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[image: In this newsletter: This Week in Washington:
Budget BattleFinancial Shorts: SEC & Executive Pay; Freddie Mac & Fannie
Mae; Federal Reserve Dodd-Frank Update]


*Washington Update– April 1, 2011*
[image: In this newsletter: This Week in Washington: Budget
BattleFinancial Shorts: SEC & Executive Pay; Freddie Mac & Fannie Mae;
Federal Reserve Dodd-Frank Update] [image: In this newsletter: This
Week in Washington: Budget BattleFinancial Shorts: SEC & Executive Pay;
Freddie Mac & Fannie Mae; Federal Reserve Dodd-Frank Update] [image:
1. This Week in Washington: Budget BattleAs the current stopgap spending
measure expiration approaches on April 8, there has been mixed messages
coming from both sides as to the progress toward compromise. The White House
and Democrats indicated that a deal might be possible before April 8 as
“we’re all working off the same number now.” However, House Speaker John
Boehner (R-OH) indicated otherwise saying “there is no agreement on numbers.
Nothing will be agreed to until everything is agreed to.” President Obama
has invited House Speaker Boehner and Senate Majority Leader Harry Reid
(D-NV) to the White House for further discussion.The focus of debate is now
on discretionary spending cuts versus cuts to CHIMPS (Changes in Mandatory
Program Spending). Democrats are not willing to see non-defense
discretionary spending, such as education and R&D and social services,
succumb to the majority of 2011 budget cuts. They are attempting to move the
debate to mandatory spending cuts, which Republicans say they are not
willing to approach yet, despite already having proposed about $10 billion
in CHIMPS of their own. Lawmakers in both parties are eager to reach such a
compromise, which would fund the government through the end of the fiscal
year, in September, and end a series of stopgap spending resolutions that
have kept Washington operating a few weeks at a time since last fall. A key
indication that a deal is likely is the fact that the GOP House is releasing
its 2012 budget tomorrow. It is unlikely they would do so if they were
planning to force a shutdown this week.The House set this debate rolling
last month when it approved its own budget for the remainder of Fiscal 2011,
cutting appropriations to $1.026 trillion, about $102 billion less than
Obama’s initial budget requests for 2011 and $61.3 billion below the
spending under a continuing resolution (CR) that expired March 4. In the
weeks since, Congress has passed two more continuing resolutions to avert a
shutdown, the second of which will expire April 8. In each case, savings
were enacted comprising a $10 billion down payment toward what both sides
hope will be a final deal soon. But getting across the finish line has
proven difficult especially given the conservative Tea Party pressures
within the Republican Party.For these die-hard conservatives, anything less
than slashing $61 billion in spending and cutting funds for Planned
Parenthood, the EPA and National Public Radio would be a capitulation, but
some Republicans wonder whether it’s worth the political price to insist on
the full $61 billion in cuts when that’s only a small fraction of the $1.6
trillion deficit projected for this year.Both sides are worried that this
fight will shape the next. Senior Republican lawmakers say they need to
preserve their political juice for the fight over the debt limit and
entitlement reform, which is a more important. They note that discretionary
spending accounts for only 12 percent of the federal budget and that
Congress needs to address entitlement reform in order to achieve meaningful
deficit reduction. They don’t want to use too much of their political
capital on last year’s budget battle, especially as they want to focus on
the just introduced a balanced budget amendment, the debt limit and budget
for 2012. House Budget Chairman Paul Ryan (R-WI) previewed the budget to be
released tomorrow saying that it will cut spending by more than $4 trillion
over the next decade and plans to not only balance the budget, but pay down
the debt. Furthermore, there’s a growing sense among Senate Republicans that
their leaders won’t be able to win much more in concessions from the Obama
administration in talks over a funding measure covering only the remainder
of the fiscal year. President Obama’s team has already agreed to cut $33
billion from the 2011 budget, setting spending levels for the year at $74
billion less than what the administration initially proposed. Obviously, a
deal with Democrats could avoid a government shutdown and point the way for
future compromises, but it could come at a steep price for Republican
leaders who risk the ire of some conservatives. In the event that Boehner
loses the support of two dozen or more of his GOP colleagues, he could turn
to moderate Democrats for support. With 241 Republicans, GOP leaders can
afford to lose 23 GOP votes before needing Democratic help. As tenuous as
the potential coalition is, Blue Dog Democrats hope that a bipartisan deal
can be reached on this year’s spending bill so that it can serve as a
framework for larger issues, including next year’s budget and other
reforms.It is clear that this budget impasse will be solved not because of
favor-trading but because each party fears being blamed for a shutdown. In
past decades, Congress has repeatedly missed its budget deadlines, risking a
shutdown. But these impasses were often solved with small compromises. This
time budgets are being cut so deeply that there is little money left for
small projects used to favor trade. Each side is worried about the risks of
a shutdown, but balancing those risks with conservative voices within the
Republican Party are proving complicating. 2. Financial Shorts: SEC &
Executive Pay; Freddie Mac & Fannie Mae; Federal Reserve & TransparencyThe
SEC gave their preliminary endorsement to a proposal that would ostensibly
require executive pay to be set by independent members of corporate boards.
But, they proposed leaving details to the stock exchanges. The SEC also
proposed letting the exchanges carve out major exceptions to whatever
independence standards they adopt. The proposal is part of an effort to not
only fulfill the agency’s mandate to implement provisions of Dodd-Frank but
also as an effort to ensure that the board members who approve executive pay
packages are not beholden to or co-opted by the executives they are paying.
In a related action earlier this month, the SEC proposed a rule meant to
discourage irresponsible risk-taking by preventing top executives at big
financial firms from immediately pocketing any annual bonuses in full. By
stretching payouts over a period of years, the SEC is trying keep those
executives exposed to any delayed consequences of their actions.House
Republicans announced a package of eight bills that would wind down mortgage
finance giants, Fannie Mae and Freddie Mac, more quickly than the Obama
administration proposed. The cumulative effect of the eight bills would make
the companies behave like federal agencies while stripping away the
advantages. Fannie and Freddie would be required to pay their employees
according to federal wage scales, as well as be subjected to regular
oversight by an inspector general and required to ask Treasury before
borrowing money. But at the same time, the companies would be required to
charge the same prices as private investors. They would be prevented from
serving their basic purpose as a source of cheap money for mortgage loans.
