Posts Tagged ‘democrats’

On Wisconsin!

Tuesday, March 1st, 2011

Wisconsin’s Republican Governor Scott Walker – a Tea Party favorite — accused the state legislature’s 14 Democratic senators of “vacationing” because they walked out of the State Legislature and took refuge in Illinois to avoid a vote that would strip most of the state’s employees of their collective bargaining rights.  Because of the Democrats’ absence, the Senate is unable to reach a necessary quorum to act. “Instead of stimulating the hospitality sector of Illinois’ economy, Senate Democrats should come back to the Madison, debate the bill, cast their vote, and help get Wisconsin’s economy back on track,” Walker said.

The Democrats are refusing to return unless Walker is willing to make concessions to the bill.  Republican legislative leaders – who are a majority with 19 seats — say they have enough votes to pass the bill as is.  Walker has rejected any compromise with thousands of pro-union protesters who have been camped out in the Capitol for a week, claiming that Wisconsin will lead America in weakening unions that have negotiated compensation packages.  Democratic lawmakers, union leaders and rank-and-file teachers and firefighters have asked Walker to revise his plan.

Writing in the Washington Post, columnist Ezra Klein notes that “The Badger State was actually in pretty good shape. It was supposed to end this budget cycle with about $120 million in the bank.

“More than half of the lower estimate ($117.2 million) is due to the impact of Special Session Senate Bill 2 (health savings accounts), Assembly Bill 3 (tax deductions/credits for relocated businesses), and Assembly Bill 7 (tax exclusion for new employees),” according to Klein.  “In English: The governor called a special session of the legislature and signed two business tax breaks and a conservative healthcare policy experiment that lowers overall tax revenues (among other things).  The new legislation was not offset, and it helped turn a surplus into a deficit.  As Brian Beutler writes, ‘public workers are being asked to pick up the tab for this agenda.'”

That’s not the complete story, Klein notes.  “Public employees aren’t being asked to make a one-time payment into the state’s coffers.  Rather, Walker is proposing to sharply curtail their right to bargain collectively.  A cyclical downturn that isn’t their fault, plus an unexpected reversal in Wisconsin’s budget picture that wasn’t their doing, is being used to permanently end their ability to sit across the table from their employer and negotiate what their health insurance should look like.”

Senator Jon Erpenbach (D-Middleton) expressed concern that Republicans might try to split off the union bargaining sections of the budget repair bill – which on its own would not be considered a financial bill – from the rest of the proposal. Republican senators have enough votes to pass a union bargaining proposal without adequate debate, Erpenbach said.  “Obviously we have a great deal of concern about it.  If they want this over immediately, that’s the only thing they can do.”

For Wisconsin’s teachers, the elimination of collective bargaining rights could mark a return to the days of regular strikes and workplaces where employees worry about taking too many sick days and the length of their breaks. “It is almost impossible for us to get our heads around the idea of no union,” said Miles Turner, executive director of the Wisconsin Association of School District Administrators.  The association supports changes to the collective bargaining law – which has been in effect since 1959 — but opposes its elimination.  According to Turner, eliminating collective bargaining would radically change what is now a mostly cordial working relationship between school administrators and teachers.  “There is an established method for doing business,” Turner said.  “There is an understanding between management and labor about how things will work.”

Government Looking to Require CMBS Insurance

Tuesday, February 22nd, 2011

President Barack Obama is proposing an option to create an insurance fund for mortgage-backed securities, similar to the Federal Deposit Insurance Corporation that protects Americans savings accounts. The proposal consists of three legislative options for making long-term changes to the housing finance system, while taking short-term moves to gradually reduce the government’s role in the mortgage market now dominated by Fannie Mae and Freddie Mac.  The Obama administration is asking the private sector to play the leading role in the residential mortgage market and is expected to unveil several scenarios detailing how that might come about.

