Wonkbook: More sanctions against Russia on the way?

March 19

Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.


(Photo by Alexei Druzhinin/Reuters)

Wonkbook’s Number of the Day: 100 percent. That's the percentage of phone calls that a newly revealed NSA surveillance program can record in one country.

Wonkbook’s Chart of the Day: The 1% have gained back their recession losses and then some.

Wonkbook's Top 5 Stories: (1) More sanctions against Russia on the way; (2) new NSA revelations; (3) tough battle for GOP's Obamacare alternative; (4) is economy ready to recover after polar vortex?; and (5) companies feel feds' wrath.

1. Top story: More sanctions against Russia could be on the way. What would it mean?

As U.S. ponders more sanctions, experts rethink NATO’s defense posture. "In the weeks since the Ukraine crisis began, culminating in Tuesday’s decision by Russia to annex Crimea, President Vladi­mir Putin has ignored every gauntlet the United States and its European allies have laid down. The challenge now facing the Obama administration is whether any measures it is prepared to take can deter Russia from moving beyond Crimea into the rest of Ukraine. Those measures range from freezing the assets of additional individuals, senior officials and companies, beyond the handful of Russians sanctioned earlier this week, to Iran-style banking and export restrictions, according to current and former administration officials....Russia’s audacious moves have already led to a rethinking of the defense posture that has dominated the Western alliance since the end of the Soviet Union nearly a quarter-century ago....Some experts think the West’s image of invincibility and its ability to stand up for its friends may already have been damaged." Karen DeYoung in The Washington Post.

Quotable: "'I wouldn’t, if I were you, invest in Russian equities right now — unless you’re going short,' President Barack Obama’s chief spokesman, Jay Carney, said Tuesday when pressed whether Russia was shrugging off U.S. sanctions." Jared A. Favole in The Wall Street Journal.

Poll: Americans are OK with sanctions. But, not much else. Scott Clement in The Washington Post.

Businesses fret over tougher Russia sanctions. "With tougher sanctions threatened against President Vladimir Putin over the crisis in Crimea, concern about retribution is growing among U.S. corporations with investments in Russia....For corporations, additional restrictions present two risks: They could inadvertently punish U.S. interests, and the Russians could push back against American companies....A U.S. Treasury official, who asked not to be identified discussing policy talks that are under way, said the agency has heard from American businesses with operations in Russia. He said corporations operating in Russia should have known there would be risks investing in the country." Annie Linskey and Julie Johnsson in Bloomberg.

Cantor wants to punish Putin. "The Obama administration is warning that it could take additional steps against Russia, and it looks like it will have an unusual ally: House Majority Leader Eric Cantor. The Virginia Republican, a frequent critic of the president, said Tuesday that he's asked committees to 'examine additional steps that can be taken to impose greater costs on Russia'...Cantor didn't specify what action committee members could take, but he said Russia's membership in the G-8 should be revoked, the United States should consider providing military support to the Ukraine, and the U.S. should work with NATO to 'reassure other countries threatened by Russia'...Cantor also pressed for a boost in natural-gas exports to Ukraine." Jordain Carney in National Journal.

The potential perils of those energy exports. "The US does not currently have the capital-intensive infrastructure necessary to export gas to Europe, and it isn't likely to have it for at least a couple more years. Oil is technically easier to export, but it would require the reversal of a decades-old ban. Both options could increase domestic energy prices, and aren't guaranteed to displace Russia's strong grasp on European energy markets. Producers might opt instead to send gas to Asia where they can get a higher price. It's why the White House hasn't rushed to open the spigot, and has opted first to encourage internal European efforts to diversify energy sources and supplies....Another option would be to impose sanctions on Russia's oil and gas industry, which makes up about half of the federal government's revenue....But Russia doesn't provide any gas to the US and makes up only 5 percent of US oil imports." David J. Unger in the Christian Science Monitor.

Are natural-gas exports the next Keystone XL? Amy Harder in The Wall Street Journal.