The proposal to shut down Fannie and Freddie answers a promise made by many
House Republicans during the midterm elections. And by proposing eight
separate bills, Republicans have preserved considerable flexibility to
negotiate with the White House, increasing the chances that some elements
will succeed. There already is agreement that the companies should be
closed, gradually allowing private investors the opportunity to finance
mortgage loans. The main difference is a question of timing. The Republican
plan would require Fannie and Freddie to stop subsidizing mortgage loans
through low-cost financing over the next two years, and to sell most of
their enormous mortgage holdings over the next five years. The
Administration envisions a process that may take a decade and it has shown
no eagerness to begin while housing remains in the doldrums. Federal Reserve
Chairman Ben Bernanke will start holding regular media briefings on monetary
policy next month, a historic shift to greater openness at the traditionally
secretive U.S. central bank. Bernanke will kick off a program of
four-times-a-year news conferences on April 27 following a regularly
scheduled two-day Fed meeting on monetary policy. It will be the first
regularly scheduled briefing by a Fed chairman in the history of the nearly
98-year-old central bank. Future briefings will coincide with Fed meetings
at which officials provide their quarterly economic forecasts, which fall in
June and November this year. Bernanke has taken a number of steps to boost
transparency at the Fed during his tenure as chairman, and the latest
announcement brings it into line with some other central banks. The head of
the European Central Bank holds a news conference after each ECB policy
meeting, while the governor of the Bank of England briefs media quarterly.
To make its operations more open, the central bank has in recent years begun
issuing its forecasts quarterly, rather than twice a year, and moved up the
publication of minutes of policy meetings to three weeks from about six
weeks. In fact, it did not even begin announcing its interest rate moves
until 1994.3. Dodd-Frank UpdateHouse Republicans are looking to chip away at
the Dodd-Frank financial reform law with a series of small tweaks. The
measures mark the latest attempt by House Republicans to whittle away at
some of the signature achievements of the Obama administration and the
previous, Democratic-controlled Congress. Similar to the attempted repeal of
health-care reform, a bill to repeal Dodd-Frank was introduced in January,
but has failed to gain similar traction. Instead, Republicans are pushing a
series of smaller tweaks, which they contend would reduce the burdens of the
law and boost the economy.Simple budget cuts could cripple the SEC and CFTC,
and with the budget impasse that has already frozen the agencies’ budgets,
even as their rule-writing duties have exploded, more budget cuts could be
on the horizon which would leave the agencies unable to enforce current
rules, let alone new ones.But five specific measures have also been
introduced that would target specific provisions of Dodd-Frank: • One,
Republicans are aiming to eliminate a piece of the law that makes
credit-ratings firms such as Standard & Poor's, Moody's and Fitch Ratings
liable if their initial ratings turn out to be faulty. The Dodd-Frank
provision, however, has been tough to implement as the ratings firms refused
to allow their ratings to be used in offering documents for securities
backed by auto and credit-card loans and other assets. As a result, the
market for such asset-backed securities seized up last summer. To get that
market going again, the SEC suspended a rule requiring asset-backed issuers
to include ratings in offering documents and has renewed that waiver
indefinitely. The Republican legislation would permanently protect ratings
firms from lawsuits. • Two, Republicans will also seek to exempt companies
that use derivatives to hedge commercial risk, known as “end users,” from
new requirements that they route their transactions through clearinghouses.
Under the Dodd-Frank law, most routine swaps are to be traded on exchanges
or similar electronic systems and routed through clearinghouses, which
guarantee trades and require the posting of securities or cash as
collateral, or margin. • Three, another measure seeks to exempt
private-equity fund managers from a Dodd-Frank requirement that they
register with the SEC. While many larger private-equity funds are already
registered with the SEC, small and midsize fund advisers have been arguing
that the registration requirement is expensive and burdensome. • Four,
Republicans aim to cancel another provision requiring publicly traded
companies to disclose the median annual total compensation of all employees
and calculate a ratio of how employee compensation compares with that of the
chief executive. • Finally, Republicans will introduce legislation to boost
the offering threshold for companies that don't need to register with the
SEC to $50 million from $5 million. Republicans say this change will make it
easier for smaller companies to raise money for investment.] [image: 1.
This Week in Washington: Budget BattleAs the current stopgap spending
measure expiration approaches on April 8, there has been mixed messages
coming from both sides as to the progress toward compromise. The White House
and Democrats indicated that a deal might be possible before April 8 as
“we’re all working off the same number now.” However, House Speaker John
Boehner (R-OH) indicated otherwise saying “there is no agreement on numbers.
