James Pethokoukis

Politics and policy from inside Washington

Why Dodd should stay on the Banking Committee

Sep 2, 2009 21:32 UTC

It certainly looks as if Senator Chris Dodd, at least, isn’t too big too fail. The powerful Connecticut Democrat and chairman of the Banking Committee trails his likely 2010 Republican opponent by nearly 10 points in polls and can’t even crack the 40 percent level, an ominous sign for an incumbent.

While history hints that next year should be tough anyway for Democrats like Dodd — the president’s party has lost an average of four Senate seats during midterms since the 1940s — the five-term lawmaker has plenty of troubles of his own.

There are questions about the circumstances surrounding his purchase of a pricey “cottage” in Ireland. And Dodd was only recently cleared of accusations that his mortgages from Countrywide Financial broke Senate gift rules.  Indeed, a Quinnipiac poll found that just 35 percent of those surveyed believe Dodd to be honest and trustworthy.

But it’s Dodd’s role as Banking Committee chairman that may be his biggest problem. The position continues to link him to the financial meltdown, which has made virtually all incumbent politicians look feckless.  Not all incumbent politicians, however, have been the biggest recipient of campaign cash over the past two decades from Fannie Mae and Freddie Mac. Those would be the same failed mortgage giants whom Dodd called “fundamentally strong” just before their government bailout and takeover.

So it’s no surprise that Dodd is thought to be leaning toward giving up the chairmanship of the Banking Committee for that of the Health Committee, formerly run by the late Edward Kennedy.  Though being closely linked to that issue is hardly without risks — just ask all the Democrats who got the boot in the 1994 midterm elections — at least it’s something that average voters can easily relate to. Most Americans probably don’t dwell much on which government agency should monitor systemic risk.

But the departure of Dodd from Banking would be a real loss, if for no other reason than he is dubious about making the Federal Reserve the super-regulator of the American financial system. (His likely successor, Tim Johnson of South Dakota, is an unknown quantity.)  Earlier this summer, Dodd told Reuters that “those who are advocating the Fed’s role in all of this as a systemic risk regulator ought to be prepared to then concede a good chunk of independence of the Federal Reserve. I think that poses some serious issues.”

Indeed, it does. The more the Fed is involved in the regulatory process, the more it will be open to political scrutiny, since regulation creates winners and losers — both of whom probably have political action committees and Washington lobbyists.

As it is, the Fed has been in the congressional cross-hairs as never before because of its efforts to stabilize the credit markets and U.S. economy.  Witness, for instance, the hammering Fed Chairman Ben Bernanke took from a House panel concerning his role in the Bank of America-Merrill Lynch merger.  And then there’s the effort, one gaining momentum, to audit the Fed. That could open the central bank to far more intrusive congressional critiques of monetary policy.

It’s also worth mentioning that the Fed, despite its reputation as a regulator extraordinaire, has a poor track record at dealing with systemic risk, or even identifying it in a timely manner.  As noted Fed historian Allan Meltzer told a House panel in July, “I do not know of any clear examples in which the Federal Reserve acted in advance to head off a crisis or a series of banking or financial failures.”

Dodd, for now, appears to be cooking up his own approach, creating a U.S. version of the Financial Services Authority of Britain, that would actually strip the Fed of its regulatory portfolio.  Of course, a new regulator might not be any more prescient or proactive than the existing ones. But at least it wouldn’t compromise the independence of America’s central bank in the process.

COMMENT

Yes so he can get more sweetheart deals for himself. no closing costs cheap loans for his home here and abroad. he should be out. what will it take for the press to be shocked by these people and not worship him

Posted by urmil dhanda | Report as abusive

Same old, same old from Obama on healthcare

Sep 2, 2009 18:38 UTC

What is POTUS going to say that is any different, really. The risk of the Tune Out factor is growing. This, from a pro-ObamaCare blogger:

The problem is – Obama has already been specific about nearly all of this — frequently! The 8 insurance regulations he favors are not only in both bills, they’ve been the centerpiece of the “Health Insurance Reform” attempt at rebranding in August. Obama has already specified his preferred way of paying for reform — a cap on charitable deductions for those making over $250,000. And he spent an entire presidential campaign saying that he didn’t want to raise taxes on those making less than $250,000. None of these items are particularly suspenseful, and it would indeed be a surprise if he deviated from what’s been his normal script.