Meanwhile, Congress pokes along on Ukraine aid bill. "While lawmakers bicker over the details of legislation to aid Ukraine and punish Russia, events in Eastern Europe are moving quickly. Just this week, citizens in the disputed Crimean peninsula voted to leave Ukraine and were swiftly recognized by Russia. President Barack Obama and European leaders, meanwhile, instituted targeted sanctions on Russian officials and 'cronies,' prompting Russia to consider retaliatory action against the West. And what is Capitol Hill doing to respond to the deepening crisis? Not much, except continue a war of words with Russia and leave town for a weeklong recess without a bill to send to Obama’s desk. And there’s no sign that Congress will resolve its differences anytime soon — despite growing alarm about developments in Ukraine....Action would require someone to break a deadlock between the House and Senate. The House has passed a bill that provides loan guarantees to Ukraine, legislation the Senate says falls short of helping U.S. allies and punishing Russia. But the Senate’s more comprehensive effort is running into its own obstacles. The 32-page bill that passed the Senate Foreign Relations Committee last week faces steep resistance in the House. And a push to swiftly pass it in the Senate before recess triggered an ugly floor spat among Republicans." Burgess Everett and Seung Min Kim in Politico.

Other foreign policy reads:

U.S. orders closure of Syria embassy in Washington. Karen DeYoung in The Washington Post.

BLOOMBERG VIEW: What does the West want from Ukraine? "Now that Russian President Vladimir Putin has announced his country's annexation of Crimea, how should the European Union and the U.S. respond? With tougher sanctions, certainly, and with plans to lessen the West's economic dependence on Russia — but also with clearer thinking about Ukraine's future than has been demonstrated up to now." The Editors.

PAUL: Crimea secedes. So what? "The overwhelming Crimea vote to secede from Ukraine has incensed U.S. and European Union officials, and has led NATO closer to conflict with Russia than since the height of the Cold War. What's the big deal? Opponents of the Crimea vote like to point to the illegality of the referendum. But self-determination is a centerpiece of international law. Article I of the United Nations Charter points out clearly that the purpose of the U.N. is to 'develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples.' Why does the U.S. care which flag will be hoisted on a small piece of land thousands of miles away?" Ron Paul in USA Today.

IGNATIUS: What we learned in Crimea. "From the photographs we’ve seen of the Russian special operations, or Spetsnaz, troops that intervened in Crimea, several things are obvious: They are secretive, moving without insignia and often covering their faces; they’re disciplined and they’re decisive. The diplomatic response to the Russian intervention is continuing. But Pentagon officials are beginning to assess the military 'lessons learned.' The bottom line is that Russia’s move into Crimea was a study in the speedy deployment of special operations forces to achieve a limited objective....This Russian army, in short, is not the one that proved so feeble in Afghanistan. It is well-trained and stealthy and effectively uses a 'small footprint.' And Putin clearly wasn’t deterred by NATO military moves that signaled a commitment to protect member states — but didn’t convey a willingness to check Russian black operations in a friendly, neighboring region." David Ignatius in The Washington Post.

THE WALL STREET JOURNAL: Ukraine and nuclear proliferation. "The damage to world order from Vladimir Putin's invasion of Crimea will echo for years, but one of the biggest casualties deserves more attention: the cause of nuclear nonproliferation. One lesson to the world of Russia's cost-free carve-up of Ukraine is that nations that abandon their nuclear arsenals do so at their own peril." Editorial Board.

BERSHIDSKY: The czar's speech. "It's only now, thanks to Putin's craftily brilliant speech, that Russians are trapped. All of us, 'traitors' and empire revivalists, are in one way or another accountable for Putin's tour de force. We are part of the well-armed, swashbuckling entity that Putin equates with Russia, and which will now be Russia in the eyes of the world. Putin wants it that way: He is out to prove that a non-Communist incarnation of the Soviet Union, which he still mourns, is back, and it's got teeth." Leonid Bershidsky in Bloomberg View.

NATIONAL REVIEW: Crimea is not the end. "Crimea is not the end of a crisis but the midpoint of one that began with the occupation of parts of Georgia in 2008. The difference is that the West now realizes the nature of the Putin regime. Even if it fails to agree on serious sanctions, therefore, it will gradually move to reduce its reliance on undependable Russian energy. Which means that the future crises Putin sends us will occur against a background of Russia’s greater economic weakness." The Editors.