Nothing will be agreed to until everything is agreed to.” President Obama
has invited House Speaker Boehner and Senate Majority Leader Harry Reid
(D-NV) to the White House for further discussion.The focus of debate is now
on discretionary spending cuts versus cuts to CHIMPS (Changes in Mandatory
Program Spending). Democrats are not willing to see non-defense
discretionary spending, such as education and R&D and social services,
succumb to the majority of 2011 budget cuts. They are attempting to move the
debate to mandatory spending cuts, which Republicans say they are not
willing to approach yet, despite already having proposed about $10 billion
in CHIMPS of their own. Lawmakers in both parties are eager to reach such a
compromise, which would fund the government through the end of the fiscal
year, in September, and end a series of stopgap spending resolutions that
have kept Washington operating a few weeks at a time since last fall. A key
indication that a deal is likely is the fact that the GOP House is releasing
its 2012 budget tomorrow. It is unlikely they would do so if they were
planning to force a shutdown this week.The House set this debate rolling
last month when it approved its own budget for the remainder of Fiscal 2011,
cutting appropriations to $1.026 trillion, about $102 billion less than
Obama’s initial budget requests for 2011 and $61.3 billion below the
spending under a continuing resolution (CR) that expired March 4. In the
weeks since, Congress has passed two more continuing resolutions to avert a
shutdown, the second of which will expire April 8. In each case, savings
were enacted comprising a $10 billion down payment toward what both sides
hope will be a final deal soon. But getting across the finish line has
proven difficult especially given the conservative Tea Party pressures
within the Republican Party.For these die-hard conservatives, anything less
than slashing $61 billion in spending and cutting funds for Planned
Parenthood, the EPA and National Public Radio would be a capitulation, but
some Republicans wonder whether it’s worth the political price to insist on
the full $61 billion in cuts when that’s only a small fraction of the $1.6
trillion deficit projected for this year.Both sides are worried that this
fight will shape the next. Senior Republican lawmakers say they need to
preserve their political juice for the fight over the debt limit and
entitlement reform, which is a more important. They note that discretionary
spending accounts for only 12 percent of the federal budget and that
Congress needs to address entitlement reform in order to achieve meaningful
deficit reduction. They don’t want to use too much of their political
capital on last year’s budget battle, especially as they want to focus on
the just introduced a balanced budget amendment, the debt limit and budget
for 2012. House Budget Chairman Paul Ryan (R-WI) previewed the budget to be
released tomorrow saying that it will cut spending by more than $4 trillion
over the next decade and plans to not only balance the budget, but pay down
the debt. Furthermore, there’s a growing sense among Senate Republicans that
their leaders won’t be able to win much more in concessions from the Obama
administration in talks over a funding measure covering only the remainder
of the fiscal year. President Obama’s team has already agreed to cut $33
billion from the 2011 budget, setting spending levels for the year at $74
billion less than what the administration initially proposed. Obviously, a
deal with Democrats could avoid a government shutdown and point the way for
future compromises, but it could come at a steep price for Republican
leaders who risk the ire of some conservatives. In the event that Boehner
loses the support of two dozen or more of his GOP colleagues, he could turn
to moderate Democrats for support. With 241 Republicans, GOP leaders can
afford to lose 23 GOP votes before needing Democratic help. As tenuous as
the potential coalition is, Blue Dog Democrats hope that a bipartisan deal
can be reached on this year’s spending bill so that it can serve as a
framework for larger issues, including next year’s budget and other
reforms.It is clear that this budget impasse will be solved not because of
favor-trading but because each party fears being blamed for a shutdown. In
past decades, Congress has repeatedly missed its budget deadlines, risking a
shutdown. But these impasses were often solved with small compromises. This
time budgets are being cut so deeply that there is little money left for
small projects used to favor trade. Each side is worried about the risks of
a shutdown, but balancing those risks with conservative voices within the
Republican Party are proving complicating. 2. Financial Shorts: SEC &
Executive Pay; Freddie Mac & Fannie Mae; Federal Reserve & TransparencyThe
SEC gave their preliminary endorsement to a proposal that would ostensibly
require executive pay to be set by independent members of corporate boards.
But, they proposed leaving details to the stock exchanges. The SEC also
proposed letting the exchanges carve out major exceptions to whatever
independence standards they adopt. The proposal is part of an effort to not
only fulfill the agency’s mandate to implement provisions of Dodd-Frank but
also as an effort to ensure that the board members who approve executive pay
packages are not beholden to or co-opted by the executives they are paying.
In a related action earlier this month, the SEC proposed a rule meant to
discourage irresponsible risk-taking by preventing top executives at big
financial firms from immediately pocketing any annual bonuses in full. By
stretching payouts over a period of years, the SEC is trying keep those
executives exposed to any delayed consequences of their actions.House
Republicans announced a package of eight bills that would wind down mortgage
finance giants, Fannie Mae and Freddie Mac, more quickly than the Obama
administration proposed. The cumulative effect of the eight bills would make
the companies behave like federal agencies while stripping away the
advantages. Fannie and Freddie would be required to pay their employees
according to federal wage scales, as well as be subjected to regular
oversight by an inspector general and required to ask Treasury before
borrowing money. But at the same time, the companies would be required to
charge the same prices as private investors. They would be prevented from
serving their basic purpose as a source of cheap money for mortgage loans.
The proposal to shut down Fannie and Freddie answers a promise made by many
House Republicans during the midterm elections. And by proposing eight
separate bills, Republicans have preserved considerable flexibility to
negotiate with the White House, increasing the chances that some elements
will succeed. There already is agreement that the companies should be
closed, gradually allowing private investors the opportunity to finance
mortgage loans. The main difference is a question of timing. The Republican
plan would require Fannie and Freddie to stop subsidizing mortgage loans
through low-cost financing over the next two years, and to sell most of
their enormous mortgage holdings over the next five years. The
Administration envisions a process that may take a decade and it has shown
no eagerness to begin while housing remains in the doldrums. Federal Reserve
Chairman Ben Bernanke will start holding regular media briefings on monetary
policy next month, a historic shift to greater openness at the traditionally
secretive U.S. central bank. Bernanke will kick off a program of
four-times-a-year news conferences on April 27 following a regularly
scheduled two-day Fed meeting on monetary policy. It will be the first
regularly scheduled briefing by a Fed chairman in the history of the nearly
98-year-old central bank. Future briefings will coincide with Fed meetings
at which officials provide their quarterly economic forecasts, which fall in
June and November this year. Bernanke has taken a number of steps to boost
transparency at the Fed during his tenure as chairman, and the latest
announcement brings it into line with some other central banks. The head of
the European Central Bank holds a news conference after each ECB policy
meeting, while the governor of the Bank of England briefs media quarterly.
To make its operations more open, the central bank has in recent years begun
issuing its forecasts quarterly, rather than twice a year, and moved up the
publication of minutes of policy meetings to three weeks from about six
weeks. In fact, it did not even begin announcing its interest rate moves
until 1994.3. Dodd-Frank UpdateHouse Republicans are looking to chip away at
the Dodd-Frank financial reform law with a series of small tweaks. The
measures mark the latest attempt by House Republicans to whittle away at
some of the signature achievements of the Obama administration and the
previous, Democratic-controlled Congress. Similar to the attempted repeal of
health-care reform, a bill to repeal Dodd-Frank was introduced in January,
but has failed to gain similar traction. Instead, Republicans are pushing a
series of smaller tweaks, which they contend would reduce the burdens of the
law and boost the economy.Simple budget cuts could cripple the SEC and CFTC,
and with the budget impasse that has already frozen the agencies’ budgets,
even as their rule-writing duties have exploded, more budget cuts could be
on the horizon which would leave the agencies unable to enforce current
rules, let alone new ones.But five specific measures have also been
introduced that would target specific provisions of Dodd-Frank: • One,
Republicans are aiming to eliminate a piece of the law that makes
credit-ratings firms such as Standard & Poor's, Moody's and Fitch Ratings
liable if their initial ratings turn out to be faulty. The Dodd-Frank
provision, however, has been tough to implement as the ratings firms refused
to allow their ratings to be used in offering documents for securities
backed by auto and credit-card loans and other assets. As a result, the
market for such asset-backed securities seized up last summer. To get that
market going again, the SEC suspended a rule requiring asset-backed issuers
to include ratings in offering documents and has renewed that waiver
indefinitely. The Republican legislation would permanently protect ratings
firms from lawsuits. • Two, Republicans will also seek to exempt companies
that use derivatives to hedge commercial risk, known as “end users,” from
new requirements that they route their transactions through clearinghouses.
