Lawmakers And Lobbyist: Cutting Out the Middleman
For six years, Doug Stafford was a lobbyist for the National Right to Work Committee, an anti-labor group financed by business and conservative interests. His job changed last year but his duties did not when he became the chief of staff to Senator Rand Paul, Republican of Kentucky. Mr. Paul is a chief sponsor of the National Right to Work Act, which he said would end forced unionization and “break Big Labor’s multibillion-dollar political machine forever.”
Brett Loper’s career path is a similar one. When he was an executive for the Advanced Medical Technology Association, an industry group, he lobbied hard against President Obama’s health care reform. Now, as the chief policy adviser for Speaker John Boehner, he is helping to organize the effort to repeal the health care law. The only difference is that the taxpayers are paying his salary.
There has long been a regular shuttle service between Capitol Hill and Washington’s K Street, but the numbers now are striking. Since last year’s Republican victories, nearly 100 lawmakers have hired former lobbyists as their chiefs of staff or legislative directors, according to data compiled by two watchdog groups, the Center for Responsive Politics and Remapping Debate. That is more than twice as many as in the previous two years.
In that same period, 40 lobbyists have been hired as staff members of Congressional committees and subcommittees, the boiler rooms where legislation is drafted. That again dwarfs the number from the previous two years.
While some of those lobbyist-staffers were hired by Democrats, the vast majority are working for Republicans. Representative Raul Labrador, a freshman from Idaho, hired John Goodwin, previously a lobbyist for the National Rifle Association, as his chief of staff. Representative Fred Upton, chairman of the Energy and Commerce Committee, hired Howard Cohen, a longtime lobbyist for the health care industry, as his chief counsel.
In many cases, those hiring lobbyists were Tea Party candidates who vowed to end business as usual in Washington. As The Washington Post reported, when Ron Johnson ran against Wisconsin’s Senator Russ Feingold, he accused Mr. Feingold of being “on the side of special interests and lobbyists.” Now that he is a senator, Mr. Johnson has hired as his chief of staff Donald Kent, whose firms have lobbied for casinos, defense industries and homeland security companies.
Ethics laws put limits on elected officials who move to lobbying firms. But there is nothing to stop lobbyists from getting immediately hired on Capitol Hill. This year’s class of staffers argues for a tough ban. After collecting millions from industries or unions or others, lobbyists should not be allowed to turn around and write laws that favor these special interests.
By: Editorial, Opinion Pages, The New York Times, April 2, 2011
Note To Banks: It’s Not 2006 Anymore
Nostalgia is running high on Wall Street for the days when junk mortgage underwriting and opaque derivatives trading juiced bank profits. As regulators continue to devise the machinery of the Dodd-Frank regulatory reform law, major financial institutions are working overtime in Washington to bring the good times back again.
Unfortunately for taxpayers, some of these efforts are gaining traction, particularly regarding the regulation of derivatives and mortgages.
As you may recall, Dodd-Frank was supposed to shed light on derivatives trading so that the risks and costs of these instruments would be clear to regulators and market participants. To this end, the law required derivatives to be cleared and traded on exchanges or through other approved facilities. But Dodd-Frank contained a big loophole: the Treasury secretary can exempt foreign-exchange swaps from the regulation.
Currency trading is enormous: on average, about $4 trillion of these contracts change hands each day. Major banks are huge in this market. According to the Comptroller of the Currency, trading in foreign-exchange contracts generated revenue of $9 billion in 2010 at the nation’s top five banks. That’s more than was produced by any other type of derivative.
No one was shocked when the banks began pushing the Treasury to exempt these swaps from regulatory scrutiny. From last November through January, Treasury officials met to discuss foreign-exchange swaps with 34 representatives of large financial institutions, the Treasury’s Web site shows.
A spokesman for Timothy F. Geithner, the Treasury secretary, said last week that Mr. Geithner had not made up his mind on this matter. If Mr. Geithner sides with the banks, he will have bought into their argument that foreign-exchange swaps are different from other derivatives, that this market performed ably during the financial crisis and does not need additional oversight.
Others disagree. Testifying before the House Financial Services Committee in October 2009, Gary Gensler, the chairman of the Commodity Futures Trading Commission, said: “Any exception for foreign-currency forwards should not allow for evasion of the goal of bringing all interest rate and currency swaps under regulation to protect the investing public.”
Dennis Kelleher, the president of Better Markets, a nonprofit organization that promotes the public’s interest in capital markets, said he was dubious of the contention that the market for foreign-exchange contracts performed well during the turmoil of 2008. Mr. Kelleher said that the only reason this market did not seize up like others was that the Fed lent huge amounts — $5.4 trillion — to foreign central banks through so-called swap lines during the fall of 2008.
“We suggested that Treasury hire truly independent experts to look at the data and provide the secretary with advice on whether or not the FX market performed well in the crisis and whether the exemption should be granted,” he said.