Top opinion

McARDLE: Are young invincibles killing Obamacare? "Are we definitely due for a death spiral? No. For one thing, that 38.5 percent number doesn’t come from the insurers; it comes from the government. The government has been talking to insurers, but it isn’t running their actuarial models. If the insurers assumed a worse demographic mix than the government analysts, then we may not need so many young people to keep the markets sound. Insurers also want this to work, so they may be willing to take losses for a few years to keep premiums low — especially if the government funnels money to them through the risk-corridor program. What this does tell us, however, is that it is now probably impossible to achieve the demographic mix that the government has been forecasting. And keeping it from happening may well prove very expensive for the federal government." Megan McArdle in Bloomberg View.

PORTER: A global boom, but only for some. "Remember when Al Gore took on H. Ross Perot? It was November 1993. Mr. Gore deployed his smoothest scorn to swat down the cantankerous billionaire’s argument that the North American Free Trade Agreement would produce a 'great sucking sound' of jobs flowing to Mexico. The agreement, Mr. Gore said, would become an engine of American prosperity. What struck me was not how Mr. Gore won the debate — he did — but rather how his arguments often intertwined the prosperity of the American middle class with the lot of the world’s poor. Twenty years later, it is astonishing how our understanding of globalization has changed. Mexico? American jobs went to China instead. More important, two decades worth of trade deals, including Nafta and China’s entry into the World Trade Organization, did not live up to Mr. Gore’s implicit promise that globalization would improve the living standards of most American workers. Instead, globalization is now often perceived as a leading driver of rampant inequality and wage stagnation." Eduardo Porter in The New York Times.

HILDEBRAND: The time for tightening by the Fed may be nigh. "The brutal American winter has brought disappointing economic data along with the wind and snow, from weaker than expected fourth-quarter growth to disappointing employment numbers. It is clear that some of the slowdown is weather-related but it is difficult to say just how much. If the lag in growth persists, it could indicate more underlying softness in the US economic recovery. In that scenario, the stuttering recovery could put pressure on monetary policy makers to do even more to try to stimulate growth....But there are increasing signs that pressure on the Federal Reserve could come in the opposite direction; that, in fact, the US economy is closer to its potential level than previously thought. If so, the time to begin tightening monetary policy might come sooner than currently projected." Philipp Hildebrand in The Financial Times.

FLAVELLE: Changing Americans' minds on climate change. "The American Association for the Advancement of Science is trying to awaken more Americans to the dangers of climate change....It's a commendable and necessary effort, but what if the problem goes deeper than language? The available polling data suggests Americans' views on climate change increasingly have more to do with politics than science....If this new effort by climate scientists makes it harder for that kind of self-deception to continue, kudos to them. But the human capacity to believe whatever suits you is close to endless. Maybe easing Republicans' resistance to the idea of climate change will require easing their resistance to the idea of government as an occasional force for good." Christopher Flavelle in Bloomberg View.

ROBINSON: On Obamacare, wishy-washy won't work for Democrats. "Here is what Democrats should learn from their party’s loss in a special House election in Florida last week: Wishy-washy won’t work. Republicans obviously are going to make opposition to the Affordable Care Act the main theme of their campaigns this fall. Democrats will be better off if they push back hard — really hard — rather than seek some nonexistent middle ground....The majority coalition that elected Obama twice isn’t accustomed to voting in midterm elections. Democrats need to explain why this year has got to be an exception." Eugene Robinson in The Washington Post.

CHAIT: With tax reform proposal's demise, GOP's Prague spring is officially over. "When House Ways and Means Committee Chairman Dave Camp released his tax-reform proposal a few weeks ago, Republicans reacted coolly, but none quite matched the sheer ballistic hostility of the financial industry. What set off Wall Street was a tax Camp levied on the largest banks. Their size made them “too big to fail,” thus lending them an unfair advantage, which Camp proposed, with shocking rationality, to recoup. The banks, predictably, do not see things this way. Wall Street unleashed a furious campaign to destroy and isolate Camp, canceling all fundraisers for the party until his fellow members agreed to denounce his heresy. And now Wall Street’s efforts have borne fruit." Jonathan Chait in New York Magazine.

St. Patrick's Day interlude: Watch the Chicago River get dyed green.