Under the Dodd-Frank law, most routine swaps are to be traded on exchanges
or similar electronic systems and routed through clearinghouses, which
guarantee trades and require the posting of securities or cash as
collateral, or margin. • Three, another measure seeks to exempt
private-equity fund managers from a Dodd-Frank requirement that they
register with the SEC. While many larger private-equity funds are already
registered with the SEC, small and midsize fund advisers have been arguing
that the registration requirement is expensive and burdensome. • Four,
Republicans aim to cancel another provision requiring publicly traded
companies to disclose the median annual total compensation of all employees
and calculate a ratio of how employee compensation compares with that of the
chief executive. • Finally, Republicans will introduce legislation to boost
the offering threshold for companies that don't need to register with the
SEC to $50 million from $5 million. Republicans say this change will make it
easier for smaller companies to raise money for investment.] [image: 1.
This Week in Washington: Budget BattleAs the current stopgap spending
measure expiration approaches on April 8, there has been mixed messages
coming from both sides as to the progress toward compromise. The White House
and Democrats indicated that a deal might be possible before April 8 as
“we’re all working off the same number now.” However, House Speaker John
Boehner (R-OH) indicated otherwise saying “there is no agreement on numbers.
Nothing will be agreed to until everything is agreed to.” President Obama
has invited House Speaker Boehner and Senate Majority Leader Harry Reid
(D-NV) to the White House for further discussion.The focus of debate is now
on discretionary spending cuts versus cuts to CHIMPS (Changes in Mandatory
Program Spending). Democrats are not willing to see non-defense
discretionary spending, such as education and R&D and social services,
succumb to the majority of 2011 budget cuts. They are attempting to move the
debate to mandatory spending cuts, which Republicans say they are not
willing to approach yet, despite already having proposed about $10 billion
in CHIMPS of their own. Lawmakers in both parties are eager to reach such a
compromise, which would fund the government through the end of the fiscal
year, in September, and end a series of stopgap spending resolutions that
have kept Washington operating a few weeks at a time since last fall. A key
indication that a deal is likely is the fact that the GOP House is releasing
its 2012 budget tomorrow. It is unlikely they would do so if they were
planning to force a shutdown this week.The House set this debate rolling
last month when it approved its own budget for the remainder of Fiscal 2011,
cutting appropriations to $1.026 trillion, about $102 billion less than
Obama’s initial budget requests for 2011 and $61.3 billion below the
spending under a continuing resolution (CR) that expired March 4. In the
weeks since, Congress has passed two more continuing resolutions to avert a
shutdown, the second of which will expire April 8. In each case, savings
were enacted comprising a $10 billion down payment toward what both sides
hope will be a final deal soon. But getting across the finish line has
proven difficult especially given the conservative Tea Party pressures
within the Republican Party.For these die-hard conservatives, anything less
than slashing $61 billion in spending and cutting funds for Planned
Parenthood, the EPA and National Public Radio would be a capitulation, but
some Republicans wonder whether it’s worth the political price to insist on
the full $61 billion in cuts when that’s only a small fraction of the $1.6
trillion deficit projected for this year.Both sides are worried that this
fight will shape the next. Senior Republican lawmakers say they need to
preserve their political juice for the fight over the debt limit and
entitlement reform, which is a more important. They note that discretionary
spending accounts for only 12 percent of the federal budget and that
Congress needs to address entitlement reform in order to achieve meaningful
deficit reduction. They don’t want to use too much of their political
capital on last year’s budget battle, especially as they want to focus on
the just introduced a balanced budget amendment, the debt limit and budget
for 2012. House Budget Chairman Paul Ryan (R-WI) previewed the budget to be
released tomorrow saying that it will cut spending by more than $4 trillion
over the next decade and plans to not only balance the budget, but pay down
the debt. Furthermore, there’s a growing sense among Senate Republicans that
their leaders won’t be able to win much more in concessions from the Obama
administration in talks over a funding measure covering only the remainder
of the fiscal year. President Obama’s team has already agreed to cut $33
billion from the 2011 budget, setting spending levels for the year at $74
billion less than what the administration initially proposed. Obviously, a
deal with Democrats could avoid a government shutdown and point the way for
future compromises, but it could come at a steep price for Republican
leaders who risk the ire of some conservatives. In the event that Boehner
loses the support of two dozen or more of his GOP colleagues, he could turn
to moderate Democrats for support. With 241 Republicans, GOP leaders can
afford to lose 23 GOP votes before needing Democratic help. As tenuous as
the potential coalition is, Blue Dog Democrats hope that a bipartisan deal
can be reached on this year’s spending bill so that it can serve as a
framework for larger issues, including next year’s budget and other
reforms.It is clear that this budget impasse will be solved not because of
favor-trading but because each party fears being blamed for a shutdown. In
past decades, Congress has repeatedly missed its budget deadlines, risking a
shutdown. But these impasses were often solved with small compromises. This
time budgets are being cut so deeply that there is little money left for
small projects used to favor trade. Each side is worried about the risks of
a shutdown, but balancing those risks with conservative voices within the
Republican Party are proving complicating. 2. Financial Shorts: SEC &
Executive Pay; Freddie Mac & Fannie Mae; Federal Reserve & TransparencyThe
SEC gave their preliminary endorsement to a proposal that would ostensibly
require executive pay to be set by independent members of corporate boards.
