Senate Democrats to battle over strength of Wall Street reform legislation

By Alexander Bolton and Silla Brush - 05/17/10 06:00 AM ET

Democratic senators will battle among themselves this week over whether to strengthen a Wall Street reform bill that has already met stiff resistance from Republicans and industry lobbyists.

Liberal Democrats will make a last-ditch effort to push the bill leftward by strengthening regulation of derivatives and banks that speculate with their own money instead of on behalf of clients.

The leftward push will underscore tensions in the party that flared last week between Sen. Byron Dorgan (D-N.D.) and Senate Banking Committee Chairman Chris Dodd (D-Conn.).

Dorgan, who has been a persistent critic of derivatives for more than a decade, is pushing hard for a vote on his amendment to ban so-called "naked" credit default swaps. Those are derivatives that are tied to the potential for an asset to default, but in which traders don't have an actual stake in the underlying asset.

Dodd grumbled last week that Dorgan was threatening to jumble the carefully orchestrated sequence of votes by pushing his swaps measure.

“I will be very candid with my friend from North Dakota: It complicates my job,” Dodd said. Dorgan has vowed to keep pushing his amendment despite the resistance. And his efforts could result in a vote on the issue this week.

The bigger fight, however, will take place over an amendment offered by Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) to place stronger restrictions on proprietary trading.

The amendment would ban proprietary trading at banks and require the Federal Reserve to impose tougher capital requirements on large non-banks that engage in the same type of trading. Senate aides said the amendment would likely come up for a vote, but they did not say when.

A large coalition of liberal and labor groups have lined up behind the amendment, as have at least 28 Democratic senators, according to Public Citizen.

Wall Street banks oppose the measure, which could cut into their profits significantly.

"Proprietary trading is a useful management tool. Banning it will — ironically — increase the risk to the system," said Scott Talbott, senior vice president at the Financial Services Roundtable.

The Merkley-Levin proposal would target major Wall Street banks, such as Goldman Sachs and Morgan Stanley, which became bank holding companies in 2008 at the height of the financial crisis.

Industry lobbyists and congressional aides have suggested, however, that Goldman Sachs and Morgan Stanley could shed their bank holding companies and in the future escape the outright ban. They would still be subject to potentially higher capital requirements set by the Fed.

The reform is designed to tamp down on highly leveraged firms that did not have enough capital to weather the financial crisis.

“It is a very important amendment,” said Heather McGhee, director of the Washington office of Demos, a liberal-leaning advocacy group. “It is a crucially important amendment to safeguard our economy from reckless gambling that does not benefit the vast majority of businesses.”

The pending bill would leave it up to a council of regulators to restrict proprietary trading.

According to Public Citizen, 28 Democrats have voiced support for the Merkley-Levin amendment, four have said they are leaning in favor and 10 have said they are leaning against.

Lisa Lindsley, director of capital strategies at AFSCME, said the Dorgan proposal is an important complement to the Merkley-Levin amendment.

“The most important thing is to pass the Merkley/Levin amendment to keep banks from having their casino-like practices bring down the whole economy, and we see the issue of naked credit default swaps as part of it,” Lindsley said.    

Dem vs. Dem — showdown on taxes bill

By Alexander Bolton - 05/19/10 08:40 PM ET

Sen. John Kerry is leading a group of Democratic senators who object to legislation raising taxes on venture capital firms during tough economic times.
Kerry (Mass.) and Sens. Jeanne Shaheen (N.H.) and Maria Cantwell (Wash.) are part of a dissident group of Democrats who oppose raising the tax to offset the cost of extending unemployment benefits.

They fear increasing taxes on venture capital firms would stifle investment just as the economy rebounds from the recession.

 “If you raise the tax rate on venture capital it means there will be less money to invest at a time when the economy is still recovering,” said Shaheen. “I think it’s important to have as much money in the private sector to invest as we can.”

 Critics who support the tax to pay for unemployment benefits argue the three Democrats are putting well-heeled venture capital firms ahead of working men and women who need help.

 The package also includes extended federal subsidies of COBRA healthcare premiums, increased federal Medicaid assistance to states and an important research-and-development tax credit.

 Shaheen and her allies say that it makes no sense to raise the tax rate on venture capital firms. The proposal would tax carried interest, or the profits that venture capital firms and hedge fund managers earn from investments, at the regular income tax rate instead of the lower capital gains rate.

