Wonkbook: Fed says action possible; Senate Dems split on climate bill; jobless benefits pass

Ezra Klein
Thursday, July 22, 2010; 6:53 AM

In testimony before the Senate, Fed chair Ben Bernanke appeared to embrace a sort of reverse-Augustinian view of further measures to help the economy: It will remain chaste now, but reserves the right to intervene more aggressively later. That might be cold comfort to some: Watching the difficulty the Senate had passing an unemployment extension, the analysts at Goldman Sachs are now assuming there will be no further fiscal stimulus in the next year, and that "adds almost a full percentage point to the drag on growth from Q4 2010 to Q4 2011 to what we had already estimated." Oof. Welcome to post-stimulus America, folks.

Meanwhile, the president signed the financial regulation bill; Senate Democrats are facing resistance within their own caucus on pushing a climate legislation; a long awaited unemployment benefits extension finally passed the Senate; liberals are trying to revive the public option; and you too can join Google's team of amateur librarians.

I've checked with the relevant authorities and they assure me that it's Thursday. Welcome to Wonkbook.

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Ben Bernanke says he is open to more expansionary policies from the Fed, but not yet, reports Neil Irwin: "Bernanke outlined the further actions he had in mind: cutting the interest rate paid on bank reserves, strengthening the Fed's promise to keep short-term interest rates low for the foreseeable future, or buying enough mortgage securities to replace those that are paid off. If the economy appeared at serious risk of returning to recession, the Fed would consider large-scale purchases of Treasury bonds or mortgage-related securities."

Some Senate Democrats do not want to bother with a climate bill this Congress, report Darren Samuelsohn and Coral Davenport: "For months, many moderates in the caucus have said that trying to move a climate bill that caps carbon was a bridge too far for this Congress, and they have urged dropping the cap in favor of a modest 'energy-only' bill that ramps up renewable energy. At a caucus meeting of Senate Democrats on Tuesday, the prevailing feeling was that even that measure doesn't stand a chance, say people familiar with the meeting."

The Senate gave final passage to a jobless benefits expansion that now goes back to the House for final approval, reports Lori Montgomery: "The bill would authorize states to provide retroactive support to an estimated 2.5 million people whose unemployment checks have been cut off since federal benefits expired June 2. It would also make available up to 99 weeks of income support through the end of November to millions more who have exhausted state benefits, which typically last for 26 weeks. Advocates for the unemployed say it could be several weeks in some states before the checks are in the mail."

Beatles cover interlude: Jack White plays "Mother Nature's Son" at the White House.

Still to come: Oil firms are spending billions for rapid response to future spills; FinReg becomes law; House progressives are reviving the public option; hedge fund managers favor the estate tax; and a porcupine who thinks he's a puppy.

Economy/ FinReg

Damian Paletta tells the story of how the Consumer Financial Protection Bureau made it into FinReg: http://bit.ly/cggSh5

Obama has signed FinReg into law, reports Brady Dennis: "With few exceptions, the legislation does not attempt to alter the fundamental shape of Wall Street, disappointing some liberals and consumer groups. It stops short of breaking up the nation's megabanks, it leaves out a ban on trading certain derivatives, and it doesn't set firm limits on executive pay. Nor does it significantly streamline the alphabet soup of financial regulators in Washington."

The TARP inspector-general is criticizing the Obama administration's mortgage modification program, reports Sewell Chan: "Only 340,000 homeowners have seen their mortgage terms permanently modified since the $50 billion program was announced in March 2009. That is a small fraction of the three to four million borrowers who were supposed to receive assistance under the program, which is financed by money from the $700 billion Wall Street bailout authorized in late 2008..That criticism was echoed by Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the bailout, and Richard J. Hillman, managing director for financial markets and community investment at the Government Accountability Office."

The unemployment insurance extension promises to be Congress' last jobs package for a while: http://politi.co/d2Wjlb

Republicans are blocking a $30 billion fund to lend to small businesses, reports David Herszenhorn: "In a bid to save the bill, Democrats released a new version of it on Wednesday night without a $30 billion lending program. But Mr. Reid immediately introduced an amendment that would restore the fund, and he continued to block any Republican amendments. Democratic aides said talks with the Republicans would continue, and they were still hopeful that some form of the measure would be approved."

Banks only slightly increased their lobbying spending during the FinReg fight: http://politi.co/djVGXY

David Wessel thinks Bernanke has good reasons to put off stimulative action: "Put yourself in Mr. Bernanke's chair. When the Fed began buying mortgages, the gap between yields on mortgages and Treasurys was wide; now it isn't. Mortgage rates are very low and the housing sector is still moribund; it isn't clear pushing mortgage rates down another one-quarter percentage point would do much. The Fed could buy more Treasurys, trying to push yields on 10-year Treasurys below the already low 3%. But that could backfire. With all the deficit angst around, a Fed move to buy Treasurys could provoke cries of 'they're monetizing the debt' and push up long-term rates rather than lowering them."

Credit card companies are boosting service fees in response to regulation and higher consumer debt: http://bit.ly/b8kAQf

The Fed is failing those who need its help, writes Mark Thoma: "What, exactly is the cost if they do act now? Until the Fed has a good answer to that question, and so far I haven't heard it, I will continue to wonder not only why they aren't ready to act now, which is bad enough, but why they haven't tried to do more to help an economy that is clearly struggling. We're in danger of a lost decade or worse, and the Fed is not responding adequately to that threat."

Daniel Gross notes that even hedge fund managers want to keep the estate tax: http://bit.ly/91yeW4

Adorable animal being adorable interlude: A porcupine who thinks he's a puppy.


