2010 - %3, April

Goldman's All-Star Lobbying Squad

| Thu Apr. 29, 2010 10:54 AM EDT

All-star, that is, if you're rooting against comprehensive financial regulatory reform and don't want Congress to rein in excessive bonuses, risky speculating, and financial chicanery. On the day the Senate is slated to begin debating its Wall Street overhaul, the Washington Post sheds some light on the lobbying crew Goldman Sachs has assembled to fight reform and make sure whatever changes the Senate wants don't damage the firm's bottom line. Their lobbying team looks like a who's-who of financially-connected politicos with ample connections throughout Washington. Consider it the Yankees—or, if you're a soccer fan like me, the Real Madrid—of financial lobbying, the best money can buy.

Leading Goldman's lobbying shop is Michael Paese, a former aide to Rep. Barney Frank (D-Mass.), the powerful chairman of the House financial services committee. Frank's committee largely crafted the House's version of financial reform legislation, and will play a huge role in reconciling the House and Senate's bills likely later this spring. Frank, the Post reported, banned Paese from lobbying his committee for two years, just as the chairman more recently banned a former aide, Peter Roberson, who left the committee to lobby for the derivatives industry.

Filling out Goldman's lobbying roster are more familiar names like Dick Gephardt, the populist former Democratic majority leader turned Big Finance shill. Harold Ford Jr., the telegenic former Tennessee congressman, who recently mulled a Senate run in New York and did time with Merrill Lynch, is also lobbying for Goldman now. A few more well-connected Goldman lobbyists:

  • Faryar Shirzad, a former economic aide to George W. Bush
  • Joe Wall, a former legislative affairs aide to Dick Cheney
  • Richard Roberts, who's served as a powerful Securities and Exchange Commission commissioner and aide to Sen. Richard Shelby (R-Ala.), a top GOPer on financial reform
  • Eric Edwards, formerly a staff director on a House financial services committee's subcommittee

It's a star-studded lineup, to be sure. That said, with public ire against Goldman rising, its reputation sinking, and even President Obama shunning the firm, even the Yankees of lobbying will have their work cut out for them.

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Crist-Rubio Social Media Smackdown

| Thu Apr. 29, 2010 10:40 AM EDT

On Thursday afternoon, Florida Gov. Charlie Crist was expected to announce he will pull out of the GOP Senate primary and run for the open Senate seat as an independent. That would leave Marco Rubio, a former state House speaker, as the presumed Republican nominee. Crist's move has the politerati all a-twitter, because it's the most dramatic indicator of the Republican Party's lurch to the right and Tea Partydom—and because it now sets up a dramatic three-way contest that will pit a right-wing Republican against an ex-Republican moderate against a Democrat (Rep. Kendrick Meek).

This election will get loads of national attention, and it will be interesting to see how social media becomes a part of it. So far, Rubio has cleaned Crist's clock in this regard. A report put out today (conveniently!) by the Emerging Media Research Council gives the stats:

* Rubio’s Web traffic has grown 251% across the last three months while Crist’s Web traffic has grown only 44%.

* YouTube: Rubio has more than 540,000 views across 135 videos; Crist’s videos have been viewed 32,000 times. *

* Facebook: Rubio maintains more than a 4-1 advantage on Facebook: 60,000 “likes” to 14,700 “likes”.

* Twitter: Rubio maintains more than a 2-1 advantage on Twitter: 11,500 followers to 5,100 followers.

This certainly reflects the intensity of the support Rubio, a Tea Party darling, has drawn locally and nationally. Rubio is a young and dynamic candidate who appeals to a die-hard band; thus, he's a natural for social media. The question is, once the older and more moderate Crist goes indie, can he also go viral?

Karzai-ism Spreading to Iraq?

| Thu Apr. 29, 2010 9:13 AM EDT

The Obama administration has a tough challenge figuring out how to handle the tainted government of Hamid Karzai in Afghanistan. Now, it may also have a similar mess to contend with in Iraq. The Christian Science Monitor reports:

The Obama administration is showing growing nervousness as Iraq’s postelection process of forming a new government turns out to be even more troubled and drawn-out than anticipated. After weeks of backstage prodding, US officials are now openly questioning the impact on US-Iraq relations – and in particular on plans to pull out all US combat forces this summer.

