in 1999, outside interests soon overtook the market, creating an additional influx of fast-moving money that was not subject to any real supply and demand forces which made for a volatile marketplace, wreaking havoc with farmers. High oil prices, along with spikes and crashes in corn, soybeans, wheat and dairy, combined to make the last three years among the most difficult on record for sectors of the agricultural economy.
SENATE POPULIST CORE. The 18 Democrats who voted against the Carper amendment to limit states rights to protect their own consumers interests included Barbara Boxer (D-CA), Sherrod Brown (D-OH), Byron Dorgan (D-ND), Dick Durbin (D-IL), Russ Feingold (D-WI), Al Franken (D-MN), Tom Harkin (D-IA), Pat Leahy (D-VT), Claire McCaskill (D-MO), Jeff Merkley (D-OR), Jack Reed (D-RI), Harry Reid (D-NV), Jay Rockefeller (D-WV), Bernie Sanders (I-VT), Jeanne Shaheen (D-NH), Tom Udall (D-NM), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR). To be fair, Sen. Tom Carper (D-Del.)s amendment, which bars enforcement of laws that are stricter than those on the federal books, was a substitute for a worse amendment sponsored by Sen. Bob Corker (R-Tenn.) that would pre-empt all state consumer protection laws. It failed 43-55, with Evan Bayh (Ind.), Robert Byrd (W.V.) and Ben Nelson (Neb.) the only Dems voting for it. Scott Brown (Mass.) was the only Republican voting against it.
WHATS NEXT ON AGENDA. Congress must pass a bill to extend unemployment benefits, COBRA health insurance subsidies for laid-off workers, funding to states under the Temporary Assistance for Needy Families Emergency Fund and the Federal Medical Assistance Percentage. The bill unveiled (5/20) by Senate Finance Chair Max Baucus (D-Mont.) and House Ways & Means Chair Sandy Levin (D-Mich.) would not extend benefits beyond the current 99-week limit, but it would extend funding for unemployment insurance, which expires 6/1, for the rest of the year.
The Center for Budget and Policy Priorities (cbpp.org) noted (5/20) that the American Jobs and Closing Tax Loopholes Act also contains a fix to Medicares flawed sustainable growth rate formula that would require a 21.3% reduction in physician payment rates 6/1 if the bill is not passed.
The bills cost of $192 bln is partially offset by tax changes, including closing a loophole that allows multinational corporations to claim US tax credits on profits earned overseas. ThinkProgress.org noted (5/25) that trade groups for major US corporations, with IBM taking the lead, are opposing the jobs bill because of the loss of the tax credits, which would raise about $1.5 bln a year. According to the National Employment Law Project, 1.2 mln Americans who are currently eligible for extended benefits will lose them in June if Congress doesnt act.
BLUE SKIES AFTER BIG ELECTION. Democrats hopes to hold a majority in Congress improved markedly after the May 18 primary election put a dent in Republican hopes for a repeat of 1994.
Dems held onto the late Rep. John Murthas seat in southwest Pennsylvania, a white working-class district that voted for John McCain in 2008 and is precisely the sort of district the GOP needs to turn if it hopes to erase the 78-member gap in the House. But Mark Critz, a former Murtha aide, pledged to carry on Murthas legacy of taking care of the district and won the special election with 53%. Tim Burns (R) tried to nationalize the election and tie Critz to Obama and House Speaker Nancy Pelosi, and it got him 45%. It was the seventh straight Dem victory in special elections.
Republicans finally won a special election in Hawaii, of all places (5/22), as Charles Djou won the 1st District with 39.4% after Dems split between two candidates. Unions and progressives backed state Sen. Colleen Hanabusa, who finished second with 30.8%, while D.C. Dems backed pro-corporate former Rep. Ed Case, who got 27.6%. Democrats expect to regain that seat in November after they sort things out in the primary. The district, which includes Honolulu, voted 70% for Barack Obama in 2008.
If there was an anti-establishment wave, it was in the primaries, where in Pennsylvania progressives helped Rep. Joe Sestak (D) topple Sen. Arlen Specter (D), who switched parties to become a Democrat last year after it became clear he could not get renominated in what has become a right-wing-dominated Republican Party. Sestak, a retired Navy admiral, faces former Rep. Mike Toomey (R) in the general election.
In Arkansas, unions, angered by corporatist Sen. Blanche Lincolns opposition to the Employee Free Choice Act, played a large role in getting out the progressive vote for Lt. Gov. Bill Halter, forcing Lincoln into a 6/8 Democratic runoff.