2. NSA surveillance even more extensive than previously thought

Post exclusive: NSA surveillance program reaches ‘into the past’ to retrieve, replay phone calls. "The National Security Agency has built a surveillance system capable of recording '100 percent' of a foreign country’s telephone calls, enabling the agency to rewind and review conversations as long as a month after they take place, according to people with direct knowledge of the effort and documents supplied by former contractor Edward Snowden. A senior manager for the program compares it to a time machine — one that can replay the voices from any call without requiring that a person be identified in advance for surveillance." Barton Gellman and Ashkan Soltani in The Washington Post.

More excerpts:

Here's how the tools work. "The voice interception program, called MYSTIC, began in 2009. Its RETRO tool, short for 'retrospective retrieval,' and related projects reached full capacity against the first target nation in 2011....In the initial deployment, collection systems are recording 'every single' conversation nationwide, storing billions of them in a 30-day rolling buffer that clears the oldest calls as new ones arrive, according to a classified summary. The call buffer opens a door 'into the past,' the summary says, enabling users to 'retrieve audio of interest that was not tasked at the time of the original call.' Analysts listen to only a fraction of 1 percent of the calls, but the absolute numbers are high. Each month, they send millions of voice clippings, or 'cuts,' for processing and long-term storage....No other NSA program disclosed to date has swallowed a nation’s telephone network whole. Outside experts have sometimes described that prospect as disquieting but remote, with notable implications for a growing debate over the NSA’s practice of 'bulk collection' abroad."

Not just one country? "Some of the documents provided by Snowden suggest that high-volume eavesdropping may soon be extended to other countries, if it has not been already. The RETRO tool was built three years ago as a 'unique one-off capability,' but last year’s secret intelligence budget named five more countries for which the MYSTIC program provides 'comprehensive metadata access and content,' with a sixth expected to be in place by last October....Ubiquitous voice surveillance, even overseas, pulls in a great deal of content from Americans who telephone, visit and work in the target country. It may also be seen as inconsistent with Obama’s Jan. 17 pledge 'that the United States is not spying on ordinary people who don’t threaten our national security,' regardless of nationality, 'and that we take their privacy concerns into account.' In a presidential policy directive, Obama instructed the NSA and other agencies that bulk acquisition may be used only to gather intelligence on one of six specified threats, including nuclear proliferation and terrorism. The directive, however, also noted that limits on bulk collection 'do not apply to signals intelligence data that is temporarily acquired to facilitate targeted collection.'"

What makes this program unique: "Among the agency’s bulk collection programs disclosed over the past year, its focus on the spoken word is unique. Most of the programs have involved the bulk collection of either metadata — which does not include content — or text, such as e-mail address books. Telephone calls are often thought to be more ephemeral and less suited than text for processing, storage and search. Indeed, there are indications that the call-recording program has been hindered by the NSA’s limited capacity to store and transmit bulky voice files." Barton Gellman and Ashkan Soltani in The Washington Post.

Collection of email data goes back to Bush era. "The U.S. government has acknowledged that it swept up huge volumes of data from emails in the U.S. for several years without any court approval, based solely on the orders of former President George W. Bush. In a court filings on Monday, government lawyers said that the Internet program ran in parallel with a program gathering so-called metadata about telephone calls. The counterterrorism efforts operated under presidential authority before a judge approved them in July 2004, said a 2007 court filing made public Monday by the Justice Department (and posted here.)....The email program was effectively public since June of last year, after contractor Edward Snowden leaked a top-secret National Security Agency inspector general report that described the program. Early press reports on the surveillance, such as The New York Times's groundbreaking account in December 2005, discussed its application to emails. However, when Bush publicly acknowledged the surveillance in 2006, he was vague about the details and did not mention gathering of email data." Josh Gerstein in Politico.

Pentagon intelligence watchdog not aware of NSA phone collection programs. "The Pentagon’s intelligence watchdog said he was 'not aware' of the National Security Agency’s bulk domestic phone records collection programs before the Guardian exposed it in June, nor does his office have investigations open into the controversial surveillance. The admission by Anthony C Thomas, the deputy Defense Department inspector general for intelligence and special program assessments – who has oversight responsibilities on the National Security Agency – comes despite months of public assurances that the NSA’s vast surveillance activities are thoroughly overseen, including by the Pentagon inspector general." Spencer Ackerman in The Guardian.

Explainer: The surveillance methods the NSA has at its disposal. Jon Xavier in the Silicon Valley Business Journal.

Animals interlude: Why this dog isn't allowed on the bed.