Prime Minister Nouri al-Maliki, who was a close second-place finisher in March 7 balloting, has employed what appear to be ever-more desperate measures to hang on to his post. In Washington, worries are mounting that Iraq will be saddled with a tainted government.

"They’re increasingly afraid of ending up with another Karzai-like mess," says Wayne White, a former State Department analyst on Iraq, referring to last year’s reelection of Afghan President Hamid Karzai. That election was widely deemed to have been stolen.

"There was always concern over time and the impact a drawn-out process of naming [an Iraqi] government could have," Mr. White adds. "But the prospect of a government tainted by illegitimacy is quickly becoming a much larger problem."

In a carefully worded admonition to the Iraqi government Tuesday, Secretary of State Hillary Rodham Clinton reminded Iraqi officials that "transparency and due process" are essential elements of an election and government-forming process that attains the confidence of the public. She called on Iraq’s leaders to "set aside their differences" and "to form quickly a government that is inclusive and represents the will of all Iraqis."

That's much easier said than done. After all, why shouldn't Maliki follow Karzai's lead—and do whatever he can to hold on to power? Couldn't he also expect to continute to count on Washington's support, like the Afghan leader? This shows the problem the administration faces: once you accept a fraudulent election in one country, leaders elsewhere get ideas.

An intransigent Maliki could put the Obama administration in a tough spot. As the Monitor notes,

White...says the Obama administration will be left with "a really wrenching choice over how it treats the government" if Maliki’s "efforts to stack the deck" result in him holding on to power.

That could mean renewed political instability, he says – and put the US in the uncomfortable position of "taking the side of what is widely assumed to be an illegitimate government."

To an extent that's already happening in Afghanistan. Does it matter if the same occurs in Iraq?

Cap-and-Trade in California

| Thu Apr. 29, 2010 8:30 AM EDT

When I turn on my TV these days, I'm usually assaulted by ads from the two candidates trying to win the Republican primary for governor of California this year. Both of them are Silicon Valley moderates who are desperately trying to convince the GOP faithful that they're actually stone cold reactionaries, and the ads have gotten pretty ugly. And not just toward each other. One ad that's currently in heavy rotation, after spending its first 25 seconds trashing the opposing candidate, ends with this ominous message: "After Arnold, don't we deserve....a Republican?"

Ouch. Why are California Republicans hating on Arnold Schwarzenegger? The bill of particulars against the Governator is long, but a big part of the answer is AB32, a global warming bill passed by the Democratic legislature and signed into law by Schwarzenegger in 2006. "I say the debate is over," he had declared a year earlier, and needless to say, those are fighting words for modern conservatives.

But what makes it worse — much, much worse — is what AB32 does. This is not your run-of-the-mill conservation or energy efficiency bill. That would be bad enough. But the centerpiece of AB32 is a plan to limit California's greenhouse gas emissions, and the primary way it does this is by authorizing the California Air Resources Board to implement a cap-and-trade plan designed to reduce CO2 emissions to 1990 levels by the year 2020. It's the same kind of cap-and-trade proposal that President Obama and congressional Democrats want to impose on the entire country.

Now, this would hardly be the first cap-and-trade plan in history. That honor belongs to the effort to limit acid rain in the early 90s, which employed a cap-and-trade mechanism that was — surprise! — originally a conservative idea designed to make use of market principles to reduce sulfur pollution. Nor would it be the first CO2 cap-and trade plan. Europe is already in phase two of ETS, their continent-wide cap-and-trade program. In fact, it wouldn't even be the first CO2 cap-and-trade plan in the United States. RGGI, a cap-and-trade mechanism for ten northeastern states, started up two years ago and auctions off CO2 permits every three months. You can see the results online if you're interested. (In the most recent auction, a permit to emit a ton of CO2 sold for about two bucks.)

