A Democratic Senator wants to raise $200 billion over ten years by closing corporate tax loopholes, according to Bloomberg News. Sen. Carl Levin (D-MI) wants to ditch a slew of goodies for corporations, as well as a loophole that allows wealthy money managers to pay far less in taxes than middle-class families:

Senator Carl Levin’s push to close tax loopholes will target corporate deductions for stock options and rates on investment income known as carried interest, seeking to raise at least $200 billion by one estimate.

In a memo to Democratic Senate committee leaders on Friday, the Michigan Democrat described proposals to end what he called excessive corporate tax deductions, scrap the blended tax rate for derivatives such as commodity futures and strengthen enforcement of the tax code, Bloomberg BNA reported. [...]

The plan is estimated to raise at least $200 billion over 10 years, according to a person with knowledge of the details. Levin told reporters he was sharing ideas with fellow senators and had asked the congressional Joint Tax Committee to estimate budget costs and savings for the provisions.

Republicans (and plenty of Democrats) like to talk about revenue-neutral corporate tax reform, in which every dollar raised if offset by a reduction in the corporate tax rate. Levin has consistently opposed this approach, and for good reason.

Corporate profits are currently at record highs while corporate taxes have plummeted. Corporations paid just a 12.1 percent effective tax rate in 2011. The corporate income tax used to make up about one-third of federal revenue, but today it makes up less than 9 percent. The corporate income tax used to follow along with corporate profits, but the two have become decoupled, with negative impacts for the federal budget:

As former White House economist Jared Bernstein noted, “locking in these historically low revenue levels, either as a share of GDP, total receipts, or profits, would be yet another self-inflected wound.”

The Department of Justice and state prosecutors will sue the credit ratings agency Standard & Poor’s for wrongly rating mortgage bonds before the 2008 financial crisis, according to the Wall Street Journal. The suit could come as early as this week, according to the report.

Shoddy ratings from S&P and other agencies played a key role in the collapse of the housing market by signaling that toxic mortgage backed securities were safe investments. While S&P and the other agencies have faced lawsuits from investors, a suit from DOJ would be the first federal action against a ratings agency since the crisis.

S&P said the suit was baseless in a statement to the Journal. “A DOJ lawsuit would be entirely without factual or legal merit,” the statement said. “It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market — including U.S. government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained — and that every (collateralized debt obligation) that DOJ has cited to us also independently received the same rating from another rating agency.”

London became one of the globe’s primary financial hubs partly through its so-called “light touch” regulatory approach — effectively trusting some of the world’s largest and most powerful banking enterprises to manage their own affairs without much government intervention. As a result, the U.K. central bank alternately ignored the burgeoning business of LIBOR-rigging and actively colluded in it at some level, advising banks to raise or lower their estimates in order to create an illusion of stability in the system.

For those not versed in the acronym-littered world of international lending, LIBOR stands for the “London Inter-Bank Offered Rate.” It represents the interest rate banks pay to borrow from each other for a short-term period in ten different currencies and 15 separate durations.

The strange bit comes in during the creation and publication of the rate — a survey of various banks’ estimates of the rate they think they would pay to borrow, for instance, 10 million yen for a one-week period. Those estimates are aggregated, the lowest and highest are knocked out, and the rest are averaged and published each day by the British Bankers’ Association, a private trade organization.

It wouldn’t take a financial mastermind to see how traders could abuse this system. The LIBOR represents a benchmark for derivatives and securities with a nominal value of $350 trillion or more. Skewing the rate by a single point could generate hundreds of thousands of dollars in paper profits, as Bloomberg News showed last week:

There were no rules at RBS and other banks prohibiting derivatives traders, who stood to benefit from where Libor was set, from submitting the rate — a flaw exploited by some traders to boost their bonuses.

The next morning, RBS said it would have to pay 0.97 percent to borrow in yen for three months, up from 0.94 percent the previous day. The Edinburgh-based bank was the only one of 16 surveyed to raise its submission that day, inflating that day’s rate by one-fifth of a basis point, or 0.002 percent. On a $50 billion portfolio of interest-rate swaps, RBS could have gained as much as $250,000.

