Wonkbook: Oil spill hurting climate bill; Dodd/Shelby near deal; Geithner sells bank tax

Ezra Klein
Wednesday, May 5, 2010; 7:32 AM


House: The big bill in the lower chamber is Haiti Economic Lift Act. They're also moving a bunch of resolutions, including my favorite: "Supporting the goals and ideals of National Train Day." Joint Economic Committee is being joined by economist Alan Krueger to take a look at job creation.

Senate: After an exciting Tuesday spent talking about amendments without reaching any agreement on the rules for voting on amendments, the Senate gathers at 9:30 a.m. to try again. And election nerds will be excited to hear that the Rules Committee is looking at vote-by-mail programs.

White House: You mean, what is the White House doing in addition to worrying about oil spills, defaults in the Eurozone, terrorist attempts, and financial regulation? Glad you asked! The prez is signing the Caregivers and Veterans Omnibus Health Services Act. You can read about it here.

And! The Financial Crisis Inquiry Commission begins hearings on shadow banks (watch them here), payroll processing firm ADP releases its monthly report on private-sector payrolls, the Institute for Supply Management releases its index of service-sector activity in April, and tickets are on sale for Iron Man 2, which opens Friday. Yes, I think Iron Man 2 is important policy news. Something something military-industrial complex something. And if you make me defend this belief, I'll just link to this.

Top Stories

Oil spill makes climate bill less likely: "The oil slick spreading through the Gulf of Mexico will prompt Congress to establish new regulatory, safety and technological requirements that could impede further off-shore oil drilling, the White House's top energy official said Tuesday," writes Jonathan Weisman. "But lawmakers said the catastrophic spill could further dim the White House's hopes for securing legislation aimed at reducing U.S. consumption of oil and other fossil fuels, by making it impossible to forge a compromise that includes expanded undersea drilling." Bright side: Harry Reid is taking the opposite view.

Dodd/Shelby deal appears near: Aides to the committee chairman, Christopher J. Dodd, Democrat of Connecticut, and the panel's senior Republican, Richard C. Shelby of Alabama, said the two senators had agreed to scuttle a $50 billion fund proposed by Democrats," report Edward Wyatt and David Herszenhorn. "Under the deal, the Federal Deposit Insurance Corporationwould finance the liquidation of failed financial companies, using a new credit line with the Treasury Department backed by the failed company's assets. The money would be recouped later through the sale of assets, with shareholders and creditors forced to take losses."

Old GOP line: It's a bailout! New GOP line: It's not a bailout if it's done using a line of credit from Treasury?

Tim Geithner's tries to sell the Senate Finance Committee on a post-TARP tax: "When you and your colleagues in Congress gave the Treasury Department authority to put out this financial fire, you included in the legislation a requirement that the president put forward a plan, quote, 'that recoups from the financial industry an amount equal to the shortfall in order to ensure that the TARP program does not add to the deficit or the national debt,' unquote."

"This is a simple and fair principle. Banks, not the taxpayer, should pay for bank failures. And this is a principal with ample historical precedent. In the aftermath of the S&L crisis, Congress changed the law to require the FDIC to impose a fee on banks to recoup any losses from closing failed banks." More testimony here.

Grassley's response: "If a TARP tax is imposed and the money is simply spent, that doesn't repay taxpayers one cent for TARP losses. It's just more tax-and-spend big government, while taxpayers foot the bill for Washington's out-of-control spending."

Data-nerd interlude: Charts and graphs that will finally make nothing clear.

Table of Contents: Economy (Greece catches pneumonia, America starts to sneeze), FinReg ('Audit the Fed' amendments gaining momentum), Oil spill (BP had gotten clean bill of health from government), Immigration (a Tucson sheriff takes aim at the Arizona law), health-care reform (repeal popular among Republicans, but not among voters), appendix (the rise of superweeds).


Greek crisis pounds US stocks: The markets suffered their worst day since February as the Dow Jones industrial average and the Standard & Poor's 500-stock index both fell more than 2 percent," report Dina ElBoghdady and Renae Merle. "The sell-off comes on the heels of an upbeat period marked by stronger-than-expected profits for many U.S. companies and favorable reports about consumer spending, housing and manufacturing. But financial troubles in Greece and the threat to other deeply indebted European countries serve as a startling reminder of how quickly gains could unravel."

