This week, the conference committee reconciling the House and Senate versions of financial regulatory reform has been slowly chipping away at its long list of provisions to consider. Still on the list is consumer protection, and one aspect of that is hashing out whether the proposed consumer protection regulator will be able to police auto lending.

Both the House and the Senate bills create a new regulator solely geared towards protecting consumers, but the House bill exempts auto financiers from the new agency’s oversight. The Senate bill does not include a similar exemption, but the upper chamber did pass a “motion to instruct,” sponsored by Sen. Sam Brownback (R-KS), directing the committee to defer to the House’s language.

The Obama administration, as well as the Department of Defense (due to shabby treatment of military personnel at the hands of auto dealers) are staunchly opposed to the exemption. But today, 62 House Democrats voiced their support for the auto dealer exemption, calling the House bill an “appropriate compromise“:

The House bill recognized that auto dealers are retailers who do not service, fund, or underwrite auto loans, but merely facilitate financing to help their customers purchase a vehicle…We believe the balance achieved in the House bill is an appropriate compromise that will ensure auto dealers can still offer optional dealer-assisted financing while maintaining strong consumer protections.

For starters, the notion that the House bill is a “compromise” is absurd. There is no middle ground here. Auto dealers either have to follow the consumer regulator’s rules or they don’t, and the House language makes the latter the standard.

There are plenty of good reasons for including auto dealers within the new consumer protection regime. First, exempting them creates an uneven playing field, giving auto dealers an advantage over lenders such as credit unions and community banks. Leaving part of the market unregulated makes regulatory arbitrage (shifting financial products to unregulated parts of the market) far more likely.

But more importantly, auto finance is a market ripe for deceptive and abusive practices. According to the Center for Responsible Lending, “consumers spend more than $20 billion a year in excess interest by borrowing through a dealership instead of through a bank or credit union.” The situation is particularly bad for women, senior citizens, and minority borrowers, all of whom, according to the Federal Reserve, are consistently charged higher interest rates on auto loans. The National Consumer Law Center also found that auto financiers routinely charge higher mark-ups on loans to minority borrowers.

Of course, auto dealers have significant clout on Capitol Hill, since there are 18,000 of them scattered across the country. Since 2007, trade groups for auto dealers have spent $12 million lobbying, and auto dealers, their employees, and political action committees donated $9.3 million to candidates during the 2008 election cycle. But consumer protection only succeeds if there is a level playing field and every entity — be it bank, payday lender, auto dealer, or anything else — has to play by the same rules.

Last night during an interview with BP executive Bob Dudley on Fox News, host Greta Van Susteren noted that the oil giant has been taking some heat because of its Gulf oil spill. “Your company has taken quite a beating,” she said. Dudley agreed but said his company’s critics should be careful because Gulf coast residents are dependent on BP:

DUDLEY: Well, Greta, I know that oil companies are not popular. It has been that way for sometime in the U.S. It’s a company made up of people, many of which live along the Gulf coast, that are integrated into the fabric of the communities there.

We have 23,000 people in the U.S., many of which are around the Gulf coast. I think — and everyone is devastated by what has happened today. I think I would look at some of the process today as just making sure that through that sentiment we don’t actually shoot the dog who is trying to bring home the bone and meet its obligations all across the Gulf, and we are going to be there a long time.

Watch it:

Unfortunately, some lawmakers and the conservative media argue that the Obama administration is being too harsh and have come to BP’s defense with similar arguments. Oil money beneficiary Mississippi Gov. Haley Barbour (R) recently expressed concern that BP’s financial liabilities as a result of the spill would cut into its profits and therefore somehow prevent it from meeting those liabilities.

Sen. Mary Landrieu (D-LA) deflected attacks on BP last week saying that the Gulf region needs BP now more than ever:

“First of all, the last company that people in the Gulf want to see go bankrupt is BP because we’re depending on them to clean up our environment and make our people whole,” Lousiana Sen. Mary Landrieu told “Good Morning America” today in an exclusive interview. “One of the more important issues… [is] half of our families make their living fishing, the other half of our families make their living in the Gulf drilling for oil and gas that this country desperately needs.”