But none of that matters. California is still California, a bellwether for the nation, and cap-and-trade here would give the idea both exposure and legitimacy that neither RGGI nor far-off Europe ever could. And so the opposition has gotten hot. AB32 set out a 6-year implementation schedule, which means that cap-and-trade is still a couple of years off. To keep that from happening, an ugly confederation of oil companies and conservative activists has banded together to put an initiative on the November ballot that would temporarily suspend AB32 until the economy improves. How long is "temporarily"? Until unemployment is down to 5.5% for four quarters in a row. And how long would that take? State estimates suggest that California's unemployment rate won't drop to that level until 2017, which means the earliest AB32 could go into effect is 2018. But what are the odds that California won't suffer any kind of economic downturn in the next eight years? Pretty slim. The reality is that the proposed initiative would almost certainly kill off AB32 for good.

So what are the chances of repeal succeeding? Hard to say. The anti-AB32 movement is called the California Jobs Initiative, and their argument is that AB32 will cost California over a million jobs, something the state can hardly afford in the middle of a brutal recession. AB32's supporters dismiss CJI's numbers as ridiculous, and the ammunition employed by the two sides, as usual, is dueling reports. A study from Charles River Associates suggests that AB32 would reduce average household income in California by about 1%. A study from the Air Resources Board, by contrast, projects that both household income and the number of jobs in California would rise slightly by 2020. The Legislative Analyst's Office, generally considered an honest broker, suggests that California might suffer small near-term job losses if AB32 is implemented, but their analysis is pretty shallow and speculative and their conclusions were backed up with virtually no evidence at all. Energy efficiency, on net, is usually a winner, something that a wide variety of studies has confirmed.

But all three studies agree on two things: (a) the economic effects of AB32, whether positive or negative, are likely to be modest, and (b) there's a ton of uncertainty in the forecasts. The best bet is to simply admit that the most likely economic effect of AB32 is either zero or not far from it. The econometric tools at hand just don't allow us to say much more.

But that might not be enough to save AB32. A recent Field Poll showed that 58% of Californians favor the law, but that's a pretty thin majority. A barrage of industry-funded ads will probably eat into that majority, and turnout at the November election is likely to skew conservative. Add in California's 12.5% unemployment rate and you have a recipe for a pretty effective fearmongering marketing campaign.

But even if the repeal movement fails, AB32 could still be in trouble if a Republican wins the governor's race. Jerry Brown, the only serious candidate on the Democratic side, supports AB32, but both of the Republican candidates oppose it. And since the legislation allows the governor to suspend the law for a year in the event that it poses a threat of "significant economic harm," a Republican governor could effectively kill it for good by simply suspending it every year for as long as they're in office.

This makes AB32's future hazy to say the least. Supporters need to fight off a well-funded initiative campaign and make sure a Democrat is California's next governor. And they need to do it in an electoral environment that promises to be heavily favorable to the GOP and to anti-government forces in general. Four years ago AB32 promised to be the most muscular climate bill in the country. But unless a bunch of things go its way, by next year it might be dead.

Let the Finance Reform Battle Begin

| Thu Apr. 29, 2010 7:46 AM EDT

After three days of GOP obstruction and deadlock, Senate Democrats finally wore down their colleagues across the aisle and will today begin full debate on overhauling Wall Street on the Senate floor. Instead of haggling behind closed doors, senators will now have to fight to improve or whittle down the bill out in the open. In the coming days, you’ll see members of both parties making lots of statements and offering amendments to the bill, largely crafted by Sen. Chris Dodd (D-Conn.), that bolster and weaken the array of proposed rules and regulations that rewrite how our financial services industry does business.

Right now, there look to be three main sticking points between the parties. One is the proposed consumer protection agency, which would oversee areas like mortgage lenders, auto dealers, and credit card practices. Sen. Richard Shelby (R-Ala.), a leading figure on financial reform, wants to pare back the reach and power of the agency; he says it would create unnecessary bureaucracy and would pry into the lives of Americans. Shelby’s counterpart, Sen. Dodd, said yesterday that he disagrees with Shelby’s position. "I cannot agree to his desire to weaken consumer protections given the enormous abuses we have seen," Dodd said. There's sure to be an intense fight waged on the Senate floor to determine the fate of the consumer agency.

