Mojo - March 2010

Checking Up on Obama's Transparency Promises

| Tue Mar. 16, 2010 9:35 AM EDT

Improved transparency was one of the Barack Obama's major promises coming into office last year. And it wasn't just an empty campaign pledge. On his first full day in office he signed an executive order declaring that the Freedom of Information Act  "should be administered with a clear presumption: In the face of doubt, openness prevails." FOIA, Obama said, "is the most prominent expression of a profound national commitment to ensuring an open Government."

Journalists and open government advocates heralded the move, which came after eight years of disregard and outright disdain for the act under George W. Bush. But when it comes to information requests from citizens and the press, it looks like a number of agencies aren't doing much better under Obama. From the Associated Press:

The review of annual Freedom of Information Act reports filed by 17 major agencies found that overall, the use of nearly every one of the open-records law's nine exemptions to withhold information rose in fiscal year 2009, which ended last October.
Among the most frequently used exemptions: one that lets the government hold back records that detail its internal decision-making. Obama had directed agencies to stop using that exemption so frequently, but that directive appears to have been widely ignored.

The administration has made much more information available to the public through initiatives like its Open Government web site and the disclosure of the White House visitor logs. While they are improving transparency, there’s still plenty of information that Americans have asked for and not received, as the FOIA denials indicate. A better measure of openness in government might well be how the administration deals with information that it would rather not make public. As Obama put it in his FOIA memo last year, "The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears."

UPDATE: Citizens for Ethics and Responsibility in Washington also released a grim assessment of the administration's FOIA responses so far. "Although there has been some progress, secrecy still dominates agency culture," CREW concludes. 

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Chamber's New Anti-Dodd Blitz

| Tue Mar. 16, 2010 9:23 AM EDT

This morning, the radio airwaves here in Washington, DC, featured a new ad from lobbying behemoth the US Chamber of Commerce attacking Sen. Chris Dodd's new financial reform bill, unveiled yesterday afternoon. The bill, the ad says, would add burdensome bureaucracy to financial regulation, and that we'd all be better off with a revamp of the system in place then creating new entities like a council of regulators and a consumer protection agency. The ad essentially echoes the Chamber's public position on the Dodd bill—which is outright opposition. "This bill takes three steps backwards with the hope of making future progress," said David Hirschmann, president and CEO of the Chamber's Center for Capital Markets Competitivenes.

That the Chamber opposes Dodd's bill is far from surprising. The organization, which has spent as much as $300,000 a day lobbying, fervently opposes many of the key reforms in the Dodd bill—it even started an entire website, StoptheCFPA.com, to fight plans to create a new Consumer Financial Protection Agency, an independent organization whose purpose would be to protect consumers against predatory lenders, unscrupulous credit and debit card practices, exorbitant rates charged by payday lenders, and more. The Chamber, however, has claimed that the CFPA would kill jobs and place undue burden on small business owners.

Today, the Chamber is holding a press conference on the Dodd bill at its Washington offices. We'll be there, so check back for more later this afternoon.

 

We're Still at War: Photo of the Day for March 16, 2010

Tue Mar. 16, 2010 4:00 AM EDT

war photo 031610

Pvt. Jeffrey Pohl, left, with his son Pvt. Zackary Pohl, take a short break to stop for a picture while during a recent exercise. The pair unknowingly ended up in the same basic training company after enlisting at different times. Photo via the US Army.

The Chamber's Civil War in Washington

| Mon Mar. 15, 2010 4:43 PM EDT

At the same time that the US Chamber of Commerce is leading the fight against health care reform and a carbon cap, one of its largest grassroots affiliates is strongly disagreeing with its stance in meetings with powerful lawmakers on Capitol Hill.

Today, a delegation from the San Francisco Chamber of Commerce met with House Speaker Nancy Pelosi and other lawmakers to voice strong support for cap and trade legislation and the core principles of the Senate's health care bill. The delegation included United Airlines, Pacific Gas & Electric, and several small businesses. "The San Francisco business community has a different perspective on some key issues that are currently being considered in Congress," said San Francisco Chamber vice president Rob Black, explaining why he'd chosen to circumvent the US Chamber's lobbyists. "We wanted to be able to communicate with [Pelosi] directly the San Francisco businesses community's perspectives on both those issues."

Along with the San Francisco Chamber--one of the ten largest Chamber affiliates---ever more businesses and trade groups are distancing themselves from the Chamber's partisan tactics. Earlier this month, a Microsoft representative publicly repudiated the Chamber's position on climate change, writing that the Chamber "has never spoken for nor done work on behalf of Microsoft regarding climate change legislation." And business groups that together count more members than the US Chamber does--groups that include the US Womens Chamber of Commerce, the US Hispanic Chamber of Commerce, and the South Carolina Small Business Chamber of Commerce--have signed a pledge in support of the Consumer Financial Protection Agency, which the US Chamber opposes.

Black is confident that the San Francisco Chamber's positions have wide appeal across Main Street America. Climate change and oil dependence affect everyone from farmers to city merchants, "and rising health care costs are killing our small businesses," he pointed out. "You can look at Main Street and see lots of empty store fronts. A big part of that is health care costs. We have to address that." 