Of course, it’s not as if the banks are getting away scot-free — Barclays Bank coughed up more than $400 million in fines last summer for its part in the scam, Swiss giant UBS paid over $1.5 billion to regulators on both sides of the Atlantic, and RBS will probably pay close to $800 million in settlements, Reuters reports.

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Our guest blogger is Daniel Pereira, Managing Editor at Brafton Inc.

The Energy Information Administration reports household spending on gasoline hit nearly a three-decade high in 2012, accounting for almost 4 percent of income. That averages to roughly $2,900 per person a year.

Gas consumption has decreased — largely because of fuel-efficient cars — but even these gains were not enough to offset 2012′s record gas prices:

U.S. gasoline consumption fell in 2011 to 134.2 billion gallons, its lowest level since 2001. However, at the same time, EIA’s average city retail gasoline price rose 26.1% in 2011, and another 3.3% in 2012, when it reached $3.70 per gallon. The effect of the higher prices in 2011 and 2012 outweighed the effect of reduced consumption.

The Atlantic’s Jordan Weissmann notes the increase in gas prices between 2009 and 2012 is “about the same as the payroll tax hike that economists believe could shave as much as 0.6 percent off of GDP growth this year.”

By the American Petroleum Institute’s admission, U.S. oil production increased 13.8 percent last year — the largest ever for the industry. Yet that boom clearly did not bring down gas prices. So far, four Big Oil companies have reported earnings of more than $100 billion in profits last year, including $45 billion for ExxonMobil.

The Washington Post reports that the Federal Communications Commission (FCC) is considering a proposal to provide free internet access in major metropolitan and many rural areas. The plan, largely opposed by wireless telecom companies and supported by tech companies including Microsoft and Google, would open up publicly owned spectrum as super strength WiFi and take several years to implement. Some of the possible key benefits include:

1. Helping the U.S. close the broadband infrastructure gap. Despite being the birthplace of many internet innovations, the U.S. ranks 16th in terms of broadband penetration, speed, and price. A staggering 96 percent of U.S. residents live in areas with two or fewer wireline internet providers, and 5 percent live in areas without any providers. A massive public work Wifi program would help deliver high speed internet access to areas currently lacking and provide competition in areas with limited choice.

2. Using wireless spectrum as a public good. There is a debate raging over the best use of publicly owned wireless spectrum, with some business interests advocating for the space to be auctioned to private companies — creating the potential for monopolies. Using the spectrum for provide free internet access to the public is a way to to make sure average users benefit, rather than big corporations.

3. Expanding freedom of expression online. The United Nations calls freedom of expression online a human right, but not everyone has internet access in the U.S. and private attempts to build out access haven’t been able to bridge the gap. Eliminating the cost barrier by providing access for free will undoubtedly expand the number of total U.S. internet users, thus giving more people a voice online.

4. Bolstering innovation. Expanding the number of internet users means expanding the market for internet devices — that’s one of the reasons tech giants including Microsoft and Google are supporting the plan — and opening the way for more experimentation and innovation in that marketplace. The original Washington Post story notes that the last time the FCC opened up a spectrum for public use, creativity in the form of “[b]aby monitors, garage door openers and wireless stage microphone” directly followed.

A Florida Republican this week reintroduced legislation to speed up the foreclosure process for the third consecutive year, even though similar legislation has sparked outrage from consumer advocates over the last two years.

State Rep. Kathleen Passidomo (R) is touting the new bill as a “more moderate” version of the legislation that has failed each of the previous two years, the Miami Herald reports. But while it includes some provisions proposed by homeowner advocates, it still reduces the the time banks have to process a foreclosure from five years to one, a problematic “fix” that could incentivize more fraudulent processing of foreclosure documents:

Passidomo’s bill aims to speed things up. It requires mortgage lenders to certify that they have the correct paperwork proving they have the right to foreclose. [...]

The measure includes a provision that consumer activists supported last year to limit banks’ ability to go after homeowners for additional debt after a foreclosure.

Banks currently have five years to pursue a so-called “deficiency judgment” against a homeowner. The bill reduces that time-period to one-year.

The average Florida foreclosure, the Herald notes, takes more than 600 days to process. But even though Florida has more foreclosures than most other states, that length is hardly atypical. Nationally, homeowners with mortgages worth less than $250,000 are in default for an average of 611 days before they enter foreclosure. Borrowers with mortgages worth $1 million average 792 days in default before foreclosure begins.