What to do with systemically risky, or "too-big-to-fail," banks is another prickly issue. In an interview with CNBC yesterday, Sen. Bob Corker (R-Tenn.), another leading Republican on financial reform, said the two parties had yet to reconcile their differences on ending the threat of too-big-to-fail banks and preventing future taxpayer bailouts. That said, Corker hinted that GOPers and Democrats weren’t that far apart on the issue: "We can fix 'Too Big To Fail' piece. We really can, in about five minutes. Everybody knows how to fix it." If Corker’s remarks are any indication, reaching a compromise on too-big-to-fail—what Corker seems to believe is low-hanging fruit for the Senate—could be top of the to-do list.

The third issue where major differences remain is regulating derivatives, the exotic, opaque instruments used both by farmers and manufacturers to hedge their risk and by Wall Street to bet on swings in the markets. The derivatives language included in the bill now is especially tough—most of it comes from the Senate agriculture committee’s derivatives bill, which would require derivatives to be traded on exchanges (like the New York Stock Exchange) and put through a clearinghouse so that the risk of losses is absorbed by many parties instead of a few (think AIG). The agriculture committee’s bill would also force derivatives trading desks to be spun off from their larger banking operations, a provision that’s drawn the ire of Wall Street.

Yesterday, Shelby said, "on the derivatives, we haven't worked that out." And the lone Democrat to vote against cloture three times with Republicans, centrist Sen. Ben Nelson (D-Neb.), opposes the current derivatives legislation, too. A provision in the derivatives section would force existing derivatives contracts to post margin—either cash or securities as collateral—on those deals. Warren Buffett, the head of Omaha-based Berkshire Hathaway, had sought to kill that margin requirement for existing derivatives, saying the government couldn't rewrite existing contracts, and his company put pressure on Nelson to do so. But margin requirement remains in the bill, and it's unlikely Nelson will agree to the bill's derivatives rules as they are now until there’s resolution on the Buffett provision.

Of course, there are many other fights to come on the 1,300-page bill. (You can read about more of those here.) Only now, you can watch those fights on CSPAN, or the highlights on the big TV networks, just as many people tuned in for the war over health care reform. The debate starts today around noon.

Introducing a Better LEED

| Thu Apr. 29, 2010 7:30 AM EDT

The US Green Building Council's LEED program is certainly an arbiter of eco-chic, but it's also criticized for pressuring builders to employ expensive bells and whistles, such as rooftop solar panels, over more effective and cheaper ways of cutting carbon, such as building tall apartments near urban cores. Today, LEED is rolling out a new ratings system that may start to change that. The LEED for Neighborhood Development program will certify entire subdivisions based on how they conform to smart growth principles such as walkability and proximity to transit.

Environmentalists and smart growthers have been hard at work on LEED-ND for more than six years; many have been frustrated that the program has taken so long to go live. Writing on his blog in January, the NRDC's smart growth czar, Kaid Benfield, complained that USGBC was still worshipping blingy technologies to the exclusion of simpler fixes such as building in a smarter location. "Perhaps this is not surprising," he wrote, "given the organization's membership, board, and committees are overwhelmingly populated by representatives of the building industry, their architects, and their consultants."

Sophie Lambert, the director of LEED-ND, says the delay in debuting the program shouldn't be surprising. It was designed by a sometimes touchy collaboration between USGBC, the NRDC, and the Congress for New Urbanism. "With three different groups that agree on a lot of things but do disagree on some issues," she told me yesterday, "there were a lot of philosophical conversations and that kind of thing that definitely added time."

New Urbanists hope LEED-ND will help preempt opposition to infill development among NIMBYs and local environmentalists who may have a reflexive fear of density (a common problem that I chronicled in Tall is Beautiful, an article in the May/June print magazine). Developers can get certified under LEED-ND before they actually start building, then use the award to help get permits and neighborhood approval.