Is Halter Trying to Keep Big Labor at Arm's Length?

| Mon Mar. 15, 2010 4:13 PM EDT

Bill Halter kicked off his Democratic primary challenge to Senator Blanche Lincoln with heavy backing from national labor unions. Now he's trying to keep his distance from them. On Friday, an independent group called “Arkansas for Change” launched an attack ad against Lincoln that was co-sponsored by a Texas AFL-CIO organizer. The ad hit on many of Halter’s own criticisms of Lincoln, accusing her of “bailing out Wall Street banks—no strings attached” and going soft on consumer financial protection.

Lincoln charged the ad was it was launched by “Halter’s union sponsors.”  But Halter quickly responded that his campaign “has nothing to do with the expenditure ad." He then tried to disassociate himself from the pledge that the SEIU made in December to help him retire more than $440,000 in campaign debt. The Lincoln campaign has “alleged that the campaign debt has been paid off [by the SEIU], but it hasn’t been—I wish it was,” he told a local news station.

 

Former FDIC Chair Blasts Dodd

| Mon Mar. 15, 2010 4:12 PM EDT

Who better to turn to for perspective on Sen. Chris Dodd's new Wall Street overhaul than a top former regulator? That's what CNBC did this afternoon, inviting Bill Isaac, a former chairman of FDIC during the 1980s, to discuss Dodd's comprehensive new bill and its ramifications on our financial markets, consumer protections, and the like. What Isaac had to say was a blunt reality check on Dodd's new bill.

The former regulator, now the head of an international consulting firm, said flatly that there is "no significant financial reform in this bill." The root causes of our regulatory failures, Isaac said, reside in lackluster watchdogs like the Treasury Department, Federal Reserve, and the Securities and Exchange Commission. By expanding the Treasury and Fed's power and "ignoring" the SEC, Dodd's bill merely glosses over the institutional problems in need of serious repair, Isaac said. "This is not a serious financial reform proposal," he said. "Senator Dodd himself back in November put forward a much more sweeping reform of our regulatory system. Our regulatory system is broken. It needs a sweeping overhaul."

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More Delay on Derivatives

| Mon Mar. 15, 2010 3:45 PM EDT

The big omission in Sen. Chris Dodd's long-awaited financial reform bill today is any substantive update on new regulation of derivatives, those tricky, opaque financial products that have caused such immense headaches. Derivatives, in a nutshell, are contracts whose value goes up or down based the price of an underlying entity, like a stock, bond, certain form of currency, or commodity (corn, oil, etc.). Right now, most derivatives are traded "over-the-counter," which means the trade takes place between a customer and a broker-dealer, and there's little to no information published about trading, so hundreds of billions of dollars in derivatives trades essentially take place in the dark.

What lawmakers and reforms want to do is move most of those trades onto a clearinghouse or exchange like the New York Stock Exchange. That would shed some light on who's trading with whom, how much the buyer bought, and how much the buyer paid. Sounds fair, right? The House's financial reform bill called for moving OTC derivatives trading onto exchanges, and Dodd's initial framework for financial reform released in November called for the same. However, negotiations between Sens. Jack Reed (D-RI) and Judd Gregg (R-NH), the two lawmakers tasked with crafting the Senate banking committee's derivatives overhaul, have yet to result in any new breakthrough, and the derivatives language in Dodd's plan announced today offers no new updates on where those negotiations might be headed.

Going forward, the key aspect of derivatives reform to watch is whether some senator throws in what's called an end-user loophole. End users are the companies—airline companies, utilities—who use derivatives for legitimate purposes, like hedging the price of oil so that if oil costs go up or down, those companies can plan on a consistent price level. It's basic risk management. Some lawmakers want to exempt these endusers because they're not using derivatives for speculative, gambling purposes. The problem is, an enduser loophole would ultimately exempt two-thirds of OTC derivatives trades—and a number of those exempted would trades by gambling banks, letting the people who need to be regulated slip by. It would be the exception that ate the rule, and it's a crucial part of the bill. How Sens. Reed and Gregg deal with it will be a telling sign of how serious they are about reining in these troublesome trades.

Dissecting Dodd's Wall Street Plan

| Mon Mar. 15, 2010 3:11 PM EDT

To much fanfare, Sen. Chris Dodd (D-Conn.) rolled out his new framework for a comprehensive bill to crack down on Wall Street and plug the holes in our patchwork of financial regulation. The bill, titled the Restoring American Financial Stability Act, would create, as anticipated, an independent Consumer Financial Protection Bureau housed in the Federal Reserve. It would also introduce a council of regulators to spot system-wide financial risk and tackle those problems and shine some light on the shadowy markets for financial products like derivatives, which draw their value from the price of commodities like corn and oil and are mostly unregulated. A breakdown of three main parts of the bill—consumer protection, a council of regulators, and unwinding failed big banks—is below. (There'll be more analysis of the bill the more we dig into it.)

