legislation

Obama To Announce Regulatory Framework For New ‘Patient’s Bill Of Rights’: AP

June 21, 2010

WASHINGTON (Associated Press) — President Barack Obama on Tuesday will announce new health insurance benefits for consumers, marking the first 90 days since he signed landmark legislation to expand coverage. The announcement will follow a private meeting between administration officials, several state insurance commissioners, and CEOs of major insurance companies, amid concerns over continued premium hikes, the White House said. Obama is expected to attend at least part of the session. Consumers who buy their policies directly faced increases averaging 20 percent this year, according to a survey released Monday by the Kaiser Family Foundation. Although most Americans are covered on the job, about 14 million purchase insurance on the individual market and have the least bargaining power when it comes to costs. Obama’s announcement will cover regulations to implement a so-called patient’s bill of rights provided under the new law, said administration allies who were briefed in advance and spoke on condition of anonymity ahead of the official announcement. The consumer safeguards are limited steps that take effect this year. The main provisions of the legislation, including federal funding to help 32 million now uninsured get coverage, won’t come until 2014. The administration worries that escalating premiums will force more people drop their policies before the law is fully implemented. Obama foreshadowed parts of his announcement last week, telling a nurses’ group that the patient bill of rights would include the elimination of lifetime dollar limits on coverage, a particular problem for people dealing with hard-to-treat types of cancer. Insurance companies would be prohibited from canceling the policies of people who get sick, he added. And health plans would be required to provide consumers with simple and clear information about their choices and rights. The law also calls for other safeguards to be put in place this year, including allowing women to pick an ob-gyn specialist as their primary care doctor and forbidding insurers from denying coverage to children on account of a previous medical problem. Protection against insurance denials would extend to adults in 2014, when most Americans would be required to carry coverage. ___ Online: http://www.healthreform.gov

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Charles Plosser, Philadelphia Fed Chief, Criticizes Financial Reform Bills, Says They Don’t End ‘Too Big To Fail’

June 16, 2010

A top Federal Reserve official reiterated his call Wednesday for a tougher approach to ending Too Big To Fail, arguing that the current pending legislation before Congress doesn’t adequately address the “most important element in fixing our financial system.” Federal Reserve Bank of Philadelphia President Charles Plosser criticized proposals that leave too much discretion to regulators and political appointees — as the legislation does — because he feels that when the time comes for a failing TBTF bank to be dismantled and shut down, regulators will be reluctant to pull the trigger. “I don’t think we’ve got the Too-Big-To-Fail problem solved in this legislation, and that’s the one I worry most about,” the central bank official told a crowd of bankers, regulators and economists in New York. Organized by a group of 15 economists that comprise the Squam Lake Group, the meeting was held to discuss the group’s views on reforming the financial system. “In my view, the most important element in fixing our financial system is that we must end the notion that some financial firms are too big or too interconnected to fail,” Plosser said. “If a firm’s creditors believe that the government will rescue them in times of trouble, they will have little incentive to exert market discipline and discourage a firm from taking excessive risk. “Eliminating too big to fail should be the first priority of any regulatory reform. This is easier said than done. As the crisis has taught us, when the systemic risks are perceived to be large — and regulators are prone to see systemic risks under every rock — they will be very reluctant to close down insolvent firms or impose losses on creditors. “So how do we reduce these risks so that regulators can credibly commit to a policy of allowing financial companies to fail and not resort to rescues or bailouts?” he asked. Plosser is one of at least four regional Fed presidents who have publicly said that the current pending legislation does not do enough to end Too Big To Fail. Richard Fisher of Dallas, Thomas Hoenig of Kansas City and James Bullard of St. Louis are the known dissenters. The Obama administration and the Fed’s Washington-based Board of Governors, meanwhile, publicly cheer the legislation, hailing it as the measure that will end TBTF. “While Congress is likely to pass a regulatory reform bill in the coming weeks, this is certainly not the end of the process of regulatory reform,” Plosser cautioned. “Regulators will need to work out many details left open by the legislation. “And taking the longer view, I don’t think that Congress’s approach is necessarily the final word on designing a resolution mechanism that will end the problem of firms that are too big to fail.” Instead of relying on the approach advocated by the Obama administration, which was largely adopted by both the House and Senate, Plosser repeated his call for a new bankruptcy-like process to resolve large, complex financial firms on the verge of failure. Market participants need firm rules and procedures, he argued, echoing a view voiced by Hoenig. Relying on regulators won’t be enough. “[I]f we are to deal effectively with the too-big-to-fail problem, we must have a credible mechanism to deal with such failures,” Plosser said. “[T]he resolution process should be as predictable as possible; regulatory authorities should not be able to use discretion to alter contractual claims in the resolution process. “I believe a bankruptcy court with special procedures for financial institutions would be better equipped than a bank regulator to credibly dismantle large financial institutions without bailouts,” he added. And unlike current bankruptcy law, which exempts derivatives contracts from its normal procedures, Plosser thinks this new version of bankruptcy should include most derivative contracts. “Arguably, this special treatment actually increased systemic risks during the recent crisis,” Plosser said of the existing exemption of derivatives contracts from bankruptcy court. Here’s how: “Sophisticated counterparties were encouraged to provide short-term repo funding, collateralized by securities that turned out to be very illiquid, such as various asset-backed securities,” he said. Repos are repurchase agreements, which are transactions in which one party borrows cash using securities as collateral with a promise to buy back those securities at a later date. “These creditors clearly perceived that they did not need to carefully monitor their borrowers’ condition, in part, because they expected that they could seize collateral before other claimants,” he said. “In turn, this created incentives for the borrowing firms to increase leverage, and increase their reliance on short-term funding, which increased fragility in the financial system.” Hence, he argues, “we should limit the special treatment in bankruptcy to a much smaller group of contracts, such as those repos secured by highly liquid collateral (cash or Treasuries).” If that happens, then other types of short-term funding may become “more expensive and less pervasive,” Plosser said. “In turn, our financial system might become a little less fragile. Not such a bad outcome.” As for the oft-repeated critique that the international coordination issues involved in putting a failing TBTF bank through bankruptcy, Plosser acknowledged that while it’s an “obstacle,” it needn’t lead to his plan being ignored. “One possible solution is for global financial firms to declare a single jurisdiction under which bankruptcy would be administered,” he said. While this would require coordination, “contrary to some claims, however, we don’t really require a full harmonization of bankruptcy regimes across nations.” Rather, he said, “it is enough to seek agreement about the creation of a special regime for financial firms. International firms do go through bankruptcy now, so I don’t see this as an insurmountable task.” These firm rules are all the more important because regulators likely won’t be able to spot the next crisis, Plosser said, echoing a sentiment voiced by other policymakers. “Discretionary supervision and regulation alone are not sufficient to prevent excessive risk-taking or prevent future crises,” said Plosser.

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New York Fed’s Enhanced Power May Come at Expense of Reduced Independence

June 14, 2010

By Craig Torres and Caroline Salas June 15 (Bloomberg) — The Federal Reserve Bank of New York, which carried out central-bank rescues of money markets and Wall Street firms, is poised to have its powers expanded even more — at the risk of reduced independence. Senate and House negotiators meet today to begin hammering out a financial-regulation bill that puts the New York Fed at the forefront of the central bank’s new role as overseer for financial stability. Lawmakers also want its chief, now nominated by the bank’s board, to be a White House appointee. Senate Banking Committee Chairman Christopher Dodd says the selection process must be overhauled to avoid conflicts of interest at the regional Fed bank, which supervises firms including JPMorgan Chase & Co. and Goldman Sachs Group Inc., where New York Fed chief William Dudley spent two decades. Opponents, including St. Louis Fed President James Bullard , say the legislation represents an effort by politicians to exert more control over monetary policy. “Congress is concerned about accountability,” Gary Stern , Minneapolis Fed president from 1985 to 2009, said in a telephone interview. “You would get a different kind of person in the job. I am an economist by training. You might continue to get some people like that. But you might get people who are more active politically.” The so-called base text of the financial-overhaul legislation would give the central bank a seat on a newly created Financial Stability Oversight Council. The Fed would be delegated to watch over firms that “may pose risks to financial stability,” including banks it supervises and non-bank financial firms. Authority Extended The New York Fed might have its authority extended to firms such as GE Capital. Jeffrey Immelt , chairman of General Electric Co., the parent of GE Capital, sits on the New York Fed Board. Dodd’s proposal to have the regional Fed chief appointed to a five-year term subject to Senate approval means politicians would pick two-thirds of the Federal Open Market Committee. Dudley, whose term ends in February, is vice chairman of the rate-setting panel. Of the Fed’s 12 regional bank presidents, he’s the only one with a permanent vote on the FOMC alongside the seven Washington-based governors. The New York Fed executes monetary policy through its trading desk, which bought billions in bonds during the financial crisis. The Fed’s total assets have expanded to $2.33 trillion as it bought Treasury bonds, mortgage-backed securities and agency debt to lower interest rates. That compares with $903 billion two years ago. Treasury Secretary Timothy Geithner , a former New York Fed president, said in March he opposes White House appointment because it “would tilt the balance substantially in New York’s favor.” ‘Loose Money’ “What Congress ultimately wants out of this is loose money,” said Mark Calabria , a former Senate Banking Committee staffer who is now a director of financial-regulation studies at the Cato Institute in Washington, a research center that favors free markets. Bernard Sanders , a Vermont independent, said having the New York Fed president nominated by the White House “is a great thing” because it removes bankers from the decision. Senator Judd Gregg , a New Hampshire Republican, called it “bad policy” because it “injects too much congressional activity into the operational side of the Fed.” Even so, the presidential appointment clause probably “is going to survive” Gregg said in a June 9 interview. Krishna Guha , a spokesman for the New York Fed, declined to comment. Many emergency programs approved by the Board of Governors were designed by Geithner when he headed the Fed, with help from Dudley, who was then executive vice president in charge of markets. Dudley once slept on the carpet of his ninth-story Liberty Street office instead of checking into a nearby hotel during the crisis. Berkeley Doctorate Dudley, 57, holds an economics doctorate from the University of California at Berkeley and worked as a Fed economist from 1981 to 1983. He joined Goldman Sachs in 1986 and became its top U.S. economist. He moved to the New York Fed in 2007 and succeeded Geithner in 2009. Dudley’s salary at the New York Fed last year was $410,780. The search committee that picked Dudley was comprised of former Goldman Sachs chairman Stephen Friedman , who was chairman of the New York Fed Board; Charles Wait , chairman of the Adirondack Trust Co. of Saratoga Springs, New York; and Denis Hughes , president of the AFL-CIO in New York. Six of the nine directors that sit on regional Fed boards are bankers or people chosen by them. Political appointment of the New York Fed chief “makes a lot of sense” given its permanent vote on rates and the larger role the Fed will play in financial-system oversight, said Ken Rogoff , a Harvard University economist. Center of Gravity “I can understand concern about giving an administration too much power to shift the center of gravity at the Fed, but presumably the confirmation process still provides some degree of checks and balances,” said Rogoff, a former International Monetary Fund chief economist. Fed officials disagree. The St. Louis Fed’s Bullard, in a letter to 13 senators last month, said the change “would introduce an unprecedented level of political intervention in the operation of a reserve bank.” “I don’t think that is the right way to go,” Fed Chairman Ben S. Bernanke said at a Joint Economic Committee hearing in April. Marvin Goodfriend , an economist at Carnegie Mellon University and a former Richmond Fed policy adviser, said the legislation “goes right to the heart of the Fed’s independent powers.” The Fed opened the door to greater political pressures by stepping into the realm of fiscal policy with rescues of Bear Stearns Cos. and American International Group Inc., says Allan Meltzer , a historian of the central bank. “The Fed has done more credit allocation and fiscal policy than ever before,” said Meltzer, an economist at Carnegie Mellon University in Pittsburgh. “Most of the damage was done before this bill.” To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net ; Caroline Salas in New York at csalas1@bloomberg.net

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New York Fed’s Enhanced Power May Come at Expense of Reduced Independence

June 14, 2010

By Craig Torres and Caroline Salas June 15 (Bloomberg) — The Federal Reserve Bank of New York, which carried out central-bank rescues of money markets and Wall Street firms, is poised to have its powers expanded even more — at the risk of reduced independence. Senate and House negotiators meet today to begin hammering out a financial-regulation bill that puts the New York Fed at the forefront of the central bank’s new role as overseer for financial stability. Lawmakers also want its chief, now nominated by the bank’s board, to be a White House appointee. Senate Banking Committee Chairman Christopher Dodd says the selection process must be overhauled to avoid conflicts of interest at the regional Fed bank, which supervises firms including JPMorgan Chase & Co. and Goldman Sachs Group Inc., where New York Fed chief William Dudley spent two decades. Opponents, including St. Louis Fed President James Bullard , say the legislation represents an effort by politicians to exert more control over monetary policy. “Congress is concerned about accountability,” Gary Stern , Minneapolis Fed president from 1985 to 2009, said in a telephone interview. “You would get a different kind of person in the job. I am an economist by training. You might continue to get some people like that. But you might get people who are more active politically.” The so-called base text of the financial-overhaul legislation would give the central bank a seat on a newly created Financial Stability Oversight Council. The Fed would be delegated to watch over firms that “may pose risks to financial stability,” including banks it supervises and non-bank financial firms. Authority Extended The New York Fed might have its authority extended to firms such as GE Capital. Jeffrey Immelt , chairman of General Electric Co., the parent of GE Capital, sits on the New York Fed Board. Dodd’s proposal to have the regional Fed chief appointed to a five-year term subject to Senate approval means politicians would pick two-thirds of the Federal Open Market Committee. Dudley, whose term ends in February, is vice chairman of the rate-setting panel. Of the Fed’s 12 regional bank presidents, he’s the only one with a permanent vote on the FOMC alongside the seven Washington-based governors. The New York Fed executes monetary policy through its trading desk, which bought billions in bonds during the financial crisis. The Fed’s total assets have expanded to $2.33 trillion as it bought Treasury bonds, mortgage-backed securities and agency debt to lower interest rates. That compares with $903 billion two years ago. Treasury Secretary Timothy Geithner , a former New York Fed president, said in March he opposes White House appointment because it “would tilt the balance substantially in New York’s favor.” ‘Loose Money’ “What Congress ultimately wants out of this is loose money,” said Mark Calabria , a former Senate Banking Committee staffer who is now a director of financial-regulation studies at the Cato Institute in Washington, a research center that favors free markets. Bernard Sanders , a Vermont independent, said having the New York Fed president nominated by the White House “is a great thing” because it removes bankers from the decision. Senator Judd Gregg , a New Hampshire Republican, called it “bad policy” because it “injects too much congressional activity into the operational side of the Fed.” Even so, the presidential appointment clause probably “is going to survive” Gregg said in a June 9 interview. Krishna Guha , a spokesman for the New York Fed, declined to comment. Many emergency programs approved by the Board of Governors were designed by Geithner when he headed the Fed, with help from Dudley, who was then executive vice president in charge of markets. Dudley once slept on the carpet of his ninth-story Liberty Street office instead of checking into a nearby hotel during the crisis. Berkeley Doctorate Dudley, 57, holds an economics doctorate from the University of California at Berkeley and worked as a Fed economist from 1981 to 1983. He joined Goldman Sachs in 1986 and became its top U.S. economist. He moved to the New York Fed in 2007 and succeeded Geithner in 2009. Dudley’s salary at the New York Fed last year was $410,780. The search committee that picked Dudley was comprised of former Goldman Sachs chairman Stephen Friedman , who was chairman of the New York Fed Board; Charles Wait , chairman of the Adirondack Trust Co. of Saratoga Springs, New York; and Denis Hughes , president of the AFL-CIO in New York. Six of the nine directors that sit on regional Fed boards are bankers or people chosen by them. Political appointment of the New York Fed chief “makes a lot of sense” given its permanent vote on rates and the larger role the Fed will play in financial-system oversight, said Ken Rogoff , a Harvard University economist. Center of Gravity “I can understand concern about giving an administration too much power to shift the center of gravity at the Fed, but presumably the confirmation process still provides some degree of checks and balances,” said Rogoff, a former International Monetary Fund chief economist. Fed officials disagree. The St. Louis Fed’s Bullard, in a letter to 13 senators last month, said the change “would introduce an unprecedented level of political intervention in the operation of a reserve bank.” “I don’t think that is the right way to go,” Fed Chairman Ben S. Bernanke said at a Joint Economic Committee hearing in April. Marvin Goodfriend , an economist at Carnegie Mellon University and a former Richmond Fed policy adviser, said the legislation “goes right to the heart of the Fed’s independent powers.” The Fed opened the door to greater political pressures by stepping into the realm of fiscal policy with rescues of Bear Stearns Cos. and American International Group Inc., says Allan Meltzer , a historian of the central bank. “The Fed has done more credit allocation and fiscal policy than ever before,” said Meltzer, an economist at Carnegie Mellon University in Pittsburgh. “Most of the damage was done before this bill.” To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net ; Caroline Salas in New York at csalas1@bloomberg.net

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Blackstone, Fortress Fight Proposed Shareholder Tax in Buyout-Firm Measure

