Washington Extra – Oil up

March 2, 2011

How high is it? A 2-1/2 year high.

How high can it go? No one knows.

BUSINESS/SUMMERYEnergy Secretary Steven Chu expressed what is on many minds – that the oil price jump can hurt the economy. “We have a very delicate recovery going on and an increase in prices will make that vulnerable.”

Even with all options on the table, U.S. officials expressed great caution about imposing no-fly zones over Libya. “I think we are a long way from making that decision,” Secretary of State Hillary Clinton said.

Some Republicans saw the oil price scare as an opportunity to push again for expanding off-shore oil drilling. “To end this dangerous over-reliance on oil imports, we must find more domestic resources, improve our efficiency and improve international cooperation,” Senator Dick Lugar said.

We had the chance at the Reuters finance summit to ask CFTC Chairman Gary Gensler what a regulator does when a market takes a sharp turn, like oil has in response to Libya.

He asks the surveillance staff to do a briefing. “And I ask questions about whether there’s any concentration, and whether the surveillance staff is seeing any manipulation or trade practice violations, and get into a dialogue about what the exchanges are seeing.”

We also learned what the mild-mannered regulator likes to do in his off-hours — go to the Lady Gaga concert.

Here are our top stories from the Future Face of Finance Summit…

Bank pay creeps over uneven regulation

International regulators have touted success at reining in bank bonuses, but creeping overall paychecks and an uneven global crackdown are threatening the reforms. The rancor over bank bonuses means investment bankers across the globe are now getting a higher level of fixed pay, but industry groups in Europe still feel their financial sector is facing much tougher rules than the rest of the world. Bankers, regulators and industry lobby groups that attended the summit were of the view that the industry has turned more realistic after getting blinded by excessive greed during the heady pre-crisis days.

For more of this story by Dave Clarke, Denny Thomas and Rachel Armstrong, read here.

Gensler looks to yank profits from Wall St roots

Gary Gensler is working to break up the Wall Street club where he cut his professional teeth, but concedes it will take some time. “I think Congress’ intent was to open it up. We’ll see how successful. You’ll get to judge that in a few years,” he said. As the CFTC works to implement scores of new rules mandated by Congress in the Dodd-Frank law, Gensler has had to face down aggressive lobbying by Wall Street firms intent on preserving the substantial profits they realize from derivatives.

For more of this story by Christopher Doering and Roberta Rampton, read here.

Frank sees gay equality ‘in my lifetime’

The highest-profile openly gay lawmaker predicted that the United States could soon see an end to legalized discrimination based on sexual orientation and gender. And defending the Federal Reserve Bank’s most recent round of bond-buying and other moves to shore up the financial system after the 2007-2009 crisis, Rep. Barney Frank said: “I wish you would go back and look at all the predictions about disaster, kind of like same sex-marriage. What harm has it done? The answer is none.”

For more of this story, read here.

For more from the Future Face of Finance Summit, click here.

More of our top stories from Washington…

Top officials cautious on Libya no-fly zone

Senior officials highlighted the risks of imposing a “no-fly” zone over Libya as a way to help rebels facing counterattacks by Muammar Gaddafi’s forces, saying such a move was not imminent. Some lawmakers have urged a no-fly zone as a way to loosen Gaddafi’s grip on power, but opposition is high among Arab nations to any foreign intervention. “Let’s just call a spade a spade. A no-fly zone begins with an attack on Libya to destroy the air defenses,” Defense Secretary Robert Gates told the House of Representatives. “And then you can fly planes around the country and not worry about our guys being shot down.”

For more of this story by Susan Cornwell and Caren Bohan, read here.

WikiLeaks: How the Cola war was won in Libya

An unpublished U.S. diplomatic cable obtained by WikiLeaks tells the previously undisclosed story of how an American corporate powerhouse — the $35-billion Coca-Cola — got caught up in a fierce fraternal dispute between two of Libyan leader Muammar Gaddafi’s sons. “You know the movie ‘The Godfather’? We’ve been living it for the last few months,” a businessman involved in the dispute was quoted as telling an official in Tripoli.

For more of this story by Mark Hosenball, read here.

Interior says more deepwater permits coming

The door could now be open for a “significant” number of new offshore drilling permits, Interior Secretary Ken Salazar said, as the administration comes under increased pressure to tackle surging world oil prices. The Interior department on Monday issued a permit for a deepwater well co-owned by Noble Energy and BP, the first since the BP spill last year. “There are other deepwater permits that are pending and the ones that will go out the door will hopefully be the templates that will allow us to move forward with an additional, significant number of deepwater permits,” Salazar told a Senate committee.

For more of this story by Ayesha Rascoe, read here.

For a related graphic, click here.