 The federal capital gains tax is 15 percent, while ordinarily the nation’s top earners must pay 35 percent. A source close to Kerry said he is not looking for a carve-out to only help venture capital firms but wants to lighten the tax hit on all affected industries.

Kerry has suggested options to Finance Committee Chairman Max Baucus (D-Mont.) “that would make changes to the House language that would affect all impacted industries,” the source said.

 Venture capital firms are concentrated in Boston along with New York, and Kerry voiced reservations about raising taxes on investment income when President Barack Obama first proposed it in early 2009.

Senate Majority Leader Harry Reid (D-Nev.) has said the so-called extenders package must pass by Memorial Day, but the concerns of Kerry and other senators make it more difficult. Reid told colleagues the package was crucial to the recovery of the economy.

“We have parts of that extenders bill, Mr. President, that are essential to the economic recovery,” Reid said on the Senate floor. “One is the tax credit for research and development that businesses absolutely need; the uncertainty of it is really hurting the overall economy.”

Shaheen suggested that investors who are patient with their capital and make long-term commitments with their resources should not have to pay income-tax rates on their gains. 

“Hopefully you can then separate real venture capital from efforts to just turn money around,” said Shaheen.

Baucus and House Democratic leaders have proposed a compromise to Kerry and his allies. The alternative proposal would set a new tax rate on investment income that would blend the capital gains and income tax rates, according to a source familiar with negotiations.

 “My concern is that generically there is a distinction between patient capital risk-taking, long-term investment versus the kinds of things that hedge funds do,” said Kerry.

 Kerry said he doesn’t like using the term “carve-out” for the changes he is pushing to help venture capital funds and other long-term, responsible investors.

“There isn’t a one-size-fits-all solution,” said Kerry, who suggested that investment firms should be treated differently depending on what they invest in.

He believes it doesn’t make sense to slap the same tax rate on investment firms that fund technology start-ups and hedge funds that invest in credit default swaps.

 Kerry denied that he has threatened to block the extenders package.

 “I just stated my position, which is that I think we ought to fix it,” Kerry said. “I haven’t made any other declarations of any kind. I only want to see if we can work something out.”

Venture capital CEOs from Massachusetts have pressed Democratic lawmakers about potential tax increases on their carried interest income.

Jeff Bussgang, a partner at the Boston venture capital firm Flybridge Capital Partners, described a recent trip 80 CEOs and business leaders made to Washington in a blog post on peHUB.com.

The group met with Kerry and House Financial Services Committee Chairman Barney Frank (D-Mass.).
 Bussgang reported that Frank promised: “We will exempt venture capital from the carried interest tax.”

The total cost of the extenders package is not yet certain because lawmakers are still haggling over whether to include a costly long-term freeze in scheduled cuts to doctors’ Medicare reimbursements

Big Oil Bailout

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Republicans Rely On ‘YouCut’ Gimmick To Propose Ending Successful Jobs Program

Last week, House Republicans launched a gimmicky website called “YouCut,” which asked visitors to vote on which item out of a pre-chosen set they would like to see axed from the federal budget. Republicans promised to bring a bill to the House floornixing the item that received the most votes.
The problem with this is two-fold. For starters, eliminating every single one of the proposed YouCut items would amount to cutting 0.017 percent of the federal budget. This highlights the fundamental unseriousness of Republican claims that you can significantly reduce the federal budget deficit by targeting small-ball spending programs. But second, the ultimate “winner” of the contest is a successful jobs program that was fundamentally mischaracterized and misunderstood by the GOP.
With about 29 percent of the 280,000 votes cast, the Temporary Assistance for Needy Families Emergency Contingency Fund led the pack. House Republicans called the fund a “backdoor way to undo” welfare reform that “incentivizes states to increase their welfare caseloads.” Of course, phrased that way, the program sounds absolutely awful!
But as the Center on Budget and Policy Priorities pointed out, neither of those claims are actually true. While the Emergency Fund does provide payments to families facing financial emergencies, it does so with stringent work requirements. In addition, it’s enabling states “to place 186,000 unemployed individuals in subsidized jobs by the end of the summer”:

It’s the largest subsidized employment effort states have ever taken under TANF, the national block grant created by the 1996 welfare reform law. A large share of the jobs are in the private sector…Individuals receiving TANF assistance funded through the Emergency Fund must meet the same stringent work requirements imposed on other TANF recipients. They have 12 weeks to find a job — an extremely difficult task in today’s labor market — after which they must meet their work requirement through other work activities, such as unpaid work.