More than 85 percent of residential mortgages are now backed by the federal government.  Republicans want to slash that to zero, though they acknowledge that a transition so extreme cannot be achieved overnight.  At its core, the debate over what to do about Fannie and Freddie is an ideological one: How much should the government pay to sustain the housing market?  House Republicans, who want to abolish the government backing altogether, contend that the private market can more accurately price the risk of home mortgages.  By contrast, Democrats believe that government backing is necessary to assure that mortgages are accessible to middle-class Americans.  Mark Zandi, chief economist at Moody’s Analytics, said the impact would be approximately one percent.  “Regardless of what policymakers say, global investors will almost surely continue to believe the U.S. government would backstop a badly foundering mortgage finance system,” said Zandi, who has proposed a hybrid system that charges for the guarantee.

Meanwhile, Treasury Secretary Timothy Geithner has warned against acting too quickly or making rash changes.  “Given Fannie Mae and Freddie Mac’s current role in the mortgage market, we must proceed carefully with reform to ensure government support is withdrawn at a pace that does not undermine economic recovery,” he said.  “We believe there is sufficient funding to ensure the orderly and deliberate wind down of Fannie Mae and Freddie Mac, as described in our plan.

Geithner has proposed three options, all of which favor seeing the government eventually wind down Fannie and Freddie, whose survival has required more than $150 billion from the Treasury Department since the government seized them in September of 2008.  The first option would privatize mortgage finance and limit the government’s role to narrowly targeted subsidies, like Federal Housing Authority (FHA), USDA and Department of Veterans’ Affairs financing.  The second option adds a layer of government support that could be implemented to ensure access to credit during a housing crisis.  The third option, the one that bears the closest resemblance to the current system, would allow the government to guarantee mortgages but under stringent capital and oversight requirements, termed “catastrophic reinsurance behind significant private capital.”

The probable winners from replacing Fannie and Freddie are mortgage lenders and insurers, analysts at Goldman Sachs said. “While higher rates could decrease origination volumes, growth should still outpace balance-sheet availability,” the Goldman analysts said.  In addition to lenders, mortgage insurers are also potential beneficiaries.  “The stated goal of returning the (Federal Housing Authority) to its traditional role as a targeted lender of affordable mortgages supports the view for better-than-expected private market top-line growth.”

Despite the uncertainty about what entity will ultimately replace Fannie and Freddie, the Obama administration remains upbeat about the cost of winding down the embattled agencies. The administration expects its losses from Fannie and Freddie to ultimately be cut nearly in half.  However, the Treasury Department estimates that after receiving dividends from the GSEs (government-sponsored enterprises) for that assistance, the total losses could shrink to $73 billion by 2021 — 45 percent less than current levels.

An outspoken critic of the Obama plan is Mike Colpitts, who writes for The Housing Predictor.  According to Colpitts, “Like a solider standing alone in the battlefield, the Obama administration’s housing finance reform proposal offers the U.S. a way of ridding itself of the most troubled mortgage giants, Freddie Mac and Fannie Mae in the real estate collapse.  But it stops short of offering any concrete long term solutions with a housing plan for the nation like a lone soldier Missing In Action.  Realtors, mortgage professionals, new homebuilders and the lending industry compose many of the most fractured industries in the current U.S. economy as a result of the real estate collapse.  They deserve a plan on which they can rest their futures with the rest of America to benefit the entire nation, and for once provide concrete change towards a real economic recovery.”

Republicans May Underfund Dodd-Frank Implementation

Thursday, January 20th, 2011

Republicans May Underfund Dodd-Frank ImplementationPresident Barack Obama’s crackdown on Wall Street excesses could be hampered if the incoming Republican-controlled Congress refuses to fund two crucial regulatory agencies.  The Dodd-Frank financial reform law – passed with heavy Democratic support – promised a generous budget to regulate the $600 trillion over-the-counter derivatives market.  Now, the law’s implementation may be derailed by the incoming 112th Congress.  Randy Neugebauer (R-TX), who will chair the House Financial Services oversight subcommittee, wants to review the regulators’ expansion plans.  “Once you turn the money loose, it’s a little harder to stop that train,” he said.