In the press conference today, Dodd made his case for the need to overhaul the regulation of banks, mortgage lenders, broker-dealers, and everyone in between. "As I stand before you today, our regulatory structure, which was constructed in a piecemeal fashion over many decades, remains hopelessly inadequate," Dodd said. "There hasn’t been financial reform on the scale that I'm proposing this aftenoon since the 1930s." He added, "We are still vulnerable to another crisis...It is certainly time to act."

One of the most contentious parts of Dodd's bill, a new consumer protection agency, didn't look much different from descriptions that were leaked over the weekend. While housed in the Fed, Dodd's proposed consumer agency would have a director appointed by the president and confirmed by the Senate, and a budget paid for by the Federal Reserve Board but not controlled by the Fed. The consumer agency would be able to write, supervise, and enforce its own rules for banks, credit unions, and other institutions with more than $10 billion in assets. The agency would also create a new consumer hotline and an "Office of Financial Literacy" to educate consumers on financial issues.

The council of regulators Dodd has proposed, dubbed the Financial Stability Oversight Council, would bring together the heads of nine existing  regulators. The council would identify systemic risk when it occurs, and recommend that risky non-bank companies (read: subprime mortgage lenders) be supervised by the Fed. With a 2/3 vote, the council could make a too-big-to-fail bank divest some of its holdings to pose less of a threat to the financial markets should it fail, a la Lehman Brothers.

On the too-big-to-fail front, the Financial Stability Oversight Council would not only react to bloated and dangerous banks but would help to prevent banks from getting so big. The council would require regulators to enforce a "Volcker Rule," preventing federally insured banks from engaging in risky trading for their own benefit. This rule would also limit the kinds of relationships between insured banks and riskier hedge funds and private equity funds. Notable as well is the bill's plan to make the largest banks pay into a bailout fund that would grow to $50 billion in size; that fund would be used to liquidate failed banks, instead of asking taxpayers to bail them out.

Warren Tepidly Backs Dodd

| Mon Mar. 15, 2010 1:19 PM EDT

Elizabeth Warren, the lead advocate for the proposed Consumer Financial Protection Agency, seems to like—or, at least, not dislike—the financial reform package (finally) released on Monday by Sen. Chris Dodd, the Democratic chairman of the Senate banking committee. In the summary of the legislation, Dodd notes that his bill would create the CFPA as an independent bureau within the Federal Reserve—which could pose problems—but that it will have the power to write and enforce rules governing the sale of various financial products, including credit cards and mortgages. Yet its enforcement powers would not extend to banks with less than $10 billion in assets. In a statement, Warren notes:

Since bringing our economy to the brink of collapse, Wall Street has spent more than a year and hundreds of millions of dollars in an all-out effort to block financial reform. Despite the banks’ ferocious lobbying for business as usual, Chairman Dodd took an important step today by advancing new laws to prevent the next crisis. We're now heading toward a series of votes in which the choice will be clear: families or banks.

That sounds like a cautious endorsement. A source close to Warren notes she is concerned that the new watchdog's enforcement powers may not be vigorous enough and that there are several provisions, such as one governing the treatment of non-banks, which need strengthening. The CFPA debate will continue.

Health Care's Final Push

| Mon Mar. 15, 2010 12:19 PM EDT

If you haven't been living under a rock, you've probably heard that the House plans to vote on the Senate's health care reform bill later this week—probably on Friday or Saturday. That means this is the final push. I've written about the opposition from the left, but the truth is that most progressives support passage. The bill's real opponents are a lot more powerful. Corporations, boosted by a Supreme Court ruling that they can spend whatever they want on politics, are throwing millions behind an effort to convince skittish House Dems to vote against the bill. You'll never guess who's leading the charge:

The coalition of groups opposing the legislation, led by the United States Chamber of Commerce, is singling out 27 Democrats who supported the health care bill last year and 13 who opposed it. The organizations have already spent $11 million this month focusing on these lawmakers, with more spending to come before an expected vote next weekend.

An alliance of groups supporting the health care plan, which works closely with the White House and Democratic leaders, had been spending far less and focusing on fewer districts. But after pharmaceutical companies made a $12 million investment for a final advertising push, spending by both sides for the first time is now nearly the same.

Thankfully for the bill's supporters, the left is, to borrow a phrase, "fired up and ready to go." The Service Employees International Union (SEIU) has told reluctant Democrats that it will back primary challengers for Dems who vote against reform. MoveOn.org is threatening the same. And there is zero doubt that the White House will throw its full weight behind helping Nancy Pelosi gets the votes she needs. Barack Obama even postponed his trip to Australia and Indonesia to make sure he would be around for the final push. So what are the chances the thing passes? Polling expert Nate Silver says "no lower than 50 percent, and no higher than the 64 percent posited by Intrade."

In the end, the outcome may ride on how many Dems agree with Slate's Will Saletan that their vote on health care is more important than their reelection. I think passing the bill is actually the best option left to the Dems from a political standpoint (failure or giving up would be even more disastrous). But there's little doubt that, bill or not, the Dems will lose seats in November. While many reasonable people don't think a "yes" vote on health care would cost a Dem his or her seat, some members of the House believe it might—and that's what matters. If Pelosi or Obama can convince those members to vote "yes" regardless of the potential consequences, the bill will pass. If they can't, it probably won't.