“The recession has caused unprecedented need for many struggling families with children and the TANF Emergency Contingency Fund helps states meet that demand but is also responsible for directly funding 185,000 jobs. I can think of few ideas Republicans have floated that have been as devoid of compassion and commonsenseas this one,” said Rep. Jim McDermott (D-WA).
Even Gov. Haley Barbour (R-MS), no liberal darling, has said that the program provides “much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities.” But House Republicans are set to put it on the chopping block, because of an online gimmick.

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US: Obama unveils obesity plan to curb kids marketing

By: just-food.com | 11 May 2010

Michelle Obama unveils anti-obesity campaign for kids

First Lady Michelle Obama today (11 May) unveiled a Task Force action plan calling on food manufacturers to curb the marketing of unhealthy foods to children.

Obama joined Domestic Policy Council Director Melody Barnes and members of the Childhood Obesity Task Force to unveil the plan, which aims to tackle the problem of childhood obesity.

“For the first time, the nation will have goals, benchmarks, and measureable outcomes that will help us tackle the childhood obesity epidemic one child, one family, and one community at a time,” Obama said.  “We want to marshal every resource – public and private sector, mayors and governors, parents and educators, business owners and health care providers, coaches and athletes – to ensure that we are providing each and every child the happy, healthy future they deserve.”

The plan comes on the back of the First Lady’s Let’s Move campaign launched in February, and details 70 specific recommendations, a coordinated strategy, identifies key benchmarks, and outlines an action plan in a bid to solve the problem of childhood obesity within a generation.

It will also involve cabinet members and administration officials holding events across the US to highlight the importance of addressing obesity issues.

Recommendations include; prenatal care for parents, improved labels on food and menus, reduced marketing of unhealthy products to children, improved health care services including BMI measurement for all children, providing healthy food in schools, and getting children more physically active.
Click here to view a copy of the full report.

US: CSPI urges Mrs Obama to pressure food industry

By: just-food.com | 10 February 2010

CSPI wants support for school programmes

US First Lady Michelle Obama has been urged to do more to encourage the food industry to tackle child obesity after she launched a healthy-eating drive in the US yesterday (9 February).
Consumer watchdog The Center for Science in the Public Interest called on Mrs Obama to support political moves to prevent the selling of junk food in US schools.
CSPI nutrition policy director Margo Wootan said the First Lady should pressure food and drinks companies to support efforts to update the “disco-era national standards” for school vending machines and “get junk food and all sugary beverages out of schools once and for all”.
“For far too long, the nation's response to childhood obesity has been underwhelming, considering obesity’s massive impact on the nation's physical and fiscal health. The First Lady has the clout and visibility to change that and mobilise the nation's resources to address the problem,” Wootan said.
Mrs Obama yesterday launched 'Let's Move', a drive designed to cut obesity levels among children in the country. The campaign has been drawn up in a bid to encourage US families to eat healthily and exercise more.

The push has been launched in tandem with The Partnership for a Healthier America, an independent NGO set up to "solve the child obesity challenge".

Wootan added the First Lady could work with Congress to fund the full US$1bn per year recommended in the President's budget for school nutrition and urge politicians to move the bill quickly, so new reforms can be in place for the next school year.