The two regulatory agencies in question are the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).  The SEC, for example, had expected to receive an 18 percent increase to its 2011 budget, which would have allowed it to hire 800 new regulators to enforce Dodd-Frank.  Roadblocks are on the horizon, however, in the form of Representative Spencer Bachus (R-AL), who will chair the House Financial Services Committee, and Frank Lucas (R-OK), who will chair the agricultural committee that oversees the CFTC.  The two Congressmen wrote to regulators, saying “An overarching concern…is the need to get it done right, not necessarily get it done quickly.”  The Republicans’ attitude to enforcing Dodd-Frank could be a boon to Wall Street firms, whose lobbyists are advocating a go-slow approach.

Mary Schapiro, SEC Chairman, said “We will have to take some more steps to cut back.  At this stage, it will impact our work.”  The chronically underfunded and understaffed CFTC, which had expected a 50 percent budget increase, had planned to hire 240 new regulators this year to enforce its new oversight of the swaps market.  According to CFTC Chairman Gary Gensler, “I do think without sufficient funding next summer (2011) you’d see a significant number of registrants – swap dealers, swap execution facilities and so forth – whose legitimate applications would have to be slowed down.  Michael Greenberger, a University of Maryland law professor and previously the CTFC’s director of trading and markets, says.

2010 U.S. Census Shows Slowest Population Growth in 70 Years

Thursday, January 6th, 2011

2010 U.S. Census Shows Slowest Population Growth in 70 YearsNow that the long-awaited data from the 2010 Census has been published, the states are learning which places will gain congressional seats and precious electoral votes — a circumstance that could impact the outcome of the 2012 presidential election.  The U.S. Constitution requires a census count every 10 years to accurately reflect population shifts in the nation and determine congressional reapportionment as the states divide the House of Representatives’ 435 seats.  Inevitably, Democrats and Republicans will squabble over redistricting as states gaining or losing seats draw new districts.

“Many of the population increases are expected in Republican-leaning states in the South and West, while traditional strongholds of the Democrats in the North and Midwest are expected to lose population,” noted Keating Holland, CNN’s polling director.  Additionally, because Republicans in several states took control of the legislatures from Democrats in the mid-term elections, they will have significant control over how the districts are redrawn.

Ohio and New York each will lose two Congressional seats.  Poised to lose a single seat are Illinois, Iowa, Louisiana, Massachusetts, Michigan, Missouri, New Jersey and Pennsylvania.  California will retain its 53 Congressional seats – the largest in the nation.  States that will pick up seats include Florida, Arizona, Georgia, Nevada, South Carolina, Utah and Washington.

According to the U.S. Census Bureau,  the data gleaned will “directly affect how more than $4 trillion is allocated to state, local and tribal governments over the next 10 years.”  If preliminary estimates hold true, the 2010 census will reveal that America’s population growth fell to its lowest level in 70 years. Demographers believe the official 2010 count will be approximately 308.7 million, putting U.S. growth at nine percent, the slowest growth since the 1940 census.  During that decade, the Great Depression slashed previous population growth rate by more than half, to 7.3 percent.  The U.S. is still growing quickly relative to other developed nations.  The population in France and England each increased approximately five percent over the past decade; Japan’s population is largely unchanged and Germany’s population is declining.  China grew at about six percent; Canada’s growth rate is more or less 10 percent.

House GOP Taking a Second Look at Dodd-Frank Financial Reform Law

Thursday, November 18th, 2010

Congressional Republicans may water down the financial reform law.  The newly empowered Republicans in the House of Representatives will attempt to rein in regulators who are in the process of implementing the comprehensive reform of financial rules and advocate for a smaller government role in the mortgage market.  By taking control of the House in the recent mid-term elections, the GOP will have more influence over the newly created Consumer Financial Protection Bureau and greater sway over any technical fixes that Congress makes to rules that govern derivatives trading.

“We don’t want them to regulate capriciously, arbitrarily, without engaging in a cost-benefit analysis,” said Representative Jeb Hensarling (R-TX), a member of the House Financial Services Committee.  President Barack Obama brought attention to the Republicans’ intent in a recent radio and Internet address, noting that House and Senate members “are now beating the drum to repeal all of these reforms and consumer protections.  I think it would be a terrible mistake,” he said.

