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Economy

Banks Aim To Repeal Dodd-Frank Provision Requiring Them To Own A Portion Of Their Risky Loans

A provision of the Dodd-Frank financial reform law that is often overlooked is one requiring lenders to hold onto a portion of risky loans that they make. This addresses a key problem that contributed to the country’s economic meltdown, which was the ability for subprime lenders to securitize and sell off an entire loan, divorcing themselves from the risk of mortgage default.

As the Center for Public Integrity has pointed out, during the subprime bubble, “lenders were selling their loans to Wall Street, so they wouldn’t be left holding the deed in the event of a foreclosure.” Wall Street then sold the loans off to investors, moving the default risk even further down the road. This process fueled a dramatic decline in lending standards.

Dodd-Frank requires that lenders retain five percent of every loan on their books, so that they are not completely separated from default risk. McClatchy reports that the banks are trying to quietly nix that part of the law:

Financial lobbyists also are working to soften requirements that Wall Street firms put more “skin in the game” by retaining more mortgage bonds on their books to guard against shoddy lending…They’re trying to expand the definition of “plain vanilla” mortgages that would be exempted from the risk-retention requirements. [...]

The [American Securitization Forum] and its members want to exempt interest-only mortgages, which caused many unsophisticated borrowers to lose their homes. “Certain types of loans aren’t standard, but are appropriate for high creditworthy borrowers,” Deutsch said in an interview, pointing to wealthy borrowers who seek to maximize their mortgage-interest deductions at tax time.

During the debate over Dodd-Frank, the banks pushed Sen. Bob Corker (R-TN) to propose an amendment (which was ultimately defeated) striking the risk-retention provision from the bill. It’s no surprise that during the law’s rule-making phase, they are trying to weaken it as much as possible.

Exempting interest-only loans from the risk-retention requirement would be particularly detrimental, considering that they are risky loans that typically involve large resets, and the dramatic increase in monthly mortgage payments that such resets entail. “In a lot of ways, [an interest-only loan is] an illusion of homeownership with the reality of rental,” said Michael Calhoun, president of the Center for Responsible Lending.

With House Republicans hell-bent on rolling back provisions in Dodd-Frank, this is one more area that merits watching. After all, the banking industry is already counting on “better outcomes” with Republicans running the lower chamber.

Politics

GOP Rep.-elect Richard Hanna: If GOP Adopts ‘Posture’ Of No Compromise, It Will ‘Be Punished In Two Years’

With the House of Representatives coming under Republican control in the new Congress, many Americans are wondering how the new leadership will behave. A number of major Republicans have come out against any sort of compromise with Democrats in Congress, like Rep. Dave Camp (R-MI), the ranking member of the House Ways and Means Committee, who has vowed to block middle class tax cuts if the tax cuts for the richest Americans aren’t extended as well.

GOP Rep.-elect Richard Hanna (NY) separated himself from hardliners in his party like Camp yesterday during an interview with a State of Politics reporter. The interviewer asked Hanna, “There’s a lot of people in your party that are already talking about taking a hard line and not compromising with the president. What do you think?” Hanna responded by saying that he doesn’t “feel that way. And I think that ultimately if the Republican Party takes that kind of posture, then they will be punished in two years, becaues people are sick of partisanship“:

INTERVIEWER: There’s a lot of people in your party that are already talking about taking a hard line and not compromising with the president. What do you think? Is it too early, are you going to get your feet wet and then decide, or are you going to take a hard line, are there certain things you won’t compromise on?

HANNA: I’m sure there are, but I’m sure there’s many things I’m sure we’ll be able to work together with. I don’t feel that way. And I think that ultimately if the Republican Party takes that kind of posture, then they will be punished in two years, because people are sick of partisanship. And I think if you live in New York you have a particularly good view of the product it makes over time. That’s not my goal, my goal is to find solutions and work for them.

Watch it:

While Hanna also came out against further continuing unemployment benefits that are set to expire at the end of this month, he came out against a full repeal of the recently passed health care law. He said that what the country wants is a “good progressive health care reform bill that does what we ultimately wanted it do, which is provide health care to people at a reasonable cost,” and that there are aspects of the law that he likes. He said that the law may be repealed but that it’s “ultimately up to both parties to come up with something that the public finds affordable and palatable in a lot more ways.”