Congress averts shutdown, sends stopgap to Obama

Congress sent President Obama a stopgap spending bill that averts an imminent government shutdown but does nothing to resolve a bitter debate over the federal budget. The bill includes $4 billion in relatively noncontroversial cuts as it keeps the government running until March 18. Democrats say that’s probably not enough time to find common ground on a longer-term bill to fund operations through September. Obama is expected to sign the measure into law before current funding expires on Friday.

For more of this story by Andy Sullivan, read here.

SEC proposes rules to clamp down on Wall Street pay

Securities regulators issued a proposal to curb bonuses at brokerage and investment advisory firms over the objections of Republicans on the panel and even some doubts expressed by Chairman Mary Schapiro. The measure requires more disclosure of pay schemes and in some cases deferral of bonus money to later years. Some SEC members were concerned by how the proposal would affect the largest brokerage firms and financial advisory companies. The plan would also likely hit some advisers of large hedge funds.

For more of this story by Sarah N. Lynch, read here.

Bernanke sees 200,000 hit to jobs from budget cuts

Federal Reserve Chairman Ben Bernanke said a Republican spending cut plan would not cause a big dent to economic growth, but could cost around 200,000 jobs over two years. That estimate is at odds with losses of as much as 700,000 cited by Democrats but also clashes with forecasts of job gains Republicans have pointed to. “That would translate into a couple of hundred thousand jobs. So it’s not trivial,” he told the House Financial Services Committee.

For more of this story by Mark Felsenthal, read here.

US court allows military funeral anti-gay protests

The Supreme Court ruled that members of a fundamentalist church have a free-speech right to hold anti-gay protests at military funerals to promote their view that God hates America for tolerating homosexuality. In a case pitting free-speech versus privacy, the court held that the Westboro Baptist Church’s picketing at a private funeral and even hurtful protest messages were protected by the Constitution’s First Amendment.

For more of this story by James Vicini, read here.

For a factbox on important Supreme Court free-speech cases, click here.

Fox News takes Gingrich, Santorum off air for now

Fox News is taking off the air Newt Gingrich and Rick Santorum because they appear to be preparing presidential campaigns, denying them a powerful platform to advocate their views. The suspensions would last 60 days unless they tell the network they are not running for president. Fox News executive Dianne Brandi told the Los Angeles Times that the policy might also apply to former Alaska Governor Sarah Palin and former Arkansas Governor Mike Huckabee.

For more of this story by Steve Holland, read here.

U.S. stresses prevention in fighting Medicare fraud

Healthcare programs are moving away from “pay and chase” and concentrating more on prevention in the battle against fraud that costs the government billions of dollars, officials told Congress. “Our goal is to keep those individuals and companies that intend to defraud Medicare, Medicaid and CHIP out of these programs in the first place, not to pay fraudulent claims when they are submitted, and to remove such individuals and companies from our programs if they do get in,” Peter Budetti of CMS said in testimony.

For more of this story by Donna Smith, read here.

FDA: Stomach acid drugs can lower magnesium

Prescription ulcer drugs such as AstraZeneca Plc’s blockbuster, Nexium, will carry a new warning that long-term use may cause low magnesium levels, health officials said. Low magnesium can lead to complications such as muscle spasms, irregular heartbeat and seizures. Patients may need to stop taking the drugs if magnesium supplements do not help, the FDA said.

For more of this story by Lisa Richwine, read here.

Military to help develop energy storage device

The energy-hungry military plans to help develop advanced power storage devices with the help of a branch of the Energy Department that fosters innovation in high-risk, but high-potential, technologies. The Department of Defense, the single largest user of energy in the world, will work with the Energy Department’s Arpa-E to develop technologies that could also have civilian applications, officials said. “The steady march of technology has created a voracious appetite for energy,” in the military, said Navy Secretary Ray Mabus.

For more of this story by Timothy Gardner, read here.

What we are blogging…

Unlikely alliance: Congressman Barney Frank and the Tea Party

At first glance it would appear that Congressman Barney Frank and lawmakers backed by the Tea Party movement have little in common. Look again. Frank said his quest to reduce military spending will probably attract Tea Party lawmakers who campaigned on a platform of fiscal discipline, even to cuts in an area that typically meet strong resistance from Republicans.

For Tabassum Zakaria’s full post, click here.

From elsewhere…

Huntsman’s path to White House starts in China

Jon Huntsman is a savvy operator who knows how to work a crowd. His encounter with ordinary Chinese at a small anti-government protest in Beijing was typical of an envoy who has often delved beyond diplomatic circles during his two-year tenure in China. It was also consistent with the independent-minded personality of a man who declined to endorse a fellow Mormon from Utah, Mitt Romney, in the 2008 presidential election to back John McCain who had a media reputation as a “maverick.”

For more of this special report, read here.

Photo credit: Reuters/Mike Blake (gas prices in California)

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