With Democrats still in control of the Senate and in the White House, it’s highly unlikely that the Republicans will be able to carry out a fundamental revision or even repeal of the Dodd-Frank law.  There’s also the possibility of a presidential veto if repeal legislation makes it through both houses on Congress.  Because the Republicans now have a majority in the House, the diminished number of Senate Democrats will have to reach across party lines on financial issues for the simple reason that any changes will require support from both parties.  Bipartisan compromise will be used to arrive at consensus in the next Congress, said Senator Tim Johnson (D-SD), who is replacing the retiring Senator Christopher Dodd (D-CT), who headed the Senate Banking Committee.  According to Johnson, “We sometimes differ on how we achieve our goals, but we have to agree more often than not.”

Save the Planet; Prevent Commercial Mortgage Meltdown

Thursday, November 4th, 2010

The “CRE Solution” could create green jobs while averting commercial building foreclosures.  A total of $1.4 trillion worth of commercial real estate loans are coming due between now and 2014, with the majority on small- and medium-sized buildings that are either under water or very nearly there.  Writing for the Huffington Post, Daphne Wysham says that “crisis breeds opportunity. It turns out that buildings are responsible for about half of America’s emissions of greenhouse gases.”  Wysham, a fellow and board member of the Institute for Policy Studies, is founder and co-director of the Sustainable Energy and Economy Network, as well as founder and co-host of Earthbeat Radio, which airs on 54 stations in the United States and Canada.

According to Wysham, “Here’s the crazy truth:  With a national effort to boost energy efficiency, we could actually meet the building sector’s greenhouse gas emissions target set by the Obama administration for the next few years, put 1,300,000 million workers – 600,000 of them construction workers, 20 percent of whom are unemployed – back to work and dodge the next wave of mortgage meltdowns.  We could make a painless downpayment on our emissions reductions goals, while giving some of our beleaguered businesses a tax break and saving money we’re now squandering on wasted energy.”

Architects and researchers from Architecture 2020 have devised what they call the “CRE Solution”, which would allow small business and business owners in danger of default a multi-year tax break if they retrofit to improve energy efficiency.  “The more energy efficient the building becomes, the greater the tax break,” Wysham said.  “Commercial building owners could trade or sell these tax deductions to investors, who would be invested in putting our highly skilled construction workers back on the job, retrofitting these properties.  For the $6 billion in tax breaks the federal government would provide for this purpose, Uncle Sam would receive $10 billion back in net federal tax revenue, while state and local governments netted $5.25 billion.”

TARP Savings Could Finance Jobs Program

Wednesday, January 6th, 2010

Returned TARP funds could finance jobs creation program.  The $700 billion Troubled Asset Relief Program (TARP) cost $200 billion less than originally anticipated,  according to a new Treasury Department report.  That reflects faster repayments by big banks, as well as less spending on rescue programs as the financial sector recovers more quickly than expected.

And it’s good news for President Obama’s new job creation stimulus.  In a speech delivered at the nonpartisan Brookings Institution,  President Obama outlined a wide-ranging plan to create jobs that could be partially financed by the $200 billion in TARP funds that the government now expects to get back.

Among the job creation proposals detailed by President Obama are:

  • A tax cut for small business to encourage hiring.
  • Eliminate capitals gains on these businesses for one year.
  • Redirect leftover TARP money to support small business growth.
  • Invest new money in rebuilding roads, bridges and other infrastructure improvements.
  • Start a “Cash for Caulkers” plan that would give rebates to people who make their homes more energy efficient.

“Small businesses, infrastructure, clean energy:  these are areas in which we can put Americans to work while putting our nation on a sturdier economic footing,” according to President Obama.  “That foundation for sustained economic growth must be our continuing focus and our ultimate goal.”

The President’s proposals require Congressional approval.