LGBT

Reid To Bring Defense Bill To The Floor With DADT Repeal Amendment

Moments ago, Human Rights Campaign (HRC), Servicemembers Legal Defense Network (SLDN), and the Center for American Progress Action Fund (CAPAF), announced that White House officials and Senate Majority Leader Harry Reid (D-NV) will bring the National Defense Authorization Act (NDAA) to the floor of the Senate during the lame duck session, with an amendment to repeal Don’t Ask, Don’t Tell:

Key Senate leadership and Administration officials this evening met with representatives of the Human Rights Campaign (HRC), Servicemembers Legal Defense Network (SLDN), and the Center for American Progress Action Fund (CAPAF). The officials told the groups that Majority Leader Harry Reid and President Obama are committed to moving forward on repeal by bringing the National Defense Authorization Act – the bill to which “Don’t Ask, Don’t Tell” repeal is attached – to the floor in the lame duck session after the Thanksgiving recess. Further the Majority Leader and the President made clear their opposition to removing the DADT provision from the NDAA. Information on the exact timing and procedural conditions will be announced by the Majority Leader’s office.

The question, of course, is whether the Senate will have enough time to consider the measure in an open amendment process, something that typically requires two weeks of debate. Therefore, if Reid brings the measure to the floor on Monday, November 29th, the Senate could finish debate and vote on the bill by December 13th and then begin conferencing the measure with the aim of passing it before Christmas.

“Present at the meeting with representatives from HRC, SLDN and CAPAF were: Jim Messina, Deputy White House Chief of Staff; Phil Schiliro, White House Director of Legislative Affairs; Chris Kang, Special Assistant to the President for Legislative Affairs; Brian Bond, Deputy Director of the White House Office of Public Engagement; David Krone, Chief of Staff to Majority Leader Reid; and Serena Hoy, Senior Counsel to Majority Leader Reid,” the groups’ press release states.

Tomorrow, Sens. Joe Lieberman (I-CT), Mark Udall (D-CO), Kirsten Gillibrand (D-NY), Roland Burris (D-IL), Barbara Boxer (D-CA), Ron Wyden (D-OR), Patrick Leahy (D-VT), Dianne Feinstein (D-CA), and Al Franken (D-MN) are also scheduled to hold a press conference urging the Senate to repeal the policy during the lame duck session.

Update

Senate Armed Services Committee Chairman Carl Levin (D-MI):

I welcome Senator Reid’s announcement that he will bring up the National Defense Authorization Act after Thanksgiving. I will work hard to overcome the filibuster so that ‘Don’t Ask, Don’t Tell’ is repealed and the NDAA — which is critical to our national security and the well-being of our troops — is adopted. I have asked Senator Reid to make his motion to bring up the matter after my committee and the public have received the Defense Department’s report and following the hearings that I plan to hold on the matter, which should take place during the first days of December.


Update

,Rachel Maddow covered the latest developments:


Update

,AP: “Jim Manley, a spokesman for Reid, said Wednesday that it had not been decided yet how many or which amendments might be considered for debate.”


Update

,Sen. Majority Leader Harry Reid (D-NV) just issued the following statement. Note he does not get into details about the amendment process or any other specifics:

During the work period following the Thanksgiving holidays, I will bring the Defense Authorization bill to the floor, including a repeal of ‘Don’t Ask, Don’t Tell.’ Our Defense Department supports repealing ‘Don’t Ask, Don’t Tell’ as a way to build our all-volunteer armed forces. We need to repeal this discriminatory policy so that any American who wants to defend our country can do so.


Update

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Security

New Study Cites Economic Benefits Of The DREAM Act

The North American Integration and Development Center at UCLA has released a new report highlighting the economic benefits of enacting the Development, Relief and Education for Alien Minors (DREAM) Act. The report, entitled “No DREAMers Left Behind: The Economic Potential of DREAM Act Beneficiaries” states:

Passage of the DREAM Act is not only a question of individual fulfillment; it is a practical step toward realizing a return on the U.S. public education system’s investment in immigrant youths. DREAMers make up a highly-educated and potentially high-income earning group that can contribute billions of dollars to the U.S. economy across diverse industries. The DREAM Act offers a moral solution to the trap of being a young, motivated, undocumented immigrant in the U.S. It is also an economically sensible piece of legislation that advances the interests of U.S. society as a whole.