Still, smart growthers wish LEED would go even further. LEED-ND is still just a voluntary supplement for LEED's regular set of building standards, which were updated last year to give more weight to urban design but still allow top-ranked "platinum" buildings to be in the suburbs, where driving to and from them probably cancels out most of their energy savings. Earning LEED's platinum seal should require also getting certified through LEED-ND, Doug Farr, the past chair of LEED-ND, has argued. I asked Lambert why that isn't happening. "I think USGBC is definitely intrigued by that idea," she said, "but still needs to figure out if that's something the marketplace is ready for."

 

 

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Kerry Rallies Climate Bill Supporters

| Thu Apr. 29, 2010 5:00 AM EDT

The Senate's Democratic champion of the stalled climate and energy legislation called on supporters on Wednesday to keep the pressure on legislators to act this year. "[B]ottom line: we have to pass comprehensive legislation this year or I believe we never will," wrote John Kerry in an email.

The note compared reports of the bill's death to the famed "Dewey Defeats Truman" headline of 1948 (which, of course, was wrong), and assured supporters that he is working to keep the bill on track.

Here's the full letter to supporters:

Just a quick check-in as I know you've been reading and hearing a lot about the alleged "death" of comprehensive climate and energy legislation. Feels like it's practically a rite of passage for important legislation—how many times was health care reform declared "dead" before it passed?
But, bottom-line: we have to pass comprehensive legislation this year or I believe we never will. I am working this 24-7, and these past 72 hours I can tell you it quite literally feels 24-7—so let me assure you: these headlines are like the famous "Dewey Defeats Truman" headline from 1948. And we need that Give Em Hell Harry spirit because there's one thing he knew - and one thing I remember from back in Iowa when the pundits wrote us off—if you fight hard enough and keep at it, you can get where you need to go.
Lindsey Graham, Joe Lieberman and I are talking every day—talked a few times yesterday - and I know we can get back on track. I will keep you in the loop on things, and to keep up with what's happening, follow me on Twitter: http://twitter.com/JohnKerry. I'll be updating it real-time before reality gets bounced through the echo chamber of DC and spun a hundred different ways.
There's going to be more twists and turns ahead. There always are. But we're keeping our eye on the prize—ending our dependence on foreign oil that makes Iran $100 million dollaswrs richer each day and has our planet headed towards a catastrophic tipping point.
We're going to get there—and please follow me on Twitter for ways you can pitch in.
Thanks,
John Kerry

We're Still at War: Photo of the Day for April 29, 2010

Thu Apr. 29, 2010 4:00 AM EDT

 

A UH-60 Black Hawk flies over some scenic landscape while traveling to the location of a leaflet drop in Joghatoe District, Logar province, Afghanistan, on April 23, 2010. Photo via the US Army.

Oil Spill Goes From Bad to Worse

| Thu Apr. 29, 2010 12:51 AM EDT

I haven't verified these numbers myself, but the friend who sent them to me is a trustworthy sort. Experts now estimate that five times more oil has been spilling into the water from that oil rig explosion off the coast of Louisiana than they thought before:

Okay. Here's how much they estimated was leaking before this evening: 42,000 gallons a day.

Five times that amount means approximately 210,000 gallons a day have been leaking into the Gulf.

If this spill continues unabated for two months — and that seems to be the most likely time frame at this point — we're talking about 12.6 million gallons.

Exxon Valdez? That was 10.8 million.

Enjoy your evening.

But even that might be low. SkyTruth.org estimates that the spill rate is 20 times higher than initial estimates and that 6 million gallons of oil have already spilled into the Gulf. An Exxon Valdez size spill might only be a few days away.

Greece Plumbs the Depths

| Wed Apr. 28, 2010 10:58 PM EDT

You have to hand it to the LA Times for somehow dredging up a local angle to the Greek debt crisis:

Earlier on, with public protests against austerity plans escalating, the Athens government placed a $250,000 order for the body shields that Temecula-based Paulson Manufacturing Corp. makes for riot police and others.

Now, the order has been placed on hold. "We're waiting," the Athens government said in a short message to the company's international staff. "Their money problems in Greece are dramatically affecting us," said company President Roy Paulson.

Jeebus. The Greeks are so broke they can't even afford the protective gear they need to put down the riots caused by the country being broke. If the Germans bail them out, will they insist that the Greek government buy German riot equipment instead?