Senate Republicans blocked the second vote in less than 24 hours to begin debate on financial reform. The cloture vote lost 57-41, with centrist Sen. Ben Nelson (D-Neb.) again voting with Republicans to prevent the full debate on the Senate floor. That surely means Nelson still hasn't restored the derivatives provision to the bill that's backed by Warren Buffett, the business guru who heads Omaha-based Berkshire Hathaway. The provision would have exempted existing derivatives contracts, of which Berkshire has tens of billions, from posting additional cash or securities as collateral. 

The Senate is slated to vote again to begin debate as early as tomorrow, as Majority Leader Harry Reid (D-Nev.) ratchets up the political pressure to cast GOPers as in bed with Wall Street. However, it's unclear when any breakthroughs will occur, as Senate Republicans have said they want more concessions from Democrats on issues like a new consumer protection agency and new regulations on too-big-to-fail banks. For now, the talks continue to stay behind closed doors. That will continue to frustrate Democrats who want to drag the debate into the light of day, where they hope the ties between Republicans and Big Finance will be more apparent to the public and will give financial reform the momentum to reach the finish line.

Here's the headline summary of the latest Democracy Corps poll:

Health care’s passage did not produce even a point rise in the president’s approval rating or affection for the Democratic Congress. Virtually every key tracking measure in April’s poll has remained unchanged, including the Democrats’ continued weakness on handling of the economy.

Sounds grim. So I was surprised to see that the poll actually contains some modestly good news for Democrats: a substantial drop in the number of people who think the country is on the "wrong track" and a small rise in the number who have warm feelings toward congressional Dems. This improvement is due almost entirely to changes among self-identified Democrats, which can be spun two ways. The positive way: the base is getting more excited! The negative way: But no one else is!

Anyway, the chart is below. The complete report is here.

Worried your 18-month-old might not be getting enough chocolate? Luckily, now there's a solution. Over at Food Politics, Marion Nestle reports on Mead-Johnson's new chocolate and vanilla flavored formulas for toddlers. Nestle lists the main ingredients in the chocolate version:

  • Whole milk
  • Nonfat milk
  • Sugar
  • Cocoa
  • Galactooligosaccharides (prebiotic fiber)
  • High oleic sunflower oil
  • Maltodextrin

So what is toddler formula, anyway? Nutritionally, the unflavored version is pretty similar to whole milk, except with more calcium and phosphorous. There seems to be a consensus that after age one, kids don't really need formula at all, as long as they have a healthy solid-foods diet and are getting plenty of calcium. In 2007, Australian toddler-formula makers came under fire for aggressive marketing, including handing out samples to pregnant women.

The president of the Australian Lactation Consultants Association, Gwen Moody, said food should replace milk as the primary source of energy during a child's second year. "Mothers buy the formula and they also give their child cow's milk … so either the child doesn't eat because they're not hungry, or they do eat, which can lead to weight gain. It is very clever to develop a market for this age when a child should be eating solids."

Even cleverer to make the formula taste like Yoohoo (whose ingredients, by the way, are not all that dissimilar to chocolate toddler formula).

Look, people. I'm ostensibly from the South, and it does me no small piece of stress to continue to harp on racist Texas cops, angry Virginia Hitler lovers, homophobic Mississippi parents, and unstable, secessionist South Carolina legislators. But it's become apparent that there's this thing called Inner America, which is like Inner Mongolia, only less inviting. Inner America is a mental space where some angry, xenophobic, misogynistic id-impulse is running roughshod over our civil national superego. Inner America isn't confined to any specific place, but sadly, it has many loud, flag-planting adherents in my beloved South.

One place it's apparently taken root is in the brain of Alabama Republican Tim James, who's running for governor on the "I Hate People Who Are Not Like Me" platform, which seems to be gaining momentum this week. Tim is a former governor's son, and Americans do sooo love their southern-accented sons of chief executives. The key difference between James and George W. Bush, though, is Dubya actually deigned to learn a language other than English, and bucked Inner America by backing a path to citizenship for undocumented immigrants. James, not so much. Take a gander at his new campaign ad!