Granted, he hasn’t before specified the level of subsidies he wants to give to the uninsured. But if it’s 400% of the federal poverty line ($88,000 for a family of 4), it’s no surprise as both the House and the Senate Health, Education, Labor and Pensions Committee provide subsidies to that level. If it’s less than that – say the 300% that the Senate Finance Committee is rumored to be toying with – then it would be a surprise. It would also be a bad policy concession.

Did the Obama stimulus package actually slow the economy?

Sep 2, 2009 13:57 UTC

An interesting bit from the WSJ:

Dave Anderson, chief financial officer of Honeywell International Inc., said the stimulus package actually froze business activity at first as firms tried to figure out how they could benefit from the government spending. The $787 billion package “created actually a slowdown in order activity in terms of the flow that we would normally have anticipated,” Mr. Anderson said at a conference sponsored by Morgan Stanley. “We anticipate that that’s going to actually pick up in the second half of the year. I think it’s not unreasonable to see several hundred million dollars of orders.

Me: This sounds similar to what seems to happen when cutting taxes. If the start date is a ways off, economic activity is delayed.

COMMENT

Still, the average working person lives in fear of losing what little is left. So far, the only time blue collar types were mentioned was back in Feb. when government told GM “get those workers and retirement agreements fixed and we’ll hand over the bucks.” China is doing better than Americans with all the money so far spent. GM is partnering over there now. Thanks a lot!!

Posted by RH Pyle | Report as abusive

5 scenarios for healthcare reform

Sep 2, 2009 13:28 UTC

Former Bush White House economist Keith Hennessey lays some odds on how healthcare reform will proceed from here:

I see five possible paths for the President and Democratic Congressional leaders.  I will list them in the order in which I think they will be considered, and I will assign my subjective probabilities to each.

  1. Cut a bipartisan deal on a comprehensive bill with 3 Senate Republicans, leading to a law this year;  (10% chance)
  2. Pass a partisan bill through the regular Senate process with 59 Senate Democrats + one Republican, leading to a law this year;  (10% chance)
  3. Pass a partisan bill through the reconciliation process with 50 of 59 Senate Democrats, leading to a law this year;  (25% chance)
  4. Fall back to a much more limited bill that becomes law this year;  (50% chance)
  5. No bill becomes law this year. (5% chance)

And here is his bottom line:

You can’t make the insurance “reforms” work by themselves.  In addition, insurance reforms without the individual mandate would cause insurers to awaken from their confused slumber and enter the debate with vigor (in opposition). … For this reason, I think it’s easier to “build up” to a smaller bill.  There will clearly be a bipartisan consensus to increase Medicare spending on doctors (the so-called “doc fix”).  I will guess that this path leads to $100B — $200B of spending over 10 years:  more Medicare money for doctors, combined with expansions of Medicaid for the poor.  To offset the deficit effect, they would cut Medicare Advantage and nick at other Medicare providers, and maybe do some of the Kerry tax increase proposal.  This would be an “incremental” package that advocates would argue is a small step in the right direction.  I would oppose such a package, but it might be able to get 60 votes, and could almost certainly get the 50 votes needed through reconciliation, and without any significant procedural hurdles.  … This is what Democrats do when all else has failed, to make sure the President has something to sign.  It’s a failure path that they would unconvincingly argue is a first step toward a larger reform.