US: Child obesity "may still be rising" - study

By: just-food.com | 3 March 2010

US kids snack on junk food almost three times a day, study says

Child obesity in the US may not have hit a plateau, experts have claimed, with kids now snacking three times a day.
According to a study published in the US journal Health Affairs, some 16.4% of kids aged 10-17 were obese in 2007, the study claimed - up from 14.8% in 2003 and equating to almost 10.6m obese children.
Two of the researchers behind the study claimed US children were "snacking more than ever" on junk foods.
Carmen Piernas of the the Carolina Population Center at the University of North Carolina, and Barry Popkin, a professor of nutrition at the same university, said US children are consuming over 27% of their "daily caloric intake" through "calorie-dense, nutrient-poor foods" snacks.
The authors of the Health Affairs study claimed that, among some sections of the US population, the numbers of obese children could still be on the rise.
"Our findings suggest that the obesity epidemic among children may not yet have reached its plateau for some groups of children," the authors claimed. They added that those most likely to be overweight or obese were among the poorest, publicly insured, black and Hispanic children.
The health officials and academics behind the study called on the Obama administration and the US Congress to make fighting childhood obesity "a signature domestic initiative".
Last month, First Lady Michelle Obama launched 'Let's Move', a drive designed to cut obesity levels among children in the country.
The Health Affairs study also called on Congress to bring in new taxes to "discourage [the] consumption of high-calorie foods and beverages" and force restaurants by law to list calories on menus.
"More experts no longer see obesity as a matter determined solely by personal responsibility; they believe that there needs to be collective responsibility for taking on the problem along the lines of the movement to fight smoking and tobacco," the researchers said.

US food makers weigh in obesity

By: Dean Best

Child obesity remains a heavyweight issue in the US and is a key concern of the Obama administration. First Lady Michelle Obama has launched a series of initiatives - and US food manufacturers are pledging their own moves, too.

Florida Keys tar balls not linked to Deepwater Horizon oil spill

 News Release

Date: May 19, 2010

Contact: Anna K. Dixon

(305) 797-1586

KEY WEST, Fla. - The Coast Guard Marine Safety Laboratory in New London, Conn. analyzed a sampling of tar balls discovered on Florida Keys shoreline Tuesday and determined that none of the collected samples are from the Deepwater Horizon oil spill.
A sampling of tar balls discovered on beaches at Fort Zachary Taylor State Park, Fla., Smathers Beach in Key West, Big Pine Key, Fla., and Loggerhead Key in the Dry Tortugas National Park, Fla. were flown by a Coast Guard HU-25 Falcon jet based in Miami, Fla., to New London, Conn. Tuesday for testing and analysis.
The results of those tests conclusively show that the tar balls collected from Florida Keys beaches do not match the type of oil from the Deepwater Horizon oil spill in the Gulf of Mexico. The source of the tar balls remains unknown at this time.
Capt. Pat DeQuattro, commanding officer of Sector Key West, authorized the use of the Oil Spill Liability Trust Fund Tuesday to commence cleanups of any oil pollution on Florida Keys shoreline and established a Unified Command comprised of members from the Coast Guard, the National Oceanic and Atmospheric Administration, the Department of the Interior, the Florida Department of Environmental Protection and Monroe County to manage the Florida Keys Tar Ball Incident response.
"The conclusion that these tar balls are not from the Deepwater Horizon oil spill incident in no way diminishes the need to continue to aggressively identify and clean up tar ball-contaminated areas in the Florida Keys," DeQuattro said.  "We will continue to operate as a Unified Command and utilize funding through the Oil Spill Liability Trust Fund until we have successfully identified any additional tar balls on the shoreline and completed cleanup efforts."
Coast Guard pollution investigators from Sector Key West responded to a report of twenty tar balls found on the beach at Fort Zachary Taylor State Park in Key West Monday.  Coast Guard Sector Key West received notification from the Florida Park Service around 5:15 p.m. Monday of twenty tar balls ranging in size from approximately three to eight inches in diameter.  Park rangers conducted a shoreline survey of Fort Zachary Taylor and the adjacent Navy beach at Truman Annex and recovered the tar balls at a rate of nearly three tar balls an hour throughout the day, with the heaviest concentration found at high tide, around 12:30 p.m.
Tuesday, Coast Guard Sector Key West received notification from the National Response Center at approximately 8 a.m. of tar balls on the beach in Big Pine Key, followed by a 9 a.m. report of tar balls on Loggerhead Key in the Dry Tortugas National Park.  The report of tar balls on Smathers Beach came via telephone to watchstanders at Sector Key West at approximately 8:20 a.m.

The public is asked to report the sighting of any tar balls to the U.S. Coast Guard at 1 (800) 424-8802.  Any oiled shorelines can be reported to 1 (866) 448-5816.

The public is reminded that tar balls are a hazardous material, which while not dangerous to most people can cause an allergic reaction and should only be retrieved by trained personnel.  All beaches on the Florida Keys remain open.