In the Kentucky Republican primary, teabagger Rand Paul stunned the Kentucky Republican establishment by defeating Trey Grayson, who was the handpicked candidate of Sen. Mitch McConnell (R-Ky.). Pauls Democratic opponent will be state Atty. Gen. Jack Conway, who also ran an insurgent campaign in the primary against Lt. Gov. Dan Mongiardos reluctance to support President Obamas health reform. And while the national media has anointed Paul as the favorite in the general election, Conway actually got 20,000 more votes in the primary election and Paul has presented Conway with plenty of sound bites to digest.
For example, the weekend before the primary, Paul expressed reservations about the Americans with Disabilities Act, which he said is unfair to business owners. He wants to eliminate the Department of Education and corporate income taxes and he would raise the retirement age for Social Security. The day after he won the nomination, he expressed mixed emotions about the Civil Rights Act. Those positions arent necessarily a problem with his Tea Party allies, but they dont fit the image the GOP hopes to project as they seek to win back independent voters. And Al Giordano at narconews.com noted on 5/19 that Paul is the son of longtime Congressman Ron Paul. How anti-incumbent or anti-Washington is that, really? Paul also said the Obama administrations criticism of BP for its handling of the Gulf oil spill sounds really un-American in his criticism of business.
In a Senate, where Democrats now have a 59-41 majority, Chris Bowers of MyDD.com (5/24) rates 13 races as truly competitive. If Dems sweep them, they could gain a seat. If Republicans sweep them, they would take a 53-47 majority. He includes Connecticut, where Sen. Chris Dodd (D-Conn.) is stepping down, and Wisconsin, where Republicans hope to unseat Russ Feingold (D-Wis.), among the competitive races.
In Connecticut, Atty. Gen. Richard Blumenthal (D) was the odds-on favorite to succeed Dodd, before the New York Times reported that Blumenthal on at least two occasions in the past seven years had suggested that he served in Vietnam when he actually served stateside in the Marine Corps Reserves in the 1970s. On examination by the Associated Press, it turned out that in the same 2008 speech cited by the Times, where at one point he said he served in Vietnam, Blumenthal earlier noted correctly that he served during the Vietnam era, which supported his claim that he did not intend to mislead voters. The Times did not report that detail, but Blumenthal apologized anyway.
Blumenthals likely Republican opponent, Linda McMahon, has credibility problems of her own as former CEO of World Wrestling Entertainment Inc., but she has pledged to spend $50 mln of her own fortune on the Senate race. Former Rep. Rob Simmons, a decorated Vietnam war veteran who served three terms in Congress, dropped out of the race (5/24) after the state GOP convention endorsed McMahon.
Other Dems considered at risk include Sen. Barbara Boxer (Calif.) and Patty Murray (Wash.), who are leading in polls, and Sens. Harry Reid (Nev.) and Michael Bennet (Colo., who faces Andrew Romanoff in the Democratic primary), who are trailing in matchups with likely Republican opponents. Open seats up for grabs include Ohio, Illinois, Kentucky, Missouri and Pennsylvania.
Republican senators at risk include Richard Burr (N.C.) and John McCain (Ariz.), who faces a primary challenge from former Rep. J.D. Hayward.
Dems have long-shot hopes of unseating Sen. Chuck Grassley (Iowa) and Sen. Jim DeMint (S.C.), while Republican are favored to pick up Dem-held open seats in Delaware, Indiana and North Dakota as well as to knock off Sen. Blanche Lincoln (D-Ark.) or her primary challenger, Bill Halter. Republicans are favored to hold a GOP seat in New Hampshire and Florida, where Charlie Crist is running an independent bid for the Senate seat.
Harry Reids re-election chances are looking up after the Republican frontunner, Sue Lowden, a casino executive, was widely mocked for suggesting that poor patients could barter chickens for health care. Nevada election officials felt the need to ban chicken suits inside Nevada polling places for the 6/8 primary.
Dems also are looking better in the generic congressional ballot. For the week ending 5/23, Gallup found 47% of registered voters plan to vote for a Democrat and 46% said they plan to vote for a Republican.
Harold Meyerson wrote at prospect.org (5/19) that Obama may not be popular in many congressional districts, but Republican ideology hasnt proved itself to be an economic ally for these voters, either. Democrat Critz defeated Republican Burns in Jack Murthas old district by drawing precisely these distinctions he wasnt Obama, but he sure was no Republican. This theme, and its variations, may just save the Democrats as they battle in states and districts like these come fall.