COMMENT

~ WHEN THE LAUGH OF $ATAN WA$ HEARD IN THE PEOPLE$ HALLS OF U$ CONGRE$$ ~

THIS OLD WORLD ORDER OF ABUSE AND NEGLECT OF OUR POORER AMERICANS NEEDS ENLIGHTENED POLITICAL MINDS AND HEARTS TO VIEW GOD DIFFERENTLY THEN $$$…. NO MATTER WHAT THEIR POLITICAL PARTY AFFILIATION ???

WHEN WILL OUR WEALTHY ELITE AMERICANS ABATE THEIR ASSAULT ON POORER AMERICANS WITH THEIR MONETARY CONTROL OF OUR IVORY TOWER U.S. CONGRESSIONAL LEADERS OF THE NEW WORLD ORDER ???

THERE ARE NOT MANY MORE DISTRACTIONS LEFT WHICH ARE AVAILABLE FOR OUR WEALTHY ELITE AMERICANS TO HIDE BEHIND IN NOT TAKING PROPER CARE OF ALL OUR AMERICANS IN A HUMANE FASHION !!!

RALPH NADER ATTEMPTED TO EDUCATE AMERICAN VOTERS ABOUT U.S. CORPORATE POWER IN AMERICA AND HOW THEY CONTROL OUR CONGRESSIONAL PEOPLE THROUGH THEIR POCKET BOOK (POLITICAL DONATIONS). * WITHOUT THE DOUGH $$$ THESE U.S. CONGRESSIONAL LEADERS OF THE FREE WORLD DO NOT GET RE~ELECTED TO CONGRESS.*TO STAY IN POLITICAL OFFICE IN AMERICA,ONE HAS TO BARTER YOUR VOTES IN CONGRESS AND REPRESENT POWER INTERESTS IN RETURN FOR THE BUCK$.

POORER AMERICANS HAVE NEVER HAD THE $$$ LOBBY TO INFLUENCE THIS CORRUPT POLITICAL CONCEPT (of horse trading political votes for political contributions) TO ACHIEVE PROPER HEALTH ~CARE OR LEGAL REPRESENTATION FOR ALL OUR MIDDLE ~ CLASS AND WORKING POOR AMERICANS.

AMERICAN IVORY TOWER U.S.CONGRESSIONAL LEADERS OF THE FREE WORLD HAVE PASSED FEDERAL LEGISLATION IN WASHINGTON DC TO SPEND 50 BILLION AMERICAN TAX $$$ ON THE INTERNATIONAL FIGHT AGAINST AIDS OVER THE NEXT FIVE YEARS WHILE THEIR OWN AMERICAN CITIZENS ARE BEING TOLD BY THIS SAME U.S.CONGRESS THAT NATIONAL HEALTH CARE AND PROPER LEGAL REPRESENTATION FOR MIDDLE CLASS AND WORKING POOR CITIZENS IS UNAFFORDABLE.

*** WEALTHY ELITE AMERICANS (WHO ARE ONLY 1% OF OUR USA POPULATION) SADLY ALSO CONTROL HOW OUR U.S.CONGRESS SPENDS THEIR BUDGET TRILLION$ AND HAVE OBVIOUSLY FOUND MORE WORTHY INTERNATIONAL CITIZENS THEN OUR OWN DESPERATE AND NEEDY POOR TO ASSIST !!!

~Poorer Americans Nationwide only get 400 million $$$ per year for legal representation allocated them by CONGRESS~

Middle Class and Working Poor Americans are unable to afford proper legal representation in their Civil, Criminal and Family Courts of law all across America causing tremendous hardships nationwide,but these great minds and callous hearts in our American Congress have found others Worldwide more needy then their own citizens who are being falsely incarcerated,wrongfuly executed,losing their homes or apartments,losing child custody or visitation with their children etc�

Not being afforded proper legal representation by our U.S. Congress has created a total breakdown of the American judicial system for our poorer Americans because the our U.S. Courts punish all of us little people if we are not assisted with proprer legal counsel.*It is a known fact that our average Middle Class and Working Poor Americans without proper legal representation in all of our American Courts of law lose their legal cases to the better financed who are able to afford lawyers.

