Today, the Center for American Progress and the Hamilton Project held a conference examining challenges in the labor market, but since the topic du jour right now in Washington is financial regulatory reform, the discussion almost inevitably wound its way to that subject. The day’s final panel featured New York City Mayor Mike Bloomberg and National Economic Council Director Larry Summers, both of whom weighed in on financial reform.

Bloomberg, of course, is mayor of a city that depends, in very large part, on tax revenue from Wall Street bonuses, so he’s hesitant to endorse much that will significantly crack down on financial sector profits. To that end, when asked about the proposed creation of a new consumer protection regulator, Bloomberg said that he’d prefer the focus be on financial literacy education, “not restrictions.” Summers, however, disagreed:

We don’t allow you to sell baby seats that are unsafe for babies. We don’t allow you to sell baby seats that look good, but that have 20 pages of print that say ‘by the way, it’s not safe’…I don’t see the problem with some regulation that actually goes to the content of the product.

This resembles the rhetoric employed by Harvard Law Professor Elizabeth Warren in making her case for the creation of an independent consumer protection regulator. As she pointed out way back in 2007, you aren’t allowed to sell a toaster with a 20 percent chance of exploding, but you can sell a mortgage with a 20 percent chance of putting a family into foreclosure:

It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street…Similarly, it’s impossible to change the price on a toaster once it has been purchased. But long after the papers have been signed, it is possible to triple the price of the credit used to finance the purchase of that appliance, even if the customer meets all the credit terms, in full and on time. Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards they are left at the mercy of their creditors?

During the financial reform debate that is set to kick into high gear next week, Republicans are set to propose amendments gutting the consumer protection portion of Sen. Chris Dodd’s (D-CT) legislation. But to be effective, the new regulator has to be able to ban financial products that serve no purpose other than to boost bank profits at the expense of consumers.

Our guest blogger is Rebecca Lefton, a researcher for Progressive Media.

BP’s profits rose an unexpected 135% in the first quarter of 2010 compared with the first quarter the prior year. Yet these were “overshadowed” by the tragic oil spill resulting from an explosion at the Deepwater Horizon oil drilling rig, located 40 miles off the coast of Louisiana. The rig is owned by a Switzerland-based company, Transocean Ltd, and leased to BP (formerly British Petroleum). These companies and Halliburton, whose cementing operations may have caused the explosion—are being sued for negligence.

BP has aggressively rebranded itself as a company focused on alternative, clean energy sources. The company has a series of commercials advertising their “Beyond Petroleum” campaign “promoting and marketing alternative energy solutions.” But “Beyond Petroleum” is an Orwellian slogan for what is still almost entirely an oil company focused on making billions every year from dirty fossil fuels. A new video from the Center for American Progress Action Fund’s Victor Zapanta depicts BP’s greenwashing in contrast with the tragic results of its drilling operations:

Indeed, although BP ads depict green flowers and spinning windmills, BP only invested a tiny fraction of their profits into alternative energy last year. Their actual investments in alternative energies — $1.3 billion in 2009 — are dwarfed by their profits. In fact, the last two years their budgeted alternative energy investments were around seven percent compared to profits. According to Driessen of the Atlas Economic Research Foundation, BP spent the same amount on this advertising over two years (the campaign was launched in 2000) as they did on hydrogen, wind, and solar energy over a six-year period:

Beyond ‘Beyond Petroleum’ Greenwashing Lies Tar Sands. On April 14, BP “easily beat off challenges to a Canadian oil sands project and to its executive pay policy.” BP rejected a shareholders resolution in opposition to Canadian tar sands production “because it emits more carbon dioxide than traditional oil production, uses more water and involves greater destruction to the landscape.” [Reuters, 4/15/2010]

BP Quit Climate Action Partnership. “ConocoPhillips, BP and Caterpillar have dropped out of the U.S. Climate Action Partnership (USCAP), the coalition of corporations and environmental groups that has been most prominent in pushing Congress to pass cap-and-trade legislation.” [Washington Post, 2/17/2010]

$16 Million In Lobbying. BP spent $16 million lobbying in 2009. [Open Secrets]

BP Profiting From Iran — Threatening our National Security. “BP, in a 2009 filing with the Securities and Exchange Commission, said it had interests in and was the operator of two fields and a pipeline located outside Iran in which the National Iranian Oil company had an interest.” [New York Times, 3/6/2010]

41% Raise For BP’s CEO. “Chief Executive Tony Hayward’s total remuneration and share awards rose 41% in 2009 on performance bonuses from improved operations which made the company one of the best performing oil majors in the fourth quarter, despite lower full-year profits due to the fall in the oil price.” [Wall Street Journal, 3/5/2010]

Americans are spending nearly $3 billion more on gasoline due to higher gasoline prices. And taxpayers are spending billions of dollars in tax subsidies to Big Oil. These subsidies will cost the U.S. government about $3 billion next year in lost revenue and nearly $20 billion over the next five years. The next dollars we spend should go to companies that provide genuinely clean and safe fuel. The costs are too high.

Next week, the Senate will begin to vote on amendments to Sen. Chris Dodd’s (D-CT) financial regulatory reform bill, and a slew of proposals are expected from both the right and the left. For instance, Sen. Ted Kaufman (D-DE), along with Sen. Sherrod Brown (D-OH), have an amendment capping bank size, while Sens. Jeff Merkley (D-OR) and Carl Levin (D-MI) are planning an amendment institutionalizing the Volcker rule, which would prevent banks from trading for their own benefit with federally insured dollars.

Republicans, meanwhile, are planning amendments aimed at weakening Dodd’s Bureau of Consumer Financial Protection and blowing holes in Sen. Blanche Lincoln’s (D-AR) surprisingly strong derivatives regulation. But those are fairly high-profile issues.