June 11, 2010

By Ryan J. Donmoyer and Jason Kelly June 11 (Bloomberg) — Legislation to raise taxes on managers of private equity firms such as Blackstone Group LP would also impose higher levies on their shareholders, a move that’s sparking protests from the buyout funds. Under the measure, shareholders of publicly traded partnerships would pay ordinary tax rates on a portion of any profits when they sell shares, rather than the lower capital gains rates they pay now. If passed, the bill would take effect in 2011, when top ordinary rates are scheduled to be 39.6 percent and capital gains rates 20 percent. Blackstone and other firms are pressing U.S. House and Senate lawmakers to revise the measure, which would help pay for a jobs bill Congress is considering. Still, a tax expert said the levy “is consistent with the spirit of the bill.” “The investors have simply purchased monetized streams of services income from the selling partners,” said Victor Fleischer , a University of Colorado law professor who advises Congress on ways to change how buyout firm managers are taxed. At issue is what is known as carried interest, the share of profits that fund executives charge as the largest part of their compensation for managing investors’ money. That income often qualifies for capital gains tax treatment under current law; the legislation would more than double the tax by applying higher rates to a large share of the fee. Hot Assets Blackstone and similarly structured firms such as Fortress Investment Group LLC and Oaktree Capital Management LLC sold interests in their management companies when they went public in 2007, rather than in the investment funds themselves. Shareholders get a piece of the management company’s carried interest. Oaktree is traded on a private exchange operated by Goldman Sachs Group Inc. Under a separate partnership tax law, certain firm resources, known as hot assets, must be taxed at ordinary tax rates when stakes are liquidated. In an analysis of the House legislation, the Joint Committee on Taxation concluded that carried interest is a hot asset and would taint capital gains treatment when investors sell their share. The joint tax committee’s analysis alarmed the National Association of Publicly Traded Partnerships , said its director, Mary Lyman. Lyman said her group is lobbying the Senate to fix the problem. “I personally don’t think that any public unit holder should have to pay the consequences for what management does,” she said. Shares Fall To be certain, few investors in Blackstone and Fortress have many profits to realize. Blackstone’s share price has fallen about 28 percent to $10.40 and Fortress has dropped about 32 percent to $3.59 since early last month, when the Senate signaled it would back a tax increase on carried interest for the first time. “I fail to understand why a business like ours has attracted so much opprobrium, so we are being punished in this fashion,” said Blackstone spokesman Peter Rose . Fortress spokeswoman Lilly Donohue declined to comment. The higher tax burden might also apply to investors in about 125 publicly traded partnerships in energy and natural resources such as Kinder Morgan Energy Partners LP in a House version of the bill. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, responded with a substitute measure this week that exempts the energy partnerships while leaving the tax in place for investors of Blackstone. House Ways and Means Committee Chairman Sander Levin objected to any exemptions. “I am opposed to carving out,” Levin, a Michigan Democrat, told reporters. “I want a generic bill.” Baucus said he is still working to try to address Levin’s concerns. To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net . Jason Kelly in New York at jkelly14@bloomberg.net

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U.S. Senators Urge New Powers for President to Respond to Cyber Attacks

June 10, 2010

By Jeff Bliss June 10 (Bloomberg) — The president could order emergency measures to combat cyber attacks under legislation being announced today by three senators, according to a summary of the bill obtained by Bloomberg News. Under the legislation, the president’s specific powers would be developed with companies and wouldn’t allow the government to take over private networks or give it more surveillance authority, the summary said. “Any emergency measures imposed must be the least disruptive necessary to respond to the threat,” according to the summary. The new measure will be detailed at a press conference today by its co-sponsors. They are Joseph Lieberman , the Connecticut independent who heads the Senate Homeland Security and Governmental Affairs Committee, Susan Collins of Maine, the panel’s senior Republican, and committee member Tom Carper , a Delaware Democrat. “Our economic security, national security and public safety are now all at risk from new kinds of enemies, cyber- warriors, cyber-spies, cyber-terrorists and cyber-criminals,” Lieberman said in a statement. “The need for this legislation is obvious and urgent.” Concern about presidential authority to shut down the Internet previously generated opposition among some businesses to a measure introduced by Senators Jay Rockefeller , a West Virginia Democrat, and Maine Republican Olympia Snowe . That legislation has been rewritten to clarify the president’s role in a cyber emergency. Hacker Attacks Lawmakers are trying to craft legislation to boost U.S. cyber-security following reports of hacked government computer systems and Mountain View, California-based Google Inc.’s January threat to leave China in the wake of a computer attack. “For too long, our approach to cyber security has been disjointed and uncoordinated,” Collins said in a statement. The Lieberman-Collins-Carper measure would require the president to inform Congress in advance of what measures are being taken. The measures would expire in 30 days unless renewed by the president. Under the legislation, a White House Office of Cyberspace Policy would be established. The measure would leave it to businesses that run critical facilities such as power plants and telecommunications networks to choose the security they use to protect networks. A national cyber-security center would be created within the Department of Homeland Security . The center’s Senate- confirmed director would advise the president on the federal government’s computer-network security. The center would work with companies to develop requirements for tightening security and share warnings with the private sector about possible attacks. For Related News and Information: To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net

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Rep For Foreign Bankers Physically Restrains HuffPost Reporter From Questioning Treasury Official

June 8, 2010

A representative for a foreign bankers group forcefully prevented the press — and physically restrained a Huffington Post reporter — from attempting to question a U.S. Treasury Department official who had just addressed a roomful of bankers on the administration’s financial reform efforts. The effect was to shield the public official, a key lieutenant to Treasury Secretary Timothy Geithner, from answering reporters’ queries. The official, Marisa Lago, an assistant secretary for international markets and development , told the assorted bankers from foreign institutions that she didn’t expect other countries to follow the Obama administration’s lead in its attempt to prevent banks from trading with their own funds or from owning hedge funds and private equity firms, speculative activities that comprise the so-called “Volcker Rules.” There’s “not an expectation” that the initiatives will be “rolled out globally,” Lago said. The proposed ban on these activities, named after its original proponent, former Federal Reserve Chairman Paul Volcker, is vigorously opposed by domestic banks. The prohibition on proprietary trades and other speculative activity is designed to bar banks from using existing taxpayer support, in the form of access to cheap funds from the Fed and federal deposit insurance, to engage in actions that aren’t central to the business of banking. The rules represent a “desire to protect banks” and restrict their ability to take risk, Lago said. Among the banks in attendance were bankers from Arab Bank Plc, Barclays Capital Inc., BNP Paribas, the Bank of China, Deutsche Bank AG, and Societe Generale SA. Lago spoke spoke at the luxury hotel Waldorf Astoria, New York. If the “Volcker Rules” were to emerge from the final financial reform legislation that the House and Senate will soon take up, they will not apply to foreign banks that conduct these activities abroad. Lago also told the bankers that although challenges remain regarding the resolution authority contained in the legislation, that shouldn’t dissuade Congress from passing it. Federal financial regulators and the Obama administration argue that the authority will enable them to dismantle ailing large, interconnected financial firms before their collapse threatens the entire financial system. It’s a key part of the administration’s attempt to forever end the perception that large financial firms are too big or too interconnected to fail. Lago said there are “challenges” with respect to whether foreign regulators will also implement such a regime, and whether the U.S. and its global counterparts will coordinate their activities when such a firm threatens global financial stability. Critics of the legislation say that these challenges are permanent, and will prevent the new authority from ever being used if a systemically-important firm, like a Goldman Sachs or JPMorgan Chase, nears collapse. Instead, these firms would be bailed out by taxpayers and regulators in one way or another. However, those challenges shouldn’t be used an an “excuse” to not implement the new, beefed-up authority, said Lago. After she delivered her remarks and answered assorted questions from bankers and their lawyers, reporters attempted to ask a few questions, too. But William Goodwin, the communications director for the Institute of International Bankers , told reporters that Lago had to rush off to another meeting. As two reporters trailed Lago as she walked towards the hotel’s Park Avenue doors, this reporter attempted to follow her out. But this reporter was physically restrained by Goodwin, who forcefully grabbed his arm, pulled him back and prevented him from exiting the hotel or asking a question of Lago, a public official. Lago was then whisked away by a taxi. Goodwin didn’t respond to multiple requests for comment.

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Buyout Managers Tax Increase Scaled Back Under Senate Democrats’ Proposal

June 8, 2010

By Brian Faler and Ryan J. Donmoyer June 8 (Bloomberg) — Senate Democrats said they will scale back a House-approved tax increase on investment-fund managers as part of their jobs legislation. The plan would tax an increasing amount of the profit share paid to fund executives, known as carried interest, at higher ordinary income tax rates rather than at the lower capital gains rate. The measure also would reinstate a provision dropped by House Democrats that would send state governments $24 billion to help pay for Medicaid health care for the poor. It would pay for that in part by increasing to 41 cents the current 8-cent tax oil companies pay on each barrel of oil they produce. “We have to get more Americans back to work,” said Senate Finance Committee Chairman Max Baucus , a Montana Democrat. Baucus’s proposal, starting next year, would tax half of the carried interest that doesn’t reflect a return on invested capital at ordinary tax rates, while the rest would be taxed at the lower capital gains rate. The share taxed as ordinary income would grow to 65 percent beginning in 2013. Carried interest that is attributed to the sale of assets held for at least seven years would be subject to lower rates. The tax increase on carried interest would raise $14.5 billion over 10 years, down from the $17.7 billion the House plan is projected to generate. Democratic Senator Charles Schumer of New York said the Senate aims to pass the legislation by early next week. To contact the reporters on this story: Brian Faler in Washington at jarowley@bloomberg.net ; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

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Lampert May Avoid Obama Tax Increase With $864 Million Hedge Fund Payout

June 7, 2010

By Miles Weiss June 8 (Bloomberg) — Billionaire Edward Lampert may have found a way to shield himself from millions of dollars in taxes under legislation that would raise levies on profits at private- equity firms. ESL Partners LP, the Greenwich, Connecticut, hedge fund Lampert started more than 20 years ago, and affiliates distributed about $829 million of stock in Sears Holdings Corp. , AutoNation Inc. and AutoZone Inc. to him on June 2, according to regulatory filings. The fund is scheduled to transfer more shares in the retailers to Lampert by the end of July. By taking direct ownership of the shares, Lampert would be taxed at the capital-gains rate of 15 percent when the stock is sold, rather than the ordinary income rate of 39.6 percent that his fund would have to pay under the bill, according to Robert Willens , whose New York-based firm analyzes tax and accounting rules for Wall Street clients. Lampert is ranked 316th on the Forbes list of world’s richest people, with an estimated net worth of $3 billion. “It’s totally an astute thing to do,” Willens said in a telephone interview. “It doesn’t take a fortune teller to predict that we are going to see a lot of this activity between now and the end of the year.” While the legislation is aimed at reducing a tax break for buyout firms, Lampert’s hedge fund often holds investments for more than a year, making it eligible for the lower rate applied to private equity under the current law. Steven Lipin , a spokesman for ESL, declined to comment, and Lampert didn’t return telephone calls and e-mails sent to his office. Sale Restrictions According to last week’s filings with the U.S. Securities and Exchange Commission, Lampert signed an agreement that he can only sell “or otherwise dispose of” the Sears, AutoZone and AutoNation shares he received through the distribution on the same terms and at the same time as ESL Partners. Lampert, 47, may have carried out the distribution for estate-planning purposes, said David Himmelreich, a principal at Hynes, Himmelreich, Glennon & Co., a wealth-management firm in Darien, Connecticut. In January, Lampert disclosed that he had placed Sears, AutoZone and AutoNation shares with a combined market value of $10.3 million in a grantor retained annuity trust, a vehicle that allows people to give large sums to family members under the Internal Revenue Code without paying a gift tax. Sears Acquisition He set up ESL Partners in 1989 and holds an undisclosed stake in the fund through its general partner, RBS Partners LP. Lampert is also the chairman of Hoffman Estates, Illinois-based Sears, which he acquired through an $11.9 billion merger with Kmart Holding Corp. in 2005 to form what now ranks as the nation’s largest department-store chain. The hedge-fund group reported owning stocks with a market value of $12.3 billion as of March 31, with AutoZone, AutoNation and Sears accounting for about $11.4 billion. Holdings included shares of Citigroup Inc., Genworth Financial Inc. and Capital One Financial Corp. In last week’s SEC filings, Lampert described the transfers as “internal restructuring transactions” that will provide him with “direct ownership” of shares he previously held indirectly through the hedge fund. The distribution simultaneously reduces his ownership in the hedge fund, said Lynn Fowler, a partner at the Atlanta law firm Kilpatrick Stockton LLP who specializes in developing tax-efficient business strategies for corporate clients. Carried Interest Tax In January, Lampert’s hedge fund made a similar distribution to him on a smaller scale. In 2004, affiliates of ESL Partners transferred some of their holdings to the hedge fund, while Lampert didn’t personally receive any shares, regulatory filings show. The legislation approved by the House on May 28 would raise taxes on carried interest, or the share of profit paid to managers who run private-equity, venture-capital and real-estate funds. The House had voted three times in three years to raise the levy, only to see the measure stall in the Senate. The Senate may vote this week on the bill, which backers say would help avoid higher federal budget deficits. The Congressional Joint Committee on Taxation estimates that the private-equity provision, known as Section 710, would raise about $17.7 billion in revenue over 10 years. “This may not be the sole reason Lampert did what he did, but it’s entirely probable that it is one reason,” said Stanley Blend, chairman of the law firm Oppenheimer, Blend, Harrison & Tate Inc. in San Antonio and the former head of the tax section at the American Bar Association. “I’m sure that trying to beat the effective date of Section 710 entered into his thought pattern.” Long-Term Holder Private-equity firms pay tax on carried interest at the long-term capital-gains rate because they usually hold investments in buyout targets for at least a year. Hedge funds, which also take about 20 percent of gains as carried interest, have less to lose under the legislation because their profits tend to come from short-term trading, so they are already taxed at ordinary income rates. Lampert’s hedge-fund group is different because it holds stakes in publicly traded companies such as AutoZone for years. AutoNation shares have roughly doubled since ESL Partners and its affiliates reported holding a 23 percent stake in October 2001. Sears has risen fivefold since Lampert filed a Schedule 13D in May 2003 showing that his funds owned 49 percent of Kmart. AutoZone has soared to about $186 a share from $30 since ESL Partners disclosed its stake in June 1999. Stock Distributions According to last week’s SEC filings, ESL Partners distributed 3.79 million Sears shares with a market value of about $299 million to RBS Partners on June 2, which in turn sent 3.72 million of the shares to Lampert and 77,470 to his partner, William Crowley . The partnership and its affiliates distributed about 2.79 million AutoZone shares with a value of almost $520 million and 1.16 million AutoNation shares valued at about $23 million to the two money managers through entities such as RBS Partners, based on June 7 closing prices. Lampert received stock with a combined market value of about $828.9 million, according to the documents. ESL Partners plans to make a second distribution to Lampert and Crowley after obtaining clearance under federal antitrust rules. Under current tax rules, distributions of marketable securities by an investment fund such as ESL Partners to its general partner don’t generate a tax bill, according to Fowler. The general partner can then transfer the Sears, AutoZone and AutoNation stock to its managing members, in this case Lambert and Crowley, who would pay taxes at the capital gains rate if they sold the shares at a profit. ‘Best of Both Worlds’ As of Jan. 1, a similar distribution would be taxed as ordinary income under the pending legislation, a step that Congress is taking to prevent private-equity funds from avoiding the higher rate by transferring appreciated securities to individuals, Fowler said. “Lampert actually gets the best of both worlds,” Fowler said in an interview. “He can maintain the capital-gains treatment and he can also control the timing of when he pays that capital gain.” The move is “a method of having the carried interest distributed out to Mr. Lampert before the effective date of the new legislation,” said Victor Fleischer , the University of Colorado law professor who wrote the 2006 paper “Two and Twenty: Taxing Partnership Profits in Private Equity Funds.” Depending on the method ESL Partners used to allocate carried-interest profits, Lampert may have already paid the levies imposed on such gains, limiting the tax-related benefits from the distribution he received, Fleischer said. To contact the reporter responsible for this story: Miles Weiss in Washington at mweiss@bloomberg.net

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Simon Johnson: Richard Fisher, Senior Fed Official: White House Is Dead Wrong

June 6, 2010

Richard Fisher, president of the Dallas Fed, has long been a proponent of serious financial sector reform.

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Gulf Oil Spill: Schumer Calls For Repeal Of Liability Limits

May 31, 2010

NEW YORK — U.S. Sen. Charles Schumer says he will introduce a bill to repeal a law that could allow the owner of the oil drilling rig that sank in the Gulf of Mexico to limit its liability for the disaster to $27 million. Schumer called it “outrageous” that the company could “get away with paying mere pennies of the total cost of clean-up” of the massive oil spill in the Gulf. Schumer says he will introduce the legislation Tuesday. Transocean Ltd., which owned the Deepwater Horizon rig, requested the limit in federal court under the 1851 Shipowner’s Limitation of Liability Act. The company, based in Switzerland, says it requested the limit to have all the lawsuits filed against it aggregated in one court. Transocean has argued the limit will not affect any claims related to cleanup costs.