But, they proposed leaving details to the stock exchanges. The SEC also
proposed letting the exchanges carve out major exceptions to whatever
independence standards they adopt. The proposal is part of an effort to not
only fulfill the agency’s mandate to implement provisions of Dodd-Frank but
also as an effort to ensure that the board members who approve executive pay
packages are not beholden to or co-opted by the executives they are paying.
In a related action earlier this month, the SEC proposed a rule meant to
discourage irresponsible risk-taking by preventing top executives at big
financial firms from immediately pocketing any annual bonuses in full. By
stretching payouts over a period of years, the SEC is trying keep those
executives exposed to any delayed consequences of their actions.House
Republicans announced a package of eight bills that would wind down mortgage
finance giants, Fannie Mae and Freddie Mac, more quickly than the Obama
administration proposed. The cumulative effect of the eight bills would make
the companies behave like federal agencies while stripping away the
advantages. Fannie and Freddie would be required to pay their employees
according to federal wage scales, as well as be subjected to regular
oversight by an inspector general and required to ask Treasury before
borrowing money. But at the same time, the companies would be required to
charge the same prices as private investors. They would be prevented from
serving their basic purpose as a source of cheap money for mortgage loans.
The proposal to shut down Fannie and Freddie answers a promise made by many
House Republicans during the midterm elections. And by proposing eight
separate bills, Republicans have preserved considerable flexibility to
negotiate with the White House, increasing the chances that some elements
will succeed. There already is agreement that the companies should be
closed, gradually allowing private investors the opportunity to finance
mortgage loans. The main difference is a question of timing. The Republican
plan would require Fannie and Freddie to stop subsidizing mortgage loans
through low-cost financing over the next two years, and to sell most of
their enormous mortgage holdings over the next five years. The
Administration envisions a process that may take a decade and it has shown
no eagerness to begin while housing remains in the doldrums. Federal Reserve
Chairman Ben Bernanke will start holding regular media briefings on monetary
policy next month, a historic shift to greater openness at the traditionally
secretive U.S. central bank. Bernanke will kick off a program of
four-times-a-year news conferences on April 27 following a regularly
scheduled two-day Fed meeting on monetary policy. It will be the first
regularly scheduled briefing by a Fed chairman in the history of the nearly
98-year-old central bank. Future briefings will coincide with Fed meetings
at which officials provide their quarterly economic forecasts, which fall in
June and November this year. Bernanke has taken a number of steps to boost
transparency at the Fed during his tenure as chairman, and the latest
announcement brings it into line with some other central banks. The head of
the European Central Bank holds a news conference after each ECB policy
meeting, while the governor of the Bank of England briefs media quarterly.
To make its operations more open, the central bank has in recent years begun
issuing its forecasts quarterly, rather than twice a year, and moved up the
publication of minutes of policy meetings to three weeks from about six
weeks. In fact, it did not even begin announcing its interest rate moves
until 1994.3. Dodd-Frank UpdateHouse Republicans are looking to chip away at
the Dodd-Frank financial reform law with a series of small tweaks. The
measures mark the latest attempt by House Republicans to whittle away at
some of the signature achievements of the Obama administration and the
previous, Democratic-controlled Congress. Similar to the attempted repeal of
health-care reform, a bill to repeal Dodd-Frank was introduced in January,
but has failed to gain similar traction. Instead, Republicans are pushing a
series of smaller tweaks, which they contend would reduce the burdens of the
law and boost the economy.Simple budget cuts could cripple the SEC and CFTC,
and with the budget impasse that has already frozen the agencies’ budgets,
even as their rule-writing duties have exploded, more budget cuts could be
on the horizon which would leave the agencies unable to enforce current
rules, let alone new ones.But five specific measures have also been
introduced that would target specific provisions of Dodd-Frank: • One,
Republicans are aiming to eliminate a piece of the law that makes
credit-ratings firms such as Standard & Poor's, Moody's and Fitch Ratings
liable if their initial ratings turn out to be faulty. The Dodd-Frank
provision, however, has been tough to implement as the ratings firms refused
to allow their ratings to be used in offering documents for securities
backed by auto and credit-card loans and other assets. As a result, the
market for such asset-backed securities seized up last summer. To get that
market going again, the SEC suspended a rule requiring asset-backed issuers
to include ratings in offering documents and has renewed that waiver
indefinitely. The Republican legislation would permanently protect ratings
firms from lawsuits. • Two, Republicans will also seek to exempt companies
that use derivatives to hedge commercial risk, known as “end users,” from
new requirements that they route their transactions through clearinghouses.
Under the Dodd-Frank law, most routine swaps are to be traded on exchanges
or similar electronic systems and routed through clearinghouses, which
guarantee trades and require the posting of securities or cash as
collateral, or margin. • Three, another measure seeks to exempt
private-equity fund managers from a Dodd-Frank requirement that they
register with the SEC. While many larger private-equity funds are already
registered with the SEC, small and midsize fund advisers have been arguing
that the registration requirement is expensive and burdensome. • Four,
Republicans aim to cancel another provision requiring publicly traded
companies to disclose the median annual total compensation of all employees
and calculate a ratio of how employee compensation compares with that of the
chief executive. • Finally, Republicans will introduce legislation to boost
the offering threshold for companies that don't need to register with the
SEC to $50 million from $5 million. Republicans say this change will make it
easier for smaller companies to raise money for investment.] [image: 1.
This Week in Washington: Budget BattleAs the current stopgap spending
measure expiration approaches on April 8, there has been mixed messages
coming from both sides as to the progress toward compromise. The White House
and Democrats indicated that a deal might be possible before April 8 as
“we’re all working off the same number now.” However, House Speaker John
Boehner (R-OH) indicated otherwise saying “there is no agreement on numbers.