The analysis could be done within 60 days, he said. The Treasury told him it was confident that it had all the information it needed. “Their response was, ‘Thank you,’ ” he said.
Big financial institutions are also eager to return to the days of lax mortgage lending, judging from two initiatives being discussed in Washington. Both are intended to get the home loan market moving again — and to buoy falling home prices.
One relates to how regulators define a “qualified residential mortgage,” a term of art in the Dodd-Frank law. Issuers of asset-backed securities that are made up of such loans needn’t keep any credit risk of those securities. But sellers of loan pools that don’t consist of qualified mortgages are required to retain some of the risk in them. This provision was meant to eliminate the perverse incentives of the mortgage boom, when packagers of loan pools were encouraged to fill said pools with toxic waste because they had little or no liability for the deals once they were sold.
What constitutes a qualified mortgage has become a battleground issue because of the risk-retention rules under Dodd-Frank. Qualified mortgages should be of higher quality, based upon a borrower’s income, ability to pay and other attributes to be decided by financial regulators.
The board of the Federal Deposit Insurance Corporation will hold an open meeting on Tuesday to discuss qualified mortgages and the risk-retention rule. Among the questions to be considered is how much of a down payment should be required in a qualified loan, and whether mortgage insurance can be used to protect against the increased risks in loans that have smaller down payments.
The use of mortgage insurance during the boom effectively encouraged lax lending. Investors who bought securities containing loans with small or no down payments were lulled into believing that they would be protected from losses associated with defaults if the loans were insured.
But when loans became delinquent or sank into default, many mortgage insurers rescinded the coverage, contending that losses were a result of lending fraud or misrepresentations. When they did so, the insurers returned the premiums they had received to the investors who owned the loans. Lengthy litigation between the parties is under way but has by no means concluded.
Clearly, for many mortgage securities investors, this insurance was something of a charade. So any argument that mortgage insurance can magically transform a risky loan into a qualified residential mortgage should be laughed off the stage. And yet, mortgage insurers are making those arguments vociferously in Washington.
The final front in the mortgage battle involves a plan to restart Wall Street’s securitization machine with instruments known as covered bonds. Here, too, the big banks and the housing-financial complex are arguing that if private investors are to return to the mortgage market, we must create a new instrument that will let the good times roll again.
Covered bonds are pools of debt obligations that have been assembled by banks and sold to investors who receive the income generated by the assets. The bank that issues the bonds, meanwhile, retains the credit risk. If losses arise, the bank that issued the covered bonds must offset the loss with its own capital. That could push troubled banks closer to the edge.
If an asset in the pool defaults, a separate entity would be required to remove the assets from the bank’s control. The assets would then be out of reach of the F.D.I.C. should the bank fail and the agency step in as receiver. The investors who bought the covered bonds would have first call on the assets, ahead of the F.D.I.C.
This structure would wind up bestowing a new form of government backing to the major banks issuing the bonds, raising the potential for losses at the F.D.I.C. insurance fund, which protects savers’ deposits.
Equally troubling, the covered bond structure favored by the banks would let the pools invest in risky assets such as home equity lines of credit. These loans have been among the worst-performing assets out there. Covered bonds issued overseas, by contrast, typically consist solely of high-quality loans.
“The industry is trying to do an end run around the F.D.I.C.,” said Christopher Whalen, publisher of the Institutional Risk Analyst. “This proposal is about restarting the Wall Street assembly line for selling toxic waste to investors.”
Clearly, the battle for the safety and soundness of the nation’s financial markets is far from won. The issues are complex and confounding — by design, in many cases — and financial institutions have armies of advocates in Washington. The taxpayers do not, which makes monitoring of these crucial proceedings all the more essential.
By: Gretchen Morgenson, The New York Times, March 26, 2011
A Teachable Moment: Character In An Anti-Teacher Climate
It’s a question on a lot of parents’ minds these days: How do we teach character?
New York Times columnist David Brooks was in Cleveland on Monday to talk about his new book, “The Social Animal: The Hidden Sources of Love, Character, and Achievement.” During the audience Q-and-A, the self-described conservative was asked how he would design high school curriculum to include the teaching of character.
Brooks shared a memory of his own teachers: “I don’t remember what they taught me, but I remember how they behaved.” Many in the audience nodded and murmured in agreement.
Like most people, I could easily rattle off the names of several teachers who changed my life by the way they lived theirs. I’ll spare you that walk down my memory lane.
Instead, I want to quote another self-described conservative who had a lot to say about character. His recent e-mail to me echoed the sentiments expressed by many readers who object to various states’ legislative attacks against public school teachers, including those in Ohio. These letters and e-mails are not from teachers, but from those who love them.
This particular reader is a business analyst. He made it clear that, while our dads held similar blue-collar jobs, he and I grew up to disagree on many issues. He’s not a fan.
But he does share my high regard for the men and women paid by taxpayers to teach America’s children. He’s been married to one of those dedicated public servants in Cleveland for nearly 14 years.