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Video: House Passes Jobs Bill With Buyout Managers’ Tax Rise: Video

May 28, 2010

May 28 (Bloomberg) — The U.S. House approved legislation to extend unemployment insurance, restore some tax breaks and raise taxes on managers of buyout funds and other investment partnerships. Lawmakers voted 215-204, largely along party lines, for the legislation costing about $112 billion. The Senate plans to consider the plan during the week of June 7 after lawmakers’ Memorial Day recess. Bloomberg’s Lori Rothman and Hans Nichols report. (Source: Bloomberg)

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House Passes U.S. Jobs Legislation With Higher Tax on Buyout Firm Managers

May 28, 2010

By Ryan J. Donmoyer May 28 (Bloomberg) — The U.S. House approved legislation to extend unemployment insurance, restore some tax breaks and raise taxes on managers of buyout funds and other investment partnerships. Lawmakers voted 215-204, largely along party lines, for the legislation costing about $112 billion. The Senate plans to consider the plan during the week of June 7 after lawmakers’ Memorial Day recess. “It’s a good bill for jobs, it’s a good bill for closing tax loopholes, it’s a good bill for dissuading people from taking jobs overseas,” Majority Leader Steny Hoyer , a Maryland Democrat, said on the House floor before the vote. The plan would continue funding for extended unemployment benefits through Nov. 30 and renew a variety of tax cuts for businesses and individuals. The House also voted 245-171 to give doctors a 19-month reprieve from scheduled cuts in their reimbursements from the Medicare program. Before the Senate acts next month, some jobless benefits will begin to expire May 31, at a time when the national unemployment rate remains near 10 percent. A record 45.9 percent of the jobless have been out of work for 27 weeks or more. When the payments lapsed earlier this year during a dispute over their extension, lawmakers made new benefits retroactive. The legislation drops funds for extended health insurance subsidies for jobless workers while retaining dozens of tax breaks for businesses. Buyout Firms The Congressional Budget Office said the bill would add $54.2 billion to a deficit projected to reach $1.5 trillion this year. To help cover its cost, the measure would raise tax rates on some income for managing partners at buyout firms, venture capital funds and real estate partnerships by about $17.7 billion over 10 years. It also would raise taxes by an estimated $14.5 billion on global operations of U.S.-based companies such as International Business Machines Corp. Michigan Representative David Camp , a Republican, said those taxes shouldn’t be imposed permanently to pay for extension of temporary policies. “This bill has nothing to do with jobs,” Camp said. “Virtually every business group is opposed to this package,” he added, citing the U.S. Chamber of Commerce and the National Federation of Independent Businesses. Democratic leaders secured the votes needed to pass the bill by scaling back a larger measure to appease fiscally conservative party members concerned about voting for deficit spending just months before November’s congressional elections. Health Insurance Lawmakers dropped an extension of health insurance subsidies for jobless workers as well as higher matching funds for state-run health programs such as Medicaid. Lawmakers delayed until Jan. 1, 2011, a proposed tax increase on profit shares paid to managers of buyout funds and other financial partnerships. Earlier, the increase was to be applied to income earned this year. Texas Representative Henry Cuellar , a member of the fiscally conservative Blue Dog Coalition said the changes helped switch his vote from “no” to “yes.” “The bigness issue and the deficit issue for me has been addressed to a much more acceptable level,” Cuellar said. The legislation would provide subsidies for local infrastructure projects by extending the Build America Bonds program. It also would require retirement plan administrators to disclose more information about fees charged to 401(k) retirement accounts and give companies with underfunded pension funds more time to make those accounts solvent. Carried Interest Approval of the legislation would end a long battle over Democrats’ efforts to increase taxes on so-called carried interest paid to executives at private equity, venture capital and real estate firms. The House has voted three times in three years to raise the levy, only to see the measure stall in the Senate. Lawmakers said it has broader support this year amid pressure to avoid adding to the deficit. Carried interest is the share of profit that fund managers are paid as part of their compensation. That share often qualifies for capital gains tax rates of 15 percent; the bill would eventually subject three-quarters of the income to ordinary tax rates of more than 40 percent. The legislation would spend $23 billion to give doctors a 2.2 percent increase in Medicare reimbursement rates this year and a 1 percent rise next year. Physicians were facing a 21 percent cut in their payment rates this year and a 6 percent reduction next year. Other provisions would make it harder for lawyers and other professionals to avoid Social Security and Medicare taxes by organizing what are known as S corporations. Oil companies would be another loser under the bill, which would increase to 34 cents from 8 cents a per-barrel tax to raise $12 billion. Senate Finance Committee Chairman Max Baucus said earlier this week that Democrats in his chamber will have the votes to approve the legislation, offering assurances to House members concerned about voting for a bill that may not become law. “We’re ready,” said Baucus, a Montana Democrat. “It will pass the Senate.” To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net ; Brian Faler in Washington at bfaler@bloomberg.net

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Wall Street ‘Popping Champagne’ Over Watered-Down Financial Reform Bill (VIDEO)

May 25, 2010

“Maybe this is not going to be so bad.” That’s the way the New York Times ‘s heralded financial scribe Andrew Ross Sorkin put it when describing the stock market’s immediate reaction to the Senate passing a broad financial reform package last week. Sorkin, appearing on “Charlie Rose,” initially didn’t agree with his fellow guest Steven Pearlstein of the Washington Post , who argued that Wall Street was “popping Champagne” over the bill’s holes and omissions. But as you’ll see in this video compilation by HuffPost’s Ben Craw , the idea that Wall Street is essentially relieved by the current bill is shared by more than a few people. This news, which was also reported by the New York Times has been making its way around the airwaves of late. And as Congress wraps up the reconciliation of the House and Senate versions of the legislation, you’re likely to see more signs of outright relief. WATCH: Video produced by HuffPost’s Ben Craw

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Financial Sector Lobbyists Push For Last Minute Loopholes

May 24, 2010

WASHINGTON — In a rare defeat for President Barack Obama, the Senate on Monday called for auto dealers to be excluded from the regulations of a proposed consumer financial protection bureau. The nonbinding 60-30 vote provides direction to lawmakers as they assemble broad Senate and House bills setting new, sweeping controls on Wall Street. The Senate passed its bill last week; the House acted in December. The House bill already includes an exemption for auto dealers, who mounted a vigorous lobbying campaign to escape the reach of the legislation. While the Senate bill does not include such an exclusion, Monday’s vote gives auto dealers an extra measure of leverage to avoid the reach of a consumer entity. With House-Senate negotiations on the bill expected to conclude next month, the talks provide an opening for a last lobbying thrust before the legislation reaches the president for his signature. Obama has argued forcefully against diluting the bill’s consumer provisions. The administration has enlisted the help of the Pentagon, which maintains soldiers are especially prone to car loan schemes, and Obama himself spoke out against the exclusion last week. Auto dealers say they only process the loans and then turn them over to other lending institutions for them to administer and service. The exclusion would not apply to auto dealers that provide their own financing, such as Carmax, or to giant auto lender GMAC. “There’s not a single auto dealer on Wall Street,” said Sen. Sam Brownback, R-Kan., the leading sponsor of the exclusion. “These are Main Street businesses and they took it on the chin last year.” Senate Banking Committee Chairman Chris Dodd, D-Conn., argued that auto dealers, like community banks and other institutions that assemble mortgages and other loans, should fall under the agency’s oversight. “The second-largest purchase that most Americans make is the purchase of an automobile,” he said. “We buy a home and we buy an automobile, and they are expensive. … We’re trying to protect people.” The Senate vote was not as significant as if the auto dealer exclusion had passed as an amendment to the Senate bill. But the vote was strongly bipartisan, with 21 Democrats voting in its favor. Senate Republicans last week decided to withdraw an amendment to exclude the dealers from regulation for Republican tactical reasons aimed at keeping a Democratic amendment on banks from reaching the floor. Dodd will be a member of the House-Senate conference committee that will blend the final bill. House Financial Services Committee Chairman Barney Frank, D-Mass., will chair the conference committee. Senate Majority Leader Harry Reid, D-Nev., did not announce other members of the committee on Monday. But a list circulating late Monday on Capitol Hill and among lobbyists did not contain any Democrats who voted to exclude the auto dealers. In a posting on the White House website Monday, Obama’s deputy communications director, Jennifer Psaki, wrote: “The president has been clear on this issue, repeatedly urging members of the Senate to fight efforts of the special interests and their lobbyists to weaken consumer protections.” The Senate on Monday also voted to instruct House and Senate negotiators to exclude insurance company affiliates of banks from rules in the Senate bill that would force depository institutions to spin off their business in complex securities known as derivatives. The bipartisan measure passed 87-4. Auto dealers may well have more clout than even powerful automakers on Capitol Hill; while automotive factories are scattered here and there around the country, it’s hard to imagine a House member without a car dealership in his or her district. Car dealers made at least $3 million in campaign donations at the federal level this election cycle, with more than two-thirds going to Republicans. In the 2008 election, they gave at least $11.9 million, steering more than three-quarters to the GOP, according to data compiled by the nonpartisan Center for Responsive Politics. Automakers, by comparison, gave $2.6 million in the 2008 election, split almost evenly between Democrats and Republicans, and at least $340,000 this election cycle, with 58 percent going to Democrats. ___ Associated Press writer Sharon Theimer contributed to this report.

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Financial Sector Lobbyists Push For Last Minute Loopholes

May 24, 2010

WASHINGTON — In a rare defeat for President Barack Obama, the Senate on Monday called for auto dealers to be excluded from the regulations of a proposed consumer financial protection bureau. The nonbinding 60-30 vote provides direction to lawmakers as they assemble broad Senate and House bills setting new, sweeping controls on Wall Street. The Senate passed its bill last week; the House acted in December. The House bill already includes an exemption for auto dealers, who mounted a vigorous lobbying campaign to escape the reach of the legislation. While the Senate bill does not include such an exclusion, Monday’s vote gives auto dealers an extra measure of leverage to avoid the reach of a consumer entity. With House-Senate negotiations on the bill expected to conclude next month, the talks provide an opening for a last lobbying thrust before the legislation reaches the president for his signature. Obama has argued forcefully against diluting the bill’s consumer provisions. The administration has enlisted the help of the Pentagon, which maintains soldiers are especially prone to car loan schemes, and Obama himself spoke out against the exclusion last week. Auto dealers say they only process the loans and then turn them over to other lending institutions for them to administer and service. The exclusion would not apply to auto dealers that provide their own financing, such as Carmax, or to giant auto lender GMAC. “There’s not a single auto dealer on Wall Street,” said Sen. Sam Brownback, R-Kan., the leading sponsor of the exclusion. “These are Main Street businesses and they took it on the chin last year.” Senate Banking Committee Chairman Chris Dodd, D-Conn., argued that auto dealers, like community banks and other institutions that assemble mortgages and other loans, should fall under the agency’s oversight. “The second-largest purchase that most Americans make is the purchase of an automobile,” he said. “We buy a home and we buy an automobile, and they are expensive. … We’re trying to protect people.” The Senate vote was not as significant as if the auto dealer exclusion had passed as an amendment to the Senate bill. But the vote was strongly bipartisan, with 21 Democrats voting in its favor. Senate Republicans last week decided to withdraw an amendment to exclude the dealers from regulation for Republican tactical reasons aimed at keeping a Democratic amendment on banks from reaching the floor. Dodd will be a member of the House-Senate conference committee that will blend the final bill. House Financial Services Committee Chairman Barney Frank, D-Mass., will chair the conference committee. Senate Majority Leader Harry Reid, D-Nev., did not announce other members of the committee on Monday. But a list circulating late Monday on Capitol Hill and among lobbyists did not contain any Democrats who voted to exclude the auto dealers. In a posting on the White House website Monday, Obama’s deputy communications director, Jennifer Psaki, wrote: “The president has been clear on this issue, repeatedly urging members of the Senate to fight efforts of the special interests and their lobbyists to weaken consumer protections.” The Senate on Monday also voted to instruct House and Senate negotiators to exclude insurance company affiliates of banks from rules in the Senate bill that would force depository institutions to spin off their business in complex securities known as derivatives. The bipartisan measure passed 87-4. Auto dealers may well have more clout than even powerful automakers on Capitol Hill; while automotive factories are scattered here and there around the country, it’s hard to imagine a House member without a car dealership in his or her district. Car dealers made at least $3 million in campaign donations at the federal level this election cycle, with more than two-thirds going to Republicans. In the 2008 election, they gave at least $11.9 million, steering more than three-quarters to the GOP, according to data compiled by the nonpartisan Center for Responsive Politics. Automakers, by comparison, gave $2.6 million in the 2008 election, split almost evenly between Democrats and Republicans, and at least $340,000 this election cycle, with 58 percent going to Democrats. ___ Associated Press writer Sharon Theimer contributed to this report.

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Dylan Ratigan: Four Things Worth Supporting In Financial Reform Bill (VIDEO)

May 21, 2010

While the financial reform bill passed by the Senate does not address the root causes of the financial collapse, it’s not entirely worthless, according to Dylan Ratigan. During “The Dylan Ratigan Show” on Friday, Ratigan selected four of the most worthy features of the legislation and urged viewers to call on lawmakers to support them when the House and Senate meet to hash out the final language. Ratigan endorsed the following: Sen. Al Franken’s amendment regulating ratings agencies Called the “Restore Integrity To Credit Ratings,” Franken’s amendment would establish a regulatory board to select the credit rating firm that issues a security’s first credit rating. Sen. Susan Collins’ capital requirements Passed unanimously, Sen. Collins’ amendment would require regulators to take into account a financial institution’s risk when assessing capital requirements. Collins’ amendment would also set capital requirements for bank holding companies that would be as strict as those for insured banks, reports Reuters. Rep. Ron Paul’s partial ” Audit the Fed ” bill The bill, which ultimately became part of the House financial reform bill, calls for an audit of the Federal Reserve Board’s actions during the financial crisis. Federal Reserve Transparency Act. Sen. Blanche Lincoln’s ban on derivatives trading Lincoln’s amendment would force banks to spin-off their derivatives trading desks because of the role the financial products played in the financial crisis. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Janis Bowdler: Auto Dealers Stalled: Senate Chooses to Invest in Families

May 21, 2010

Last night’s passage of the “Restoring American Financial Stability Act of 2010″ (S. 3217) in the Senate was remarkable for many reasons, but what may be most remarkable is what’s not in the bill: an exemption from accountability for auto dealers. Despite the fact that auto dealers act as lenders that broker and structure the terms of the car loans they sell, they shamelessly pelted the Senate with demands to be excluded from the oversight and accountability to be delivered by the Consumer Financial Protection Bureau (CFPB). Civil rights, consumer, labor, and public interest groups banded together with military family organizations, credit unions, and community banks in opposition to this special interest carve-out. The pressure worked. Senator Brownback’s (R-KS) amendment to create a loophole for auto dealers never came to a vote. As it stands in the Senate bill, auto dealers will be held to the same standards as the banks and credit unions they compete against for auto financing business. Our fight is not over, however. Senator Brownback now plans to bring a nonbinding motion to instruct the conferees to include his amendment. Certainly this would please the legions of car dealer lobbyists bombarding Capitol Hill to carve out their piece of the pie. But a vote for the motion is a vote for car dealers to remain unaccountable for dubious behaviors, of which many consumers are all too familiar. The Senate must continue to resist their pleas and set laws into motion that target consumers’ needs, not those of special interest groups. This legislation is particularly important for communities of color , many of whom have been steered by auto dealers toward risky loans with higher-than-necessary markups and other abuses that I have discussed in detail in earlier posts. The House and Senate bills will need to be reconciled. Congress should bring together the strongest elements of both bills to create true reform. We hope the conferees take their cues from the Senate and puts families before lobbyists. If they reject backdoor deals that benefit special interests, this legislation will stand as a solid step forward to improve Wall Street, auto lots, and families’ expectations for their financial future.

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U.S. Senate Approves Wall Street Financial Overhaul Bill After 59-39 Vote

May 20, 2010

By Alison Vekshin and Phil Mattingly May 20 (Bloomberg) — The U.S. Senate approved a sweeping overhaul of Wall Street regulation that would create a consumer protection agency, strengthen oversight of derivative trading and ban proprietary trading at banks. Senators voted 59-39 today in favor of the measure, which also creates a mechanism for liquidating failing financial firms and a council of financial regulators to monitor markets for threats to the economy. The move sends the legislation into negotiations designed to reconcile differences with the House bill approved in December. “We’ve got a very strong, good bill,” Senator Christopher Dodd , the Banking Committee chairman who offered the legislation, told reporters before the final vote. “There’s still a conference probably to go and we’re going to do some additional work,” the Connecticut Democrat said. Congressional Democrats moved to overhaul governance of U.S. financial companies in response to the 2008 financial crisis that followed the collapse of the subprime mortgage market. The Senate and House measures aim to prevent a repeat of the $700 billion taxpayer-funded bailout that helped firms including American International Group Inc. and Citigroup Inc . weather the worst recession since the 1930s. Republican Criticism Republicans criticized the Senate bill, saying it failed to deal with government-sponsored enterprises Fannie Mae and Freddie Mac, which were seized by the government in 2008. The Republicans also said the consumer financial protection bureau the bill would create at the Federal Reserve would establish a massive new bureaucracy. “The failure to address the GSEs is the most glaring omission in this legislation,” Senator Richard Shelby , the banking committee’s top Republican, said before the vote. “This bill will stifle innovation in consumer financial products and reduce small-business activity,” he said. The Senate measure adopts priorities Obama outlined last June for strengthening financial rules. It allows the Federal Deposit Insurance Corp. to take apart large failing financial firms in an orderly way if their collapse could threaten the economy. The regulatory bill would create a consumer financial- protection bureau at the Fed with powers to write and enforce rules banning abusive credit-card and mortgage lending practices. It calls for a one-time audit of the Fed’s emergency actions since December 2007. Derivatives It includes language offered by Senate Agriculture Committee Chairman Blanche Lincoln that would require commercial banks to wall off their trading operations, one of the most contentious and difficult issues of the Senate debate. The underlying legislation would push most of the $615 trillion in over-the-counter to be processed, or cleared, with a third party. The bill would push over-the-counter trades onto regulated exchanges or similar electronic systems, a measure that would raise margin costs on some transactions. Derivatives have taken a central role in the debate after losing bets on swaps tied to mortgage-backed securities pushed AIG, the New York-based insurer, to the brink of bankruptcy when the housing market collapsed in 2008. Derivatives are contracts whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or the weather. To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net . Phil Mattingly in Washington at pmattingly@bloomberg.net .