Lawyers For Poor Americans is now actively in the hunt for International Countries and Leaders Worldwide to help raise 5 Billion Dollar$ for our slighted poorer Americans who have had their own American Congress turn their backs on their desperate needs in not affording them proper legal representation.

Troy Davis and Mumia Abu ~ Jamal are 2 perfect examples of American citizens who never had proper legal representation or defense investigations afforded them by our U.S. Congressional Leaders Of The Free World in their initial criminal trials in (Georgia and Pennsylvania) who might very well have to pay the ultimate price of possibly being completely innocent and falsely executed in the near future.

These two poorer Americans are among tens of thousands of legal cases nationwide that never were afforded proper legal representation or proper defense investigations at their initial trials……**We the public really have no idea if these men are innocent or guilty until they both are given fair legal representation at their new future trials.

Improper murder trials take place in Third World Countries all the time. *** Why should average Middle~Class and Working Poor Americans in the Wealthiest Country Of The World be treated as if they are living a Third World Life Style ??

This is the first of many www International pleas by Lawyers For Poor Americans for other leaders and countries to help raise the needed monie$ to correct these blatant injustices that have been inflicted on poorer Americans for the last few decades.

Lawyers For Poor Americans has many other written articles that can be viewed with any www search engine by our name or our telephone number.

Lawyers For Poor Americans is a www lobby group of volunteers that sing out about the decades old neglect,abuse and injustices being inflicted on our poorer Americans that have become Crimes Against Humanity issues for the International World Court to investigate.

lawyersforpooreramericans@yahoo.com
(424-247-2013)

Posted by LAWYERS FOR POOR AMERICANS | Report as abusive

Is the stock market splitting open like a boiled peanut?

Sep 1, 2009 18:58 UTC

Fellow Reuters columnist Agnes Crane see trouble ahead:

Turn the calendar to September and markets are fixated about potential problems at the banks again. The obsession with September being a bad month for stocks and for the world in general has nothing to do with it, I’m sure.

I’m certainly the last person to downplay the still tough road ahead given the state of the U.S. consumer, commercial real estate and the excesses that still need to be wrung out of the system, but the fickle trading, especially in the stock market this summer, has made it difficult to read too much into the daily moves.

COMMENT

The problems we uncovered with the leveraging residential real estate are going to be even more frightening for commercial real estate.Do not forget,the same formula and mentatlity were applied.”Bundling good with not so good” still applies.

Posted by The TAX payer | Report as abusive

Stealing economic growth from the future

Sep 1, 2009 18:53 UTC

Fellow Reuters columnist Rolfe Winkler has it. Exactly. Right:

What Cash 4 Clunkers did for cars, the first time home buyer credit is doing for housing — pulling future demand into the present. Count on home sales to head back down after this tax credit disappears.

COMMENT

Cars are fungible, houses, in the greater view, are not.

As a Realtor, I see the desire of 1st Time Buyers wanting to enter the market to take advantage of the Tax Credit, but they are restricted severely by the very poor inventory, and competition from Investors.

I know that in So. California & the Las Vegas Metro area, there is a shortage of inventory that is keeping those buyers from the American Dream. Until the Banks begin releasing the “Hidden Inventory” of properties on their books, we will not see any improvement in the real estate market. Although, we may even experience a greater decline in values if dumping takes place.

The Tax Credit should be extended to allow absorption of the inventory once the investors have exhausted their funds or met their porfolio needs.