House Democrats, Republicans trade barbs over welfare program

By Vicki Needham - 05/18/10 05:50 PM ET

The e-mail channels lit up Tuesday afternoon as House Democrats and Republicans sparred over a proposal to cut a temporary program that provides help for needy families.
At the center of the criss-crossing e-mails is the Temporary Assistance for Needy Families Emergency Contingency Fund, which Republicans argue is a waste of money and Democrats say is providing much-needed assistance to families while also creating jobs during the recession.
Minority Whip Eric Cantor (R-Va.) announced today that the $2.5 billion program led online voting — 29 percent of 280,000 total voters — on the new YouCut initiative, a Republican effort asking Americans to vote on what spending they think should be eliminated. Cantor said he will call for an up-or-down vote on Thursday.
"Not only is the new program unaffordable and duplicative, it undercuts welfare reforms made in the mid-1990s that saved taxpayers billions of dollars," Cantor said in a statement.
Rep. Jim McDermott (D-Wash.) in turn accused Republicans of spreading incorrect information about the temporary program, arguing that it doesn't provide incentives to states to increase the number of people on welfare or allow states to increase the number of people receiving assistance without requiring people to engage in find work.
Republicans are "so out of touch that they have deceived people about a program that Republicans outside the Beltway think is a good thing," said McDermott, chairman of the House Ways and Means Subcommittee on Income Security and Family Support. "The recession has caused unprecedented need for many struggling families with children" and the TANF Emergency Contingency Fund "helps states meet that demand but is also responsible for directly funding 185,000 jobs. I can think of few ideas Republicans have floated that have been as devoid of compassion and commonsense as this one."

McDermott includes quotes from governors and state officials praising the program for helping to speed the economic recovery and providing summer job possibilities for young people who face greater challenges in finding employment.
The program, which was included in the stimulus bill, is slated to expire September 30. But it has broad backing on and off Capitol Hill to extend the program for another year.

The battle didn't end there. 

Cantor's office sent out a response calling McDermott's comments "defensive" and "angry" saying "it's only reasonable that state officials would want to continue to get additional federal money."
The e-mail highlighted the failure of a jobs program in Florida and questioning what happens to subsidized jobs once federal money runs out. 

Gulf Oil Slick Approaching Loop Current

During the first weeks following the explosion at the Deepwater Horizon well in the Gulf of Mexico, oil drifting from the site of the incident usually headed west and northwest to the Mississippi River Delta. But in the third week of May, currents drew some of the oil southeast. According to the National Oceanic and Atmospheric Administration (NOAA), the southward spread increased the chance that the oil would become mixed up with the Loop Current and spread to Florida or even the U.S. East Coast.
This pair of sea surface temperature images shows how the warm waters of the Loop Current connect the Gulf of Mexico to the Atlantic Ocean (top image, May 1–8, 2010) and the dynamic northern margin of the Loop Current a week and a half later, on May 18 (bottom image). Based on observations of infrared energy collected by the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Terra satellite, the images show cooler temperatures in blue and purple and warmer temperatures in pink and yellow. Cloudy areas are light gray.
The Loop Current pushes up into the Gulf from the Caribbean Sea. The current’s tropical warmth makes it stand out from the surrounding cooler waters of the Gulf of Mexico in this image. The current loses its northward momentum about mid-way through the gulf, and bends back on itself to flow south. It joins warm waters flowing eastward between Florida and Cuba, which then merge with the Gulf Stream Current on its journey up the East Coast.
At a May 18 press conference, NOAA reported that “satellite imagery on May 17 indicates that the main bulk of the oil is dozens of miles away from the Loop Current, but that a tendril of light oil has been transported down close to the Loop Current. NOAA is conducting aerial observations today to determine with certainty whether oil has actually entered the Loop Current…. The proximity of the southeast tendril of oil to the Loop Current indicates that oil is increasingly likely to become entrained. When that occurs, oil could reach the Florida Straits in 8 to 10 days.”
The bottom image shows the location of the leaking well and the approximate location of the southern arm of the oil slick on May 17 (based on natural-color MODIS imagery). Oil was very close to the Loop Current, whose warm waters appear in yellow near the bottom of the image. However, there is also an eddy of cooler water (purple) circulating counterclockwise at the top of the Loop Current. According to NOAA, “Some amount of any oil drawn into the Loop Current would likely remain in the eddy, heading to the northeast, and some would enter the main Loop Current, where it might eventually head to the Florida Strait.”