As evidenced by a document released today by the Senate Republican Policy Committee (RPC), the GOP is also taking aim at some smaller issues, which nevertheless could significantly impede the effectiveness of financial reform. Here are two points made by the RPC that show where the debate is headed:

– The bill creates overlapping and potentially conflicting regulations: The Dodd bill does not fully and clearly preempt state law. Indeed, the bill provides that it does not preempt state laws that provide greater protection than federal law.

– The bill would weaken arbitration, harming consumers and investors. Arbitration is a form of alternative dispute resolution that has long been recognized as an effective tool for efficiently and fairly resolving disputes.

Both of these statements are absolutely true: Dodd’s bill wouldn’t preempt state law and would weaken arbitration. But, contrary to the RPC’s assertions, these are important steps that will protect consumers from the excesses of the financial industry.

Preemption of state law, as I’ve discussed here often, played a large role in allowing the subprime crisis to spread. Many states had laws that went further on cracking down on shoddy lending than federal law, but President Bush’s regulators preempted them, stopping states in their tracks and allowing pernicious lending practices to continue unabated.

Arbitration, meanwhile, is a practice used by the financial industry to ensure that it can’t be sued for exploitative business practices. As Ian Milhiser has pointed out, “for years, the banking industry has padded its profits by forcing consumers to sign a ‘forced arbitration’ agreement denying them to right to sue the bank in a real court, and instead forcing any disputes between the bank and a lender into a biased, corporate-run forum that rules in favor of the banking industry 95% of the time.”

The banking industry is going all out against this legislation, as it is strong in a number of areas and would change the dynamic between consumers and the financial industry in many ways. And it’s these sorts of little changes, in parts of the bill that aren’t getting the headlines, where the industry, aided by willing Republicans, can have a lot of success. Proponents of the bill will have to take a stand against these sort of changes.

Today, the Senate began debate on financial regulatory reform, after Republicans finally agreed to end three days of obstruction last night and allow the bill to come to the floor. Ever since regulatory reform first began to move through the House of Representatives last year, the GOP (and its allies in the big business community) have sought out sympathetic figures that it (falsely) claims the legislation will have an adverse effect upon. Florists, churches, and the makers of Snickers bars have all had their moment, and today’s choice is community bankers.

First, Sen. Saxby Chambliss (R-GA) appeared on MSNBC to decry the effect of derivatives regulation on community banks. Then, Sen. Richard Shelby (R-AL), the ranking member of the Senate Banking Committee, went to the Senate floor to claim that resolution authority — the proposed mechanism for unwinding large, failed financial firms — would give large banks an advantage over their smaller counterparts. Watch a compilation:

Neither of these concerns has a basis in reality. Chambliss is worried about the effect of derivatives reform when 97 percent of the activity in the $300 trillion derivatives market is undertaken by just five mega-banks: JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup and Wells Fargo. I’m not sure what sort of derivatives trading Chambliss thinks is occurring at the community level, but reform should make it cheaper for businesses to use derivatives to legitimately hedge against risk.

As for Shelby’s concern, the fact that resolution authority will enable the very biggest banks to fail (instead of being propped up by the government) should benefit smaller banks — which already have a mechanism in place for when they fail — by removing the big firms’ implicit government guarantee.

But if the GOP is really concerned about the effect of regulatory reform on community banks, then it should be embracing the push to levy a bank tax on the biggest financial firms. This would help level the playing field by making it more expensive to be a large interconnected firm (offsetting some of the funding advantages that such size conveys). The Congressional Budget Office has said that a bank tax would “improve the competitive position of small- and medium-size banks, probably leading to some increase in their share of the loan market.”

Of course, the GOP has shown no inclination to support a bank tax. In fact, it has actively scoffed at the idea. But Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, said earlier this week that “I don’t think there’s much doubt that there will be a bank tax.” So will Chambliss and Shelby jump on board?

This week, a slew of current and former Goldman Sachs executives appeared before the Senate Permanent Subcommittee on Investigations to attempt to explain the firm’s practice of selling products that it internally regarded as “shi*ty.” The timing of the hearing was fortuitous for Democrats, as they try to shepherd Sen. Chris Dodd’s (D-CT) financial regulatory reform bill to a vote.

One of the more contentious aspects of the reform debate is that dealing with derivatives, after Sen. Blanche Lincoln (D-AR) released a surprisingly strong bill that goes further in bringing the opaque markets into the light than either Dodd’s or the bill passed by the House of Representatives last fall. And Goldman Sachs, along with the rest of Wall Street, are mobilizing to blunt the impact of the bill.

The five largest banks in the nation made $23 billion on derivatives trading in 2009, so this is a very lucrative business that they are trying to protect. But as former President Bill Clinton pointed out at the Peter G. Peterson Foundation yesterday, the problem with Goldman’s business model is that its transactions have nothing to do with an actual product or the legitimate use of derivatives to hedge against risk:

I like this idea of requiring greater reserves on derivatives and I think there ought to be clearinghouses as [CFTC Chairman] Gary Gensler suggested, because I think that too much of this stuff has no economic purpose no matter who wins and who loses. And to me that’s the bigger problem. These Goldman guys are mad because they think they were targeted at this time, and they think they didn’t violate the law. I’m not at all sure they violated the law. But I do believe that there was no underlying merit to the transaction, and that’s what I think we need to look at.

Watch it:

Clinton isn’t kidding. As I’ve pointed out quite a bit, there are $78 dollars in derivatives for every single dollar that is used by a company to hedge against risk. This is the kind of stuff Great Britain’s chief regulator, Adair Turner, is talking about when he says that “there are some profitable activities so unlikely to have a social benefit, direct or indirect, that [banks] should voluntarily walk away from them.” As Clinton suggested, banks should certainly have to put these trades through clearinghouses, which ensure that both sides of a trade have adequate collateral to back the deal up. Even better is putting the trades on a public exchange, so that other investors and regulators can get a much better sense of what is occurring in the market.