Nothing will be agreed to until everything is agreed to.” President Obama
has invited House Speaker Boehner and Senate Majority Leader Harry Reid
(D-NV) to the White House for further discussion.The focus of debate is now
on discretionary spending cuts versus cuts to CHIMPS (Changes in Mandatory
Program Spending). Democrats are not willing to see non-defense
discretionary spending, such as education and R&D and social services,
succumb to the majority of 2011 budget cuts. They are attempting to move the
debate to mandatory spending cuts, which Republicans say they are not
willing to approach yet, despite already having proposed about $10 billion
in CHIMPS of their own. Lawmakers in both parties are eager to reach such a
compromise, which would fund the government through the end of the fiscal
year, in September, and end a series of stopgap spending resolutions that
have kept Washington operating a few weeks at a time since last fall. A key
indication that a deal is likely is the fact that the GOP House is releasing
its 2012 budget tomorrow. It is unlikely they would do so if they were
planning to force a shutdown this week.The House set this debate rolling
last month when it approved its own budget for the remainder of Fiscal 2011,
cutting appropriations to $1.026 trillion, about $102 billion less than
Obama’s initial budget requests for 2011 and $61.3 billion below the
spending under a continuing resolution (CR) that expired March 4. In the
weeks since, Congress has passed two more continuing resolutions to avert a
shutdown, the second of which will expire April 8. In each case, savings
were enacted comprising a $10 billion down payment toward what both sides
hope will be a final deal soon. But getting across the finish line has
proven difficult especially given the conservative Tea Party pressures
within the Republican Party.For these die-hard conservatives, anything less
than slashing $61 billion in spending and cutting funds for Planned
Parenthood, the EPA and National Public Radio would be a capitulation, but
some Republicans wonder whether it’s worth the political price to insist on
the full $61 billion in cuts when that’s only a small fraction of the $1.6
trillion deficit projected for this year.Both sides are worried that this
fight will shape the next. Senior Republican lawmakers say they need to
preserve their political juice for the fight over the debt limit and
entitlement reform, which is a more important. They note that discretionary
spending accounts for only 12 percent of the federal budget and that
Congress needs to address entitlement reform in order to achieve meaningful
deficit reduction. They don’t want to use too much of their political
capital on last year’s budget battle, especially as they want to focus on
the just introduced a balanced budget amendment, the debt limit and budget
for 2012. House Budget Chairman Paul Ryan (R-WI) previewed the budget to be
released tomorrow saying that it will cut spending by more than $4 trillion
over the next decade and plans to not only balance the budget, but pay down
the debt. Furthermore, there’s a growing sense among Senate Republicans that
their leaders won’t be able to win much more in concessions from the Obama
administration in talks over a funding measure covering only the remainder
of the fiscal year. President Obama’s team has already agreed to cut $33
billion from the 2011 budget, setting spending levels for the year at $74
billion less than what the administration initially proposed. Obviously, a
deal with Democrats could avoid a government shutdown and point the way for
future compromises, but it could come at a steep price for Republican
leaders who risk the ire of some conservatives. In the event that Boehner
loses the support of two dozen or more of his GOP colleagues, he could turn
to moderate Democrats for support. With 241 Republicans, GOP leaders can
afford to lose 23 GOP votes before needing Democratic help. As tenuous as
the potential coalition is, Blue Dog Democrats hope that a bipartisan deal
can be reached on this year’s spending bill so that it can serve as a
framework for larger issues, including next year’s budget and other
reforms.It is clear that this budget impasse will be solved not because of
favor-trading but because each party fears being blamed for a shutdown. In
past decades, Congress has repeatedly missed its budget deadlines, risking a
shutdown. But these impasses were often solved with small compromises. This
time budgets are being cut so deeply that there is little money left for
small projects used to favor trade. Each side is worried about the risks of
a shutdown, but balancing those risks with conservative voices within the
Republican Party are proving complicating. 2. Financial Shorts: SEC &
Executive Pay; Freddie Mac & Fannie Mae; Federal Reserve & TransparencyThe
SEC gave their preliminary endorsement to a proposal that would ostensibly
require executive pay to be set by independent members of corporate boards.
But, they proposed leaving details to the stock exchanges. The SEC also
proposed letting the exchanges carve out major exceptions to whatever
independence standards they adopt. The proposal is part of an effort to not
only fulfill the agency’s mandate to implement provisions of Dodd-Frank but
also as an effort to ensure that the board members who approve executive pay
packages are not beholden to or co-opted by the executives they are paying.
In a related action earlier this month, the SEC proposed a rule meant to
discourage irresponsible risk-taking by preventing top executives at big
financial firms from immediately pocketing any annual bonuses in full. By
stretching payouts over a period of years, the SEC is trying keep those
executives exposed to any delayed consequences of their actions.House
Republicans announced a package of eight bills that would wind down mortgage
finance giants, Fannie Mae and Freddie Mac, more quickly than the Obama
administration proposed. The cumulative effect of the eight bills would make
the companies behave like federal agencies while stripping away the
advantages. Fannie and Freddie would be required to pay their employees
according to federal wage scales, as well as be subjected to regular
oversight by an inspector general and required to ask Treasury before
borrowing money. But at the same time, the companies would be required to
charge the same prices as private investors. They would be prevented from
serving their basic purpose as a source of cheap money for mortgage loans.
The proposal to shut down Fannie and Freddie answers a promise made by many
House Republicans during the midterm elections. And by proposing eight
separate bills, Republicans have preserved considerable flexibility to
negotiate with the White House, increasing the chances that some elements
will succeed. There already is agreement that the companies should be
closed, gradually allowing private investors the opportunity to finance
mortgage loans. The main difference is a question of timing. The Republican
plan would require Fannie and Freddie to stop subsidizing mortgage loans
through low-cost financing over the next two years, and to sell most of
their enormous mortgage holdings over the next five years. The
Administration envisions a process that may take a decade and it has shown
no eagerness to begin while housing remains in the doldrums. Federal Reserve
Chairman Ben Bernanke will start holding regular media briefings on monetary
policy next month, a historic shift to greater openness at the traditionally
secretive U.S. central bank. Bernanke will kick off a program of
four-times-a-year news conferences on April 27 following a regularly
scheduled two-day Fed meeting on monetary policy. It will be the first
regularly scheduled briefing by a Fed chairman in the history of the nearly
98-year-old central bank. Future briefings will coincide with Fed meetings
at which officials provide their quarterly economic forecasts, which fall in
June and November this year. Bernanke has taken a number of steps to boost
transparency at the Fed during his tenure as chairman, and the latest
announcement brings it into line with some other central banks. The head of
the European Central Bank holds a news conference after each ECB policy
meeting, while the governor of the Bank of England briefs media quarterly.