Four oil companies are spending over $1 billion on a rapid reaction system for future oil spills, reports Angel Gonzalez: "Exxon Mobil Corp., Chevron Corp., Royal Dutch Shell PLC and ConocoPhillips said Wednesday that they are forming a joint venture to design, build and operate a rapid-response system to capture and contain up to 100,000 barrels of oil a day flowing 10,000 feet below the surface of the sea..The companies will evenly split an initial investment of $1 billion in the nonprofit venture, which they are calling the Marine Well Containment Co. But the tab to build the system and have crews on alert for years could run in the billions of dollars."

Environmental groups are split on Obama, report Darren Samuelsohn and Carol Lee: "Leaders of the Environmental Defense Fund have tried a more direct route: convening a 90-minute sit down with reporters late last month at which the message was specifically aimed at getting the president's ear..Even with the pointed rhetoric for the White House, some environmentalists think their colleagues can and should say more. 'The lesson from the Clinton administration is that you pressure Democrats early and often,' said Phil Radford, president of Greenpeace USA. 'You don't wait to demand real leadership until it's too late because you think they're your buddies.'"

The EPA and State Department are fighting over an oil pipeline from Canada: http://bit.ly/agINoo

Energy secretary Steven Chu is advocating white roofs as a form of climate mitigation, reports John Collins Rudolf: "Another study published this year by researchers with the Berkeley lab used global climate models to determine the cooling benefit of increasing the albedo, or reflectivity, of both roofs and roadways in large cities. The study found that increasing the reflectivity of those surfaces in urban areas with a population of over one million would offset the heating effect of 1.2 gigatons of carbon dioxide emission annually, the equivalent of taking 300 million cars off the road for 20 years."

Public pension funds are seeking to lead suits against BP: http://bit.ly/adcAbk

The House has passed two bills regulating drilling, reports Giovanni Russonello: "One of the measures would force the oil industry to more than double its investment in spill-prevention and cleanup technologies. It would also consolidate the agencies in charge of oversight in the case of a spill and provide more funding for academic research. The second bill would redirect funding currently devoted to studying deepwater drilling techniques, instead putting it toward research and development of offshore drilling safety strategies."

Brad Plumer argues the Senate can make time for a climate bill if it wants one: "Yesterday, George Voinovich (R-Ohio) told reporters: 'Anybody that's being intellectually honest has got to say we do not have the time to do anything meaningful at this point in time when it comes to climate change.' That's not literally true. There's plenty of time left. Months, in fact. Senators could skip the August recess, take their jobs seriously, and get to work addressing perhaps the biggest issue facing the country (and planet). Republicans could stop senselessly filibustering every little Senate procedure. The clock may be winding down, yes, but that's not because of some abstract celestial force. It's not a logical necessity. It's a conscious choice that individual senators are making."

Crowdsourcing interlude: Help Google digitize old books.

Domestic Policy

Liberal members of Congress are introducing a bill creating a public option, reports Noam Leavy: "'There is all this concern about the deficit,' said Rep. Lynn Woolsey, D-Calif., a leading champion of the proposal. 'Well, guess what, this would reduce the deficit because it saves so much money.' Woolsey and her allies, including Reps. Jan Schakowsky of Illinois and Fortney 'Pete' Stark of California, are armed with a new analysis by the nonpartisan Congressional Budget Office. It projects the public option could save the federal government $68 billion between 2014 an 2020, according to Democrats."

Lawmakers are holding back on funding programs to end homelessness, reports Shira Pollak: "The House approved legislation last month that bankrolls the National Housing Trust Fund's $1.065 billion cost, but the Senate has yet to take up the funding. The holdup in the Senate has delayed the construction of over 10,000 rental homes that are needed to begin chipping away at an estimated shortfall of 3 million low-income units, according to Sheila Crowley, president of the National Low Income Housing Coalition."

Richard Lugar became the second GOP senator to endorse Elena Kagan's Supreme Court nomination: http://bit.ly/a2QMnm

The Senate rejected a proposal to block the Justice Department's lawsuit against Arizona's immigration law, reports Scott Wong: "Sens. Jim DeMint (R-S.C.) and David Vitter (R-La.) introduced an amendment to a small business bill that would have barred federal funds from being used in any lawsuit seeking overturn the Arizona law. But the amendment failed on a 43-55 mostly party-line vote. Arizona's two Republicans senators, John McCain and Minority Whip Jon Kyl, backed the amendment."

National education standards are gaining ground, reports Nick Anderson: "The National Governors Association and Council of Chief State School Officers proposed what they call the 'common core' standards in June after experts spent months drafting, circulating and revising them. Adopting the standards gives states and the District points in the Obama administration's $4.35 billion Race to the Top competition for school reform funds. Advocates say the standards are more rigorous than what, until now, has been the norm across the country. Some critics say the standards are not strong enough; others fear that adopting national standards will erode local control over schools."

Business lobbyists are gearing up to fight to extend the Bush tax cuts: http://bit.ly/bhAAk0

The US had no choice but to sue Arizona, argue Doris Meissner and John Ziglar: "When Arizona lawmakers passed S.B. 1070, a significant challenge to this settled constitutional principle, they virtually guaranteed that the federal courts would have to judge the constitutionality of their actions. Allowing states to set their own immigration policies fails to solve the overall problem of illegal immigration and violates the supremacy clause of the Constitution. The federal government can permit states and localities to act on its behalf in immigration matters, but it must expressly delegate that authority."

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

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