Yesterday, after three days of preventing Sen. Chris Dodd’s (D-CT) financial regulatory reform bill from coming to the Senate floor, Republicans finally relented. Debate on the bill is slated to start this afternoon, and first up on the docket is the section dealing with derivatives, which has Wall Street up in arms.

The Republicans are hoping to weaken the derivatives section of the bill by portraying it as harming businesses that aren’t connected to Wall Street. Senate Minority Leader Mitch McConnell (R-KY) displayed a bit of this earlier in the week, when he said that reform of the derivatives market would impair Mars’ ability to hedge against changes in sugar prices (which is obviously integral for a candy company). Sen. Kit Bond (R-MO) grabbed this ball last night and ran with it, claiming on CNBC that Dodd’s bill would “stick it” to farmers who use derivatives to protect themselves against price changes:

What I’m worried about is Main Street, and the derivative section as written now would stick it to energy companies, utility companies having to hedge, as well as farmers. We’ve got to get that part out of it. That’s the bad part…What I want is spinning off Main Street, get them out of the derivatives. It was not derivatives on Main Street that caused this problem. Get Main Street out. That’s what we want. We want out of it. Fix Wall Street, don’t kill Main Street.

Watch it:

Sen. Richard Shelby expressed a similar concern, saying “I want to make sure that the bona fide end user is protected — the people who are not casino gamblers with derivatives that did not cause the problem, that hedge and manage risk for their own well-being.”

These concerns are vastly overblown, as the legislation already contains exemptions for those entities legitimately hedging against risk. But furthermore, the commodities futures market (which deals with products like corn and wheat) is already regulated in much the way that Dodd’s bill would regulate the rest of the derivatives market, using clearinghouses to ensure that both parties involved in a trade have adequate collateral to back up their deal. And as Commodity Futures Trading Commission Chairman Gary Gensler explained, the commodities market has survived decades of financial turmoil largely without incident precisely because it’s regulated:

Derivatives themselves are not new: They have existed since the Civil War, when farmers and grain merchants began using them to hedge against future changes in the price of corn and wheat. So they entered into derivatives contracts with other parties to lock in the price of corn or wheat for harvest time. These first derivatives — called futures — have been comprehensively regulated since the 1930s. Futures markets functioned largely without incident during the 2008 financial crisis in part because these contracts are cleared by regulated clearinghouses.

It’s the rest of the $300 trillion derivatives market that is the concern, and which the Democrats want to regulate in much the same way that futures contracts are already overseen. For every $1 used by a company or a farmer to legitimately hedge against risk, there are $78 in derivatives that are traded for the sake of being traded. As former President Bill Clinton put it, “I think too much of this stuff has no economic purpose…Too much of our growth in the last decade was in finance.” And prudent regulation is needed to make sure that this huge market can’t bring the economy to its knees again.

Today, after Republicans voted against beginning debate on Sen. Chris Dodd’s (D-CT) financial regulatory reform bill for a third time, Senate Majority Leader Harry Reid (D-NV) and the Democrats said that they were prepared to keep the Senate in session all night, forcing the GOP to actively filibuster the bill.

“All the talk of the Republicans about wanting to do something about this bill before it gets on the floor is really anti-Senate and anti-American,” said Reid. Sen. Claire McCaskill (D-MO) added that the plan “is to stay all night asking consent of Republicans to let us debate Wall Street reform. I just don’t get why we can’t debate.”

However, before it got to that point, the Republican leadership caved, and now seems poised to let Dodd’s bill come to the floor for debate. There doesn’t seem to have been any deal cut with the Republicans, aside from unspecified “loopholes” that Minority Leader Mitch McConnell (R-KY) claims were closed in the $50 billion resolution authority fund that the GOP has been railing against (but that many, including Federal Deposit Insurance Corp. Chairman Sheila Bair, support).

Already, Sens. Susan Collins (R-ME), Olympia Snowe (R-ME) and Lamar Alexander (R-TN) have said that they will be voting to move to debate. Sen. George Voinovich (R-OH) also seemed poised to vote to proceed earlier today, while Sen. Bob Corker (R-TN) dismissed the “alternative” plan that Republicans have been circling today (which, in large part, looked like Dodd’s bill anyway).

What remains to be seen is the sort of amendments that Republicans will propose during the actual floor debate. If they look anything like the amendments Republican members of the Senate Banking Committee drew up (then never offered) during committee markup, Democrats will have to take a strong stand against them. Floor debate is expected to take up to two weeks.

For what seemed like an eternity, the financial regulatory reform debate was bogged down over the question of consumer protection. Democrats wanted to create an independent Consumer Financial Protection Agency (CFPA) — such as that passed by the House of Representatives last year — while Republicans wanted to leave consumer protection responsibilities with the already existing bank regulators, which essentially amounted to an endorsement of the status quo.

The GOP complaint at the time was that the new agency constituted an overreach, and they falsely claimed that it would have to power to regulate Main Street businesses and would undermine bank profitability. So Sen. Chris Dodd (D-CT) tried to compromise in his financial reform legislation by placing a Bureau of Consumer Financial Protection within the Federal Reserve (which didn’t garner him any votes in the Senate Banking Committee).

And evidently all the time spent on this issue hasn’t changed very much, as Sen. Richard Shelby (R-AL) said yesterday that consumer protection still constitutes the “biggest obstacle” to forging a financial reform deal:

“The biggest obstacle is probably the consumer agency and the reach and the scope of it right now,” Shelby told reporters at the Capitol. “If they will meet us halfway on that, I think we could get a bill.”