Posted by Jack in San Diego | Report as abusive

One superregulator to rule them all

Sep 1, 2009 18:43 UTC

What is the case, really, for the Fed being the superregulator of the US financial system? I mean, what is the record of achievement in either regulating banks or detecting systemic crises? Not to mention that by expanding the Fed portfolio de jure, you are opening it up to increased political interference. It is already operating as a quasi fourth branch of government. It doesn’t need any more authority. I realize that Bair’s Justice League of Regulators may be unwieldy in a crisis, but let’s not get into a TBTF position to begin with. Raise capital requirements that increase by a greater percentage than assets and be done with it, no wild swings in rates, and make sure accounting rules don’t magnify cyclicality.

COMMENT

I think you mean the quasi fifth branch of government.

Media is the 4th estate. ;)

More on the union-Dem plan for new investment taxes

Sep 1, 2009 17:57 UTC

I got some really great comments on that post

1) Don’t these idiots realize that a transaction tax makes a market even more volatile? Look at China for example, they have a 1/10 % transaction tax, which severely reduces liquidity. Look how their market girates UP 5% one day, DOWN 8% the next! If you want to generate some fees from trading profits, TAX the profit on on those who earn them. Like Goldman Sachs & Warren Buffet. Don’t let them weasel their way out!

2) Placing a tax on trades will dry up much liquidity, and drive most traders out of America’s mkts.

3) This tax AMOUNTS TO 5 TIMES all of my current trading cost combined!

Example:

5000 shares $50 per share costs $50 to buy and sell. At a low cost direct access broker. (Including commission, exchange fees, SEC fees, etc)

This tax would be an additional $250 for that trade. To add insult to injury you have to pay it even if you lose money on the trade. On top of that you have to pay taxes on any profit via capital gains tax!

There is no right time to have a tax like this. BUT ATER A MARKET CRASH THERE IS NO WORSE TIME TO CONSIDER SUCH A TAX!

4) Using the logic of this article, then the US should also levy an extra tax on all UAW members since tax money bailed out the union auto companies. Stop all bailouts and stop all goverment redistribution of wealth programs so that ALL people can have lower taxes.

COMMENT

America is going the way of a 3rd world communist country. This is what and who you have voted for.

People for this tax are too stupid to realize the broader effects this will have on our capital markets.

Posted by dan czab | Report as abusive

How about a $1.4 trillion (a year!) tax increase?

Sep 1, 2009 14:34 UTC

It always amazes me when people act as if raising taxes has no impact on economic growth, like this article from a Financial Post columnist who advocates raising US taxes by $1.4 trillion a year:

1) Washington could raise US$600-billion per year or more if Americans paid a 5% federal sales tax on goods and services if it were identical to Canada’s 5% GST.

2) Another US$280-billion could be generated if Americans paid slightly more than double what they pay now, or US$3.75 a gallon, for gasoline, which is roughly what Canadians pay.

2) Another US$180-billion is available if Americans paid the same taxes on cigarettes as Canadians.

4) Then there’s another US$355-billion for government coffers if Americans had the same liquor taxes as Canadians. The total that could be raised from all four is US$1.415-trillion. That is, by the way, the size of Canada’s or Spain’s economies.

COMMENT

wow, some idiots actually *want* to pay taxes. Well you won’t mind picking up my tab then? No? What’s that? You don’t like me and you don’t want to pay for me? Well, ditto.

Posted by Andrew | Report as abusive

The Great Recession or the Pretty Bad Recession?

Sep 1, 2009 13:46 UTC

Allan Meltzer (WSJ) pleads for people to stop comparing this downturn to the Great Depression. It is more like the 1973-75 period, he argues. He also opines that it has been in the Obama administration’s self interest to overstate the severity of the recession so it could hype its own achievements in “saving” the US economy.

I would also add that it was in the WH interest to maximize economic concern to maximize the chances of successfully pushing through its economic agenda. But the WH made the mistake of a) thinking that concerns about economic security would dwarf concerns about the sustainability of massive government spending and budget deficits, and b) underestimating how concerns about economic growth would undercut cap-and-trade  and the attempts to pay for healthcare reform by raising taxes.

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