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Reid: Wall Street Debate To End In Senate This Week

May 17, 2010

Senate Majority Leader Harry Reid (D-Nev.) is “likely” to file cloture on the Wall Street reform bill Monday evening, setting up a final vote on the legislation for Wednesday, said Reid spokesman Jim Manley. Reid said from the well of the Senate earlier Monday that “as soon as tonight, we could file cloture on this and hold a final vote this week.” Dozens of amendments have yet to be voted on, with senators jockeying for precious floor time. Reid’s determination to finish the bill by the middle of the week makes it all the harder to get an individual amendment to the floor. “I do remind all my colleagues that the amendment process can continue after cloture is filed and after it is invoked,” Reid said. Cloture is required to overcome objections to move forward on a bill. With 60 votes, cloture is invoked and a final vote can be held after an intervening day. Several amendments to strengthen the bill are in line for a vote, including one from Sens. Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) that would implement the Volcker Rule, which bars commercial banks from trading with taxpayer-backed funds. Another, from Sen. Sheldon Whitehouse (D-R.I.), would require credit cards to follow the laws of the state where a customer resides, rather than the non-existent laws of the state where the credit card company builds its headquarters — typically South Dakota or Delaware. As the public debate has carried on, the bill has been made stronger. Reform advocates are hoping for similar transparency during conference committee negotiations, which are typically held behind closed doors, where killing key provisions is easier. House Financial Services Committee Chairman Barney Frank (D-Mass.) is pushing to hold such negotiations in front of C-SPAN cameras. First, though, the Senate must wrap up its work. “The Senate has voted for amendments to strengthen the bill and has voted against efforts to weaken it. Democrats and Republicans have voted for each other’s amendments. This is the way it should be. But the end must come. The time has come to begin work sending this to conference so we can have a bill go to the president. I hope the two managers of this bill, Chairman Dodd and ranking member Shelby, can continue to work on this bill. Another reason to finish sooner rather than later is that we have such important work to do this month,” said Reid. “At the top of that list is a new jobs bill.”

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House Transport Panel Chairman Oberstar Opposes United-Continental Merger

May 6, 2010

By John Hughes May 6 (Bloomberg) — United Airlines ’ merger with Continental Airlines Inc. should be rejected by the U.S. Justice Department because it would reduce competition, House Transportation Committee Chairman James Oberstar said. The merger would lead to higher fares, less service and more market power by “global mega-carriers,” Oberstar, a Minnesota Democrat, said on a conference call with reporters. “This transaction fundamentally alters the nature of competition in the domestic and international marketplace and should be stopped,” he said today in Washington. “I would not support any minuscule alterations, or even apparently larger ones” aimed at making the plan palatable. “This is wrong.” United parent UAL Corp. and Continental said May 3 they plan to merge in a stock swap that will create the world’s biggest airline. The plan will test President Barack Obama’s administration, which will consider its first airline merger after George W. Bush ’s administration approved three in a row. Oberstar, 75, said he expects Obama’s Justice Department “to be more serious” and to “use its authority of its antitrust powers.” He said he outlined his concerns in a letter to the Justice Department. Continental Chief Executive Officer Jeff Smisek would retain his title in the new company and United CEO Glenn Tilton would be nonexecutive chairman. United’s name and Chicago headquarters would be kept, as would Continental colors and logo. Each Continental share would be exchanged for 1.05 UAL shares. ‘Golden Parachutes’ This isn’t the first time Oberstar has used his role to criticize mergers. He opposed Delta Air Lines Inc.’s purchase of Northwest Airlines Corp. in 2008, saying it would lead to other deals and leave only three network carriers. “Hell no,” Oberstar said of mergers while Delta and Northwest were discussing a possible deal. “We did not enact deregulation in order to create golden parachute opportunities for airline executives, and that’s what results from mergers.” Oberstar said airlines were “whining” last year when they opposed his legislation, which is still pending, to place limits on carriers’ antitrust immunity for international alliances. “They don’t want to have to stand up and justify their getting a piece of the antitrust law of the nation?” Oberstar said then. “That’s nonsense. That’s un-American.” United and Houston-based Continental are the third- and fourth-largest U.S. airlines by traffic. The carriers had almost $29 billion in combined revenue last year. The airlines employ more than 88,000 workers. To contact the reporters on this story: John Hughes in Washington at jhughes5@bloomberg.net ;

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Obama Will Fight For New Campaign Finance Rules To Counter Citizens United

May 1, 2010

WASHINGTON — President Barack Obama on Saturday pressed Congress for swift action on measures to restrict political advertising by corporations and labor unions, saying that “no less than the integrity of our democracy” is at stake. Legislation introduced in Congress this week would require that corporations and unions identify themselves in political ads they pay for and that the chief executive or other top official state that “I approve this message.” The measures are in response to a 5-4 Supreme Court ruling in January that upheld the First Amendment rights of these groups to spend money on campaign ads, thus enhancing their ability to influence federal elections. Obama slammed the decision at the time, saying the court had given a “green light to a new stampede of special-interest money in our politics” and pledging to work with Congress on a “forceful response” to the ruling. With the November midterm elections looming, Obama said in his weekly radio and Internet address that it was important that Congress act swiftly to ensure that the voices of the American people aren’t drowned out by deep-pocketed corporations and other special interests. The president said the proposals would give voters the important information they need to evaluate the claims in ads paid for by “shadowy campaign committees,” corporations and special interests. He said he would fight to see them become law. “Now, of course, every organization has every right in this country to make their voices heard,” Obama said. “But the American people also have the right to know when some group like ‘Citizens for a Better Future’ is actually funded entirely by ‘Corporations for Weaker Oversight.’” The proposals also would also bar foreign-controlled corporations and government contractors from spending money on U.S. elections and prohibit political spending by companies that accepted government bailout money. Corporations and unions also must disclose campaign-related spending on their websites and report such spending to shareholders and members. The measures are unlikely to become law without a fight. The Senate’s Republican leader, Mitch McConnell of Kentucky, long an ardent opponent of putting limits on campaign spending, criticized the bills as being more about election advantage than transparency, accountability or good government. He noted that two of the Democratic sponsors, Sen. Chuck Schumer of New York and Rep. Chris Van Hollen of Maryland, led the effort to elect Democrats to Congress. The U.S. Chamber of Commerce also has promised to fight attempts to “muzzle or demonize” independent voices in the electoral process. The lawmakers said their goal is to have the legislation on the books by July 4, to take effect before Nov. 2 election. ___ On the Net: Obama address: http://www.whitehouse.gov

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Obama Will Fight For New Campaign Finance Rules To Counter Citizens United

May 1, 2010

WASHINGTON — President Barack Obama on Saturday pressed Congress for swift action on measures to restrict political advertising by corporations and labor unions, saying that “no less than the integrity of our democracy” is at stake. Legislation introduced in Congress this week would require that corporations and unions identify themselves in political ads they pay for and that the chief executive or other top official state that “I approve this message.” The measures are in response to a 5-4 Supreme Court ruling in January that upheld the First Amendment rights of these groups to spend money on campaign ads, thus enhancing their ability to influence federal elections. Obama slammed the decision at the time, saying the court had given a “green light to a new stampede of special-interest money in our politics” and pledging to work with Congress on a “forceful response” to the ruling. With the November midterm elections looming, Obama said in his weekly radio and Internet address that it was important that Congress act swiftly to ensure that the voices of the American people aren’t drowned out by deep-pocketed corporations and other special interests. The president said the proposals would give voters the important information they need to evaluate the claims in ads paid for by “shadowy campaign committees,” corporations and special interests. He said he would fight to see them become law. “Now, of course, every organization has every right in this country to make their voices heard,” Obama said. “But the American people also have the right to know when some group like ‘Citizens for a Better Future’ is actually funded entirely by ‘Corporations for Weaker Oversight.’” The proposals also would also bar foreign-controlled corporations and government contractors from spending money on U.S. elections and prohibit political spending by companies that accepted government bailout money. Corporations and unions also must disclose campaign-related spending on their websites and report such spending to shareholders and members. The measures are unlikely to become law without a fight. The Senate’s Republican leader, Mitch McConnell of Kentucky, long an ardent opponent of putting limits on campaign spending, criticized the bills as being more about election advantage than transparency, accountability or good government. He noted that two of the Democratic sponsors, Sen. Chuck Schumer of New York and Rep. Chris Van Hollen of Maryland, led the effort to elect Democrats to Congress. The U.S. Chamber of Commerce also has promised to fight attempts to “muzzle or demonize” independent voices in the electoral process. The lawmakers said their goal is to have the legislation on the books by July 4, to take effect before Nov. 2 election. ___ On the Net: Obama address: http://www.whitehouse.gov

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Senate Opens Debate on Financial-Overhaul Bill, Including Derivative Rules

April 29, 2010

By Alison Vekshin and Phil Mattingly April 29 (Bloomberg) — The U.S. Senate began debate on Democrats’ financial-overhaul bill today, including a provision to create the first formal regulatory structure for the $605 trillion over-the-counter derivatives market. Senate Republicans agreed yesterday to let debate begin on the legislation, which is based on a proposal from President Barack Obama and is aimed at strengthening oversight of Wall Street in response to the worst financial crisis since the Great Depression. “The status quo, as we all know, is unacceptable,” Senate Banking Committee Chairman Christopher Dodd , a Connecticut Democrat who offered the legislation, said today as debate began. “We cannot leave the American people vulnerable to the present construct of our financial regulatory system.” Republicans decided to allow debate after Democrats agreed to change a section of the bill aimed at preventing future bailouts of Wall Street banks similar to the $700 billion bailout Congress approved in 2008 for firms including Citigroup Inc. and American International Group Inc. Earlier this week, Republicans blocked Democrats from starting debate on the measure in three procedural votes. At issue is a provision that would give the government new power to take apart failing financial firms whose collapse would shake the economy. It would create a $50 billion industry- supported fund that regulators would use to pay the cost of dissolving a firm. Republicans say the language contains loopholes that wouldn’t end bailouts. No Taxpayer Funds Dodd acknowledged the concern and said the Senate would consider an amendment offered by Senator Barbara Boxer , a California Democrat, to require that no taxpayer funds be used to disassemble a failed company. “My goal during consideration of this legislation will be to reshape this bill so that it actually ends bailouts, protects consumers without jeopardizing our small-community banks and brings transparency to the world of derivatives,” said Alabama Senator Richard Shelby , the top Republican on the Senate Banking Committee, which approved the bill last month on a party-line vote. Shelby, who yesterday broke off talks with Dodd that had been aimed at crafting a bipartisan compromise, said he would “seek to remove dozens of provisions that unnecessarily expand the reach of the federal government into the private affairs of Americans.” Consumer Protection The legislation would create a consumer financial protection bureau at the Federal Reserve and a council of regulators to monitor the economy for systemic risk. It would strengthen oversight of hedge funds and ban proprietary trading at U.S. banks. Democratic Senators Sherrod Brown of Ohio and Ted Kaufman of Delaware introduced an amendment aimed at keeping banks from becoming so big that their collapse could harm the financial system. The amendment would limit the size of banks by imposing a 10 percent cap on a bank holding company’s share of U.S. insured deposits and set a 6 percent leverage limit for those firms and some nonbank financial firms. To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net ; Phil Mattingly in Washington at pmattingly@bloomberg.net

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Shelby Says He, Dodd Are Near Overcoming Hurdle in Finance-Overhaul Talks

April 28, 2010

By Alison Vekshin April 28 (Bloomberg) — The main Republican negotiator on U.S. financial-overhaul legislation said he was close to an agreement on language governing bank bailouts, a move that may break the Senate impasse over whether to begin debate. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said he and committee Chairman Christopher Dodd “have made great strides” in talks regarding the most contentious section of the bill dealing with government power to unwind large failing companies. Shelby, who plans to meet with Dodd of Connecticut later today, said he would be willing to move forward with the bill without agreeing on other key provisions, including a consumer agency and derivatives oversight. “We’re going to try to see if there is any way to bridge any gap between us and the Democrats on the consumer agency,” Shelby told reporters. “If there’s not, we’ll have to go the next step. All roads ultimately lead to the floor one way or the other.” Senate Republicans blocked Democrats from starting debate on the Wall Street rules overhaul for a third time today, saying they want the legislation changed to prevent future bank bailouts. Republicans remained united against Democrats in the 56-42 vote, with 60 needed to begin consideration. Republican leader Mitch McConnell cited yesterday’s testimony by Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein that he was “generally supportive” of the bill. Dodd’s bill would create a mechanism to unwind failing firms whose collapse would disrupt the economy, with a $50 billion industry-supported fund to cover the cost. Republicans say the fund could perpetuate bailouts of Wall Street banks. Shelby said he expects the fund to be removed from any agreement he reaches with Dodd. To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net .

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Obama to Wall St.: Stop Fighting, Embrace Overhaul

April 22, 2010

By Roger Runningen and Hans Nichols April 22 (Bloomberg) — President Barack Obama called on the financial industry to drop its “furious efforts” to fight his regulation plan, saying a failure to impose tougher rules on the market will put the U.S. economic system at risk. The U.S. was almost dragged into a second Great Depression by “a failure of responsibility — from Wall Street to Washington,” Obama said today in the text of a speech he’s delivering at Cooper Union in New York, about two miles from Wall Street. “Some on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business, or save for retirement,” Obama told an audience of about 700 people, including financial industry executives, local officials, consumer advocates, faculty and students. “What happens here has real consequences across our country.” Obama repeated the arguments he’s been making for overhauling financial industry regulations over the past two years, a drive that is nearing its final stages. His push to get the legislation through Congress got a boost when Democrats and Republicans resumed negotiations after weeks of trading accusations. The effort was also helped by the administration’s ramped-up lobbying campaign and the announcement last week by the Securities and Exchange Commission that it is suing Goldman Sachs Group Inc. for alleged fraud linked to derivatives. Benefits of Overhaul Obama said financial firms as well as taxpayers will benefit by the imposition of new standards to prevent “reckless risk-taking,” the creation of a mechanism to unwind institutions whose failure threatens the financial system, and a more transparent market for trading derivatives. He criticized the “battalions of financial industry lobbyists descending on Capitol Hill” to influence the legislation. Obama also sought to directly rebut charges by congressional Republicans that the legislation would guarantee future government bailouts of failing firms. “There is a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process,” he said. “But what is not legitimate is to suggest that we’re enabling or encouraging future taxpayer bailouts, as some have claimed. That may make for a good sound bite, but it’s not factually accurate.” New Regulator At issue is legislation sponsored by Senate Banking Committee Chairman Christopher Dodd , which may come to the Senate floor as early as next week. It would set up an independent regulator within the Federal Reserve to guard consumers against abuse and deception in such instruments as mortgages, credit cards or loans. It would also create the mechanism to dismantle systemically important financial firms when they fail, and strengthen oversight of derivatives and hedge funds. The House has already passed its version of the regulatory-overhaul legislation, and the House and Senate would have to merge their bills. To give the address, Obama returned to the site where, during the 2008 presidential campaign, he outlined his proposals for a new regulatory regime. “I take no satisfaction in noting that my comments have largely been borne out by the events that followed,” he said. To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net Hans Nichols in New York at Hnichols2@bloomberg.net

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Shelby Says He’s Near an Agreement With Dodd on Financial-Rules Overhaul