3. The GOP's Obamacare alternative faces a tough road ahead

The GOP's alternative health-care plan looks to be going nowhere fast. "Here’s the dirty secret about the House Republicans’ efforts to replace Obamacare: They haven’t even decided if they will hold a vote. Not to mention, the House GOP would still have to repeal Obamacare in order to implement whatever alternative health care plan they release, which isn’t going to happen as long as President Barack Obama is sitting in the Oval Office....But with a Republican alternative to Obamacare come serious practical and political problems that could prevent the legislation from even getting to the House floor. A critical midterm election is just a few months away. Public opinion is firmly against Obama’s health care law, and releasing specific bills could take the focus off the Democrats’ squirming. Republicans aren’t even convinced they will find consensus on any specific set of new health care bills." Josh Bresnahan and Jake Sherman in Politico.

The alternative could be just as messy as Obamacare. "While there apparently isn't yet a detailed alternative to analyze, the concepts being considered as part of the proposed replacement are far from new. Indeed, they've been part of Republican alternatives from conservative think tanks like the American Enterprise Institute and the Heritage Foundation. The final GOP package could include old standbys like health savings accounts, expanding state-run high-risk pools for the hardest-to-insure individuals, and the sale of insurance across state lines. One immediate problem for Republicans is that these ideas don't exactly have buy-in from the insurance industry like, say, the individual mandate did, and without its backing, they would be hard to pull off....Another problem for the Republican proposals is that they could undermine two of the health care law's most popular features — the ban against insurance companies declining to insure people with pre-existing conditions (or charging prohibitive amounts to do so) and the ability of parents to keep their children, up to age 26, on their insurance plans....A return to such high-risk pools would by definition mean revisiting a time when insurance companies used pre-existing conditions to exclude certain people." Frank James in NPR.

Speaking of messiness, Md. residents who had problems signing up for Obamacare will get more time — a sign of things to come? "To be clear, the state says it’s not an extension of the open enrollment period scheduled to close March 31. Only Marylanders who made an attempt to enroll by March 31 will get more time if they call a state hotline by that day. All four insurers selling on Maryland's exchange agreed to the special extension....Could this be the first of similar extensions soon to come? Could be." Jason Millman in The Washington Post.

Interview with Ezekiel Emanuel: Why a complex, unjust, expensive, error-prone system might end up providing the best health care. Harold Pollack in The Washington Post.

Explainers:

14 ways to get a hardship exemption. Scott Gottlieb in Forbes.

10 states are critical to health care plan enrollment. Phil Galewitz in Kaiser Health News.

Other health care reads:

Obama makes Obamacare pitch to Hispanics: We won’t deport relatives because you enroll in ObamaCare. Jonathan Easley in The Hill.

Worries about cancer centers under health care law. Ricardo Alonso-Zaldivar in The Associated Press.

Some young people won't get tax help for health insurance. Elana Gordon in Kaiser Health News.

Worst-timed sneeze interlude: This poor trombonist. During a concert.

4. Will the economy leap back post-polar vortex?

The polar vortex kept shoppers at home — will the economy pick up now? "So will sales heat up as the weather does? Well, a bit. The polar vortexes made people put off purchases and nights out that they'll probably make up for now. But there'll be an even bigger boost to spending if consumers go back to doing what they did before the crash: taking on more debt. That's already starting. And it's not just student loans. It's also subprime auto loans, which went from 18 percent of the total in 2009 to 27 percent in 2013. It's a building bullishness that's a little reminiscent of the housing bubble days. It's things like advising people to take out home equity loans to buy stocks with (a terrible bit of advice that's since been deleted). Of course, it's nowhere near the kind of exuberance, rational or otherwise, that we saw in the late 1990s and 2000s. But it is a sign that people are getting their animal spirits back. They're starting to worry about missing the boom more than avoiding the bust. The question is whether enthusiastic markets can drag consumers with them." Matthew O'Brien in The Atlantic.

Inflation in U.S. shows little pickup in February. Here's what it means for the Fed. "The cost of living in the U.S. was little changed in February, showing inflation remains well below the Federal Reserve’s goal as policy makers meet to decide on the path of interest rates....Fed policy makers have expressed concern that too-low inflation signals economic weakness. At their meeting this week, they are likely to decide on new language to signal the future path of interest rates, dropping a link to the unemployment rate, which has fallen faster than forecast, according to a Bloomberg survey." Michelle Jamrisko in Bloomberg.