It sort of makes you pine for the days when xenophobic politicians bothered to actually code their hate language. It could have been worse: James could have just come out and said, "We must secure the existence of our people and a future for white children." Still, when you make Dubya look urbane and cosmopolitan, we're reaching Inner America critical mass. 

Goldman's Time Bombs

Matt Steinglass warns those of us defending Goldman Sachs' overall desire to short the housing market in 2006 not to get sidetracked. Hedging as a general strategy is fine. But deliberately constructing specific securities that you believe will implode, and then selling them to your clients as great investments is not so fine. According to the Senate subcommittee investigating Goldman, that's what they did on five different CDOs they issued in 2006 and 2007. Here's their description of one of them:

Goldman executives told the Subcommittee that the company was trying to remove BBB assets from the company books during this period of time. Goldman Sachs was the sole short investor in this proprietary deal, buying protection on all $2 billion in referenced assets and essentially placing a bet that the assets would lose value.

Matt comments:

Throughout 2007, the subcommittee says, while Goldman Sachs was putting together subprime mortgage-based CDOs, it had a strong net short position on subprime mortgage-based securities. And, the subcommittee says, this wasn't a matter of one hand not knowing what the other was doing. The effort to package and sell the CDOs was part of a deliberate effort to get subprime mortgage-based securities off the company books, because the bank believed they were going to collapse. In essence, the subcommittee is saying, Goldman Sachs was ripping off both its customers, and the people who sold it CDS protection.

People have been confusing this issue by pointing out that there's nothing wrong with shorting housing, or that there's nothing wrong with hedging your investments. And that's true. What's wrong is shorting a mortgage-backed security and then telling your clients, to whom you have a fiduciary duty, that they should buy that mortgage-backed security. Or insuring yourself against the failure of a CDO, while arranging to have all your worst mortgage-backed securities, which you expect to go bust, stuffed into that CDO, so that it's sure to fail. Did Goldman Sachs really do this? We don't know yet. But these are the accusations.

Legally, I don't know what Goldman's fiduciary responsibility was to its customers. So I'll leave that aside. But from a non-Wall Street rube's point of view, here's what's always struck me as the best evidence that Goldman knew just how mendaciously they were acting: they didn't have to construct complex new securities in order to hedge their own subprime holdings. They could have simply sold them instead. Or tried to, anyway. But of course, that would have given the game away: if Goldman had tried to sell off a whole bunch of the subprime ABS on its books, the whole world would have immediately wondered what Goldman knew that they didn't. The housing bubble would have popped and the market would have declined 12-18 months before it did.

Of course, most people in that position wouldn't have had any other choice. They would have sold their holdings and taken their lumps. But because Goldman was a major player in credit derivatives, they did have another choice. Instead of selling their ABS holdings, they constructed complex synthetic securities that allowed them to keep this stuff on their books but profit from its decline. This had the unfortunate side effect of inflating an already destructive housing bubble even beyond the ability of mortgage brokers to do it with dodgy loans, but Goldman didn't much care about that. They just wanted to invent some clever way to quietly unwind their bad bets, and if that created billions of dollars of new bad bets out of whole cloth, well, that was just the world's tough luck.

It probably wasn't illegal. But it sure piled damage on top of damage. Keeping it from happening again would be a boon.

The immigration reform effort was dealt a big blow last weekend when Sen. Lindsey Graham (R-S.C.), who'd been collaborating with Sen. Chuck Schumer (D-N.Y.) on a bipartisan bill, threatened to abandon the effort entirely unless climate and energy legislation moved ahead first. It's not yet clear what Graham's stance actually means. But Schumer and other leading Senate Democrats are forging ahead with or without Graham, in keeping with Senate Majority Leader Harry Reid's desire to accelerate the reform timetable and bring a bill directly to the floor. According to policy experts and advocates familiar with the state of play, Schumer and other Democrats are presently drafting a framework for immigration reform—an outline that is intended to be the precursor to a bipartisan bill.