April 20, 2010

By Alison Vekshin April 20 (Bloomberg) — Republican Senator Richard Shelby said he and Banking Committee Chairman Christopher Dodd are close to reaching a bipartisan agreement on financial overhaul legislation the Senate plans to begin considering this week or next. “We’re making progress; I believe that we’re going to get us a bipartisan bill,” Shelby, of Alabama, told reporters today in Washington. “We’re probably conceptually together on 85 percent” of the bill. Dodd, a Connecticut Democrat who plans to meet with Shelby later today to continue negotiations, said in a speech from the Senate floor he and Shelby are 80 to 90 percent in agreement. The two senators are “getting closer” to a bill that will attract bipartisan support, Dodd told reporters. An agreement between Dodd and Shelby would draw much-needed Republican votes to the legislation, aimed at redesigning U.S. rules governing Wall Street. Last week, all 41 Senate Republicans signed a letter pledging to oppose the measure as it was passed by Dodd’s committee last month. Senate Majority Leader Harry Reid , a Nevada Democrat, said today he expects to bring the financial overhaul measure to the floor this week or next. Republicans, led by Senate Minority Leader Mitch McConnell of Kentucky, have criticized a provision that would give the government authority to take apart failed large financial firms using a $50 billion industry-supported fund. Republicans say the provision would create a permanent taxpayer-funded bailout. Alternatives Reid said Democrats are looking at dropping the fund, and Dodd said yesterday he’d be willing to consider alternatives. President Barack Obama is talking with senators about removing the $50 billion fund from the plan, his spokesman Bill Burton told reporters today. Burton said Dodd’s bill is “strong,” and predicted it will get bipartisan support. Obama won’t “water down the legislation just to be able to call it bipartisan,” Burton said. The president plans to give a speech promoting the financial overhaul plan on April 22 in Manhattan. Shelby said the remaining issues he and Dodd must resolve include a proposed consumer protection bureau at the Federal Reserve and a provision to strengthen derivatives oversight, along with the $50 billion fund. “We’re probably not that far away,” Shelby said regarding talks with Dodd. “There are a lot of tedious, difficult negotiations going on still, but I think we can get there.” To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net

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Democrats May Scrap Bailout Fund to Secure Support for Financial Overhaul

April 20, 2010

By Alison Vekshin and Patrick O’Connor April 20 (Bloomberg) — Senate Democrats likely will scrap a proposal for a $50 billion fund to wind down big failing companies in an effort to draw Republican support for financial- overhaul legislation being considered later this week. Senators Susan Collins and Olympia Snowe, both Maine Republicans who are seen as potential supporters of the bill, told reporters yesterday they oppose the fund. Treasury Secretary Timothy Geithner told Collins that the Obama administration also is lukewarm to the idea. “This can be worked out in a bipartisan bill that will greatly strengthen our financial system and prevent the too-big- to-fail phenomenon,” Collins said following her meeting with Geithner, who has spent the last week courting Republicans to back the bill. “We need to prevent creating a moral hazard, which the $50 billion bailout fund clearly does.” The Obama administration and Senate Democrats need at least one Republican vote to start debate on the financial- markets overhaul in the chamber. That task became harder when all 41 Republican senators signed a letter last week opposing the legislation, sponsored by Senate Banking Committee Chairman Christopher Dodd , a Connecticut Democrat. The fund stoked Republican opposition to the legislation, which would set up a mechanism to allow the government to unwind systemically important failed financial institutions in a process that would be paid for by the industry-supported fund. Republicans say the provision would institutionalize taxpayer- funded bailouts of Wall Street banks. Seeking More Changes Dropping the fund would take away a Republican talking point against the bill. The move wouldn’t necessarily secure votes from Republicans, who are seeking additional changes to the legislation. Asked if removing the rainy-day fund would entice her to back the bill, Snowe said, “That would be helpful.” The $50 billion fund would be paid for by the large financial firms with money collected in advance of any failure. President Barack Obama last year proposed having the industry repay the government for the cost of dissolving a failed firm only after one collapses. Dodd told reporters yesterday he isn’t committed to the fund, which he said was a Republican idea. He added that he is willing to consider alternatives. “There are many ways of doing this,” Dodd said. “The common point of interest is not to have taxpayers be exposed.” Pre-Paid Trust One option is to create a pre-paid trust that could be used only to unwind failed firms, Dodd, 65, said. Richard Shelby , the Senate Banking Committee’s top Republican who is negotiating a compromise bill with Dodd, said he supported dropping the fund. “We need to knock that out,” Shelby, 75, told reporters following a meeting with Dodd. “We want to send the message, as I keep saying – unambiguous – that nothing is too big to fail.” The overhaul legislation would have prevented the fraudulent activity alleged in the Securities and Exchange Commission’s April 16 lawsuit against Goldman Sachs Group Inc. , Dodd said yesterday at a Washington news conference. “By not enacting our legislation, by filibustering it, stopping it, we leave the American public vulnerable once again to the kind of shenanigans that have occurred in our large financial institutions across this country,” Dodd said. Geithner Meetings The Obama administration has stepped up its lobbying of lawmakers in recent weeks after debate over the Wall Street overhaul grew more rancorous. Geithner was on Capitol Hill yesterday for another round of meetings with potential Republican backers of the bill. Both Maine senators expressed a willingness to work with the White House on a final package. “I’m always willing to be the only Republican, if it’s the right thing,” Snowe, 63, said. “I don’t think we can address these concerns in the next three days,” Collins, 57, said. “But I see no reason why we could not negotiate a bill in the next three or four weeks.” To keep up momentum for the drive to pass the legislation, Obama is undertaking a campaign for public support, including a speech April 22 in Manhattan. Obama is returning to New York’s Cooper Union where as a candidate he called for new rules governing banks and other financial institutions. It “makes no sense” to stick with the status quo on Wall Street, Obama, 48, said at a political fundraiser last night in California. ‘Big Battle’ Obama predicted a “big battle” over the proposed overhaul of financial regulations, speaking in Los Angeles at a fundraiser for California Senator Barbara Boxer’s re-election bid. “There are some things that are worth fighting for, and financial regulatory reform is one of those things.” The administration and Senate Democratic leaders are trying to peel off a few Republican votes to move the measure forward. “The American people want us not to play politics with this important issue, but, instead, to get something done,” White House press secretary Robert Gibbs said yesterday. The administration ultimately expects “a strong bipartisan vote” in favor of an overhaul, he said. He said the administration won’t weaken the bill to get Republican support. “We’re not watering down financial reform on behalf of big banks,” he said. “We’re just not going to do that.” To contact the reporters on this story: Patrick O’Connor in Washington at poconnor14@bloomberg.net ; Alison Vekshin in Washington at avekshin@bloomberg.net .

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Obama Says He’ll Veto Finance Measure Without Stronger Derivatives Rules

April 16, 2010

By Hans Nichols and Roger Runningen April 16 (Bloomberg) — President Barack Obama said he would veto any legislation to overhaul U.S. financial regulations if it doesn’t include new rules on the derivatives market. “We can’t allow history to repeat itself,” Obama said at the start of a meeting with his panel of outside economic advisers. “I will veto legislation that does not bring the derivatives market under control in some sort of regulatory framework that assures that we don’t have the same kind of crisis that we’ve seen in the past,” he said. The session with a panel of business and labor leaders and economists, headed by former Federal Reserve Chairman Paul Volcker , was being held at the White House as the Senate is gearing up to debate a bill to revamp financial regulations. The White House meeting began hours after the Securities and Exchange Commission sued Goldman Sachs Group Inc. , saying the company misstated and omitted key facts about collateralized debt obligations tied to subprime mortgages, financial instruments that contributed to the worst financial crisis since the Great Depression. Obama made no mention of the case in highlighting his effort to impose new rules on Wall Street. ‘Army of Lobbyists’ Opponents of the legislation have drafted “an army of lobbyists” who have found some willing allies in Congress who are trying to “carve out a lot of exceptions and special loopholes so that folks on Wall Street will keep making these risky bets without any oversight,” Obama said. Volcker, an advocate of tightening rules for banks, said he thought “things are coming together” in support for the financial overhaul legislation. He didn’t elaborate. The White House meeting is intended, in part, to add momentum to the administration’s effort to get through Congress legislation revamping the nation’s financial regulations, including those governing the $605 trillion over-the-counter derivatives market. It was the second time this week that Obama has put the measure at the center of his public agenda. The chief vehicle is a bill sponsored by Senate Banking Committee Chairman Christopher Dodd that would create a consumer-protection bureau, ban proprietary trading at banks, and set up a mechanism to enable the government to dismantle failed firms. Republican congressional leaders are trying to keep their party unified in opposition to the administration’s proposals. They have dubbed the legislation “the bailout bill” because it grants the federal government authority to unravel institutions whose failure threatens the financial system. Republican Opposition “Despite President Obama’s rhetoric, his permanent bailout bill gives Goldman Sachs and other big Wall Street banks a perpetual, taxpayer-funded safety net by designating them ‘too big to fail,’” House Minority Leader John Boehner , an Ohio Republican, said in a statement today. Today’s meeting of Obama’s Economic Recovery Advisory Board was primarily focusing on ways to bolster U.S. economic growth and job creation as well as Obama’s goal to double exports in five years. Jim Owens , chairman and chief executive of Caterpillar Inc. and a member of Obama’s panel, said the export business of the world’s largest maker of bulldozers and excavators is up, and he will be hiring more workers for that business. Obama said his administration is reviewing U.S. export controls that are “outdated” and causing the U.S. to lose business. To contact the reporters on this story: Hans Nichols in Washington at Hnichols2@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net

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Mike Lux: Which Retiring Senators Will Be Working for Wall Street Next Year?

April 5, 2010

The most unnerving part of the debate on financial reform is wondering which of the retiring senators spending time on crafting the legislation are thinking about, or even actively discussing, going to work for one of the Wall Street mega-banks. One of the great myths in American political theory is that once a politician gets ready to retire, or can’t run again because of term limits or other reasons, it makes him or her likely to be a “statesman” because he or she doesn’t have to worry about the voters anymore. The presumption that actual voters are unhelpful to getting good legislation passed is profoundly undemocratic because once voters don’t matter anymore, other things begin to matter too much: where you will work next, how much you will get paid, what your close friends (many of whom have raised all that money for you over the years) think, what the DC establishment that you will be hanging out with at cocktail parties in your retirement think. Things like that may start to matter a lot more to some retiring Senators than being able to defend the deals you are cutting to voters. It’s not like the kind of thing I’m talking about has never happened. The most obvious case is Billy Tauzin working on the prescription drug bill that was such a sweet deal for Pharma, and then going to work for them as a seven-figure salaried president after he retired. But there are many, many other cases of congresspeople and senators working on legislation affecting an industry the year they retire, then getting a great consulting gig with the industry trade association soon thereafter. The financial reform bill is way too important to let this happen. All of the senators and House members working on this bill should pledge right now that they will not go to work after they retire for Goldman Sachs, Citibank, JP Morgan Chase, any other of the other mega-banks, the American Bankers Association, or any of the other big industry players on this legislation. There are too many rumors swirling around on Capitol Hill right now of major players in this fight who are retiring this year starting to feel out industry players for jobs in 2011. The White House, Speaker Pelosi, and Senator Reid should demand that all the Senators working on this bill take such a pledge to not sell out the American public. The Dodd bill needs to be strengthened. Democrats need to draw a line in the sand and fight for a bill that really does something to take on the big banks. If the Republicans want to defend Wall Street by filibustering such a bill, God bless them, I’d be delighted to have that fight. But to get the best possible bill, we need the Senators negotiating it to not be preparing to work for the industry.

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Frank Bars ICE Lobbyist Roberson From Contacting House Committee Members

April 1, 2010

By Matthew Leising April 1 (Bloomberg) — Representative Barney Frank, chairman of the House Financial Services Committee, said former senior adviser Peter Roberson is barred from lobbying his staff for as long as he leads the panel. Roberson, hired by Atlanta-based Intercontinental Exchange Inc. in February as vice president of government relations, would normally be prevented from contacting commmittee staff for one year under House ethics rules. “Several people have expressed criticism of the move by Peter Roberson from the staff of the Financial Services Committee to ICE, after he worked on the legislation relevant to derivatives,” Frank said today in a statement. “I completely agree with that criticism.” Bloomberg News first reported on Roberson’s move on March 29. To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net

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Ratigan: Dodd’s Financial Reform Bill Doesn’t Go Far Enough (VIDEO)

March 25, 2010

Dylan Ratigan ridiculed the Senate’s financial reform bill Thursday and argued that it wasn’t enough to protect the country from another financial collapse. Standing before a “Family Feud” backdrop, Ratigan analyzed three key problems plaguing the American financial system and concluded that the legislation put forward by Sen. Chris Dodd (D-CT), doesn’t do enough to solve them. Ratigan was interested in three things. Does the bill “stop banks from keeping secrets?” No. Ratigan called for more transparency and argued that under the new bill, banks will still be allowed to conceal risky investment strategies that include credit default swaps and repo 105. Does the bill “stop gambling with your money?” No. The bill does not stop banks from investing in their own interests using accountholders’ deposits, Ratigan argued. Does the bill “stop cops working for crooks?” No. Ratigan says that the bill doesn’t address the conflict of interest between rating agencies and the Wall Street firms that pay them. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Health-Care Changes to Start Taking Effect This Year (Correct)

March 24, 2010

By Shannon Pettypiece and Alex Nussbaum (Corrects effective date in first paragraph. Story first moved March 23.) March 23 (Bloomberg) — Indoor tanning salons will charge customers a 10 percent tax beginning in July in one of the changes Americans will see as a result of the U.S. health-care overhaul signed into law by President Barack Obama . Insurers will be required by September to begin providing health coverage to kids with pre-existing illnesses and allow parents to keep children younger than 26 on their plans as the clock has begun ticking on many of the law’s provisions. Medicare recipients will receive a $250 rebate for prescription drugs when they reach a coverage gap called the donut hole if the Senate passes and the president signs companion legislation approved March 21 by the U.S. House. The $940 billion overhaul subsidizes coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. Many of the changes in the bill of more than 2,400 pages, such as requiring most people to have health insurance and employers to provide coverage, will take at least two years to go into effect. “Most of the major public policy changes embodied in the health care reform legislation will become effective only after the next presidential election in 2012,” said Maury Harris , an economist with UBS AG , said in a research report. High-Risk Pools Within 90 days, the law will provide immediate access to high-risk insurance plans for people who can’t get insurance because of a pre-existing medical problem, Harris said. These high-risk pools will be funded by $5 billion in federal grants. Companies led by Minnetonka, Minnesota-based UnitedHealth Group Inc. , the largest health insurer, will be banned within six months from dropping a person’s coverage because of severe illness and from limiting lifetime or annual benefits. Participants in Medicare, the U.S. government’s health coverage for those 65 and older, are expected get a $250 rebate toward prescription drugs once their benefits run out — a coverage gap know as the “doughnut hole.” The benefit is part of the package of amendments to the legislation now pending in the Senate. Drugmakers led by New York-based Pfizer Inc. will have to offer discounted drugs to Medicare recipients next year, according to an analysis of the legislation by the Kaiser Family Foundation, a nonprofit group based in Menlo Park, California In 2013, individuals whose annual income is more than $200,000 and couples making more than $250,000 will see an increase in Medicare payroll taxes. Those taxes will also be expanded to cover dividend, interest and other unearned income. Employer Coverage In 2014, employers with more than 50 employees will be required to provide health coverage and most people will be required to have health insurance, Harris said in his report. A tax on high-cost “Cadillac” policies won’t go into effect until 2018. The insurance industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014. By 2019, the bill is expected to have expanded health insurance coverage to 32 million people, according to UBS’s Harris. The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc. , the largest U.S. chain, and its rivals. Financial Disclosure Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans. Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified. The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions. To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net ; Shannon Pettypiece in New York spettypiece@bloomberg.net

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Health-Care Changes to Start Taking Effect This Year (Correct)

March 24, 2010

By Shannon Pettypiece and Alex Nussbaum (Corrects effective date in first paragraph. Story first moved March 23.) March 23 (Bloomberg) — Indoor tanning salons will charge customers a 10 percent tax beginning in July in one of the changes Americans will see as a result of the U.S. health-care overhaul signed into law by President Barack Obama . Insurers will be required by September to begin providing health coverage to kids with pre-existing illnesses and allow parents to keep children younger than 26 on their plans as the clock has begun ticking on many of the law’s provisions. Medicare recipients will receive a $250 rebate for prescription drugs when they reach a coverage gap called the donut hole if the Senate passes and the president signs companion legislation approved March 21 by the U.S. House. The $940 billion overhaul subsidizes coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. Many of the changes in the bill of more than 2,400 pages, such as requiring most people to have health insurance and employers to provide coverage, will take at least two years to go into effect. “Most of the major public policy changes embodied in the health care reform legislation will become effective only after the next presidential election in 2012,” said Maury Harris , an economist with UBS AG , said in a research report. High-Risk Pools Within 90 days, the law will provide immediate access to high-risk insurance plans for people who can’t get insurance because of a pre-existing medical problem, Harris said. These high-risk pools will be funded by $5 billion in federal grants. Companies led by Minnetonka, Minnesota-based UnitedHealth Group Inc. , the largest health insurer, will be banned within six months from dropping a person’s coverage because of severe illness and from limiting lifetime or annual benefits. Participants in Medicare, the U.S. government’s health coverage for those 65 and older, are expected get a $250 rebate toward prescription drugs once their benefits run out — a coverage gap know as the “doughnut hole.” The benefit is part of the package of amendments to the legislation now pending in the Senate. Drugmakers led by New York-based Pfizer Inc. will have to offer discounted drugs to Medicare recipients next year, according to an analysis of the legislation by the Kaiser Family Foundation, a nonprofit group based in Menlo Park, California In 2013, individuals whose annual income is more than $200,000 and couples making more than $250,000 will see an increase in Medicare payroll taxes. Those taxes will also be expanded to cover dividend, interest and other unearned income. Employer Coverage In 2014, employers with more than 50 employees will be required to provide health coverage and most people will be required to have health insurance, Harris said in his report. A tax on high-cost “Cadillac” policies won’t go into effect until 2018. The insurance industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014. By 2019, the bill is expected to have expanded health insurance coverage to 32 million people, according to UBS’s Harris. The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc. , the largest U.S. chain, and its rivals. Financial Disclosure Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans. Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified. The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions. To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net ; Shannon Pettypiece in New York spettypiece@bloomberg.net