Paper says Fed shouldn't use rates to target large bubbles. "Federal Reserve officials have started warming up to the notion that they might one day need to raise interest rates to prevent dangerous asset bubbles from inflating too much. Anton Korinek at Johns Hopkins University and Alp Simsek at MIT have a simple warning: Don’t do it. They say regulatory policies aimed at limiting leverage are the better way to tackle financial markets that appear to have gotten out of whack....The finding is very timely. Fed officials, including Chairwoman Janet Yellen, consider the costs vs. the benefits of their easy money policies. They have often highlighted the potential for fueling financial instability as a major potential cost. But most see it outweighed so far by the benefits of spurring growth and employment." Pedro Nicolaci da Costa in The Wall Street Journal.

Explainer: What to look out for at Wednesday's Fed meeting. Pedro Nicolaci da Costa and Jon Hilsenrath in The Wall Street Journal.

Analysis: Murky path ahead for Fed as Yellen takes reins. Binyamin Appelbaum in The New York Times.

Other economic indicators:

Housing starts fell slightly in February, but underlying data suggest potential spring rebound. Eric Morath and Sarah Portlock in The Wall Street Journal.

CEOs expect hiring, capital spending to pick up, but only modest growth. Lewis Krauskopf in Reuters.

Other economy reads:

Obama manufacturing hubs struggle to create jobs. Julia Edwards and Jason Lange in Reuters.

The U.S. cities with the highest levels of income segregation. Richard Florida in The Atlantic Cities.

When living wage is minimum wage. Ben Casselman in FiveThirtyEight.

10 numbers that explain why income inequality is a hot topic right now. Jaime Fuller in The Washington Post.

U.S. Labor's Perez details Obama's overtime-pay rules overhaul. Amanda Becker in Reuters.

Explainer: 3 rules to make sure economic data aren't bunk. Ben Casselman in FiveThirtyEight.

Jennifer Lawrence interlude: Crazy lip sync.

5. Banks and automakers feel feds' wrath.

Big banks finish paying $20 billion in mortgage settlement, report says. "The nation’s largest banks have met their obligations to provide relief to struggling homeowners under the $25 billion national mortgage settlement, the landmark agreement to clean up shoddy foreclosure practices. On Tuesday, the court-appointed monitor of the settlement said Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial had all completed their requirements to offer borrowers aid in the form of loan forgiveness, short sales, forbearance or refinancing. The mortgage servicers had to provide $20 billion in relief to borrowers with different types of relief assigned different credit toward that figure. While they ponied up a total of $50 billion to assist more than 600,000 families, only $20.7 billion of that money was counted under the settlement...." Danielle Douglas in The Washington Post.

Report bears out some concerns of settlement's critics. "Housing advocates and watchdogs have criticized the settlement for not placing enough emphasis on allowing families to stay in their homes and stabilizing hard-hit neighborhoods. Some of their critique is borne out in the report: the debt on a primary mortgage was forgiven for 95,000 homeowners, and 73,000 were allowed to refinance at lower interest rates when they would not have otherwise qualified to do so. Those two types of relief are most likely to keep families in their homes.That was low compared with the 220,000 that were relieved of second-lien debt and the 184,000 who were allowed to do a short sale or give up their homes to the bank. Still, families who felt marooned in their homes by the housing crash may have welcomed the ability to move away without penalty. By far, the largest gross dollar amounts in the settlement went to short sales and relinquishments, but under the terms of the settlement, that type of relief earned less 'credit' than debt forgiveness. The discrepancy is rooted in the settlement’s attempt to avoid allowing the banks to satisfy its terms by doing things they would have done anyway." Shaila Dewan in The New York Times.

In another settlement, Toyota to settle for $1B with Justice Dept. over acceleration issues. "The Justice Department is set to announce as soon as Wednesday a billion-dollar agreement with Toyota to settle a federal probe of the automaker's handling of customer complaints related to unintended acceleration, people familiar with the deal said. The investigation led by the office of Manhattan U.S. Attorney Preet Bharara has examined allegations that the Japanese automotive giant initially misled federal authorities after the complaints became a source of controversy in 2009. Under the settlement, Toyota is expected to avoid criminal charges and is expected to pay about $1 billion, those familiar with the agreement said." Evan Perez and Shimon Prokupecz in CNN.

