James Pethokoukis

Politics and policy from inside Washington

The Volcker Rule: It’s not happening

Feb 16, 2010 19:07 UTC

A few points:

1) The much-hyped Volcker Rule proposal is failing fast in the U.S. Congress. But Paul Volcker himself probably isn’t that surprised. The former Federal Reserve chairman joked he was “just a photo op” even after President Barack Obama’s public embrace of his proposal to limit bank proprietary trading. More evidence that the moment for sweeping reform has probably passed.

2) The hope for any reform at all rests with the U.S. Senate’s new negotiating tag-team of Democrat Chris Dodd, chairman of the Banking committee, and Republican freshman Bob Corker. But Corker says the Volcker Rule isn’t going to be a “major topic” for discussion. And that is probably OK with much of the committee. As one banking industry lobbyist told me, “There is just not a lot of appetite among members of the minority or the majority to add [bank trading limits]. So I just don’t think you’re going to see it.”

3) Increasingly, the Volcker Rule looks more stunt than viable solution. Though Volcker had been pushing it for months, White House advocacy surprised both the Banking committee and banking industry. A poor way to introduce serious legislation in Washington. Lame-duck Dodd, who sees reform as his legacy, hears the clock ticking. A bill not passed by early summer is probably dead for the rest of this election year. His view: The Volcker Rule is a sudden and unwelcome complication.

4) Cynics saw it as a populist, knee-jerk response to the loss of a Massachusetts U.S. Senate seat held by Democrats for more than a half century. Even some Volcker Rule advocates admitted the plan didn’t directly address the regulatory failures that contributed to America’s financial meltdown. And although the proposal was introduced in January with great fanfare by Obama – Volcker standing prominently at his side – Senate Democrats say the creation of a new consumer finance regulator is actually the issue the White House is spending political capital on.

5) It is a reality that highlights the Obama administration’s scant interest in more extreme measures to limit the size of the banking sector or its activities. And if Volcker did harbor any small doubts about that, he shouldn’t any more.

COMMENT

I’ve been gone for a while, but now I remember why I used to love this site. Thank you, I will try and check back more often. How often do you update your web site?

Nuclear power and crony capitalism

Feb 16, 2010 18:53 UTC

Give the POTUS some credit for proposing something, anything on domestic policy that is certain to irk his base. Reuters:

President Barack Obama announced $8.3 billion in loan guarantees on Tuesday to build the first U.S. nuclear power plant in nearly three decades in a move designed to help advance climate legislation in Congress. … The loan guarantee will go to help Southern Co. build two reactors at a plant in the state of Georgia. “Even though we’ve not broken ground on a … new nuclear power plant in thirty years, nuclear energy remains our largest source of fuel that produces no carbon emissions,” Obama said after touring a union education center in Lanham, Maryland. “To meet our growing energy needs and prevent the worst consequences of climate change, we’ll need to increase our supply of nuclear power. It’s that simple,” he said.

Yet how viable is Big Nuclear without the help of Big Government? An interesting analysis from Cato’s Jerry Taylor:

Tufts economist Gilbert Metcalf, for instance, has calculated that, under current law, the levelized cost of nuclear power in the United States is 4.31 cents per kilowatt hour (kWh). Coal-fired electricity, on the other hand, cost 3.53 cents per kWh and “clean” coal cost 3.55 cents. But even these nuclear estimates are almost certainly too low. That’s because Metcalf uses an “overnight cost” (construction costs minus financing costs) figure of $2,014 per installed kilowatt (kW) which is much too low. The Energy Information Administration (EIA) puts this cost at $2,475 per kW at present-although even this figure is suspicious because it relies on a worldwide average for nuclear power plant construction-including the grossly unreliable estimates from state-managed economies. The Standard & Poor’s overnight cost estimate of $4,000 is likely the most reliable because it is based on nuclear plant construction costs in economies where labor and material costs are very similar to those found in the United States. Industry analyst Jim Harding, who uses overnight cost figures similar to Standard & Poor’s, puts the levelized costs for new nuclear power generation at 12-15 cents per kWh right now.

Will conservatives who complain about government debt guarantees to Wall Street complain about guarantees to energy companies?

COMMENT

The move by the President to support development of nuclear power in the U.S. is necessary and long overdue. The rest of the world generates much of its electricity from nuclear power. We have lagged behind in nuclear power out of fear (since Three Mile Island) and intense lobbying by the coal and oil industries. If the rest of the world can supply electricity through safe, efficient nuclear generation then I think we can too!

Posted by Brian | Report as abusive

Bayh’s good-bye

Feb 16, 2010 14:14 UTC

A few thoughts on Evan Bayh’s stunning retirement announcement:

1) It helps move the prospect of a GOP Senate takeover from a fringe idea to consensus. Not there yet, but getting there.

2) Why does that matter? It could help nudge more Democrats to retire, particularly in the House and help Republicans recruit better candidates. (George Pataki in NY for US Senate?) And a big plus for Republican fundraising.

3) Forget talk about Bayh challenging Obama in 2012. Now, if Bayh was president with a lousy economy, then a challenge from the left (like Obama) might be a possibility. Intra-party centrist insurgencies are stuff of reporters’ imaginations.

4) A year ago, Dems thought they would gain seats in 2010. A few months ago, they thought they would hold the 60-seat supermajority or maybe lose a couple. Now a loss of seven seems quite reasonable.

5) Again, keep watching the unemployment rate and Obama’s approval rating. Washington insiders certainly are.

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