Two unions, the American Federation of State, County and Municipal Employees (AFSCME) and Service Employees International Union (SEIU) said they plan to spend $96 mln between them backing Democrats in the election, The Hill reported. The AFL-CIO didnt give a dollar amount, but the labor federation plans to be active in 18 states and 60-70 House races.
Democrats also are hopeful of defeating Texas Gov. Rick Perry (R). A University of Texas/TexasTribune.org survey (5/23) showed Perry leading former Houston Mayor Bill White 44-35. Republicans also lead Dems in five other statewide races, but none are over 50%, which indicates vulnerability.
BUILDERS ARE HIRING. For the first time in years, US builders are hiring laborers. The nation's construction industry added 14,000 jobs nationwide in April, according to the Labor Department, marking the first back-to-back monthly gains in that sector since 2006, the Los Angeles Times reported (5/24). In all, 29 states gained construction jobs that month, according to data released Friday by the Associated General Contractors of America. The US industry has been bolstered in part by federal stimulus funds for infrastructure and the slow but steady improvement in the housing market.
DOUBLE STANDARDS. While some Republicans claimed Connecticut Atty. Gen. Richard Blumenthals apparent misstatements about his military service on at least two occasions disqualified him for public office, Christopher Keating, longtime capitol reporter for the *Hartford Courant*, on the PBS NewsHour (5/18) said he never heard Blumenthal claim he served in Vietnam, nor had other Vietnam vets Keating spoke to.
Bob Somerby at dailyhowler.com (5/19) also recalled that Lindsey Graham (R-S.C.) then a congressman, *endlessly* presented himself in the 1990s as a Gulf War veteran, including in his official biography, until it was revealed in 1998 that he had never left the East Coast of the US.
Steve Benen noted at WashingtonMonthly.com (5/21) that Chuck DeVore, a retired lieutenant colonel in the Army Reserves and Republican candidate for the US Senate,, has spoken of beating shot at in Lebanon, but did not make it clear that the shooting took place in the 1980s while DeVore was a college student studying in the Middle East and there was no indication that he was a target or in actual danger.
Rep. Mark Kirk (R-Ill.), a candidate for the US Senate, also has claimed to be the only member of Congress to serve in Operation Iraqi Freedom, when he served stateside in the Naval Reserves during the invasion and occupation of Iraq.
Benen also noted (5/19) that George W. Bush made repeated false claims about his military service, including that he has served in the US Air Force, that he had been to war and that he completed his obligation to the Texas Air National Guard. Also, Ronald Reagan on at least two occasions claimed he served in a US Army unit assigned to film Nazi death camps, but Reagan spent World War II in Hollywood, making training films.
JOBLESS RATE DROPS. Unemployment rates dropped in 34 states and the District of Columbia in April, the Labor Department reported, according to the Associated Press (5/21). Six states reported higher rates, while 10 saw unemployment hold steady. That marked an improvement from March, when 16 states and D.C. reported declines in unemployment, 22 saw increases and 12 had no change. South Carolinas rate fell to 11.6% in April, from 12.2% in March, for the largest monthly drop in any state.
Nationwide, employers added a net 290,000 job in April, the most in four years, the department reported earlier in May. However, the US unemployment rate rose to 9.9% as more job hunters, feeling more confident about their prospects, resumed or started
BPS BAD SAFETY RECORD. As Bob Herbert noted in the *New York Times* (5/25), explosions and fires at the BP Texas City refinery on 3/23/05 killed 15 people and injured 180 others. The US Chemical Safety Board found organizational and safety deficiencies at all levels of the BP Corp. BP agreed to pay $373 mln in fines and restitution for environmental violations stemming from the Texas City explosion, leaks of crude oil from pipelines in Alaska and fraud for conspiring to corner the market and manipulate the price of propane carried through Texas pipelines, the US Justice Department announced (10/25/07).
Nice outfit, this BP. Anyone who thought this London-based wrecking crew gave a rats whisker about harming the Gulf of Mexico or threatening the environment of the Louisiana wetlands or the livelihoods of families living here has been inhaling way too much of BPs toxic fumes, Herbert wrote.