Dependency on Big Oil is exactly the reason the Gulf faces the situation it is currently in. While sustaining BP’s viability is in both the company’s and the public’s interest, long term reliance on dirty fossil fuels like BP’s main commodity is not sustainable.

Today, in a 5-4 decision, the Supreme Court invalidated more than 500 cases decided by the National Labor Relations Board. For more than two years, the five person board only had two sitting members, due to Congressional obstruction of its nominees, and the Court decided that the two-person board did not have legal authority to issue rulings.

The Board, which is responsible for overseeing labor-management relations under the National Labor Relations Act, realized in late 2007 that it was not going to have a full complement of members for the upcoming year, so delegated its authority to three members, of which two constitute a quorum. Writing for the majority, Justice John Paul Stevens said this procedural move doesn’t grant a two-person board the ability to do anything:

If Congress wishes to allow the Board to decide cases with only two members, it can easily do so. But until it does, Congress’ decision to require that the Board’s full power be delegated to no fewer than three members,and to provide for a Board quorum of three, must be given practical effect rather than swept aside in the face of admittedly difficult circumstances. Section 3(b), as it currently exists, does not authorize the Board to create a tail that would not only wag the dog, but would continue to wag after the dog died.

In dissent, Justice Anthony Kennedy wrote that “the Court’s revisions leave the Board defunct for extended periods of time, a result that Congress surely did not intend.”

I’m not going to get into the legal question regarding whether the decision was the right one, leaving that to far more capable people. But this whole episode clearly illustrates the problem with Congressional obstructionism.

Now, thanks to the unwillingness of Congress to consider and vote on nominations, giving the board its full complement of members, literally years of decisions may have to be relitigated. As Kimberly Freeman Brown, Executive Director of American Rights at Work, said, “hundreds of decisions in cases already decided by the NLRB will have to be re-opened, needlessly delaying finality for workers who were led to believe they already had it.”

And this isn’t solely a Republican or Democratic problem. Both parties are duly guilty of blocking NLRB nominations, under Presidents Bush and Obama. But Republicans in the 111th Congress have taken obstruction to a new level. Earlier this month, the Las Vegas Sun blasted the GOP for blocking 120 of Obama’s nominees:

[T]here are crucial vacancies in the Homeland Security, Defense and Justice departments, the National Transportation Safety Board and the Federal Energy Regulatory Commission, among others, because of the holds. As well, there are five ambassadors and 29 judges who have yet to be confirmed…The Republican holds and filibusters are doing more than hindering the Senate’s work. When the president can’t fill jobs, it blocks the administration from governing. That may score points for Republicans with their base, but it harms the country.

The Supreme Court’s decision shows that Obama was absolutely right to give two NLRB nominees recess appointments, rendering the Board functional once again. Remember, it was Chief Justice John Roberts who advocated that the administration get around Congressional inaction by using the recess appointment power.

Yesterday, Senate Democrats failed to muster enough votes to advance their tax extenders bill (which extends unemployment benefits and a variety of tax credits), sending them scrambling to craft a smaller package that will reportedly be more politically palatable. In the meantime, Senate Republicans are pushing a version of the package authored by Sen. John Thune (R-SD), which is scheduled to receive a vote today.

As I pointed out last week, Thune’s bill preserves corporate loopholes that the Democratic bill closes, while simultaneously cutting funding for Medicaid, infrastructure improvements, and assistance to needy families (that also helps those families find work). In addition, the bill cuts 5 percent of the budget of all federal agencies (except the Department of Defense and Veterans Affairs), while rescinding $80 billion in unobligated discretionary funds and $37.5 billion in money from the economic recovery act.