More specifically, the report concludes, “In the No DREAMers Left Behind scenario, 2.1 million undocumented immigrants would become legalized and generate approximately $3.6 trillion” over a 40-year period. Another positive effect of the DREAM Act would be that “[a] higher supply of skilled students would also advance the U.S. global competitive position in science, technology, medicine, education and many other endeavors.”

These findings are especially significant given the nation’s falling level of educational attainment. As Wonk Room economics blogger Pat Garofalo notes, “By 2025, according to estimates by the Lumina Foundation, our nation will be short 16 million college-educated workers. This will have real consequences for both the economy as a whole and for individual workers.”

In the past, the College Board has indirectly supported the report’s conclusions, stating, “In strictly economic terms, the contributions that DREAM Act students would make over their lifetimes would dwarf the small additional investment in their education beyond high school, and the intangible benefits of legalizing and educating these students would be significant.”

The reasoning behind the report’s findings is pretty straightforward. The DREAM Act provides young undocumented immigrants who were brought to the U.S. through no fault of their own with the opportunity to get on a path to legalization by attaining a college education or serving in the military. As a result, those who qualify for the DREAM Act will also have access to better economic opportunities than they would if they were working without a visa in the shadows of the economy.

Even former Gov. Mike Huckabee (R-AK) agrees with that logic, saying, “the economy will be better when that [undocumented] kid is able to fully realize his potential and break the pattern of his parent’s illegal activity.” Polls show that 70 percent of Americans support the DREAM Act.

Yesterday, after a meeting between the President and Latino congressional leaders, the White House issued a press release stating, “The President and the CHC [Congressional Hispanic Caucus] leaders believe that, before adjourning, Congress should approve the DREAM Act.” The question is whether Rupublicans will join or obstruct the effort to allow undocumented students to improve their lives and the U.S. economy.

Yglesias

Endgame

They don’t love you like I love you:

— Constitutional monarchy is good for women’s equality.

“A number of States register or license interior designers”; are there big problems in the states that don’t?

— Ron Wyden, dreaming of tax reform.

— Sarah Palin has the reading list of a presidential candidate.

— White House decides to suck up more to the US Chamber of Commerce.

— Women make up just 24 percent of the people “interviewed, heard, seen, or read about in mainstream broadcast and print news.”

Undergrad yesterday told me he likes the blog but dislikes the “hipster music” I allegedly favor. The Yeah Yeah Yeahs’ totally awesome “Maps”.

Politics

Pat Robertson’s Group Demands Investigation Of Muslim Congressional Staffers Based On Misleading Fox Report

With America caught up in an Islamophobic whirlwind, anything remotely tied to the Islamic faith sets off paranoid hysterics over an impending Muslim takeover. Rather than responsibly debunk these delusions, the Fox News network has contributed to the hysteria by promoting extremely radical guests, polarizing rhetoric, bigoted punditry, and racial profiling. Last week, FoxNews.com unveiled a new “investigation” targeting Muslim staffers on Capitol Hill. According to the report, the Congressional Muslim Staff Association’s (CMSA) have sought to bring the “Who’s Who” of jihadist sympathizers to its weekly Friday Jummah prayer meetings “for more than a decade.”

Right on cue, the right-wing American Center for Law and Justice demanded that the Justice Department to investigate and “take immediate action to halt” the congressional prayer sessions. Channeling its founder and indefatigable anti-Muslim Rev. Pat Robertson, the ACLJ said the “absurdity” of inviting “the very terrorists who want to destroy America” to Capitol Hill “raises a host of significant questions-including concerns about national security” and, based on Fox’s “report,” warrants a “thorough investigation”:

The American Center for Law and Justice (ACLJ) is calling on the U.S. Department of Justice to launch an investigation concerning reports that Islamic terrorists have appeared before a Congressionally sponsored Muslim group that meets at the U.S. Capitol. The investigative report by Fox News reveals that a number of well-known terrorists-including U.S. born Anwar al-Awlaki, the Al Qaeda cleric believed to be hiding in Yemen and the lone American on the U.S. government’s capture or kill list-have appeared at what’s been described as weekly ‘prayer’ sessions on Capitol Hill.