Yet there was our government not only giving BPs reprobates the go-ahead to drill for oil a mile deep in the gulf but also handing them a waiver, allowing them to avoid a detailed analysis of the effect of their operations on the surrounding environment. Giving an environmental waiver to a company as contemptuous of the environment as BP shows just whose side the government is on in the face-off between predatory giant corporations and the interests of ordinary American citizens.
BIG OFFSHORE LIE. The Obama administration, in the wake of the Gulf of Mexico disaster, has apparently decided that digging in on its misguided decision in March to expand offshore drilling is the way to go, Kate Sheppard noted at WashingtonPost.com (5/25). Political leaders, including President Obama and Interior Secretary Ken Salazar, say we have little choice but to put up with drilling in the Gulf of Mexico and other environmentally sensitive areas to feed our addiction to oil. But Sheppard, a writer for MotherJones.com, noted that drilling off every coast in the US wont resolve the gap between the 3% of the worlds oil reserves in the US and the 23% of world oil consumption in the US. Even the most productive portion of the new area opened to drilling in the March announcement, a 24 million acre area of the eastern gulf, is expected to yield only 3.5 bln recoverable barrels of oil. The US consumes 19.5 mln barrels of oil per day, which means that these wells would only produce about 180 days worth of oil hardly worth the catastrophic situation we face in the gulf today, she noted.
Far more reduction in our oil imports will come through the fuel efficiency measures that the administration has already taken. The new automobile fuel economy standards for cars and light trucks that the administration outlined last month are anticipated to cut oil use 11.6 bln gallons per year by 2016. The executive order Obama issued to raise mileage standards for heavy trucks could cut oil consumption another 11 bln gallons by 2030. Those are the right steps.
Jonathan Hiskes noted at Grist.org (5/24) that Skip Laitner, director of economic analysis at the American Council for an Energy-Efficient Economy (aceee.org) testified to the Senate Energy Committee in 2008, after gas prices topped $4 a gallon, that the US could save 46 bln barrels of oil a year by 2030 with an all-out investment in energy efficiency cutting waste out of vehicles, buildings, the electrical grid and elsewhere. Domestic offshore drilling produced 537 mln barrels a year over the last nine years, according to the Minerals Management Service, so a full-bore efficiency plan would save the equivalent of 85 years of offshore drilling. Laitners proposals included such things as educating people to keep their tires inflated, improving urban planning and public transit and encouraging telecommuting.
Sheppard noted at MotherJones.com (4/1) that when the Obama administration ordered carmakers to increase fuel efficiency for cars and light trucks to 35.5 mpg by 2016 which is expected to save 1.8 bln barrels of oil and reduce nearly 1 bln tons of greenhouse gas emissions over the life of the new vehicles the American Petroleum Institute condemned the new rules as EPA overreaching to create an opportunity for regulating greenhouse gas emissions from virtually every firm and business in America, no matter how unwieldy, intrusive and burdensome such regulation might be.
JINDALS ISLAND. Louisiana Gov. Bobby Jindal (R) complained about the federal response to the BP blowout and threatened to build his own 80-mile-long barrier island to keep the oil out of the coastal plain. But John Collins Rudolf of the New York Times noted in his Green blog (5/22), the project would cost $350 mln, sand is in short supply along the Louisiana coast, dredging for sand offshore could add $100 mln to the cost and the state had not submitted a barrier island plan for the Army Corps of Engineers to review. And even if the barrier was started, with a six-month construction time, experts questioned whether it could be built in time to make a difference and what damage the barrier island would do to the environment.
DEM BASE LIKES COMPROMISE. Progressive Dems are frustrated at repeated futile attempts by President Obama and congressional leaders to compromise with Republicans, but Chris Bower of MyDD.com noted (5/25) that a new poll by Pew Research confirmed earlier findings that self-identified Democrats prefer politicians who compromised, while self-identified Republicans prefer politicians who stood by their beliefs. The poll found that 49% of Dems are more likely to vote for a candidate who will compromise with people (19% of Dems are less likely to vote for a candidate who compromises), while 40% of Republicans are less likely to vote for a candidate who compromises (and 35% are more likely). Independents favor compromise, 44-15.
The same poll, conducted with *National Journal* for the Society for Human Resource Management (5/20-23), found that about half (49%) say they are less likely to vote for a candidate who supported the bank bailouts, 14% said they are more likely to vote for a candidate that supported the legislation, while 32% said it will make no difference. By contrast, about as many said they are more likely to vote for a candidate who supported the recently passed health care law (39%) as less likely to favor such a candidate (35%).
From The Progressive Populist, June 15, 2010
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