Banks’ past efforts to hasten the foreclosure process led to fraudulent techniques like robo-signing and the forgery of foreclosure documents, which led banks to foreclose on homes they didn’t own, on homes that shouldn’t have been in foreclosure, and on homeowners who were seeking to modify their mortgages. The new legislation would supposedly require banks to certify their paperwork, but banks have previously flouted or gamed such mandates.

Consumer advocates are already drawing attention to the bill. “Might be a good time to start contacting your Florida state representatives in the state House and Senate on this issue,” one activist wrote in an email to followers, the Herald reported. “The more Floridians who oppose this bill and the earlier they oppose it, the better.”

Thoughout debates over reducing the nation’s deficit, President Obama has proposed the closure of certain tax loopholes as a way to raise new revenue. The carried interest loophole, which lets wealthy hedge fund managers pay a lower tax rate on certain income, has been chief among the loopholes Obama wants to close, and with the debate over federal spending accelerating yet again, Obama renewed his call to close the loophole in a pre-Super Bowl interview with CBS:

OBAMA: There is no doubt we need more revenue coupled with smart spending reductions in order to bring down our deficit. And we can do it in a gradual way so it doesn’t have a huge impact. And as I said, when you look at some of these deductions that certain folks are able to take advantage of, the average person can’t take advantage of them. The average person doesn’t have access to Cayman Island accounts, the average person doesn’t have access to carried interest income where they end up paying a much lower rate on billions of dollars that they’ve earned. And so we just want to make sure that the whole system is fair, that it’s transparent, and that we’re reducing our deficit in a way that doesn’t hamper growth, reduce the kinds of strategies that we need in order to make sure that we’re creating good jobs and a strong middle class.

The carried interest loophole is one that benefits a small number of hedge fund and private equity managers, who collect income via management fees and by taking a cut of their investors’ profits. The loophole allows the portion of income they make from investors’ profits to be treated as capital gains income, which is taxed at a lower rate than ordinary income. By reducing the amount they collect in management fees and instead taking the majority of their earnings from profits, the managers are able to substantially reduce the amount of taxes they pay on that income.

Proponents of the loophole argue that carried interest, like capital gains, should receive a preference because it is a return on investment income. But as the Center for American Progress’ Seth Hanlon and Gadi Dechter explained, carried interest is “derived from the labor and skill involved in managing other people’s investments,” and as such, it should be treated as ordinary income.

That results in a major loss of revenue for the United States. The Congressional Budget Office estimates that closing the carried interest loophole would generate $21 billion over the next decade.

43 Republican Senators last week signed a letter saying that they would block any nominee to run the Consumer Financial Protection Bureau — regardless of the nominee’s qualifications — unless the agency is weakened and made subservient to other bank regulators. As economist Paul Krugman put it, “it’s an open attempt to use raw obstructionism to overturn the law.”

Sen. Rob Portman (R-OH) declined to sign that letter, but he is attempting to weaken the Bureau nevertheless. In a separate letter to CFPB director Richard Cordray, Portman laid out his belief that Cordray should embrace the weakening of his own agency:

“As a nominee to lead an independent agency, you have an opportunity to stake out a reasonable position on these proposals independent of the White House,” [Portman] wrote in a letter sent to Cordray Friday. “Now is the time to exercise that independence and lend your support to these commonsense reforms to make the Bureau more effective and accountable to the American people, so that the Senate can find a path forward on your nomination.” [...]

In particular, Portman called on Cordray to come out in favor of bringing the CFPB’s budget under the control of congressional appropriators, and actually replacing the director position with that of a bipartisan commission. The Ohio senator told the former Ohio attorney general that the bureau is in need of “basic accountability reforms” to bring its “unaccountable structure” under control.

In order to ensure its effectiveness, the CFPB needs an independent director and an independent stream of funding. Otherwise, it will share the fate of other bank regulators, which are weakened by partisan commission packing and lack of funds. House Republicans, for instance, have managed to undermine the Dodd-Frank financial reform law by denying regulatory agencies the funds to implement it.

The GOP has made it clear that obstructing any nominee for any reason is a strategy that is on the table. Portman would prefer that Cordray accede to that reality by weakening his own position voluntarily.