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Health-Care Overhaul Bill Signed by Obama to Start Taking Effect This Year

March 23, 2010

By Shannon Pettypiece and Alex Nussbaum March 23 (Bloomberg) — Indoor tanning salons will charge customers a 10 percent tax beginning today in just one of the changes Americans will see as a result of the U.S. health-care overhaul signed into law by President Barack Obama . Insurers will be required by September to begin providing health coverage to kids with pre-existing illnesses and allow parents to keep children younger than 26 on their plans as the clock has begun ticking on many of the law’s provisions. Medicare recipients will receive a $250 rebate for prescription drugs when they reach a coverage gap called the donut hole if the Senate passes and the president signs companion legislation approved March 21 by the U.S. House. The $940 billion overhaul subsidizes coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. Many of the changes in the bill of more than 2,400 pages, such as requiring most people to have health insurance and employers to provide coverage, will take at least two years to go into effect. “Most of the major public policy changed embodied in the health care reform legislation will become effective only after the next presidential election in 2012,” said Maury Harris , an economist with UBS AG , said in a research report. High-Risk Pools Within 90 days, the law will provide immediate access to high-risk insurance plans for people who can’t get insurance because of a pre-existing medical problem, Harris said. These high-risk pools will be funded by $5 billion in federal grants. Companies led by Minnetonka, Minnesota-based UnitedHealth Group Inc. , the largest health insurer, will be banned within six months from dropping a person’s coverage because of severe illness and from limiting lifetime or annual benefits. Participants in Medicare, the U.S. government’s health coverage for those 65 and older, are expected get a $250 rebate toward prescription drugs once their benefits run out — a coverage gap know as the “doughnut hole.” The benefit is part of the package of amendments to the legislation now pending in the Senate. Drugmakers led by New York-based Pfizer Inc. will have to offer discounted drugs to Medicare recipients next year, according to an analysis of the legislation by the Kaiser Family Foundation, a nonprofit group based in Menlo Park, California In 2013, individuals whose annual income is more than $200,000 and couples making more than $250,000 will see an increase in Medicare payroll taxes. Those taxes will also be expanded to cover dividend, interest and other unearned income. Employer Coverage In 2014, employers with more than 50 employees will be required to provide health coverage and most people will be required to have health insurance, Harris said in his report. A tax on high-cost “Cadillac” policies won’t go into effect until 2018. The insurance industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014. By 2019, the bill is expected to have expanded health insurance coverage to 32 million people, according to UBS’s Harris. The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc. , the largest U.S. chain, and its rivals. Financial Disclosure Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans. Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified. The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions. To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net ; Shannon Pettypiece in New York spettypiece@bloomberg.net

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Health-Care Overhaul Bill Signed by Obama to Start Taking Effect This Year

March 23, 2010

By Shannon Pettypiece and Alex Nussbaum March 23 (Bloomberg) — Indoor tanning salons will charge customers a 10 percent tax beginning today in just one of the changes Americans will see as a result of the U.S. health-care overhaul signed into law by President Barack Obama . Insurers will be required by September to begin providing health coverage to kids with pre-existing illnesses and allow parents to keep children younger than 26 on their plans as the clock has begun ticking on many of the law’s provisions. Medicare recipients will receive a $250 rebate for prescription drugs when they reach a coverage gap called the donut hole if the Senate passes and the president signs companion legislation approved March 21 by the U.S. House. The $940 billion overhaul subsidizes coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. Many of the changes in the bill of more than 2,400 pages, such as requiring most people to have health insurance and employers to provide coverage, will take at least two years to go into effect. “Most of the major public policy changed embodied in the health care reform legislation will become effective only after the next presidential election in 2012,” said Maury Harris , an economist with UBS AG , said in a research report. High-Risk Pools Within 90 days, the law will provide immediate access to high-risk insurance plans for people who can’t get insurance because of a pre-existing medical problem, Harris said. These high-risk pools will be funded by $5 billion in federal grants. Companies led by Minnetonka, Minnesota-based UnitedHealth Group Inc. , the largest health insurer, will be banned within six months from dropping a person’s coverage because of severe illness and from limiting lifetime or annual benefits. Participants in Medicare, the U.S. government’s health coverage for those 65 and older, are expected get a $250 rebate toward prescription drugs once their benefits run out — a coverage gap know as the “doughnut hole.” The benefit is part of the package of amendments to the legislation now pending in the Senate. Drugmakers led by New York-based Pfizer Inc. will have to offer discounted drugs to Medicare recipients next year, according to an analysis of the legislation by the Kaiser Family Foundation, a nonprofit group based in Menlo Park, California In 2013, individuals whose annual income is more than $200,000 and couples making more than $250,000 will see an increase in Medicare payroll taxes. Those taxes will also be expanded to cover dividend, interest and other unearned income. Employer Coverage In 2014, employers with more than 50 employees will be required to provide health coverage and most people will be required to have health insurance, Harris said in his report. A tax on high-cost “Cadillac” policies won’t go into effect until 2018. The insurance industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014. By 2019, the bill is expected to have expanded health insurance coverage to 32 million people, according to UBS’s Harris. The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc. , the largest U.S. chain, and its rivals. Financial Disclosure Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans. Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified. The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions. To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net ; Shannon Pettypiece in New York spettypiece@bloomberg.net

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Obama Handed Victory as House Passes Biggest Health Overhaul in 40 Years

March 21, 2010

By Laura Litvan, James Rowley and Kristin Jensen March 21 (Bloomberg) — The U.S. House passed the most sweeping U.S. health-care legislation in four decades, rewriting the rules governing medical industries and ensuring that tens of millions of uninsured Americans will get medical coverage. The 219-212 vote marks the biggest victory yet for President Barack Obama , who will soon sign the bill into law. Only Democrats voted for the legislation, underscoring a partisan divide that promises to make health care the defining issue in November’s congressional elections. Lawmakers hailed the action as a historic follow-on to the 1965 creation of the Medicare program for the elderly and a way to mitigate soaring health costs that make up a sixth of the U.S. economy. It came after a last-minute deal with anti- abortion Democrats and a lobbying trip by Obama to the Capitol. “It is with great humility and with great pride that we tonight will make history for our country and progress for the American people,” House Speaker Nancy Pelosi said just before the vote. “We will be joining those who established Social Security, Medicare and now, tonight, health care for all Americans.” To get it done, House Democrats approved a Senate bill passed in December while preparing for another vote on a measure that would amend the Senate legislation to fix provisions they don’t like. The Senate must also pass this second bill under a budget process called reconciliation that requires a simple majority vote. The chamber plans to act next week. Total Costs The two bills together will cost $940 billion over 10 years and cover 32 million uninsured Americans, the Congressional Budget Office estimated. That’s more than made up for with a new tax on the highest earners, fees on health-care companies and hundreds of billions of dollars in Medicare savings, which will reduce the federal budget deficit , the CBO said . Companies such as health insurer WellPoint Inc. of Indianapolis, medical-device maker Medtronic Inc. of Minneapolis and drugmaker Pfizer Inc. of New York will get millions of new customers with the extension of coverage. Their industries will also face billions of dollars in new fees. As part of the overhaul, drugmakers agreed to help the elderly more easily afford medicines. Insurers , who opposed the legislation, will have to take all customers, regardless of pre- existing conditions, and face limits on how much revenue can be spent beyond covering medical expenses. Personal Penalties Americans, in turn, will have to buy insurance or pay a penalty, with the possibility of tapping new purchasing exchanges and government aid for lower-income Americans. Republicans said the costs will balloon, criticized the increases in government programs and held out the possibility that private insurance and medical care would be hurt. House Minority Leader John Boehner said prior to the vote that the legislation was a health-care bill “that no one in this body believes is satisfactory. We have failed to listen to America, and we have failed to reflect the will of our constituents.” Business groups including the U.S. Chamber of Commerce also lobbied against the legislation, and Peoria, Illinois-based Caterpillar Inc. sent a letter to leaders saying the bills would raise its costs by $100 million in the first year alone. The House’s two-step process became necessary after Democrats lost the 60th vote in the Senate generally needed to push through major legislation. Just weeks after the Senate’s party-line 60-39 vote, Democrats were almost finished drafting a House-Senate compromise bill when Massachusetts Republican Scott Brown won a Jan. 19 special election to fill the seat left vacant by the death of Democrat Edward M. Kennedy . Majority Vote The use of the budget-reconciliation tool opens the door for the Senate to pass the second bill with 51 votes, as long as it can withstand Republican challenges and the rulings of a parliamentarian, who will take out any provision he decides have only an incidental impact on the federal budget. Any changes in the Senate would force a new House vote on the reconciliation bill, further complicating the effort. House Democrats particularly want to scale back a tax on high-end, or so-called Cadillac, insurance plans because they say it would affect too many workers. Ready to ‘Tackle’ Illinois Senator Richard Durbin , a member of the Democratic leadership, said today that his party is prepared for challenges and any amendments Republicans might file. “We’re ready to tackle that if that’s what they want to do,” Durbin said on CBS’s “Face the Nation” program. “We’re ready to deal with honest amendments. There will come a time when the American people say enough, this is about politics.” Obama, who faced criticism for largely leaving the drafting of the legislation to Congress, swung into high gear in recent weeks. He hosted a Feb. 25 bipartisan summit at the White House, proposed detailed final compromises and lobbied dozens of undecided Democrats. He postponed a trip to Asia to remain in Washington for today’s vote. Obama benefited in part from the votes of Democrats who are leaving Congress and who were willing to switch sides after voting “no” on a House version in November. He also won support from Democrats including Representative Dennis Kucinich of Ohio, who had threatened to oppose the final measure because it didn’t include a new government program, or public option, to compete against private insurers. The legislation will expand the Medicaid government program for the poor to cover those up to 133 percent of the federal poverty level, and offer subsidies for millions of other Americans to buy insurance through an online exchange offering policies at more-affordable group rates. Many employers with more than 50 workers that don’t offer coverage will be subject to a penalty. The reconciliation bill will change the penalty to $2,000 per worker, from $750 in the Senate bill, and subtract out the first 30 employees. The overhaul is financed in large part through new taxes. The reconciliation bill would add a 3.8 percent Medicare tax on investment income imposed on individuals who earn more than $200,000 a year and joint tax filers who have more than $250,000 in earnings. That adds to a higher Medicare payroll tax already in the Senate bill. To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net ; James Rowley in Washington at jarowley@bloomberg.net ; Kristin Jensen in Washington at kjensen@bloomberg.net

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Democrats Reach Deal on Abortion, Have Votes in House to Pass Health Bill

March 21, 2010

By Laura Litvan and Nicole Gaouette March 21 (Bloomberg) — House Democrats are on the verge of passing the most far-reaching health legislation in more than four decades as leaders reached a last-minute deal on abortion restrictions that won over a bloc of lawmakers. Within hours of beginning debate, anti-abortion Democrats led by Representative Bart Stupak of Michigan struck an agreement with the White House that will preserve the ban on federal funding of abortion. The accord calls for President Barack Obama to sign an executive order stating that federal money can’t be used for abortions, White House communications director Dan Pfeiffer said. Obama will sign the measure once the bill is passed, Pfeiffer said. “While the legislation as written maintains current law, the executive order provides additional safeguards to ensure that the status quo is upheld and enforced,” Pfeiffer said in a statement. Stupak and at least six other lawmakers signed on to the accord. House Democrats will have more than enough votes, House Majority Leader Steny Hoyer , a Maryland Democrat, said on NBC television’s “Meet the Press” earlier today. “We think 216 plus votes when we call the roll.” President Barack Obama urged lawmakers to approve the bill, which would revamp an industry that makes up a sixth of the economy, during a visit to Capitol Hill yesterday. Opposition Republicans universally oppose the legislation, arguing that the Democrats are underestimating the cost and pushing through changes that polls show Americans oppose. “The people of this country don’t like this bill,” House Minority Whip Eric Cantor said on ABC’s “This Week.” Representative Mike Pence , an Indiana Republican, said the Democrats don’t have the votes. Republicans will use “any means at our disposal to oppose this government takeover,” Pence said on CNN’s “State of the Union” program. “Stay tuned. It’s going to be an interesting day.” Democrats promised victory. “We’re going to make history today,” Representative John Larson of Connecticut, the House Democratic Caucus chairman, said on “This Week.” “Barack Obama will pass health-care reform, demonstrating whose side we’re on.” Among those joining Stupak in the agreement with the White House are Representatives Kathleen Dahlkemper and Christopher Carney , both of Pennysylvania, Marcy Kaptur and Steve Driehaus , both of Ohio, and Alan Mollohan and Nick Rahall , both of West Virginia. “We’re well past 216” votes, Stupak said at a news conference this afternoon. Two Votes The House will take two votes today, taking up a Senate bill that passed in December and then a so-called reconciliation measure that amends parts of the Senate plan that House Democrats don’t like. If the House approves the Senate bill, the overhaul becomes law after it’s signed by Obama, who canceled a trip to Asia to be present. Enough House Democrats opposed the Senate version that leaders considered bypassing a direct up-or-down ballot on the legislation in a maneuver that would “deem” it approved. Republicans had accused them of trying to duck a difficult vote, and Democrats yesterday dropped the plan. “We determined we could do this, and it was a better process,” Hoyer said. If today’s votes are successful, the compromise package will go back to the Senate, where Majority Leader Harry Reid said yesterday he had the “commitment of a significant majority” of Democrats to approve it. Up to Senate Illinois Senator Richard Durbin , a member of the Democratic leadership, said his party is prepared for challenges and any amendments Republicans might file. “We’re ready to tackle that if that’s what they want to do,” Durbin said on CBS. “We’re ready to deal with honest amendments. There will come a time when the American people say enough, this is about politics.” Leading up to today’s House vote, at least eight Democrats who voted “no” on a House version of the bill in November have switched sides to support the measure. The latest, Brian Baird of Washington, sent out a statement today. “The status quo cannot be sustained,” Baird said. At least three other Democrats have switched to oppose the measure. The president yesterday told members that the legislation offers “the toughest insurance reforms in history.” He said many Americans are living a “quiet crisis” because of health-care concerns. “Now, we’re on the threshold of doing something about it,” said Obama, who has made the issue the centerpiece of his domestic legislative agenda. Since Medicare “Is this the single most important step that we have taken on health care since Medicare ? Absolutely,” Obama said of the 10-year, $940 billion measure. On CNN, Utah Republican Senator Orrin Hatch said he didn’t think the Senate would pass the reconciliation bill that House lawmakers have written. If senators make changes to the reconciliation bill , it would have to go back to the House for passage. That could potentially complicate passage as House Democrats would have to muster support all over again to pass a bill altered by the Senate. It’s not going to be “a one-time deal,” Hatch said. California’s Democratic Senator Dianne Feinstein disagreed and said Senate debate will start on March 23 and continue for several days. “I believe there are at least 51 votes there,” Feinstein told CNN. The vote “comes down to whose side are you on?” said Larson. “Are you siding with the insurance industry or are you siding on behalf of the people who have been waiting decades for this passage?” Asked about the loss of Democratic seats in the November elections, Larson said there’s always a chance of losing members in midterm elections. “It isn’t about how many members are going to lose their seats,” he said. “It’s about this moment, it’s about the truth.” To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net ; Nicole Gaouette in Washington at ngaouette@bloomberg.net

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Stupak, House Democrats Reach Agreement on Abortion Issue in Health Bill

March 21, 2010

By Laura Litvan and Julianna Goldman March 21 (Bloomberg) — Representative Bart Stupak said he and other House Democrats have reached an agreement that he said would ensure that no federal funds will be used to finance abortions in health-care legislation. Stupak, of Michigan, had complained that language restricting federal funds for abortion in Senate legislation the House will vote on today was too weak. The agreement calls for President Barack Obama to sign an executive order stating that federal funds can’t be used for abortion, White House communications director Dan Pfeiffer said. Obama will sign the measure once the bill is passed, Pfeiffer said. “While the legislation as written maintains current law, the executive order provides additional safeguards to ensure that the status quo is upheld and enforced, and that the health care legislation’s restrictions against the public funding of abortions cannot be circumvented,” Pfeiffer said in a statement. To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

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Democrats Have Ample Support to Pass Health Overhaul in House, Leaders Say