Remember, Shelby has said that bank profits should always trump “consumer finance whatever.” To get a sense of what the Republicans consider “halfway,” we can take a look at their financial reform “alternative,” which has been floating around today (though doesn’t seem to be owned by any GOP lawmaker in particular):

Title III creates an independent Council for Consumer Financial Protection (“Council”) that will have the authority to promulgate rules for all of the enumerated consumer protection statutes. The Council will be composed of three independent consumer protection experts, the Chairperson of the FDIC, the Comptroller of the Currency, and the Chairman of the Board of Governors for the Federal Reserve. The composition of the Council will ensure that all rules, regulations arid orders promulgated by the Council appropriately consider the, safety and soundness considerations of financial institutions while ensuring that adequate consumer safeguards are in place.

A council, particularly one without a clearly defined director, will be almost powerless to stand up to the bank regulators. And of course, since the regulators themselves sit on the council, the council will almost inevitably be relegated to secondary status, all but enshrining that bank profitability is more important than consumer protection. Rep. Walt Minnick (D-ID) and a band of conservative Democrats had the same idea during the House financial reform debate, and it’s as bad now as it was then.

Plus, to make matters worse, the Republican alternative allows the federal government to preempt any and all consumer protection rules that individual states might put in place. So As Matt Yglesias put it, “on the one hand, [the GOP alternative] seemingly weakens the independence of the consumer regulator. On the other hand, it has the consumer regulator preempt any and all state regulations. This is a helpful reminder that nobody on the right actually gives a damn about federalism except as a tool to advance conservative substantive policy.”

For months now, Republicans have been mischaracterizing Sen. Chris Dodd’s (D-CT) financial regulatory reform bill as inevitably leading to “permanent bailouts,” institutionalizing the notion that some banks are “too big to fail.” For instance, Sen. Mitch McConnell (R-KY) said that Dodd’s bill means “a perpetual taxpayer bailout of Wall Street banks,” while Rep. Spencer Bachus (R-AL), the ranking member on the House Financial Services, said that it “would make AIG style bailouts permanent.” This strategy came right out of a memo penned by GOP pollster Frank Luntz, who said that the best way to defeat financial reform is to play on the public’s distaste for further bailouts.

Yesterday, for the second consecutive day, Republicans — along with Sen. Ben Nelson (D-NE) — prevented Dodd’s bill from coming to the Senate floor. But in an effort to look like they are doing something more than obstruct, they released their own “alternative” to the Dodd bill, as well. And interestingly enough, Republicans either also want to implement permanent bailouts, or they are acknowledging that their meme was complete bunk, as their alternative mirrors Dodd’s language when it comes to unwinding failing financial firms:

Title I of the Republican alternative will establish a resolution mechanism for the orderly winding-dawn and liquidation of financial companies. The resolution mechanism will provide a process for winding-down financial companies with minimal impact on the financial system while ensuring that failed firms are liquidated and creditors and shareholders bear all the losses of the failed firm and the costs of its resolution.

There are some minor tweaks that the Republicans have made, such as having the D.C. courts, rather than a panel of bankruptcy judges, give the go-ahead for a resolution. The GOP also did away with the $50 billion fund, built up through assessments on the biggest financial firms, that would be tapped in order to facilitate a firm’s dismantling. (In that way, the GOP plan resembles the Treasury Department’s original resolution authority proposal.) Otherwise, the Republican alternative looks just like Dodd’s.

This basically proves that the GOP’s opposition has been hot air aimed at currying favor with Wall Street, rather than actual policy differences. And in that regard, the lockstep opposition has been paying off, as for the first time since 2004, Wall Street is giving more money to Republicans than Democrats.

Though the differences aren’t huge, doing away with the $50 billion fund is, I think, an unwise move. In fact, the fund should be larger, closer to the $250 billion that the House originally proposed. The reason for this is simple. If one large financial institution is going under, chances are that others aren’t in good shape, and having to find other places to raise revenue can be dangerously pro-cyclical. As FDIC Chairman Sheila Bair has said, a pre-funded system “has significant advantages over an ex post funded system.” And in fact, a majority of Americans in a new Washington Post-ABC News poll favor a pre-funded mechanism for dismantling failed banks.

Sen. Blanche Lincoln (D-AR) has been garnering a lot of attention recently due to her position as chairwoman of the Senate Agriculture Committee, which gave her significant influence over the portion of Sen. Chris Dodd’s (D-CT) financial reform legislation dealing with derivatives. To the surprise of many (myself included), Lincoln’s legislation went further than Dodd’s and even includes a provision that would force commercial banks to spin off their derivatives trading desks.

But derivatives are not the only thing on Lincoln’s plate, and she wants everyone to know that one of her other priorities — slashing taxes for the heirs of multimillionaires — is still on her mind:

Senate Agriculture Chairwoman Blanche Lincoln is apparently not letting her primary opponent or her focus on derivatives regulations hamper efforts to permanently cut the estate tax. An aide said Monday Lincoln continues to have discussions with members and staff and that she “is very hopeful a deal will come together in the near future”…[Lincoln's spokeswoman] said she was as committed as ever to an estate tax fix. “[Lincoln] believes that an agreement can and should be reached by Memorial Day and that achieving a deal should be a priority,” she said.

Lincoln and her Republican counterpart, Sen. Jon Kyl (R-AZ), said that they are “virtually ready” to unveil legislation formalizing their intention to cut taxes for those at the very top of the income ladder.

Due to a Bush-era accounting gimmick, there is no estate tax this year, and the tax is set to come back at the Clinton-era level of 55 percent with a $1 million exemption next year. The Obama administration and many Democrats in Congress favor permanently setting the estate tax at the 2009 level, which is 45 percent with a $3.5 million exemption. But Lincoln and Kyl want to cut the rate to 35 percent and raise the exemption to $5 million, providing a $250 billion tax cut to the richest 0.2 percent of Americans.