"It's an attempt to open things up a bit, to encourage people who might not be ready to go all the way but who are ready to signal quiet support for doing things and give them a vehicle for doing that," one Washington immigration advocate says. Other experts say they've heard of similar movement by top Democrats. "I expect the Democrats will introduce something, not necessarily a bill," says Angela Kelley, vice-president for immigration policy and advocacy at the Center for American Progress. "Democrats need to say where they stand on this...if they're smart, they would put something out that invites the Republicans to the table." According to immigration advocates, the new outline for a reform bill is expected to adhere closely to the bipartisan measure that Schumer and Graham had been previously working on—which includes provisions for tightened border security, a guest-worker program, biometric identity cards, and a pathway to legalization.

In the meantime, Senate Democrats are staying mum about the reports of progress. A spokesperson for Sen. Robert Menendez (D-N.J.), Afshin Mohamadi, declined to say whether the New Jersey lawmaker—the only Hispanic senator and a party leader on immigration issues—and his colleagues are resuming their efforts to push forward with immigration. "Things are very fluid in regards to the immigration issue. We're not to say anything publicly at this point," Mohamadi says. Reid spokesman Jim Manley says that he'd "defer to Senator Schumer," whose office did not respond to a request for comment.

With climate bill negotiations still apparently in a state of chaos, a coalition of 31 environmental groups on Tuesday called on the Senate "not to squander the great promise of bi-partisan action."

"This must be the year that the United States passes comprehensive climate and energy legislation into law in order to create jobs, strengthen our national security, and reduce carbon pollution," write the groups, which include the Sierra Club, Environmental Defense Fund, the Center for American Progress Action Fund, and 28 other environmental and progressive organizations. "We can't afford to delay action any longer; we urge the Senate to take up a comprehensive energy and climate bill in June."

The groups are hoping to keep the efforts of Sens. John Kerry (D-Mass.), Lindsey Graham (R-SC), and Joe Lieberman (I-Conn.) alive as Graham and Senate Majority Leader Harry Reid butt heads over the timing of climate and immigration legislation. Their rollout of the bill, scheduled for Monday morning, was postponed indefinitely as the authors scrambled to salvage ties with their only Republican ally.

Kerry penned an op-ed last night arguing that the bill remains "very much alive." On Tuesday he told reporters (via Greenwire) that the tension over timing "obviously has to be resolved" before they can release their bill, and Reid and Graham are "working diligently and appropriately to try to help find resolution."

To be sure, not all green groups are sad to see this particular piece of legislation falling apart. The bill's sponsors have been touting the industry support they have for their measure, listing a number of concessions made to please business interests. This has drawn objections from Greenpeace, which last week issued a statement criticizing the bill as a sop to dirty energy interests. "[I]t’s clear that polluter lobbyists have succeeded in hijacking this climate policy initiative and undermined the ambitious action necessary," said Greenpeace executive director Phil Radford. Other groups, like Friends of the Earth and Center for Biological Diversity, have not outright opposed the measure, though they have expressed concerns about the direction it seems to be headed.

Hey, if you were organizing a conference on water scarcity and climate change, would you give your speakers tap water or plastic bottles filled with water from a distant tropical island? At the [Michael] Milken Institute's global conference this week, organizers chose to do the latter, providing speakers with bottles of Fiji Water. The irony wasn't lost on attendees: "At a Milken Global Conference panel on water supply. The speakers are all drinking Fiji bottled water. Aaaargh," tweeted Paul Hyneck. Fiji, need we remind you, is an island where water supplies are scarce and locals have struggled to find clean, reliable supplies of drinking water. Meanwhile, Fiji Water owns the rights to the island's largest underground aquifer, drawing water into its diesel-fueled factory and bottling it using heavy-weight plastic. All this makes having Fiji Water at a panel about "the most creative solutions being attempted to meet the water challenge in the United States and around the world" hard to swallow.