“It is unbelievable that that the very terrorists who want to destroy America are permitted to meet in a Congressionally-sanctioned setting on Capitol Hill,” said Jay Sekulow, chief counsel of the ACLJ. “This raises a host of significant questions-including concerns about national security. We’re demanding that the Department of Justice conduct an investigation and take immediate action to halt to what appears to be a pattern of inviting Islamic extremists with ties to terrorism to participate in these events. The absurdity is clear: the U.S. government disinvites Franklin Graham to a prayer service at the Pentagon, while Islamic terrorists take part in Capitol Hill events. A thorough investigation is warranted.”

In ginning up the hysteria over terrorist infiltration, Fox and the ACLJ missed one small fact – the Friday prayers have nothing to do with the CMSA. As Religion Dispatches’ Sarah Posner explains, the prayers are held by individual staffers “under the auspices of the House chaplain; they are not an official function of the CMSA.” In fact, the CMSA, which does not receive funding or support from the government, “didn’t exist” when Fox says the people with terrorist ties supposedly went to the prayer sessions. The report, says Posner, is less fact and more “red meat” for the “conservative culture that feeds on paranoia.”

Just ask the Muslim Republicans who are involved. Suhail Kahn, a conservative Republican who served as a political appointee in the Bush administration and who currently serves on the American Conservative Union board, was once a Republican hill staffer. According to Khan, the services are open to the public and are “very pro-American, and tend to be about public service, and the honor of public service.” In fact, the member who granted Khan’s room request for a small number of Muslim staffers to pray was then-Speaker and current Islamophobe Newt Gingrich. If CMSA truly posed some national security issue, Gingrich or Senate Minority Leader Mitch McConnell (R-KY) — who’s staffer is CMSA’s vice-president — would avoid any semblance of support.

But, as Khan points out, unfounded “guilt-by-association” claims like this are nothing more than “good old fashioned bigotry.” “Ninety-nine point nine percent of honest reporters” would “know a smear when they see it” and “toss it into the garbage can,” he said. Kudos to Fox News for making that 0.1 percent.

LGBT

Gibbs Claims DADT Repeal Is As Important As START, Tax Cuts, But Says Obama Hasn’t Called Swing Senators

The Advocate’s Kerry Eleveld attended a White House press gaggle this afternoon where Press Secretary Robert Gibbs told her that while passing the National Defense Authorization Act — which contains the amendment to repeal Don’t Ask, Don’t Tell — is a priority for the administration, President Obama has not yet reached out to swing Senators on the issue:

ELEVELD: Sen. Susan Collins joined Sen. Lieberman in calling for early release of the Pentagon’s report on repeal. Has the president made any phone calls to Sen. Collins or other swayable senators – does he plan to make any phone calls to those folks?

GIBBS: I don’t know that the president has – I don’t believe that the president has talked to Sen. Collins or Sen. Lieberman on this issue. To my knowledge, the study has not come over here. Obviously, it’s being finished up by the Pentagon. [...]

ELEVELD: Just today, you’ve that the START treaty is something you think will get done [during the lame duck], and you’ve said the [middle class] tax cuts are something that you have to get done. What category would you put the Defense authorization bill in?

GIBBS: I would put it in the same category. As I’ve said before, it’s a priority for the president to get it done before the end of the year.

I should note that this may contradict what a White House official told the Huffington Post’s Amanda Terkel last week. That individual said that the administration has “reached out to Democratic and Republican lawmakers on the issue, making calls as recently as Monday night.” “The Administration has not wavered from its stance that the DADT repeal should be passed during this Congress,” the official stated.