According to a new report from the Center on Budget and Policy Priorities, Thune’s plan — since it comes so late in the 2010 fiscal year, which ends in September — could require such draconian cuts that many agencies would have to simply stop operating for two and half months:

Even if Congress enacts the Thune amendment before recessing for the July 4 holiday, and even if the Administration then works heroically to implement the rescissions immediately, the cuts could not possibly take effect before July 15. At that point, only two and a half months will remain in the fiscal year. And for an account that spends its funds at the same rate throughout the year, only 21 percent of the funds appropriated for 2010 would remain. On average, then, the Thune amendment would cut an amount equal to all of the 2010 discretionary funding remaining for agencies other than DoD and VA. Thus, his amendment would essentially shut down much of the government for the last half of July and all of August and September.

On the Senate floor, Sen. Max Baucus (D-MT) characterized Thune’s plan as “arbitrary, not-thoughtful, mindless.” This choice of adjectives is pretty spot-on.

Cuts of the sort that Thune proposes do not take into account priorities or the effectiveness of a program. The plan is a blunt instrument of the sort that conservatives love to promote, but that would also have many unintended consequences. As CBPP added, “a one-quarter cut in funding available for the final two and a half months of the fiscal year is unachievable without severe cuts in the services and benefits an agency provides, such as providing Social Security checks or conducting safety inspections in mines. Furloughs and layoffs would be inevitable.”

Thune also exempts one of the biggest targets for wasteful spending: the Pentagon. If you’re not willing to look at defense spending, you’re not really serious about addressing the deficit. And Thune’s amendment shows that he is not serious, but merely wants to take a meat axe to the federal budget to score political points.

Yesterday, the Senate failed to move its tax extenders bill (which extends unemployment benefits and a handful of popular tax credits) past a procedural hurdle, sustaining a budget point of order raised by Sen. Judd Gregg (R-NH). The final vote was 45-52, with 60 votes needed to proceed past the point of order.

One of the criticisms that opponents of the bill are raising is that it includes a tax increase that unfairly target small businesses. The legislation partially closes what’s known as the “John Edwards loophole,” which enables some businesses to avoid paying Medicare taxes by classifying wages as something they are not. Sens. Olympia Snowe (R-ME) and Mike Enzi (R-WY) called this provision the bill’s “poison pill”:

“At a time when Congress continues to dither on enacting a small business jobs bill, Section 413 is a poison pill in this tax bill, robbing American small businesses of the capital they need to create new, good-paying jobs,” Senator Snowe said. “Indeed, this is a job-killing tax hike that will force entrepreneurs across the nation to retrench and reconsider any plans for hiring employees or expanding their business.”

But what’s really going on here? Should these Senators be so concerned about closing the loophole and therefore clobbering small businesses?

S corporations, which are the most commonly employed business structure in the United States, don’t pay corporate income taxes, but instead pass all their earnings through to the firm’s shareholders, who report them on their personal income tax. This pass-through income is exempt from the payroll tax (which funds Medicare). So employees of S corporations have an incentive to accept their money not as wages (which are subject to the tax) but as pass-through income that is tax-exempt.

The epitome of this was former Sen. John Edwards paying himself millions in pass-through income from his law practice, even though it was clearly money that he earned by simply doing his law work. There’s no reason for employees of a firm to be able to escape payroll taxes by classifying their wages as something else.

The extenders bill before the Senate doesn’t fully close the loophole, but merely stipulates that any shareholder who performs substantial services for the S corporation pay payroll taxes on all the income they receive. According to Citizens for Tax Justice, this should help the majority of small businesses:

Passing legislation to close this loophole will benefit the majority of small businesses. Most small businesses pay all of their taxes, including Medicare taxes on all of their personal service income. (The loophole is not allowed for partnerships or sole proprietorships.) When some small business owners avoid taxes, honest taxpayers make up the gap by paying higher taxes. Lawmakers who are concerned about the tax burden of small businesses need to do everything possible to close loopholes in the tax code so that all Americans pay their fair share.

And, in fact, most S corporations aren’t all that small. According to the Center on Budget and Policy Priorities, “businesses with gross receipts of more than $10 million accounted for about two thirds of the gross receipts of all partnerships and S corporations.” Cleaning up the tax code to make sure that these companies pay their fair share will be to the benefit of businesses small and large.