Arizona Ponders Sale/Leaseback of Some State Buildings to Cover $3.4 Billion Deficit

Tuesday, December 15th, 2009

Arizona looking to do sale/leasebacks on some state buildings to raise fast cash.  The cash-strapped State of Arizona may sell the identical House and Senate buildings where legislative business has been conducted for 50 years. A total of 32 properties within the Capitol complex, valued in excess of $1 billion, may be sold and leased for several years prior to assuming ownership again.  Investors would benefit from long-term lease payments from a stable tenant.  According to projections, the sale/leaseback arrangement would infuse as much as $735 million into the state’s coffers.  The plan, which has bipartisan support, isn’t popular with Arizona’s taxpayers, who once owned the buildings free and clear.

Although Governor Jan Brewer vetoed a sale/leaseback proposal during the summer, the provision is expected to return as a solution to the state’s $3.4 billion deficit.  The list of properties targeted for possible sale and leaseback encompasses buildings that provide necessary government services.  Included are the House and Senate buildings, the Phoenix and Tucson headquarters of the Arizona Department of Public Safety, the State Hospital, state fairgrounds and several prisons.  The properties were selected based on their appeal to potential investors.

“We’ve mortgaged the legislative halls,” said Representative Steve Yarbrough.  “That just tells you how extraordinary the times are.  To me, it’s something we’re going to have to do no matter how much we find it undesirable.”

The 1900 State Capitol building, now a museum, is not up for sale.

Buddy, Can You Spare a Job?

Monday, December 14th, 2009

With the national unemployment rate at 10.2 percent, President Barack Obama is focusing on job creation – the American public’s number one concern.  The administration’s “White House to Main Street” summit and tour is gathering advice from a variety of stakeholders, including business executives, small-business owners, economists, union officials and Ed Pawlowski, the mayor of hard-hit Allentown, PA.

The stakes are high because the Obama administration finds itself in the difficult position of wanting to create millions of new jobs without adding to the national debt.  “There’s one group that says we need to do more about the economy, more to create jobs,” according to political analyst Charlie Cook.  “And then there’s the other side that’s saying we’re blowing the heck out of the budget deficits.  And so they’re getting squeezed.”

“If we keep on adding to the debt, even in the midst of this recovery, at some point people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession,” the President said in an interview with Fox News.

In the meantime, Congress is considering job stimulus legislation that could combine extensions of COBRA, unemployment compensation and food stamps. Because the Democrats have very little money to spend right now, they know that a successful second stimulus will have to pack a powerful punch.  Senator Mark Warner (D-VA) wants to use $50 billion in leftover TARP funds to provide loans to small businesses.  Yet another proposal from Senator Jack Reed (D-RI) would use $600 million to subsidize employees who volunteer to have their hours cut to help companies avoid layoffs.  This approach has worked spectacularly well in Germany, which has not seen an uptick in unemployment this recession.

Obama’s Housing Plan Seeks to Help Homeowners in Trouble

Monday, March 2nd, 2009

Residential, Financing

Nine million homeowners can breathe a preliminary sigh of relief.  They may get to keep their homes now that President Obama has unveiled his ambitious – and larger than expected — $75 billion mortgage relief plan.  At the same time, the Treasury Department will double the size of its support of Fannie Mae and Freddie Mac.  The government, which seized the mortgage finance companies last fall, will absorb up to $200 billion in losses at each company.

The massive Homeowner Stability Initiative is intended to help the five million borrowers who are said to be “under water” to refinance their home loans.  Additionally, it provides incentive payments to mortgage lenders to assist as many as four million families who are either already in or on the verge of foreclosure.

Obama chose the Phoenix area as the venue for his announcement because it has been hit hard by foreclosures.  He believes that putting a halt to foreclosures is key to turning around the economy.  The plan is sound and proof that Geithner can deliver specifics and bold initiatives when he needs to. bittinger_sinking_house1

It will be interesting to see if the President gets the bipartisan support that he wants from Congress to pass this vital legislation.  Obama, who likes to strike a fine balance between hope and skepticism, describes himself as an eternal optimist – though anything but a “sap”.  The Democratic majority in the House is comfortable enough that this legislation will ease through that chamber.  When the bill moves to the Senate, however, Obama may once again need to twist a few Republican arms to avoid a filibuster.