Gates’ comments focus on the President ( rather than the administration as a whole) but they do square fairly well with what I’ve been hearing from staff members for the swing senators — Snowe, Collins, Voinovich, Webb, Manchin: the administration isn’t lobbying on the issue and hasn’t called. And, it’s the same thing that the Log Cabin Republicans have complained about to Terkel and Eleveld. On Monday, an aide to Senate Majority Leader Harry Reid (D-NV) also told repeal activists that he “cannot guarantee” the bill coming to a vote “before Thanksgiving,” and that “the White House has not been engaged.”

Meanwhile, one Senate Democratic aide told the Washington Blade’s Chris Johnson that “repeal — currently pending before the U.S. Senate as part of the fiscal year 2011 defense authorization bill — is ‘barely hanging on with life support.’”

“The only way to resuscitate this effort and get a ‘Don’t Ask, Don’t Tell’ vote is for President Obama and [Defense Secretary Robert] Gates to start pushing directly, something we on the Hill had expected the president and Gates to do long ago,” the aide said.

The American people are of course still on board. A new CNN poll finds that support for repealing the measure has increased from 67% in September to 72%. Only 23% of Americans oppose repeal.

Update

The White House has issued the following statement:

Today, President Obama called Chairman Levin to reiterate his commitment on keeping the repeal of ‘Don’t Ask, Don’t Tell’ in the National Defense Authorization Act, and the need for the Senate to pass this legislation during the lame duck.

The President’s call follows the outreach over the past week by the White House to dozens of Senators from both sides of the aisle on this issue.


Update

,Senate staffers tell Greg Sargent that DADT repeal could still pass the Senate if Senator Harry Reid and the White House allow for a two-week debate and an open amendment process.

Yglesias

American Politics Was About Race Long Before Barack Obama Came on the Scene

Adam Serwer commented on racial attitudes and the Obama agenda earlier today, saying:

I think it’s wrong to suggest that opposition to Obama’s agenda is “race-based,” because that suggests conservatives would feel differently if Obama weren’t president. I think the GOP’s general positions on the issues would be the same if Hillary Clinton were president.

I think that’s basically true, but in some ways it misses the point. American political behavior is heavily shaped by racial attitudes in ways that are much more fundamental than the race of the candidate. Just look at the extraordinary racial gap in voting behavior that occurs clearly and consistently every time a white Democrat faces off against a white Republican. Or look at how nominating Michael Steel didn’t make African-American Marylanders suddenly love Republicans. Stephanie Mencimer found a good example of this in the American Values Survey when she observed a big partisan gap in the answer to the question of whether or not discrimination against whites “is as big a problem as discrimination against blacks and other minorities.”

56 of Republicans (and 61 percent of self-described tea partiers) say it is, but only 28 percent of Democrats agree. Among white voters, more ethnocentric attitudes are associated with less support for means-tested welfare and more support for universal social insurance. It’s difficult to get this stuff acknowledged in the media because people get very defensive about accusations of racism. But the genius of the Mencimer question is that it’s really just a question. Evidently a question Americans disagree about. And in a way that’s systematically related to broader political issues.

I think it’s fair to say that putting an African-American presidential candidate on the ballot increases the salience of some of these divides over racial topics (I don’t think I would have seen so many of my black neighbors standing on long lines to buy special editions of the post-election copy of the Washington Post had Hillary Clinton been the Democratic nominee) but racial issues have been important drivers of American politics since before the Constitution was written.

Health

Boehner Invents New Constitutional Doctrine Out Of Thin Air To Challenge Health Reform

House Minority Leader John Boehner’s (R-OH) passionate opposition to the notion that all Americans should be able to afford health care was apparent long before his orange-faced “Hell No You Can’t!” rant against the Affordable Care Act, so it should come as no surprise that he has signed an amicus brief challenging the ACA.  Anyone who is actually familiar with the Constitution, however, would be quite surprised by the arguments Boehner’s brief makes.  Indeed, the presumptive Speaker-elect appears to have invented an entirely new theory of the Constitution out of thin air in order to claim that the ACA is unconstitutional.

To be sure, there aren’t exactly any good arguments against the constitutionality of health reform.  As conservatives are so fond of pointing out, health care spending makes up about one-sixth of the U.S. economy, and even ultra-conservative Justice Antonin Scalia agrees that Congress has sweeping authority to regulate the economy.  Boehner’s brief nonetheless claims that the law’s minimum coverage provision — the provision requiring almost all Americans to either carry health insurance or pay slightly more in income taxes — exceeds Congress’ power under the Constitution.