Factory orders up: "Orders for manufactured goods are surging, with another jump in March, and business spending continues to grow," reports Sara Murray. "New orders for factory goods rose 1.3% to $391.5 billion, the 11th increase in the past 12 months, the Commerce Department said Tuesday. Orders increased 1.3% in February as well."

Companies are ill-served by massive layoffs during recessions: "Mr. Mascio has studied how companies in the Standard & Poor's 500-stock index have performed over 18 years," reports Scott Thurm. "His conclusion: those who cut deepest, relative to industry peers, delivered smaller profits and weaker stock returns for as long as nine years after a recession."

Steve Pearlstein told you so: "For the past year, I've been warning that the imbalances underlying the financial crisis -- the explosive growth of credit, the mispricing of risk, the mispricing of real estate and other assets, the overcapacity in the global economy -- were so huge that a quick and easy economic recovery was highly unlikely," he writes.

"And for much of that time, it has looked as though I was dead wrong. Stocks rebounded, credit markets revived, corporate profits returned and bank balance sheets have been repaired. But the nagging suspicion is that too much of this rebound is the result of the massive fiscal and monetary stimulus that not only did its job of reversing what was a dangerous downward spiral, but also made it possible for many countries to delay dealing with those fundamental economic imbalances. No better proof exists than the financial drama now unfolding in Western Europe, where for many years countries from Ireland to Greece used the financial cover offered by a new continental currency to overspend, overborrow and overexpand."

Heartwarming interlude: A child with liver cancer gets to be a superhero for a day -- with the help of a substantial chunk of Seattle.


'Audit the Fed' bill hits the Senate: "Sen. Bernard Sanders (I-Vt.) is pushing an amendment to the financial overhaul bill before the Senate that would broaden the Government Accountability Office's power to audit the Fed and compel the central bank to disclose details about the firms that received emergency federal aid during the financial crisis," report Brady Dennis and Perry Bacon Jr.

"Sanders's amendment has drawn more than a dozen co-sponsors from both parties. A petition encouraging the bill has the support of groups as disparate as FreedomWorks, a conservative activist group that has helped organize Tea Parties, and liberal organizations such as the Campaign for America's Future and prominent progressive blogs."

Seems like a bad time for the Federal Reserve's leg shop to be understaffed: "The Federal Reserve's efforts to fend off challenges to its independence by Congress could be complicated by departures from the central bank's legislative-affairs office," reports Jon Hilsenrath. "Three officials in the office┬┐Laricke Blanchard, Robert Pribble and Tara Foscato┬┐are on their way out or on leave from the group, cutting it nearly in half for now. Mr. Pribble is going to work for a hedge fund, Ms. Foscato a lobbyist. Mr. Blanchard, who used to run the group, has been loaned to the Export-Import Bank for six months."

Oil spill

The government had declared BP's Gulf of Mexico site safe: "The Interior Department exempted BP's calamitous Gulf of Mexico drilling operation from a detailed environmental impact analysis last year, according to government documents, after three reviews of the area concluded that a massive oil spill was unlikely," reports Juliet Eilperin. "The decision by the department's Minerals Management Service (MMS) to give BP's lease at Deepwater Horizon a 'categorical exclusion' from the National Environmental Policy Act (NEPA) on April 6, 2009 -- and BP's lobbying efforts just 11 days before the explosion to expand those exemptions -- show that neither federal regulators nor the company anticipated an accident of the scale of the one unfolding in the gulf."

Chemical warfare working? "The huge oil slick in the Gulf of Mexico still hadn't inundated the shore on Tuesday, and officials speculated that was partly because it was being pummeled with massive amounts of chemicals designed to break up the oil," reports Jeffrey Ball. "Those fighting the spill are spraying an unprecedented amount of dispersants into the Gulf in an attempt at environmental triage. Though there are questions about the environmental impact of using so much dispersant and using it at the seafloor, experts say, any such impact pales compared with the damage that would occur if the slick made it to the ecologically fragile Gulf Coast with full force."

BP steps up its lobbying: "BP PLC Chief Executive Tony Hayward met with lawmakers on Capitol Hill Tuesday, advancing the oil giant's campaign to avoid the sort of political backlash that has engulfed companies such as Goldman Sachs Group Inc. and Toyota Motor Corp.," report Neil King and Guy Chazan. "The push on Capitol Hill, arising after a rig leased by BP burned and sank in the Gulf of Mexico last month and the well it was drilling began leaking oil, comes as the company said it hopes as soon as Thursday to lower the first of three containment domes over the principle underwater leak."