“We spend tons of money on supplies for the kids,” he wrote. “I have begged her to leave Cleveland and she refuses to because it is her calling. I should be so lucky.”
To insulate this man and his wife from the current blood sport of teacher-bashing, I won’t name them. He did give me permission to share the recent letter of apology he wrote to his wife:
Dear Honey,
I’m sorry.
I am a conservative husband, belong to the Tea Party and I voted for John Kasich. I have been married to a Cleveland teacher for almost 14 years and my vote let her down.
I apologize:
For letting people tease you about having the summer off and not asking them to thank you for the tough days ahead that begin in early August. I know for a fact you work more hours in those 10 months than many people do in 12. All those hours are earned.
For complaining that my Sunday is limited with you because you must work.
For making you think you have to ask permission to buy a student socks, gloves and hats.
For not understanding that you walk through a metal detector for work.
For leaving dirty dishes in the sink [when you awoke] for your 4 a.m. work session. I should know you have to prepare.
For thinking you took advantage of the taxpayers. Our governor continues to live off the taxpayer dole, not you.
For counting the time and money you spend to buy school supplies.
For not saying “thank you” enough for making the world and me better.
I love you.
In this husband’s apology, we learn a lot about the remarkable teacher who is his wife. Her students sure are lucky. Every day that she shows up with such optimism is another day her students get a chance to believe in a better version of themselves.
Thankfully, this teacher is not an anomaly. Despite recent attacks on their pay, motives and even their supposed lifestyle, the majority of public school teachers across the country continue to bring their talent and high ideals to some of our most troubled districts.
Consider the take-home message for America’s schoolchildren:
Conservative politicians emboldened by brand-new legislative majorities insist that children are our most precious resource, but then pass bills guaranteed to undermine the teachers entrusted with our children’s future.
Nevertheless, those same public school teachers under attack continue to report for duty every day.
We know that children watch, and learn. And what they are sure to understand is that, unlike those politicians, their teachers refuse to give up on them.
Talk about a lesson in character.
By: Connie Schultz, Syndicated Columnist, The Plain Dealer and Creators Syndicated, Published March 16, 2011, Cleveland.com
State Crises Mean New Language Of Deceit
For most of history, we had undebatable definitions of words such as “bailout” and “bankruptcy.” We understood the former as an undeserved public grant, and the latter as an inability to pay existing bills. Whatever your particular beliefs about these concepts, their meanings were at least agreed upon.
Sadly, that’s not the case during a deficit crisis that is seeing language redefined on ideological terms.
“Bailout” was the first word thrown into the Orwellian fire. As some lawmakers recently proposed replenishing depleted state coffers with federal dollars, the American Conservative Union urged Congress to oppose states “seek(ing) a bailout” from the feds. Now, Rep. Paul Ryan, R-Wis., says, “Should taxpayers in Indiana who have paid their bills on time, who have done their job fiscally be bailing out Californians who haven’t? No.”
Ryan, mind you, voted for 2008’s TARP program — a bank bailout in the purest sense of the term. But one lawmaker’s rank hypocrisy is less significant than how the word “bailout” is being used — and abused. Suddenly, the term suggests that federal aid would force taxpayers in allegedly “fiscally responsible” Republican states to underwrite taxpayers in supposedly irresponsible Democratic ones.
Aside from stoking a detestable interstate enmity, this thesis ignores the fact that state-to-state wealth transfers are already happening. According to the Tax Foundation, most Republican-voting states receive more in federal funding than they pay in federal taxes, while most Democratic-voting states receive less federal money than they pay in federal taxes.
That means traditionally blue states like California are now perpetually subsidizing — or in Ryan’s parlance, “bailing out” — traditionally red states like Indiana. Thus, federal aid to states could actually reduce the state-to-state subsidies conservatives say they oppose.
Congressional Republicans will undoubtedly ignore these facts. Their proposed solution to the budget emergency could instead be a Newt Gingrich-backed initiative letting states default on outstanding obligations by declaring bankruptcy. Again, the word is fraught with new connotations.
Whereas sick or laid-off individuals occasionally claim a genuine inability to repay debts and thus a need for bankruptcy protections, states can never legitimately claim such a need because they are never actually “bankrupt.” Why? Because they always posses the power to raise revenue. The power is called taxation — and destroying that authority is what the new bankruptcy idea is really about. It would let states avoid tax increases on the wealthy, renege on contractual promises to public employees and destroy the country’s creditworthiness.
Blocking state “bailouts” and letting states declare “bankruptcy” are radical notions, especially in a bad economy. One would result in recession-exacerbating public layoffs; the other would institutionalize an anti-tax zealotry that destroys tomorrow’s middle class in order to protect today’s rich. That’s why advocates of these ideas have resorted to manipulating language. They know the only way to make such extremism a reality is to distort the vernacular — and if we aren’t cognizant of their scheme, they will succeed.
By: David Sirota, Syndicated Columnist, Sun Journal-published March 8, 2011
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