The 2009 level exempts 99.8 percent of estates, and since the exemption is so high, the average effective rate those hit by the tax will pay is just 14 percent. With the government trying to grapple with long-term deficits that are unsustainable, it’s the height of irresponsibility to slash taxes for the very richest segment of the population.

The U.S. Chamber of Commerce has released an ad supporting Lincoln in her primary campaign against Arkansas Lieutenant Governor Bill Halter, citing her support for tax cuts for “small businesses and family farms,” which is the misleading right-wing claim used to justify cutting the estate tax. But make no mistake — cutting the estate tax as Lincoln and Kyl suggest is nothing more than a giveaway to the richest families that the country can’t afford.

Last night, the entire Republican Senate caucus — joined by Sen. Ben Nelson (D-NE) — succeeded in blocking Sen. Chris Dodd’s (D-CT) financial regulatory reform bill from coming to the Senate floor, setting up another vote this afternoon and potentially a third on Wednesday.

For months now, the GOP has been falsely saying that Dodd’s bill would institutionalize “too big to fail,” when in fact the bill lays out a resolution authority that would allow the government to unwind large, failing financial firm with money fronted by the financial industry itself. Sen. Bob Corker (R-TN) tried to dispel this false GOP notion last week, but evidently to no avail, as Sen. Kay Bailey Hutchison (R-TX) was on CNBC last night reviving the same meme.

CNBC’s Larry Kudlow asked her “if Citigroup is on the road to failure, is it your view, is it the GOP view that it should fail and be liquidated?” Of course, Hutchison said yes, making it seem as if Dodd’s bill wouldn’t do the job:

Yes, I think you have to set a bar, because if you leave wiggle room, then you are saying, ‘hey, if you’re really too big and it really would make a difference, then you can have this cushion.’ And if we do that, then too big to fail will always be with us. So, yes, we are. Now there is a way that we can certainly give flexibility to the governing agencies for making sure that there’s liquidity, that you can service your customers. But there should be the ability for any bank or financial institution to fail, any one of them, or we will never get rid of it.

Watch it:

What Hutchison laid out sounds pretty good. But if she actually believes in what she said, she should have voted for the bill last night, as it would allow for the orderly dissolution of failed financial firms, with money provided by the banks themselves. It’s not clear from Hutchison’s statement that she has any substantive difference with the Dodd bill that she felt the need to vote against.

Of course, there’s a very good political reason for the GOP to take its current line towards the Dodd bill, voting against it for reasons that don’t make sense. As the Wall Street Journal reported today, the GOP’s stand against financial reform is reaping benefits in terms of campaign contributions from Wall Street. In fact, “for the first time since 2004, the biggest Wall Street firms are now giving most of their campaign donations to Republicans.” Many financial institutions, including Goldman Sachs, wrote $15,000 checks to the Republican party last month.

According to one GOP staff member quoted in the Washington Post, Republicans are working on a financial reform bill that they may or may not release. “It may come to the point where Republicans decide, ‘Let’s just put out specifically what we’re for.’ That decision hasn’t been made yet,” the staffer said.

Last year, when financial reform regulation first started coming together, big Wall Street banks enlisted the big business community in its fight against regulation of derivatives, the financial instruments that played a large part in the failures of Lehman Brothers and American International Group. At the time, the Wall Street banks were thrilled that their “lonely and uphill lobbying battle” would have some names that might garner more sympathy.

Today, the New York Times reported that Mars, the maker of Snickers, is concerned about derivatives legislation hurting its ability to hedge against fluctuations in the price of sugar and chocolate. Republicans — who last night, along with Sen. Ben Nelson (D-NE), blocked Sen. Chris Dodd’s (D-CT) financial reform bill from coming to the Senate floor — are using these firms concerns to criticize the entire financial reform effort. For instance, Sen. Mitch McConnell (R-KY) falsely said today that Mars is concerned about the literal cost of sugar changing under the Democrats’ bill, and that Democrats are blaming Snickers and Harley Davidson for the financial crisis:

I mean, does anyone really believe that the people who make Harley Davidsons and Snickers bars are responsible for the financial crisis? Does anyone think that? Then why would we want to punish them in our effort to hold Wall Street accountable.

Watch it:

Of course, it’s natural that companies that might be affected by financial reform to express concerns about the legislation. But the GOP is using these concerns to trash a bill that will likely help the very companies cited.

Mars uses derivatives to hedge against changes in the prices of its ingredients, so if the price goes up unexpectedly, the company won’t take a huge hit. So it’s actually in Mars’ interest for the derivatives market to be more transparent and with clear rules of the road, as that will drive down prices and prevent Wall Street banks from keeping these markets in the dark, with prices that aren’t discernible.

The reform legislation would mandate that derivatives be traded on exchanges, like stocks, and go through clearinghouses, which would ensure that the parties in a trade actually have collateral to back it up. As Commodity Futures Trading Commission Chairman Gary Gensler put it, “the more transparent a marketplace, the more liquid it is, the more competitive it is and the lower the costs for companies that use derivatives to hedge risk.” “The best way to bring transparency is through regulated trading facilities and exchanges…A greater number of market makers brings better pricing for businesses and lower costs for consumers,” he added. Plus, hedging of the sort Mars would engage in is specifically exempted from using the exchange under the proposed legislation.

Last year, there were $78 in outstanding derivatives exposure for every $1 that was legitimately used by companies like Mars to hedge risk. Five large banks — JP Morgan Chase, Goldman Sachs, Bank of America, Citigroup, and Wells Fargo — account for 97 percent of the activity in the derivatives market. Making this activity transparent will let investors like Mars know what is going on in the market and make informed decisions, driving down costs. For McConnell to pretend that the bill will unduly regulate the candy-making function of the company is disingenuous.