March 21, 2010

By Nicole Gaouette and Sandrine Rastello March 21 (Bloomberg) — House Democratic leaders say they will pass the most far-reaching health legislation in four decades today, with ample support from their party and an agreement on abortion close. House Democrats have more than enough votes to pass health- care overhaul legislation, House Majority Leader Steny Hoyer , a Maryland Democrat, said on NBC’s “Meet the Press.” “We think 216 plus votes when we call the roll,” Hoyer said. Republicans said Democrats don’t have the votes and vowed to use “any means at our disposal to oppose this government takeover,” said Indiana Representative Mike Pence on CNN’s “State of the Union” program. “Stay tuned. It’s going to be an interesting day.” The legislation will restructure an industry that makes up 18 percent of the economy, a step that President Barack Obama Barack Obama urged lawmakers to take in a visit to Capitol Hill yesterday. Republican lawmakers universally oppose the legislation, arguing that Democrats are underestimating the cost and pushing though changes that polls show Americans don’t like. House Minority Whip Eric Cantor , speaking on ABC’s “This Week,” said no Republicans will vote for the legislation. “The people of this country don’t like this bill” and are scared of it, he said. Making History “We’re going to make history today,” Representative John Larson , the House Democratic Caucus chairman, said on the ABC program. “Barack Obama will pass health-care reform, demonstrating whose side we’re on,” the Connecticut Democrat said. Objections by anti-abortion Democrats led by Representative Bart Stupak of Michigan will soon be cleared, a Democratic official familiar with the matter said. Obama is set to sign an executive order stating that federal funds cannot be used for abortion. The order reaffirms current law. “They are close to reaching an agreement, but they are not there yet,” Michelle Begnoche, Stupak’s spokeswoman said in an e-mailed statement. “The congressman hopes they will be able to get an agreement this morning and health care wrapped up today. But right now he is still a no vote.” House Minority Leader John Boehner promised a Republican “effort to repeal the bill” on NBC’s “Meet the Press” and insisted Democrats do not have the votes. “We’ll do the very best we can to keep this bill from passing,” Senate Minority Leader Mitch McConnell said on CBS’ “Face the Nation.” Prepared for Challenges Illinois Senator Richard Durbin , a member of the Democratic leadership, said his party was prepared for challenges and any amendments Republicans might file. “I certainly think we’re ready to tackle that if that’s what they want to do,” Durbin said on CBS. “We’re ready to deal with honest amendments. There will come a time when the American people say enough, this is about politics.” House Democrats are confident enough of support that they have abandoned plans to bypass a direct up-or-down ballot on the legislation and simply “deem” it approved. Republicans had accused them of trying to duck a difficult vote. Hoyer said “we determined we could do this, and it was a better process.” The House will vote on both the Senate bill and compromise legislation called a reconciliation bill that amends parts of the Senate measure that House Democrats don’t like. If the House approves the Senate bill, the overhaul becomes law after it’s signed by Obama, who canceled a trip to Asia to be present. The compromise package goes back to the Senate, where Majority Leader Harry Reid said yesterday he had the “commitment of a significant majority” of Democrats to approve it. Switching Sides Leading up to today’s House vote, at least seven Democrats who voted “no” on a House version of the bill in November have switched sides to support the measure, and a number of undecided lawmakers have come out in favor of it. At least three others have switched to oppose the measure. The president urged the members to back the legislation, which he called “the toughest insurance reforms in history,” during a visit to the U.S. Capitol yesterday. He said many Americans are living a “quiet crisis” because of health-care concerns. “Now, we’re on the threshold of doing something about it,” said Obama, who has made the issue the centerpiece of his domestic legislative agenda. “Is this the single most important step that we have taken on health care since Medicare ? Absolutely,” Obama said of the 10-year, $940 billion measure. Complex Process On CNN, Utah Republican Senator Orrin Hatch said he didn’t think the Senate would pass the reconciliation bill that House lawmakers have written. If Senators make changes to the reconciliation bill, it would have to go back to the House for passage. That could potentially complicate passage as House Democrats would have to muster support all over again to pass a bill altered by the Senate. It’s not going to be “a one-time deal,” Hatch said. California’s Democratic Senator Dianne Feinstein disagreed and said Senate debate will start Tuesday and continue for several days. “I believe there are at least 51 votes there,” Feinstein told CNN. The vote “comes down to whose side are you on?” said Larson. “Are you siding with the insurance industry or are you siding on behalf of the people who have been waiting decades for this passage?” Asked about the loss of Democratic seats in the November elections, Larson said there’s always a chance of losing members in mid-term elections. “It isn’t about how many members are going to lose their seats,” he said. “It’s about this moment, it’s about the truth.” To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net Nicole Gaouette in Washington at ngaouette@bloomberg.net

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House Leaders Work to Defuse 11th-Hour Fight Over Medicare Reimbursements

March 19, 2010

By Nicole Gaouette and James Rowley March 19 (Bloomberg) — House Democratic leaders worked to defuse an 11th-hour rebellion by more than a dozen lawmakers angry that hard-fought increases in Medicare reimbursements for local hospitals were removed from health-care legislation. The lawmakers’ concern arose after House leaders released the latest version of legislation to overhaul the U.S. health- care system. House leaders are pushing for a March 21 vote on changes to Senate-passed legislation. Left unchanged is Senate language that these lawmakers say won’t go far enough to ease geographic disparities in Medicare reimbursements . Such a provision was included in House-passed legislation to win votes of lawmakers who say hospitals in their districts would be paid less than other facilities for the same services. “My state is getting screwed,” said Representative Peter DeFazio , an Oregon Democrat. “They have to fix it. I’m a ‘no’ vote unless they fix it.” Lawmakers representing health-care providers in 17 states are affected by the change, he said. As House leaders corral votes in favor of the legislation, DeFazio said “there are a number of people who may be miscounted at this time.” House leaders, trying to round up 216 votes to pass revisions to the Senate bill, are working to craft a provision on the Medicare payments that would survive parliamentary challenges by Republicans when the measure is debated in the Senate. ‘Legitimate Concern’ Asked about the issue at a press conference, House Speaker Nancy Pelosi told reporters “we do want the language to be closer” to the House measure, which satisfied lawmakers “who have a legitimate concern about the reimbursement to their states being unfair.” “We are working on that language,” the speaker said. A provision to change the Senate version was removed from the legislation yesterday, shortly before House leaders unveiled changes, DeFazio said. It was deleted because Senate staff members told House leaders it might run afoul of parliamentary challenges by Senate Republicans, DeFazio said. To pass muster, every provision must reduce the deficit under budget reconciliation procedures being deployed to enact the most comprehensive redesign of the health-care system in five decades. Wisconsin Democrat Ron Kind said many lawmakers are upset that the geographic-disparities provision was removed from the legislation. ‘Wait and See’ “A lot of votes are hinging on it,” he said. Kind said he was “going to wait and see” whether he would support the measure. Lawmakers are trying to rewrite the provision to win a favorable ruling from the Senate parliamentarian. Without changes to reimbursements to hospitals and other providers “it’s going to be hard to justify” voting for the legislation, said Nevada Democrat Shelley Berkley , who planned to meet today with Pelosi to express her concerns about the legislation. “Every one of my hospitals is operating in the red” and the legislation as written “is not going to turn that around,” she said. Ohio Democrat Marcy Kaptur told reporters this week that she is concerned about differences between hospital reimbursements in her Toledo-area district and more affluent Ann Arbor, Michigan, about an hour’s drive to the north. Toledo-area hospitals “get hurt,” by the reimbursement disparity, “including one which does an enormous amount of charity care,” she said. “This bill, I don’t think, fixes that,” Kaptur said. “That’s a big issue for me.” To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net ; James Rowley in Washington at jarowley@bloomberg.net

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Caterpillar Writes Pelosi: Machinery Giant Concerned About Health Care Costs

March 19, 2010

Hoping to slow down the process of health care reform, the world’s largest construction machinery manufacturer sent a letter to House leadership on Thursday, warning that it would be hit hard financially by the legislation. Not that Caterpillar is in precarious shape — the machinery giant recorded substantial profits over the past few years and its executives receive generous compensation packages. In a letter to House Speaker Nancy Pelosi (D-Calif.) and House Republican Leader John Boehner (R-Ohio), the company’s vice president Gregory Folley said that Caterpillar would be forced to pay $100 million more in health care costs in the first year alone under the bill being considered. Folley pointed to an expansion of Medicare taxes and mandated insurance coverage as two provisions that would do the most damage. “We can ill-afford cost increases that place us at a disadvantage versus our global competitors,” said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. “We are disappointed that efforts at reform have not addressed the cost concerns we’ve raised throughout the year.” Others, too, have raised concerns about the lack of effective cost-cutting measures in the health care legislation. But spending $100 million to provide more health care for workers — while not chump change — doesn’t seem likely to cripple Caterpillar either. In 2009, during the height of the economic downturn, the company still managed to turn a profit of $895 million, according to SEC statements . The preceding year, Caterpillar recorded a profit of $3.557 billion. The year before that it was $3.541 billion. In short: if Caterpillar had to pay $100 million for extra health care costs in 2007 (a lucrative year but more representative than what the company earned during the height of the recession), that would have represented just 2.8 percent of its profits. The company already spends a decent chunk of that money on executive pay. According to a 2009 proxy statement to its SEC filings, Caterpillar set aside more than $37 million in total compensation for just seven of its top officials in 2008. If you add in the compensation paid to chairman and CEO J.W. Owens, that number jumps more than $17 million (up to $55,129,209). The company, of course, is facing a much more difficult economic climate now. And in that respect, concerns over “the substantial cost burdens” that health care reform “would place on our shareholders, employees and retirees” (as Folley writes) do seem worthy of discussion. But for a company whose workers have already been hit quite hard by the health care crisis, and whose executives still seem to be doing quite well, it’s difficult to view the letter to Pelosi and Boehner as a game-changer that could trip up health care reform’s passage. That said, the story currently rests atop the Drudge Report. HERE IS THE CATERPILLAR LETTER : caterpillor

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Israel’s Fischer Said Likely to Serve Second Term After Bank Law Passed

March 17, 2010

By Alisa Odenheimer March 17 (Bloomberg) — Bank of Israel Governor Stanley Fischer is likely to agree to a second term after parliament overhauled the law regulating the central bank for the first time since 1954, a person familiar with the situation said. Prime Minister Benjamin Netanyahu will hold a press conference today in which he is expected to announce that Fischer will accept a new term, the person said, speaking on condition of anonymity because no official announcement has been made. Parliament yesterday approved the legislation by a vote of 28 to 1. Fischer, whose five-year term finishes at the end of April, said on Jan. 27 that approval of the law would be an “important” consideration in his decision whether to remain in office. Fischer, 66, who was Federal Reserve Chairman Ben S. Bernanke’s thesis adviser, helped guide the Israeli economy through the global financial crisis, cutting interest rates as the recession unfolded and raising them when it ended. The economy grew 0.7 percent in 2009 compared with a 3.4 percent average contraction in the Organization for Economic Cooperation and Development Countries. To help cushion the damage to exports from the crisis, beginning in March 2008, Fischer ordered the Bank of Israel to buy foreign currency to drive down the value of the shekel. At the end of February, foreign currency reserves had more than doubled to $60.7 billion. Exports make up about half of the country’s gross domestic product. Economic Expansion The economy may expand more than the bank’s forecast of 3.5 percent for 2010 if the global recovery accelerates, Fischer said in an interview in Davos on Jan. 27. OECD members may expand 1.9 percent this year, the group said on Nov. 19. Israel’s benchmark TA-25 stock index surged 75 percent last year, led by Delek Group Ltd., a partner in a gas find at the Tamar field off Haifa’s coast last year. The benchmark stock index has gained about 80 percent since Fischer began his term at the central bank, similar to the increase in the MSCI Emerging Market Index. During the same period, the shekel has strengthened by about 15 percent against the dollar. “I hope he will announce that he is staying,” Knesset Finance Committee chairman Moshe Gafni said in presenting the law to parliament. “It is very important to the State of Israel that he stay on.” Following a career as an academic, international policy maker and a banker in the U.S., Fischer became governor of the Bank of Israel and a citizen of the country in 2005. Price Stability The Bank of Israel Law, which successive governments have been discussing for more than a decade, specifies price stability as the central bank’s primary goal, forms a board of directors with a majority of members who are not bank employees, and creates a six-member committee to set interest rates . Under the current law, the governor has the sole authority to change rates and make management decisions. The monetary committee established by the legislation will be headed by the governor and will include the deputy governor, an additional senior central bank official, and three members from outside the bank. In the event of a tie, the governor will have the deciding vote. Fischer’s insistence on changing the Bank of Israel Law and putting monetary policy in the hands of a committee will strengthen the institution once he’s left office, said Leo Leiderman , chief economist at Bank Hapoalim Ltd . in Tel Aviv, Israel’s second largest lender. “People have a lot of confidence in Fischer but who knows who’s going to be in charge afterwards,” he said. “Institutionally, he’s helped the Bank of Israel to maintain its credibility for the future.” To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

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Israel Passes Central Bank Law Sought by Fischer as He Weighs Second Term

March 16, 2010

By Alisa Odenheimer March 16 (Bloomberg) — Israel’s parliament approved a law governing the central bank, legislation that Governor Stanley Fischer has said would be a key factor as he considers a second term. The law was backed by a vote of 28 to 1. Fischer attended the balloting today. Fischer, whose five-year term finishes at the end of April, said on Jan. 27 that approval of the legislation would be an “important” consideration in his decision whether to remain in office. The current law governing the bank dates from 1954. Fischer, 66, who was Federal Reserve Chairman Ben S. Bernanke’s thesis adviser, helped guide the Israeli economy through the global crisis, cutting interest rates as the recession unfolded and raising them when it ended. The economy grew 0.7 percent in 2009 compared with a 3.4 percent average contraction in the Organization for Economic Cooperation and Development Countries. “I hope he will announce that he is staying,” Knesset Finance Committee chairman Moshe Gafni said in presenting the law to parliament. “It is very important to the State of Israel that he stay on.” Israel’s banking system was stable during the global financial crisis, something which Gafni told parliament could be credited to Fischer’s actions. The Bank of Israel law, which successive governments have been discussing for more than a decade, specifies price stability as the central bank’s primary goal, forms a board of directors with a majority of members who are not bank employees, and creates a six-member committee to set interest rates . Under the current law, the governor has the sole authority to change rates and make management decisions. The monetary committee established by the legislation will be headed by the governor and will include the deputy governor, an additional senior central bank official, and three members from outside the bank. In the event of a tie, the governor will have the deciding vote. Fischer has said that on average, decisions made by a group of professionals are better than those made by an individual. To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

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Obama, Democrats Push Ahead on Health-Care Legislation in Face of Hurdles

March 14, 2010

By Kristin Jensen and Laura Litvan March 15 (Bloomberg) — Democrats say they are poised to move forward with legislation calling for the broadest changes to U.S. health care in more than four decades after a year of partisan wrangling and missed deadlines. White House senior adviser David Axelrod predicted the House of Representatives will approve the overhaul by the end of this week in what would be a victory for President Barack Obama , who has made the legislation a top priority. “I am absolutely confident that we are going to be successful,” Axelrod said yesterday on NBC’s “Meet the Press” program. Still, a close vote is certain, with Republicans vowing to do all they can to stop the bill and House Democratic Whip James Clyburn of South Carolina saying yesterday that “as of this morning” supporters don’t yet have the votes. Clyburn voiced confidence the Democrats will succeed, and House Speaker Nancy Pelosi has signaled the balloting may come this week, saying “members are eager to pass a bill.” Obama, who plans to speak on health care today in Ohio, moved back a scheduled trip to Asia by three days to March 21 so he could lobby lawmakers. He’s pushing the House and Senate to finish before they leave March 26 for a two-week recess. The House Budget Committee will kick off the legislative process this afternoon, with a meeting at 3 p.m. ‘Don’t Have the Votes’ Pelosi probably has to win over some lawmakers who opposed the original House bill, which passed by a five-vote margin in November, while overcoming concern about issues from abortion funding to the addition of a student-loan provision to the legislation. “If she had 216 votes, this bill would be long gone,” House Minority Leader John Boehner , an Ohio Republican, said on CNN’s “State of the Union” program. “They tried to pass it in September, October, November, December, January, February. Guess what? They don’t have the votes.” Democrats want to enact the biggest changes to health insurance since the Medicare program for the elderly was established 45 years ago. They would require Americans to obtain coverage, offering new purchasing exchanges and subsidies to help. Insurers such as Hartford, Connecticut-based Aetna Inc. would get millions of new customers, while being forced to accept everyone who seeks coverage. Reconciliation Maneuver House leaders are preparing to push two sets of legislation through their chamber. Democrats first have to approve a 10- year, $875 billion bill the Senate passed in December and then clear a set of changes to that measure through a process called reconciliation. The changes are needed because House Democrats object to parts of the Senate bill. The Senate then would pass the reconciliation measure. Democrats are using reconciliation, which is designed for budget-related matters, because it only requires a simple majority vote in the Senate. Most major legislation needs 60 votes, and Democrats control 59 seats. House members are seeking assurance the changes will be passed after the Senate parliamentarian decided that Obama would first have to sign the Senate bill into law. “Members of the House are being asked to trust an untrustworthy body,” said Representative Anthony Weiner , a New York Democrat. Pelosi said many members don’t trust the Senate because so much House-passed legislation has languished there. ‘A Little Faith’ “It will take a little faith,” said the California Democrat. House Democrats particularly want to scale back a Senate- passed excise tax on high-end insurance benefits that is opposed by labor unions and eliminate special aid to Nebraska in favor of extra help for all states to cover costs for the Medicaid program for the poor. Since the House passed its version of the legislation 220- 215 in November, Democrats have lost four yes votes through vacancies and a switch by the one Republican who backed the bill, Louisiana Representative Joseph Cao . They may lose more over abortion. Michigan Representative Bart Stupak said a dozen Democrats might defect because they don’t think the restrictions on federal funding are strong enough. “I don’t think we’ll lose a dozen votes,” said the No. 2 House Democrat, Steny Hoyer of Maryland. “We may lose some.” Student Loans Another question lies in the student-loan plan. The head of the House education committee, California Representative George Miller , pushed to add a House-passed measure that would allow the government to provide college loans directly while eliminating federal guarantees and subsidies to lenders such as Reston, Virginia-based SLM Corp., or Sallie Mae . Several Senate Democrats, whose states are home to private lenders, have resisted that measure. Those debates, coupled with the Republican pledge to throw up hurdles, are leading some House Democrats to counter their leaders’ optimism. “This is not on a fast track, because there’s still too many questions on reconciliation,” said Representative Bill Pascrell , a New Jersey Democrat. White House officials said those obstacles can be overcome. “We do believe that, a week from today, we’ll be talking about a bill that has passed the House, not being considered by the House,” Obama spokesman Robert Gibbs said on CBS’s “Face the Nation” program. To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net ; Kristin Jensen in Washington at kjensen@bloomberg.net