Thomas Friedman on the spill: "There is only one meaningful response to the horrific oil spill in the Gulf of Mexico and that is for America to stop messing around when it comes to designing its energy and environmental future," he writes. "The only meaningful response to this man-made disaster is a man-made energy bill that would finally put in place an American clean-energy infrastructure that would set our country on a real, long-term path to ending our addiction to oil."

Ergonomics interlude: Is your office chair trying to kill you?


A Tuscon sheriff weighs in against the Arizona law: "My deputies have referred more illegal immigrants to Border Patrol and Immigration and Customs Enforcement than any other state or local law enforcement agency in Arizona," writes Clarence Dupnik. "But this new law will pass the burden of immigration enforcement to my county department. This is a responsibility I do not have the resources to implement."

"The more fundamental problem with the law is its vague language. It requires law enforcement officials to demand papers from an individual when they have a 'reasonable suspicion' that he is an illegal immigrant...When used in a law-enforcement context, 'reasonable suspicion' is always understood to be subjective, but it must be capable of being articulated. In the case of identifying illegal immigrants, the ambiguity of what this 'crime' looks like risks including an individual's appearance, which would seem to violate the Constitution's equal protection clause. Such ambiguity is especially dangerous when prescribed to an issue as fraught with emotion as that of illegal immigration. "

Did campaign-finance reform lead to the Arizona law? "Candidates for the legislature [in Airzona] can receive public funding if they collect 220 contributions of at least $5 each. This entitles them to more than $14,000 for the primary campaign and more than $21,000 for the general election," writes Ruth Marcus. "If a competing candidate chooses not to comply with spending and contribution limits, the publicly funded candidate gets matching funds to stay even...Trouble is, it worked -- perhaps too well. The barriers to entry were extremely low. People with little experience in politics at any level ran for the legislature and won. Previously, for better or worse, candidates of both parties were 'vetted' by business groups that then proceeded to help them raise money, a process that served to filter out extremes on both sides.

"And, as it turned out, a law pushed by 'good government' types, primarily Democrats, ended up benefiting conservative Republicans who quickly figured out that the Clean Elections money could be used to take on Chamber of Commerce-type Republicans."

Health-care reform

Health-care repeal popular among Republicans, but not among voters: "The Resurgent Republic poll of 1,000 likely voters found that only 35 percent of respondents agreed with the approach of the GOP members of Congress who sounded the call to 'repeal and replace"'the health care reform legislation passed in March," reports Ken Vogel. "Among respondents who identified themselves as Republicans, however, support for a repeal-and-replace strategy was 67 percent, compared to 36 percent among independent respondents."

Early retirees get federal help: "The White House announced Tuesday that it would help pay medical bills for early retirees who have health insurance provided by their former employers," reports Robert Pear. "The purpose of the temporary $5 billion program, authorized by the new health care law, is to reverse the erosion of employer-sponsored insurance...Under the program, the federal government can reimburse employers for 80 percent of the cost of claims from $15,000 to $90,000 a year for a retired worker who is 55 or older and not eligible for Medicare. The program will run from June 1 of this year to Jan. 1, 2014, when many early retirees, like millions of other Americans, will be able to enroll in health plans offered through new state-based markets known as insurance exchanges."

Agricultural interlude: This photo essay on farming around the world is gorgeous.


Rise of the superweed (no, not that kind): "Just as the heavy use of antibiotics contributed to the rise of drug-resistant supergerms, American farmers' near-ubiquitous use of the weedkiller Roundup has led to the rapid growth of tenacious new superweeds," report William Neuman and Andrew Pollack, "'It is the single largest threat to production agriculture that we have ever seen,' said Andrew Wargo III, the president of the Arkansas Association of Conservation Districts."

These energy projects always sound cool, but do they matter? "A start-up company has broken ground on a Texas pilot plant that is supposed to produce ethanol and diesel in a radical new way: with an organism that sweats fuel," reports Matthew Wald. "The company, Joule Unlimited of Cambridge, Mass., has developed several patented gene-altered organisms that absorb sunlight and carbon dioxide and combine these into hydrocarbons."

Closing credits: Wonkbook is compiled with the help of Dylan Matthews and Mike Shepard.

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