On Thursday, President Obama announced his commitment to pass sweeping legislation to reform Wall Street and to create a new regulatory structure meant to avert another economic crisis. However, the financial industry is fighting back, hoping to obstruct legislation, water down the bill, and possibly kill effective reform.

The legislative battle is multifaceted. Frank Luntz, a consultant who is paid by financial services firms, wrote a messaging memo now used by opponents of reform to confuse the public and smear the legislation. As Talking Points Memo revealed earlier this week, a K Street PR firm known as the DCI Group — with ties to Wall Street — is working with a front group to run ads against reform. And recently, Republicans have met with top bankers and representatives from the banking industry to trade campaign dollars for a promise to fight reform.

However, as with the health reform debate, there is a large, more subterranean effort from industry to kill reform. As the Politico Playbook reported yesterday morning, “financial-services giants are going grassroots” to lobby against reform. ThinkProgress has learned that the banks and financial conglomerates are using the same stealth lobbying operation the health insurance industry employed last year to mobilize opposition. Bank of America, JP Morgan Chase, Master Card, and other industry players are working through “Democracy Data & Communications” (DDC) — a firm that specializes in helping corporations activate their employees and customers into grassroots advocates — to join the U.S. Chamber of Commerce’s effort to kill reform. The domain list of the DDC server, obtained by ThinkProgress, contains various Wall Street websites, including one seemingly named after JP Morgan CEO Jamie Dimon, which all transfer visitors to the Chamber’s anti-reform campaign:

www.bankofamericavotes.com
www.dimonvotes.com
www.aftermarketvotes.org
www.mastercardvotes.com

USAA, the financial services corporation, also employs DDC for its grassroots lobbying and mass e-mailed its customers Friday morning to call lawmakers and oppose reform (view a copy here). Last year, DDC helped JP Morgan Chase coordinate a stealth campaign to kill efforts to tax banker bonuses.

The banks are conducting a two-faced campaign to kill reform. In public, the banks pledge to fully support reform. However, behind closed doors, the banks — many of which were bailed out with TARP money and have not paid back taxpayers — are funding the Chamber’s attack ads and are connecting their network to the Chamber’s grassroots lobbying campaign.

The Chamber’s agenda on Wall Street reform is clear. On Wednesday, the Chamber’s political director Bill Miller met with Wall Street executives, Karl Rove, and other Republican operatives. The next day, Miller fired off an e-mail directing Chamber members to fight reform, declaring that the Chamber “fundamentally” disagrees with President Obama’s approach and that the legislation cannot be improved. Miller characterized reform as a “federal takeover of our financial industry” that “won’t do the one thing America needs most: create jobs.” Of course, the Chamber was one of the main lobbying fronts used by Wall Street to deregulate the financial markets under President Bush — and then demanded bailouts as the market crashed.

Indeed, despite having helped to cause the financial crisis, the Chamber has been running at least $3 million dollars worth of ads against reform, and is also paying high-priced consulting firms to lobby against reform on Capitol Hill.

We’ve seen this act before. Health insurance companies told the President, the media, and the public that they would fully support efforts to reform the healthcare system. However, starting in 2009, health insurance companies laundered up to $20 million dollars through the Chamber to run anti-health reform ads, used firms like DDC to scare customers and send their employees to anti-health reform town halls and rallies, and worked closely with front groups to viciously smear reform legislation.

Our guest blogger is Andrew Jakabovics, the Associate Director for Housing and Economics at the Center for American Progress Action Fund, and Alon Cohen.

The Florida Bankers Association has been pushing hard in that state’s legislature for passage of the cynically named Homeowner Relief and Housing Recovery Act. The Act is pure doublespeak; it speeds up foreclosures, reduces the homeowner’s involvement in the process, and circumvents Florida’s burgeoning foreclosure mediation program and replaces it with an optional informal meeting of the parties. Luckily, the bills have been tabled for this session, but homeowners, housing counselors, and community advocates — who have all vociferously protested the bill — should expect them to reappear.

Attempting to Move Foreclosures Outside the Court

The Act seeks to radically change the foreclosure process in Florida, which is currently a judicial foreclosure state, meaning servicers must file a case in court to foreclose on a property. This gives homeowners the opportunity to appear, present evidence, and – most recently – negotiate with the servicer in a mediation session. The Act would create a new option in Florida – nonjudicial foreclosure, in which the servicer sends notice to the homeowner that it is foreclosing on the property and can do just that around 90 days later.

Worse, even before they actually take possession of the house, the new law would allow servicers who wish to sell the foreclosed property at auction or to market it for sale on the open market to enter the property and put up a “FOR SALE” sign or its equivalent.

Homeowners could shift the foreclosure back to court by submitting a request within 45 days of receiving the notice of sale, but there is solid evidence that opt-in programs reach far fewer people than opt-out ones. (Under the current judicial process, a borrower can opt-out by simply failing to appear in court.) Philadelphia’s foreclosure mediation program sees a participation rate of 75 percent while Connecticut’s program, saw participation rates of 36-39 percent while it was opt-in. (They have since changed to automatically schedule mediation sessions.)

Circumventing Foreclosure Mediation Read more

Our guest blogger is Sima J. Gandhi, a Senior Policy Analyst with the economic policy team.

As part of his continuing quest to reduce government “to the size where we can drown it in the bathtub,” anti-tax crusader Grover Norquist now wants to hold government hostage to its own deficits. And he has a good plan for doing this.
Norquist is demanding that spending cuts to tax expenditure programs be paired with tax cuts. He’s asking congressional candidates to sign a pledge to “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” This means savings generated from cuts to the nearly $1.2 trillion in tax expenditure spending would be immediately eaten up by a tax cut, instead of put toward advancing important priorities like closing the deficit.