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Dodd May Toughen CFPA In Financial Regulatory Reform Bill

March 14, 2010

To consumer advocates, it’s essential that an agency charged with protecting borrowers is able not just to write rules for industries that extend credit, but also able to enforce those rules. It’s an intuitive concept, to say the least. To make its advantages more clear, the Consumer Federation of America put together a chart that shows the current relationship between different federal laws and the agencies with rulemaking and enforcement authority under those laws. Click HERE for a full size image of the chart. The current regulation of consumer financial products is a tangled web that allows businesses and banks to shop around for the most lenient cop. The idea of the proposed Consumer Financial Protection Agency would be to centralize rulemaking and enforcement authority in one place. Not everyone likes that idea: Senate Republicans could live with giving the CFPA rulemaking authority but have drawn a line in the sand on enforcement, according to Sen. Bob Corker (R-Tenn.), who said that Senate Banking Committee Chairman Chris Dodd (D-Conn.) agreed to the deal. But after Dodd broke off negotiations with Corker on Wednesday, it’s not clear if such a deal still stands (if it ever stood to begin with). It’s likely Dodd will unveil a more progressive draft on Monday — particularly with regard to enforcement of non-mortgage nonbank lenders, according to people close to the process. In the version of the legislation that passed the House, auto dealers, which originated nearly 80 percent of more than $850 billion in outstanding debt in 2009, won a ” carve out ” that exempted them from the agency’s rulemaking altogether. So did pawnbrokers. And it seemed likely such groups would get the sweetheart treatment from the Senate as well, subject to CFPA rules but not enforcement. Those groups may not get such favorable treatment in Dodd’s forthcoming draft after all. A Senate Democratic aide told HuffPost that the folks writing the bill are trying to figure how best to empower the CFPA to crack down on non-mortgage, nonbank lenders. “For many of the smaller institutions, that would stay with their primary enforcers now,” wrote the aide in an email. “However, there would likely be a mechanism for the CFPA or similar agency to step in if problems emerged. The debate is over at what point this would happen.” A lobbyist who has been tracking the legislation also said it seemed the committee was working to make it easier for the agency to enforce its rules. “My understanding of what the committee was doing was they were looking at what they were going to toughen up in that agreement to allow the agency some more authority,” said the lobbyist. “I understand they’re talking about ways to make it easier for the agency to enforce its rules against non-mortgage nonbanks.” Corker himself said he expected Dodd, who is retiring when his term ends this year, would veer left after breaking off talks with the Republicans. There has been no indication, however, that Dodd will go back on his deal with Republicans to house the CFPA inside the Federal Reserve, an idea loathed by consumer advocates and Dodd’s banking committee counterpart in the House, Rep. Barney Frank (D-Mass), who saw to it the House passed a bill with an independent CFPA. Advocates of putting auto dealers within the agency’s purview won the hefty support of the Department of Defense, which came out last week in favor of preventing dealers from ripping off members of the armed services. “The Department of Defense supports and encourages legislative efforts to establish a Consumer Financial Protection Agency to protect service members and their families from unscrupulous automobile sales and financing practices,” said a DoD spokeswoman in an email. Rosemary Shahan, president of the California-based Consumers for Auto Reliability and Safety, has been lobbying senators in Washington this week to press for regulation of auto dealers. To make her case, Shahan points to retired Marine Cpl. William Woods, who had been back from Iraq for three months when he traded in his Mazda as a downpayment for a used Porsche on a Sacramento dealer’s lot. Woods discovered the car was a lemon when a Porsche dealership told him it had been totaled. When he took it back to the dealer to protest, they yanked the keys for both cars, leaving Woods without transportation when it came time to search for a job in October. “It was very very miserable and difficult,” he said. “It was very hard to get around, especially being in such a big city.” (On Valentine’s Day, Shahan’s group gave Woods a “new” used car worth $3,000.) The auto dealer’s lobby says the kinds of things Shahan gripes about are already illegal, so no need for new lawmaking. “They’re illegal but so what, they’re violating the law,” replies Shahan. “There isn’t anybody policing it. The [Federal Trade Commission] isn’t policing them, the Fed isn’t policing them…When you have a car financing problem, is the first thing consumers think, ‘I think I should complain to the Fed?’” Soldiers are sympathetic characters when it comes to consumer financial protection. In 2006, Congress put a 36-percent interest-rate cap on short-term credit to members of the military, effectively banning predatory payday lending to a swath of the American public. Of course, the sympathetic soldier argument doesn’t work on everyone. “This time it’s military,” complained Banking Committee member Sen. Tim Johnson (D-N.D.), Dodd’s possible successor as committee chairman, after the law passed. “Who’s to say it isn’t going to be widows and orphans or other sympathetic groups in the future?” That’s what Woods wants. “Hopefully the bill passes — that way car dealerships are no longer allowed to do this to military members or people in general.” Ryan Grim contributed to this report.

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Health-Care Bill Faces New Hurdle, Republicans Say

March 12, 2010

By Laura Litvan and Kristin Jensen March 12 (Bloomberg) — Republicans said they won a parliamentary victory as they try to fight Democrats’ efforts to pass legislation to overhaul the U.S. health-care system. Republicans said President Barack Obama has to sign a Senate health-care bill into law before the House and Senate can approve changes to it under a process called reconciliation. The Senate parliamentarian told Republicans that a reconciliation bill has to “make changes in law,” said Don Stewart , a spokesman for Senate Minority Leader Mitch McConnell . “This would be another headwind for Democrats in the House” who oppose provisions in the Senate bill, said John Sullivan , a health-care analyst at Boston-based Leerink Swann & Co. “Their biggest fear has been that they vote for the Senate version and they never get the relief they’re looking for.” West Virginia Democratic Senator Jay Rockefeller said the parliamentarian’s ruling wouldn’t disrupt plans for the House to pass the reconciliation legislation before the Senate acts on it. “Its always been my understanding that’s what they were going to do,” he told reporters. Pushing Democrats Reconciliation, which requires a simple majority vote in the Senate, is at issue because Democrats are trying to find a way to complete their work on health care now that they control only 59 of the 100 seats in the chamber. Senate Democrats passed their original bill in December with 60 votes, the number generally required to push through major legislation. Obama is asking the House to pass the Senate bill as well as another measure to make changes to it under reconciliation, a process designed for budget items. The Senate would then also approve the changes under reconciliation. The problem is that House Democrats object to some parts of the 10-year, $875 billion Senate bill, so they are seeking assurance that the package of changes will also become law. They wanted Obama to hold off signing the Senate bill until the reconciliation measure passed both chambers. Illinois Senator Dick Durbin , the No. 2 Senate Democrat, said on March 9 that he understands why some House Democrats might not trust the Senate to act on the reconciliation changes. ‘Right to Be Skeptical’ “The House has a right to be skeptical,” Durbin told reporters. “They have almost 300 bills they’ve passed” that are “somewhere lost in the Senate,” he said. The news from Republicans, who unanimously oppose the legislation, came on the same day that House and Senate leaders said they had reached agreement on the majority of the language in the new reconciliation bill. The leaders presented the outlines of the plan to House Democrats yesterday. “The decisions are made, the choice has to be made” by lawmakers, House Speaker Nancy Pelosi told reporters. Democrats are calling for the biggest changes to the medical system since the Medicare health program for the elderly was created in 1965. Their plan would require Americans to get insurance, covering tens of millions more people, and offer new purchasing exchanges and government aid to help. Insurance company executives including WellPoint Inc. Chief Financial Officer Wayne DeVeydt say the legislation doesn’t have strong enough penalties for people who don’t buy insurance and doesn’t do enough to curb medical costs . That means insurers, who would be required to accept people with pre-existing conditions, would have to raise rates, DeVeydt said on March 10. Target for Action Obama is pushing Congress to act before lawmakers leave for a two-week recess on March 26. Pelosi said the vote “is not something we are going to drag out” and that the lawmakers are awaiting a cost analysis by the Congressional Budget Office. The White House estimated that a proposal Obama put forth last month, which is providing the basis for the reconciliation bill, would cost $950 billion over 10 years. Pelosi said the legislation will eliminate 80 percent of an excise tax on high-priced insurance plans in the Senate measure and replace the lost revenue with a Medicare payroll tax on unearned income. It will increase Medicare prescription-drug benefits to eliminate a gap in coverage for seniors, she said. Leaders haven’t reached agreement on the level of subsidies to help low-income Americans purchase insurance and how much extra help to give states such as New York that offer more generous Medicaid benefits, said a House Democratic leadership aide who spoke on condition of anonymity. The House Budget Committee will take up the measure on March 15, said a congressional aide familiar with the schedule. To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net ; Kristin Jensen in Washington at kjensen@bloomberg.net

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Dodd Decision A Surprise To Reformers

March 11, 2010

Senate Banking Committee Chairman Christopher Dodd’s decision to break off negotiations with Republicans and go it alone on financial regulatory reform legislation came as a shock to some reformers. “To be honest, a lot of us were surprised,” said one consumer advocate closely involved in financial reform efforts. “It seemed like a deal of some sort was imminent and on track.” The advocate noted that Dodd’s decision was likely influenced by the outcry from progressives and other pro-reform groups who argued that Dodd, a Connecticut Democrat not seeking reelection this year, was giving Republicans and Wall Street-friendly Democrats too much sway over the legislation. Dodd’s original reform proposal in November had called for a strong, independent consumer-focused agency to protect borrowers from predatory lenders. “At the end of the day, though, there is only so much that reform advocates were willing to give on this,” the advocate said. “And because of the context — what the banks did to the economy and the bailouts — reformers have a lot of high ground right now. Democrats just don’t benefit from teaming up with the banks and losing the interest groups.” Dodd’s partner in the negotiations, Sen. Bob Corker (R-Tenn.), reportedly pushed to exclude nonbank lenders like finance companies, payday lenders and pawnbrokers from the legislation’s reach. The Independent Community Bankers of America, the leading advocacy group representing the nation’s community banks, wants tougher oversight of the largely under-regulated network of nonbank lenders. “The last thing we want is the world we have today,” Steve Verdier, senior vice president and director of Congressional relations for ICBA, said in an interview. “Community banks have examinations every 12 to 18 months. The rest of the financial industry doesn’t have anybody. It’s a terrible situation for consumers.” Reform-minded groups have strongly advocated for reining in nonbanks and banks alike. “Let’s just supervise them all, protect the consumers and not leave any loopholes,” Verdier said. But while the group — among the most powerful on Capitol Hill — supports strengthening consumer protection, it doesn’t want an independent consumer-focused agency targeting community banks. Bank regulators should keep that authority, Verdier said. Federal bank regulators have been strongly criticized for their consumer protection record, which many have called lax and ineffective. Dodd was reportedly willing to negotiate on these key points — to the detriment of consumers, consumer groups and reformers argue. On Thursday morning, in announced his decision, Dodd stated: “The proposal that I’ll offer on Monday does reflect a lot of the ideas that Bob Corker and others have brought to the table. It was important to put a proposal on the table, short of a proposal that reflects some broad bipartisan agreement.” The consumer advocate is concerned that Dodd may be watering down some reforms. “None of this is a matter of demanding perfection,” he told HuffPost. “The advocates are just demanding some meaningful, sensible, and desperately needed changes and aren’t interested in letting politicians build false confidence and have big press conferences while ignoring the central issues.” While the ICBA doesn’t support a new agency, it does support other elements of the financial reform legislation, especially those targeting Wall Street megabanks. Verdier said the group supports tougher regulation and monitoring of systemic risk, ending Too Big to Fail, giving regulators increased authority to shut down failing megabanks, and limiting banks’ Wall Street trading activities (popularly known as the Volcker Rule). “The challenge moving forward, of course, is that the industry seems to have in the neighborhood of 40 votes in the Senate,” the consumer advocate told HuffPost. “And it won’t stand for anything that isn’t written by the lobbyists,” the source added. “That’s how broken Washington is.”

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Corker Pushes `Surgical’ Senate Financial-Overhaul Bill, Sees Amendments

March 9, 2010

By Phil Mattingly March 9 (Bloomberg) — Senator Bob Corker , the Republican leading Banking Committee negotiations on legislation to overhaul financial rules, said the bill will be “surgical” and probably amended in committee and on the floor. “I don’t think we ought to try and pass legislation that solves all the problems in the world,” Corker said today during a CNBC Television interview. “There will be other legislation that comes down the road.” Banking Committee Chairman Christopher Dodd , a Connecticut Democrat, has negotiated with Corker for the past month on legislation to rewrite rules and end future taxpayer bank bailouts after the near-collapse of the financial system in 2008. The House passed its overhaul bill in December. “The goal is to have a bill that’s presented to committee that’s close enough to the middle of the road, in balance, that people can offer substantive amendments,” Corker said. Corker said the bill will have a “strong resolution piece” to wind-down systemically risky firms, avoiding bailouts for firms such as Bear Stearns Cos. and American International Group Inc. deemed “too big to fail” in 2008. Negotiators reached “an appropriate balance” on the consumer protection aspects in the bill, Corker said, without offering details on the compromise to remove the main sticking point in negotiations. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net .

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Obama Says Benefits from Health-Care Measure Will Start Before Year’s End

March 7, 2010

By Nicholas Johnston March 6 (Bloomberg) — President Barack Obama said some provisions in health-care legislation he wants Congress to pass within weeks would begin improving insurance coverage for many in the U.S. before year’s end. Soon after passage the measure would give tax credits to small businesses, bar insurance companies from refusing coverage and help senior citizens afford their medications, Obama said in his weekly address on the radio and Internet. “There are numerous protections and benefits that would start to take effect this year,” Obama said. “That’s why we must act now.” Obama urged Congress to have an “up-or-down” vote on the legislation. Republican lawmakers are unanimously opposed to Obama’s plan and have vowed to make it an issue in the campaign for congressional elections in November. The plan would give insurers such as Minnetonka, Minnesota- based UnitedHealth Group Inc . and drugmakers including New York- based Pfizer Inc . millions of new customers while also putting new requirements on the companies. The president this week promised his supporters he would do “everything in my power” to make the case for the most sweeping U.S. health-care legislation in more than four decades. On March 8, he’ll continue that effort when he travels to Arcadia University , near Philadelphia. In the Republican address , Congressman Parker Griffith of Alabama said Democrats are rushing to “jam through a massive government takeover of health care.” Republican Objections “It would raise taxes, slash Medicare benefits and destroy American jobs,” said Griffith, a medical doctor who switched political parties last year. “It would put federal bureaucrats in charge of medical decisions that should be made by patients and doctors. And it must be stopped.” Obama said there has been almost a year of debate on the legislation, including a day-long summit with Democrats and Republicans in Congress last week, and that the discussion has been “public and substantive.” “Now, despite all the progress and improvements we’ve made, Republicans in Congress insist that the only acceptable course on health care is to start over,” Obama said. Griffith said Republicans favor a “step-by-step” approach, and that he joined the party because congressional Democrats refused to listen to public opposition to their health-care proposals. Legislative Tactic He said the procedure Democrats will use to get the legislation through the Senate with 51 votes, using a tactic known as “budget reconciliation,” is a “toxic, controversial legislative scheme.” “Reconciliation would allow Democrats to make a few last- minute backroom deals and rely on only Democratic votes,” Griffith said. Under Senate rules, 60 votes are required to cut off debate and move legislation toward passage. Democrats control 59 seats in the 100-member chamber. Democratic leaders may seek to have the House pass the version of the legislation that cleared the Senate on Dec. 24 and then make changes using the reconciliation process. Obama said Republican ideas have been incorporated into the legislation and heeding calls for delay from opponents would let insurance companies continue to “arbitrarily and massively” raise rates and deny coverage based on pre-existing conditions. He said failing to pass a health-care overhaul now would mean an opportunity lost for “another decade, or another generation.” “We are not finished with our journey just yet. But we are close. We are very close,” Obama said. “So I ask Congress to finish its work. I ask them to give the American people an up or down vote.” To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net

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