As MIT economist Jonathan Gruber explains, this provision is essential to any health reform package that forbids discrimination against persons with preexisting conditions:

Insurance companies are also prohibited from excluding coverage due to preexisting illnesses.  This is a highly popular reform, but it doesn’t work in a vacuum. If insurance companies must charge the same price to people whether they’re sick or healthy many healthy people will view this as a “bad deal” and not buy insurance. This results in higher prices that chase even more people out of the market. The result is a “death spiral” that leads only the sick to purchase insurance at very high prices. Several states tried such community rating reforms—offering health insurance policies within a given territory at the same price to all persons without medical underwriting—in their nongroup markets over the past two decades, and sharp rises in insurance prices ensued along with rapidly shrinking market size.

The fact that the minimum coverage provision is essential to making sure the rest of the bill functions properly has constitutional implications.  A provision of the Constitution known as the Necessary and Proper Clause provides that Congress has the power “[t]o make all laws which shall be necessary and proper for carrying into execution” its power to pass economic regulation.  In Justice Scalia’s words, this means that “where Congress has the authority to enact a regulation of interstate commerce, it possesses every power needed to make that regulation effective.”

Boehner’s brief, however, essentially asks a Florida trial judge to rewrite this Necessary and Proper Clause to place a new an unheard of limit on Congressional authority.  Under Boehner’s reasoning, a law can only be enacted under the Necessary and Proper power if some other law would become “legally ineffective” without it.  Needless to say, Boehner fails to cite a single case supporting this claim.

The reason why Boehner can’t find such a case is because none exists.  There is, however, a Supreme Court case called Sabri v. United States, which completely eviscerates Boehner’s legal claim.  In Sabri, the Supreme Court held that — even though there is nothing in the Constitution expressly authorizing Congress to enact an anti-bribery law — Congress may still invoke its Necessary and Proper power to forbid people from bribing state officials in order to protect federal money that is entrusted to the states.  Under Boehner’s reasoning, Sabri could not have come down the way that it did, since an anti-bribery law is hardly essential to making a grant of money to the states “legally effective.”

Since Boehner is expected to lead the House of Representatives for the next two years, America can only hope that he doesn’t take the same careless attitude towards lawmaking that he does towards the Constitution.

Politics

Rep. Crowley Says GOPers Who Want To Repeal Health Care Law Should Forgo Taxpayer-Funded Health Care

Earlier this week, Rep.-elect Andy Harris (R-MD), who ran on a platform of repealing the recently-passed health care law, ironically demanded access to his taxpayer-subsidized congressional health care plan upon arriving in Washington. Yesterday, Rep. Joe Crowley (D-NY) began circulating a letter among his Democratic colleagues calling on Harris and other members of Congress who want to repeal the new health care law to forego their own government health care plans. In a letter to House Minority Leader John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY), Crowley writes, “If your conference wants to deny millions of Americans affordable health care, your members should walk that walk“:

If your conference wants to deny millions of Americans affordable health care, your members should walk that walk,” Crowley writes in a letter to House Minority Leader John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.).

You cannot enroll in the very kind of coverage that you want for yourselves, and then turn around and deny it to Americans who don’t happen to be Members of Congress. We also want to note that in 2011, the Federal government will pay $10,503.48 of the premiums for each member of Congress with a family policy under the commonly selected Blue Cross standard plan.”

Conservative members of Congress receiving taxpayer-subsidized health care benefits while opposing the same benefits for the general public is nothing new. During the height of the health care debate, Rep. Anthony Weiner (D-NY) identified 55 Republicans who were enrolled in Medicare, the country’s single-payer universal health care system for the elderly. Not one of those Republicans supported offering such a plan to everyday Americans.

Yet at least one Republican has taken up Crowley’s challenge. Rep.-elect Bobby Shilling (R-IL) told ABC’s Top Line today that he will not be taking part in the congressional health care plan, nor will he take part in many other benefits members of Congress receive, like the congressional pension plan. “Congress shouldn’t have anything better than the American people,” he said. Watch it:

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