Several major banks pleaded guilty to a conspiracy to manipulate currency prices this week, agreeing to pay some $6 billion in fines. In letters to their clients Thursday about the plea, those banks then said that they would keep right on doing the very same things they'd been fined for.
The banks are permitted more or less to do what they want -- as long as their clients know they're doing it, explains Bloomberg's Matt Levine:
Whenever a wave of bank scandals breaks -- mortgage-backed securities, Libor, FX, "bond lies" -- an important theme is always the mutual incomprehension of regulators and the public, on the one hand, who find the banks' behavior obviously abhorrent, and the banks, on the other hand, who are like, "What? This? We've done this forever. We thought it was fine."...
There is no promise of reform here: The Justice Department caught the banks doing things that it didn't like and fined them billions of dollars, but won't stop them from doing most of those things. As long as there are no more ambiguities or misunderstandings about what they are. It's a weird stalemate.
Levine calls it "defiance" on the part of the banks, and there's really no other word for it. It's a startling example of how fine the line between normal business practices and outright fraud can be in the financial sector.
On Memorial Day, we honor those who made the ultimate sacrifice in the service of their country. Wonkbook will resume on June 1.
What's in Wonkbook: 1) NSA reform 2) Opinions, including Cassidy and Buffett on the minimum wage 3) The CIA closes its climate-science program, and more
Chart of the day: While the distribution of income in the United States is roughly comparable to that of other developed nations, the distribution of wealth is much more unequal. The richest 10 percent of Americans account for 76 percent of U.S. net worth. Christopher Ingraham in The Washington Post.
1. Top story: NSA votes could extend beyond Friday
Congress is running out of time to extend some National Security Agency surveillance. "If the House and Senate do not act in concert by midnight May 31, the NSA’s bulk collection of telephone 'metadata' from private companies will end, at least temporarily. The House passed a White House-backed bill last week reworking the program, keeping the records in private hands but allowing authorities to seek discrete records with a court order, but top Senate Republicans have balked, saying the changes could hamper counterterrorism efforts." Mike DeBonis and Ellen Nakashima in The Washington Post.
Proponents of reform will try to get the House bill through the Senate Friday and over the weekend. "The bill has the backing of the majority of the Senate — including all Democrats — but it remains unclear whether it has the 60 votes necessary to overcome procedural hurdles during what increasingly looks like a rare Memorial Day weekend session. ... If the Senate voted the bill down but approved a short-term patch, the law would still expire for at least a few hours on the morning of June 1. Unless, that is, House leaders chose to quietly pass a short-term reauthorization of the law while the chamber is out of town next week. A House Republican leadership aide said that they 'are not going to' use a voice vote to get 'any type of short term extension.' Any such move would surely lead to an insurrection in the House, which has attempted to rein in the NSA on multiple occasions. Multiple House lawmakers in both parties have repeatedly objected to voting for a short-term bill. But not everyone is convinced." Julian Hattem in The Hill.
2. Top opinions
CARNEY: Clinton's views on campaign finance are worse than hypocrisy. "Not only would such campaign finance laws make it harder for groups to criticize her — they could do so only through political action committees, which have strict rules and limits on fundraising — such laws would also make it harder for SuperPACs to spend on behalf of candidates, thus making candidates more reliant on thousands of $2,700 donations. That in turn makes candidates reliant on hundreds of well-connected bundlers — such as the audience at Hillary's recent New York dinner. ... Goldman Sachs, the Carlyle Group, the National Auto Dealers Association, Corning, Fidelity, KKR, Russian financial firm Renaissance Capital, eBay, and Ericsson have all made six-figure contributions to Hillary's campaign in the form of speaking fees. Corporate and foreign contributions to campaigns are illegal, but Hillary has found a way around that restriction — unless you think this career politician's insights were really worth ten thousand dollars a minute." The Washington Examiner.
KRUGMAN: Obama must explain why he supports the Pacific trade deal. "Officials have evaded the main concerns about the content of a potential deal; they’ve belittled and dismissed the critics; and they’ve made blithe assurances that turn out not to be true. ... Whatever you may say about the benefits of free trade, most of those benefits have already been realized. A series of past trade agreements, going back almost 70 years, has brought tariffs and other barriers to trade very low to the point where any effect they may have on U.S. trade is swamped by other factors, like changes in currency values. In any case, the Pacific trade deal isn’t really about trade. Some already low tariffs would come down, but the main thrust of the proposed deal involves strengthening intellectual property rights — things like drug patents and movie copyrights — and changing the way companies and countries settle disputes. And it’s by no means clear that either of those changes are good for America." The New York Times.