To make its operations more open, the central bank has in recent years begun
issuing its forecasts quarterly, rather than twice a year, and moved up the
publication of minutes of policy meetings to three weeks from about six
weeks. In fact, it did not even begin announcing its interest rate moves
until 1994.3. Dodd-Frank UpdateHouse Republicans are looking to chip away at
the Dodd-Frank financial reform law with a series of small tweaks. The
measures mark the latest attempt by House Republicans to whittle away at
some of the signature achievements of the Obama administration and the
previous, Democratic-controlled Congress. Similar to the attempted repeal of
health-care reform, a bill to repeal Dodd-Frank was introduced in January,
but has failed to gain similar traction. Instead, Republicans are pushing a
series of smaller tweaks, which they contend would reduce the burdens of the
law and boost the economy.Simple budget cuts could cripple the SEC and CFTC,
and with the budget impasse that has already frozen the agencies’ budgets,
even as their rule-writing duties have exploded, more budget cuts could be
on the horizon which would leave the agencies unable to enforce current
rules, let alone new ones.But five specific measures have also been
introduced that would target specific provisions of Dodd-Frank: • One,
Republicans are aiming to eliminate a piece of the law that makes
credit-ratings firms such as Standard & Poor's, Moody's and Fitch Ratings
liable if their initial ratings turn out to be faulty. The Dodd-Frank
provision, however, has been tough to implement as the ratings firms refused
to allow their ratings to be used in offering documents for securities
backed by auto and credit-card loans and other assets. As a result, the
market for such asset-backed securities seized up last summer. To get that
market going again, the SEC suspended a rule requiring asset-backed issuers
to include ratings in offering documents and has renewed that waiver
indefinitely. The Republican legislation would permanently protect ratings
firms from lawsuits. • Two, Republicans will also seek to exempt companies
that use derivatives to hedge commercial risk, known as “end users,” from
new requirements that they route their transactions through clearinghouses.
Under the Dodd-Frank law, most routine swaps are to be traded on exchanges
or similar electronic systems and routed through clearinghouses, which
guarantee trades and require the posting of securities or cash as
collateral, or margin. • Three, another measure seeks to exempt
private-equity fund managers from a Dodd-Frank requirement that they
register with the SEC. While many larger private-equity funds are already
registered with the SEC, small and midsize fund advisers have been arguing
that the registration requirement is expensive and burdensome. • Four,
Republicans aim to cancel another provision requiring publicly traded
companies to disclose the median annual total compensation of all employees
and calculate a ratio of how employee compensation compares with that of the
chief executive. • Finally, Republicans will introduce legislation to boost
the offering threshold for companies that don't need to register with the
SEC to $50 million from $5 million. Republicans say this change will make it
easier for smaller companies to raise money for investment.] [image: 1.
This Week in Washington: Budget BattleAs the current stopgap spending
measure expiration approaches on April 8, there has been mixed messages
coming from both sides as to the progress toward compromise. The White House
and Democrats indicated that a deal might be possible before April 8 as
“we’re all working off the same number now.” However, House Speaker John
Boehner (R-OH) indicated otherwise saying “there is no agreement on numbers.
Nothing will be agreed to until everything is agreed to.” President Obama
has invited House Speaker Boehner and Senate Majority Leader Harry Reid
(D-NV) to the White House for further discussion.The focus of debate is now
on discretionary spending cuts versus cuts to CHIMPS (Changes in Mandatory
Program Spending). Democrats are not willing to see non-defense
discretionary spending, such as education and R&D and social services,
succumb to the majority of 2011 budget cuts. They are attempting to move the
debate to mandatory spending cuts, which Republicans say they are not
willing to approach yet, despite already having proposed about $10 billion
in CHIMPS of their own. Lawmakers in both parties are eager to reach such a
compromise, which would fund the government through the end of the fiscal
year, in September, and end a series of stopgap spending resolutions that
have kept Washington operating a few weeks at a time since last fall. A key
indication that a deal is likely is the fact that the GOP House is releasing
its 2012 budget tomorrow. It is unlikely they would do so if they were
planning to force a shutdown this week.The House set this debate rolling
last month when it approved its own budget for the remainder of Fiscal 2011,
cutting appropriations to $1.026 trillion, about $102 billion less than
Obama’s initial budget requests for 2011 and $61.3 billion below the
spending under a continuing resolution (CR) that expired March 4. In the
weeks since, Congress has passed two more continuing resolutions to avert a
shutdown, the second of which will expire April 8. In each case, savings
were enacted comprising a $10 billion down payment toward what both sides
hope will be a final deal soon. But getting across the finish line has
proven difficult especially given the conservative Tea Party pressures
within the Republican Party.For these die-hard conservatives, anything less
than slashing $61 billion in spending and cutting funds for Planned
Parenthood, the EPA and National Public Radio would be a capitulation, but
some Republicans wonder whether it’s worth the political price to insist on
the full $61 billion in cuts when that’s only a small fraction of the $1.6
trillion deficit projected for this year.Both sides are worried that this
fight will shape the next. Senior Republican lawmakers say they need to
preserve their political juice for the fight over the debt limit and
entitlement reform, which is a more important. They note that discretionary
spending accounts for only 12 percent of the federal budget and that
Congress needs to address entitlement reform in order to achieve meaningful
deficit reduction. They don’t want to use too much of their political
capital on last year’s budget battle, especially as they want to focus on
the just introduced a balanced budget amendment, the debt limit and budget
for 2012. House Budget Chairman Paul Ryan (R-WI) previewed the budget to be
released tomorrow saying that it will cut spending by more than $4 trillion
over the next decade and plans to not only balance the budget, but pay down
the debt. Furthermore, there’s a growing sense among Senate Republicans that
their leaders won’t be able to win much more in concessions from the Obama
administration in talks over a funding measure covering only the remainder
of the fiscal year. President Obama’s team has already agreed to cut $33
billion from the 2011 budget, setting spending levels for the year at $74
billion less than what the administration initially proposed. Obviously, a
deal with Democrats could avoid a government shutdown and point the way for
future compromises, but it could come at a steep price for Republican
leaders who risk the ire of some conservatives. In the event that Boehner
loses the support of two dozen or more of his GOP colleagues, he could turn
to moderate Democrats for support. With 241 Republicans, GOP leaders can
afford to lose 23 GOP votes before needing Democratic help. As tenuous as
the potential coalition is, Blue Dog Democrats hope that a bipartisan deal
can be reached on this year’s spending bill so that it can serve as a
framework for larger issues, including next year’s budget and other
reforms.It is clear that this budget impasse will be solved not because of
favor-trading but because each party fears being blamed for a shutdown. In
past decades, Congress has repeatedly missed its budget deadlines, risking a
shutdown. But these impasses were often solved with small compromises. This
time budgets are being cut so deeply that there is little money left for
small projects used to favor trade. Each side is worried about the risks of
a shutdown, but balancing those risks with conservative voices within the
Republican Party are proving complicating. 2. Financial Shorts: SEC &
Executive Pay; Freddie Mac & Fannie Mae; Federal Reserve & TransparencyThe
SEC gave their preliminary endorsement to a proposal that would ostensibly
require executive pay to be set by independent members of corporate boards.