If there was any lingering doubt about why Sen. Ben Nelson (D-Neb.) voted against opening the debate on financial reform, the identity of Nelson's top donor—Omaha-based financial company Berkshire Hathaway, led by guru Warren Buffett—should provide some clue. According to the Center for Responsive Politics, the top givers to Nelson's campaigns are the political action committee and  employees of the highly profitable Berkshire Hathaway, who have given Nelson $75,550 throughout his Senate career. Nelson and his wife, the Omaha World-Herald reports, also own between $1.5 and $6 million in Berkshire stock, financial disclosure forms show. Only five members of Congress have more than $100,000 in Berkshire stock.

Nelson's "No" vote yesterday was attributed to his ties to Berkshire. Nelson had been a top backer in Congress of a provision in the bill that would've exempted the owners of existing derivatives contracts from offering up additional cash or collateral—a requirement that will be imposed on future deals if the finance bill, as it looks now, became law. Lobbying hard for that provision was Buffett, who opposed having to post collateral on Berkshire's existing derivatives deals, a condition he called unconstitutional. However, that Buffett-backed provision was killed yesterday, and soon afterwards Nelson cast his vote against beginning debate on financial reform.

Nelson told the World-Herald that he wanted the exemption in the bill mainly because it was good policy, and he was joined by Nebraska's junior senator, Mike Johanns, who also voted "No" on cloture yesterday. Nebraska's Republican chairman saw it differently, calling Nelson's vote "Yet another backroom deal being orchestrated by Sen. Ben Nelson." There's been no word yet whether that exemption has been put back into the bill. Nelson and his colleagues will return to the Senate floor today at 4:30 pm for another vote on whether to begin full debate on financial reform. 

Last week's explosion of the Deepwater Horizon oil rig likely claimed the lives of 11 workers, and what's left of the rig is currently hemorrhaging oil into the Gulf of Mexico at a rate of 42,000 gallons per day—two painful reminders that our fossil fuel reliance is neither safe nor clean.

The massive spill, just 50 miles off the coast of Louisiana, already covers more than 1,800 square miles. It is expected to hit land by Saturday. The leak from a pipe about 5,000 feet underwater may take up to two weeks to fix. Meanwhile, clean-up crews are dropping chemical dispersants into the water to try to prevent the spill from reaching land, where it would wreak environmental havoc on coastal ecosystsems (both the Delta National Wildlife Refuge and Breton National Wildlife Refuge are not far from the spill site). But as the New York Times reports, those dispersants can also be toxic to sea life; the United States Fish and Wildlife Service reported sighting three sperm whales near of the spill, so crews were instructed to "steer clear" when dropping the chemicals.

This marks the worst oil rig disaster in decades, and it comes just weeks after the Obama administration announced plans to expand offshore drilling. Despite the fact that the oil industry and its government supporters claim that new technologies have made the sector "environmentally responsible", the blast makes it clear that oil extraction still has potentially catastrophic effects. And as Marcus Baram reports today, the oil industry, including including Deepwater Horizon rig owner Transocean Ltd. and operator BP, has fought against new safety rules that might have prevented this disaster.

The episode has prompted new concerns in Congress about the prospects for expanded drilling. Three Senate opponents of offshore drilling, Democrats Bill Nelson of Florida and Frank Lautenberg and Robert Menendez of New Jersey, on Monday called for a congressional investigation into the blast, calling it "a sobering reminder of the real risk from oil drilling." The explosion and subsequent leak, the senators wrote in a letter to relevant committee chairs, raise "serious concerns about the industry’s claims that their operations and technology are safe enough to put rigs in areas that are environmentally sensitive or are critical to tourism or fishing industries." All three have vowed to vote against climate and energy legislation if it includes an expansion of oil drilling.

It's not just Democrats. Charlie Crist, Florida's Republican governor and prospective Senate candidate, also criticized the incident as evidence that even more technologically advanced rigs don't guarantee safety:

"If this doesn't give somebody pause, there's something wrong," Crist said. "This is, as I understand it, a pretty new rig with modern technology. As I've always said it would need to be far enough, clean enough and safe enough. I'm not sure this was far enough. I'm pretty sure it was not clean enough. And it doesn't sound like it was safe enough. It's not a great situation."

Obama's announcement of his offshore expansion plan last month called for drilling "in ways that protect communities and protect coastlines." This recent spill makes it clear that may be an empty pledge.