WILKINSON: Why can't GOP presidential candidates coherently answer questions about Iraq? "Suppose... Mr Obama's choice to withdraw troops was the mistake. It then follows that the smart thing to do—the best 'long-term strategy on how to deal with it,' in Mr Bush's words—is to get American boots back on the ground and vindicate the invasion by finishing the job. The problem for hawks like Messrs Bush and Rubio is that this is an impolitic thing to say. ... If the eventual GOP nominee is going to have a shot at the White House, he will need to say that the invasion was a mistake. So it is wise to be on the record saying a version of that now. But this can be awfully hard to do if you don't fully believe it. Messrs Bush and Rubio's botched answers show what happens when politicians vacillate between what they probably really think and what is, all things considered, the politically wise thing to say." The Economist.
CASSIDY: The campaign for a living wage could change American politics. "Reacting to grassroots campaigns carried out by labor unions and other progressive groups, some of the biggest cities in America are now defying several decades of economic orthodoxy, as well as challenging a set of social norms that regarded low-wage jobs as unavoidable and acceptable. ... If it turns out that cities like L.A. and San Francisco can raise the minimum wage by fifty per cent or sixty per cent without suffering big losses in employment, the old argument that higher minimum wages are job killers will be much harder to sustain. And that would change American politics in a very significant way, greatly expanding the range of possibilities it could encompass." The New Yorker.
The Earned Income Tax Credit is better than the minimum wage, writes investor and Berkshire Hathaway Chief Executive Warren Buffett. "I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty. The better answer is a major and carefully crafted expansion of the Earned Income Tax Credit (EITC), which currently goes to millions of low-income workers. Payments to eligible workers diminish as their earnings increase. But there is no disincentive effect: A gain in wages always produces a gain in overall income. The process is simple: You file a tax return, and the government sends you a check." The Wall Street Journal.
3. In case you missed it
Former Florida Gov. Jeb Bush criticizes his brother's fiscal policy. "'I think that in Washington, during my brother's time, Republicans spent too much money,' Jeb Bush said. ... 'He could have brought budget discipline to Washington, D.C.' Total federal spending grew from $1.86 trillion in 2001 to nearly $3 trillion in 2008, an annual growth rate of 7 percent. Spending in President Obama’s first six years has had an annual growth rate of about 4 percent. Bush’s fiscal criticism is the most direct critique to date of his brother's presidency. He has said that 'mistakes were made' during the Iraq war, but he otherwise avoids directly criticizing his brother or his father, George H.W. Bush, another former president." Ed O'Keefe in The Washington Post.
The Senate ends a filibuster on Obama's trade agenda. "The 62-38 vote preserves the possibility that the Senate can finish the trade bill before the Memorial Day recess, which would be a major boon to Obama and Republican leaders in the House and Senate. It came after a round of horse-trading that assures the Export-Import Bank will receive a chance at a lifeline to live past June 30, when it is scheduled to expire. ... McConnell was seen on the floor talking with senators in both parties who want to see Ex-Im extended, and soon after a half-dozen lawmakers announced their support for the trade measure." Burgess Everett and Manu Raju at Politico.
The administration will release a new major new rule on clean water. "Environmentalists have praised the new rule, calling it an important step that would lead to significantly cleaner natural bodies of water and healthier drinking water. But it has attracted fierce opposition from several business interests, including farmers, property developers, fertilizer and pesticide makers, oil and gas producers and a national association of golf course owners. Opponents contend that the rule would stifle economic growth and intrude on property owners’ rights. ... The announcement of the rule could come as soon as Friday. If not, it is likely to happen next week, people with knowledge of the plans said." Coral Davenport in The New York Times.
The Central Intelligence Agency has closed a major climate-science program. "Under the program, known as Medea, the CIA had allowed civilian scientists to access classified data—such as ocean temperature and tidal readings gathered by Navy submarines and topography data collected by spy satellites—in an effort to glean insights about how global warming could create security threats around the world. ... Data gathered by the military and intelligence agencies is often of much higher quality than what civilian scientists normally work with. ... Over the past several years, climate change has gained prominence among defense experts, many of whom see it as a 'threat multiplier' that can exacerbate crises such as infectious disease and terrorism. Medea had been part of a larger network of climate-related initiatives across the national security community. Medea's closure notwithstanding, that network appears to be growing." Tim McDonnell in Mother Jones.
An outbreak of bird flu has tripled the price of eggs. "Egg companies—the sector hit hardest by the virus—and turkey producers are spending millions of dollars to try to contain the disease. With eggs in particular, the problem is greatly complicated by the way the American industry is concentrated in the hands of relatively few producers. ... Avian influenza has resulted in the deaths or extermination of at least 38.9 million birds, more than double the previous major U.S. outbreak in the 1980s. Of that total, more than 32 million are egg-laying hens, accounting for about 10% of the U.S. egg-laying flock. ... The outbreak has wiped out about one-third of the egg-laying flock in Iowa, the biggest U.S. egg producer. Some egg companies are unlikely to survive because of the costs of culling animals and having to go months without revenue while facilities are cleaned and repopulated with hens." Kelsey Gee in The Wall Street Journal.