Meanwhile, federal scrutiny of GM is increasing in wake of its delayed recall. "The House Energy and Commerce Committee, one of the congressional panels preparing for hearings, met Tuesday with GM officials, mainly to review the automaker’s version of events, as laid out in chronologies filed with federal regulators, company officials said. Barra said that she would testify if summoned by Congress to Capitol Hill. Barra has named a former federal prosecutor to lead an internal investigation that could stretch over months to establish a more precise record of 'what went wrong and why,' Barra said. 'There are no sacred cows,' she said. Barra was noncommittal when asked whether she would waive the immunity GM enjoys from liability claims predating its 2009 bankruptcy and federal bailout. The internal investigation will provide GM with a baseline of facts to guide the company as it moves forward, she said." Michael Fletcher in The Washington Post.

GM's recently installed CEO has been outspoken in the wake of the pressure. "For Ms. Barra, the festering controversy is both an opportunity and a risk....Ms. Barra’s straightforward strategy will be severely tested in the weeks ahead, as federal regulators and other government officials press for details on why G.M. waited years to reveal that ignition switches in its small cars could, if bumped or weighed down by a heavy key ring, cut off engine power and disable air bags. She still faces investigations from two congressional committees, federal safety regulators and the Justice Department — all paying keen attention to any public statements she makes. In her short tenure, Ms. Barra has emerged as the face of G.M., in an unexpected way — apologizing for the company’s failings in a video to employees, naming a new top executive to oversee safety issues, and participating in Tuesday’s session with reporters to take responsibility for the company’s inexplicable delay in addressing a deadly flaw in its cars." Bill Vlasic in The New York Times.

Why GM's recall woes matter for more than just GM. "The carmaker has worked tirelessly in recent times to rebuild its reputation, only to see the current recall crisis call that reputation into question once more. The situation in which GM finds itself poses a threat not only to its own reputation, but to that of the American automobile industry as well. None of Detroit’s carmakers can afford to see GM’s recall problems go on much longer, because their fight for stability has been too hard fought. When cars and trucks are in the news because of defects and driver deaths, it brings back all those old memories of shoddily built vehicles. Those memories, not just lawsuits and Congressional investigations, are what GM has to work hardest to overcome." Micheline Maynard in Forbes.

Other regulatory reads:

Costly loans are drawing attention from the states. Jessica Silver-Greenberg and Rachel Abrams in The New York Times.

Indiana Jones interlude: Best fan film rendition ever?

Wonkblog roundup

Why a complex, unjust, expensive, error-prone system might end up providing the best health care. Harold Pollack.

Maryland’s ACA enrollment extension could be a sign of things to come. Jason Millman.

The problem with Seattle’s plan to curb companies like Uber. Emily Badger.

Would you sign up for Obamacare if your mom asked you through Tinder? Jason Millman.

New study: Elementary students are doing more homework than they used to. Christopher Ingraham.

Taiwan is afraid that Chinese movies are becoming too good. Lydia DePillis.

The 1% have gained back their recession losses and then some. Christopher Ingraham.

The last decade was a historically awful time to enter the job market. Emily Badger.

Interactive: When women inherit their husbands’ Congressional seats. Christopher Ingraham.

Et Cetera

Obama administration to launch new climate data initiative. Juliet Eilperin in The Washington Post.

As Common Core tests approach, so does a sea change in schools. Claudio Sanchez in NPR.

A year after autopsy, GOP still struggles on immigration reform. Michael A. Memoli in the Los Angeles Times.

Public school students will look pretty different by 2022, projections show. Rebecca Klein in The Huffington Post.

Senators push security clearance reform after Navy Yard shooting report. Niels Lesniewski in Roll Call.

Federal drug prosecutions drop to Reagan-era levels. Ryan J. Reilly in The Huffington Post.

Convictions surge for illegal immigrants who try to return to U.S. Miriam Jordan in The Wall Street Journal.

Got tips, additions, or comments? E-mail us.

Wonkbook is produced with help from Michelle Williams.

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UGC FROM ARTICLE: !!!

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Comments
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UGC FROM ARTICLE: !!!

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