Tax expenditures are government spending programs that are delivered through the tax code. They use tax subsidies, such as deductions and credits, to transfer government funds. This type of spending constitutes 25% of government spending, and supports a variety of programs including ones that support low-income housing development; corporate research & development; oil, gas, and timber companies; and even small businesses that purchase SUVs. Some of these subsidies make sense. Others warrant a closer look. Funding for those that don’t work should be rightly eliminated. And funding for those that do make sense should continue.

Though tax expenditures are a form of government spending, they feel like tax cuts because they are implemented through the tax code. This makes them politically popular; politicians find it easier to pass government spending programs when they can sell them as tax cuts.

What’s more is that Congress fails to regularly review these tax expenditures, and the government’s budgeting process largely ignores tax expenditure spending. This lack of scrutiny, combined with their popular veneer, makes them a privileged form of government spending that once put in place are hard to dislodge.

Some policymakers are chipping away at this veneer. Representative Lloyd Doggett (D-TX) delivered a speech on the importance of scrutinizing tax expenditures, the White House proposed cutting tax subsidies for oil and gas companies, and even Congress took a step in the right direction when it cut a $20 billion subsidy to paper producers in order to help pay for health care reform.

But the point is that despite their veneer, they are a form of government spending. That’s why Norquist’s pledge to match cuts in deductions and credits with tax cuts is absurd. Government should rightly cut spending where it doesn’t make sense. But the savings should be used to close our fiscal deficit, pay for the protection provided by police and fire fighters, fund education and healthcare programs, and build critical infrastructure like public roads. Cutting spending and cutting taxes is just another way for saying we should return to a Hobbsian state of nature where life is “solitary, poor, nasty, brutish and short,” a “war of every man against every man.” Come on Norquist, let’s get real. A plan to pair spending cuts with spending is an effective spin on a silly plan to drown the government.

Our guest blogger is Karla Walter, a Senior Policy Analyst with the American Worker Project at American Progress.

In the wake of the tragedy at Massey Energy’s Upper Big Branch mine that killed 29 miners, the national media finally uncovered Massey CEO Don Blankenship’s long record of safety violations, environmental damages, and unfair labor practices. Massey’s dismal record suggests that the tragedy wasn’t a freak event or an act of God, but the result of a reckless employer that too often put profits before people.

The Department of Labor unveiled a new public enforcement database last week, the Department of Labor Enforcement Data Site, that increases accountability for companies that violate workplace laws, including mine safety laws. This resource — created in response to the President Obama’s Open Government Initiative — shines a light on practices that are unacceptable and gives the public a chance to get them changed. The site, now in beta form:

– Discloses company-specific data on minimum wage and child labor law violations for the first time without a freedom of information request,

– Unifies data on violations of workplace safety and health, diversity, and employee benefits plan reporting laws, and

– Allows the public, advocacy groups, and particularly workers to track enforcement results, exerting pressure on specific scofflaw employers and the federal enforcement agencies

Labor Secretary Hilda Solis has dubbed herself “a new sheriff in town,” and one year into her administration has made effective and innovative enforcement of worker protection laws a top priority. The site is another signal that Solis is serious about protecting America’s workers. While some of the data—including the mine safety data—are available in other locations, by unifying it in one location her department is increasing the public’s ease of access. As Massey’s unsafe mines sadly reveal, if there’s one workplace violation at a firm, there may be other kinds of violations at that site.

The Center for American Progress Action Fund’s American Worker Project has long advocated for a centralized, public website containing workplace enforcement data from all Labor enforcement agencies. The department needs to implement its intended improvements to make the site fully functional, because enforcement of worker protection laws cannot be strengthened fast enough for the safety and well-being of all working Americans. Public oversight and access to enforcement data will be a critical part of increasing accountability and improving oversight in the future.

Last week, the Securities and Exchange Commission charged that Goldman Sachs defrauded investors by failing to disclose conflicts of interest in subprime mortgage investments it sold as the housing market collapsed in 2007. Fabrice Tourre, a Goldman Vice President, is accused of encouraging investments into subprime mortgage securities he knew would fail, while working with a hedge fund to bet against its success. Referring to himself as the “the fabulous Fab,” Tourre boasted in e-mails about his scheme to defraud investors.

Reacting to the SEC’s probe into Goldman, UK Prime Minister Gordon Brown over the weekend called for his own investigation of the firm. “This is probably one of the worst cases that we have seen,” Brown said. The Royal Bank of Scotland, a bank buoyed by a UK taxpayer funded bailout during the financial crisis, was one of the biggest victims of the alleged fraud, losing $841 million dollars. Earlier today, Britian’s Financial Services Authority announced that it will in fact start a formal enforcement investigation into the London unit of Goldman Sachs — where Tourre is currently employed.

The financial industry is fighting back. On Monday, the UK division of legal and lobbying giant DLA Piper released a poll of business leaders showing that an overwhelming majority (60%) want a Tory leader to take over when elections take place on May 6. 36% of respondents specifically expressed hope for the conservative leader David Cameron to become the next Prime Minister. The poll, which is being promoted in the British press, is accompanied by a message from DLA Piper UK’s London Managing Partner Catherine Usher calling for more free market reforms and an end to the Labour “regime”:

It will come as no surprise that our companies view tax as an area for major reform, with the current regime viewed as discouraging business activity in the UK and putting us at a disadvantage to other jurisdictions. [...] The alarm bells from businesses over the issue of red tape and employment legislation have grown louder over the past few years.

What DLA Piper UK does not disclose in its poll, and what the British media is largely ignoring, is that DLA Piper UK counts Goldman Sachs, as well as many other banks and investment firms, as clients. Like their American counterparts in the Republican Party, the Tories have been quietly courting the financial industry through a new organization called the Conservatives’ City Circle. At the same time, Tories are trying to present themselves as supportive of responsible banking reform and taxation. As Left Foot Forward, a progressive UK blog, has detailed, the Tories have raised close to £200,000 from financial firms as the election approaches. The Tories’ duplicitous campaign unraveled for a moment last month when Tory MEP Nirj Deva railed against an international bank tax on grounds that it would “give money to a whole bunch of people who will probably steal it.”