But, they proposed leaving details to the stock exchanges. The SEC also
proposed letting the exchanges carve out major exceptions to whatever
independence standards they adopt. The proposal is part of an effort to not
only fulfill the agency’s mandate to implement provisions of Dodd-Frank but
also as an effort to ensure that the board members who approve executive pay
packages are not beholden to or co-opted by the executives they are paying.
In a related action earlier this month, the SEC proposed a rule meant to
discourage irresponsible risk-taking by preventing top executives at big
financial firms from immediately pocketing any annual bonuses in full. By
stretching payouts over a period of years, the SEC is trying keep those
executives exposed to any delayed consequences of their actions.House
Republicans announced a package of eight bills that would wind down mortgage
finance giants, Fannie Mae and Freddie Mac, more quickly than the Obama
administration proposed. The cumulative effect of the eight bills would make
the companies behave like federal agencies while stripping away the
advantages. Fannie and Freddie would be required to pay their employees
according to federal wage scales, as well as be subjected to regular
oversight by an inspector general and required to ask Treasury before
borrowing money. But at the same time, the companies would be required to
charge the same prices as private investors. They would be prevented from
serving their basic purpose as a source of cheap money for mortgage loans.
The proposal to shut down Fannie and Freddie answers a promise made by many
House Republicans during the midterm elections. And by proposing eight
separate bills, Republicans have preserved considerable flexibility to
negotiate with the White House, increasing the chances that some elements
will succeed. There already is agreement that the companies should be
closed, gradually allowing private investors the opportunity to finance
mortgage loans. The main difference is a question of timing. The Republican
plan would require Fannie and Freddie to stop subsidizing mortgage loans
through low-cost financing over the next two years, and to sell most of
their enormous mortgage holdings over the next five years. The
Administration envisions a process that may take a decade and it has shown
no eagerness to begin while housing remains in the doldrums. Federal Reserve
Chairman Ben Bernanke will start holding regular media briefings on monetary
policy next month, a historic shift to greater openness at the traditionally
secretive U.S. central bank. Bernanke will kick off a program of
four-times-a-year news conferences on April 27 following a regularly
scheduled two-day Fed meeting on monetary policy. It will be the first
regularly scheduled briefing by a Fed chairman in the history of the nearly
98-year-old central bank. Future briefings will coincide with Fed meetings
at which officials provide their quarterly economic forecasts, which fall in
June and November this year. Bernanke has taken a number of steps to boost
transparency at the Fed during his tenure as chairman, and the latest
announcement brings it into line with some other central banks. The head of
the European Central Bank holds a news conference after each ECB policy
meeting, while the governor of the Bank of England briefs media quarterly.
To make its operations more open, the central bank has in recent years begun
issuing its forecasts quarterly, rather than twice a year, and moved up the
publication of minutes of policy meetings to three weeks from about six
weeks. In fact, it did not even begin announcing its interest rate moves
until 1994.3. Dodd-Frank UpdateHouse Republicans are looking to chip away at
the Dodd-Frank financial reform law with a series of small tweaks. The
measures mark the latest attempt by House Republicans to whittle away at
some of the signature achievements of the Obama administration and the
previous, Democratic-controlled Congress. Similar to the attempted repeal of
health-care reform, a bill to repeal Dodd-Frank was introduced in January,
but has failed to gain similar traction. Instead, Republicans are pushing a
series of smaller tweaks, which they contend would reduce the burdens of the
law and boost the economy.Simple budget cuts could cripple the SEC and CFTC,
and with the budget impasse that has already frozen the agencies’ budgets,
even as their rule-writing duties have exploded, more budget cuts could be
on the horizon which would leave the agencies unable to enforce current
rules, let alone new ones.But five specific measures have also been
introduced that would target specific provisions of Dodd-Frank: • One,
Republicans are aiming to eliminate a piece of the law that makes
credit-ratings firms such as Standard & Poor's, Moody's and Fitch Ratings
liable if their initial ratings turn out to be faulty. The Dodd-Frank
provision, however, has been tough to implement as the ratings firms refused
to allow their ratings to be used in offering documents for securities
backed by auto and credit-card loans and other assets. As a result, the
market for such asset-backed securities seized up last summer. To get that
market going again, the SEC suspended a rule requiring asset-backed issuers
to include ratings in offering documents and has renewed that waiver
indefinitely. The Republican legislation would permanently protect ratings
firms from lawsuits. • Two, Republicans will also seek to exempt companies
that use derivatives to hedge commercial risk, known as “end users,” from
new requirements that they route their transactions through clearinghouses.
Under the Dodd-Frank law, most routine swaps are to be traded on exchanges
or similar electronic systems and routed through clearinghouses, which
guarantee trades and require the posting of securities or cash as
collateral, or margin. • Three, another measure seeks to exempt
private-equity fund managers from a Dodd-Frank requirement that they
register with the SEC. While many larger private-equity funds are already
registered with the SEC, small and midsize fund advisers have been arguing
that the registration requirement is expensive and burdensome. • Four,
Republicans aim to cancel another provision requiring publicly traded
companies to disclose the median annual total compensation of all employees
and calculate a ratio of how employee compensation compares with that of the
chief executive. • Finally, Republicans will introduce legislation to boost
the offering threshold for companies that don't need to register with the
SEC to $50 million from $5 million. Republicans say this change will make it
easier for smaller companies to raise money for investment.