While President Obama mounts his effort to impose a responsibility fee and new financial regulations, Republicans have met with top bankers to trade campaign contributions for a promise to fight change. As ThinkProgress first reported, Wall Street lavished Scott Brown (R-MA) with contributions and support front political attack groups for his special election to the US Senate. Recently, Sen. Mitch McConnell (R-KY) met with hedge fund managers before announcing his opposition to financial reform. Brown, along with his GOP colleagues, have mirrored the Tories and defended banks from a responsibility tax, while simultaneously telling the public that they support reform.

Senate Minority Leader Mitch McConnell (R-KY) took to the Senate floor today to repeat the false assertion that the pending financial reform bill will lead to further taxpayer-funded bailouts. A number of other Republicans — including House Minority Leader John Boehner — have repeated the false right-wing talking point.

The language originates from the advice of pollster Frank Luntz, who has urged Republicans to frame the final product as filled with bank bailouts. Republicans have thus asserted that the proposed resolution fund, negotiated by Sens. Bob Corker (R-TN) and Mark Warner (D-VA), amounts to a “50 billion dollar bailout fund.” The resolution authority, of course, has the opposite purpose: It is designed to eliminate too-big-to-fail institutions, not prop them up. It would raise $50 billion “from the largest financial firms” to provide for the orderly unraveling of big, systemically important institutions in the event it is needed — without forcing taxpayers to cover the losses.

Today on the Senate floor, Sen. Bob Corker (R-TN) debunked his conservative colleagues’ talking point, saying that the fund “is anything but a bailout”:

CORKER: But this fund that’s been set up is anything but a bailout. It’s been set up to, in essence, provide upfront funding by the industry so that when these companies are seized, there’s money available to make payroll and to wind it down while the pieces are being sold off. Now, a lot of people have said this is a Republican idea. There’s no question that this is something Sheila Bair has proposed. The fdic wants to see a prefund. The treasury would like to see a postfund.

Watch it:

Corker explained that all serious debate over the resolution fund concerns whether to “pre-raise” the money in anticipation of a bank failure, or to require the financial industry to fund resolution after an institution has crashed. Corker called the rhetoric “silly,” pointing out that “either way, you’ve got to have the monies available to shut the firms down” without endangering the entire financial system.

McConnell has also sought to bring the Obama administration into his argument, saying yesterday on CNN’s State of the Union that Treasury Secretary Tim Geithner and former Clinton Secretary of Labor Robert Reich agreed with him that the fund would lead to future “taxpayer funded bailouts.” Reich quickly rebuked McConnell for mischaracterizing his position, writing that “When Mitch McConnell has to misquote me to find evidence he’s telling the truth, he is desperate.”

In any case, McConnell’s qualms about the resolution fund seem little more than a political stunt. TPM reports that even after the Obama administration signaled that it was willing to ditch the offending provision, the Republican leader has remained uncritically opposed to the bill. Echoing his rhetoric during the health care debate, McConnell told CNN’s Candy Crowley yesterday that “[w]e ought to go back to the drawing board.”

– DJ Carella

Cross-posted on ThinkProgress.

Our guest blogger is Luke Reidenbach, a Research Assistant for Economic Policy at American Progress.

Last week, the BLS released the newest jobs figures for states and territories, and thirty-three states had job growth in the month of March. Exactly one year ago, there was not a single state that had job growth. This stark contrast is yet another indication that the jobs situation is improving thanks to the Obama administration’s efforts to stabilize the economy and financial sector.

But Friday’s data also show unacceptably high unemployment rates and uneven employment gains across states, highlighting the significant need for continued action. States such Indiana and Maryland have been seeing recent employment expansion, adding 19,900 and 19,300 jobs respectively in the last three months. Other states that have seen such job growth have South Carolina, Alaska, and West Virginia.

But some states aren’t doing so well. States like Michigan, Nevada, and Florida are still losing large amounts of jobs, each losing 9,500, 7,100, and 4,000 just this month. Other states are starting to show improvement, but have a much longer ways to go to fill the massive gap left by the recession. Take California, for instance. Since payrolls started to decline in July 2007, it has lost 1.3 million jobs, an 8.9 percent decline. Though it has started seeing job growth in the past few months, adding over 4,000 jobs this month, California nevertheless faces a difficult situation to come out of such a large hole.

Meanwhile, the recession has put tremendous strain on state budgets, forcing them to make hard cuts that jeopardize the strength of recovery. CBPP notes that such budgetary strains have already led 45 states to slash services in 2009 and 2010, including services for the most vulnerable.

That states will need additional support is clear. But conservative members of Congress have so far given no indication that they are willing to provide this support. Instead they have been misapplying their selective worrying about the deficit to consistently delay crucial benefits like unemployment insurance from reaching those who need it. Or even worse, threatening to repeal measures that have already proven effective. Yesterday, Rep. Jack Kingston (R-GA) threatened to “repeal” the American Recovery and Reinvestment Act.

Such threats do not bode well for future efforts to protect state and local jobs. Continuing to undermine effective recovery efforts like unemployment insurance or the stimulus package is also economically dangerous and jeopardizes the prospect for widespread growth. As the economy recovers from the severe recession, ensuring that states have the resources they need will be crucial.

Legislation like Local Jobs for America Act, introduced by Rep. George Miller (D-CA), would create approximately 1 million jobs by providing $100 billion in funds over two years to protect state and local government jobs and create local government and nonprofit sector jobs. Rather than making cheap political points, lawmakers should address the employment situation seriously and help ensure that every state fully recovers from the devastating impact of the recession.