Last week, an amendment to Sen. Chris Dodd’s (D-CT) financial regulatory reform bill proposed by Sen. Susan Collins (R-ME) was quietly adopted by unanimous consent. It’s safe to say that the amendment has gotten nowhere near the amount of attention heaped upon more high-profile amendments, like Sen. Sam Brownback’s (R-KS) auto dealer exemption or Sen. Carl Levin (D-MI) and Jeff Merkley’s (D-OR) proposal to institutionalize the Volcker rule.

The main goal of the amendment is ensuring that bigger banks with riskier profiles are subjected to higher capital requirements (meaning they have to hold more capital on hand, to cover themselves in the event that their risky activities don’t pay off). While it doesn’t set absolute standards, it does set a floor for regulators to work from. However, both the Treasury Department and the Federal Reserve have been working behind the scenes to get the amendment tossed aside:

Officials from the Treasury Department, Federal Reserve and Wall Street are working to kill an amendment to the Senate’s financial regulations bill that was adopted unanimously last week and that could force big U.S. banks to hold billions of dollars in additional capital. This could also potentially complicate international negotiations on banking rules. The amendment, written by Sen. Susan Collins (R,. Maine) with backing from Federal Deposit Insurance Corp. Chairman Sheila Bair, would force banks with more than $250 billion in assets to meet higher capital requirements.

In the run-up to the financial crisis, one of the big problems was that systemically risky financial firms were very overleveraged, with nowhere near enough capital on hand to cover their losses if they went bust. While not directly laying out new capital requirements, Collins’ amendment sets a minimum, ensuring that there is some statutory requirement that regulators can’t be talked into dismissing.

As Kevin Drum put it, “there’s no way to get around the fact that regulators need a fair amount of discretion no matter what kind of rules you set up…But we can set reasonable floors, and when both Treasury and the banks are fighting those floors tooth and nail it doesn’t bode well for how seriously they take this stuff.” Mike Konczal explained further:

No more capital loopholes! No more playing BS games where a firm creates a trust and does financial engineering alchemy to pretend that debt is equity. Serious, quality capital is required for our largest and most systemically risky banks. This is probably the real fight. When it comes to increasing capital under the Dodd Bill you can practically hear the banks say: “Yes we’ll hold more capital as long as massive amount of risky debt turned into ‘safe’ equity through the shenanigans of our financial engineers can count as that capital.” Do we need to do that all over again?

Ensuring that banks have enough capital on-hand to weather the bad times, and to incentivize them to take fewer risks, is a key part of creating a safer, stabler financial system. Collins’ amendment gets right to the heart of the matter and should be preserved.

Earlier this month, Gov. Tim Pawlenty (R-MN) vetoed a tax increase on the wealthiest Minnesotans that had been passed by the state legislature, preferring to push thorough a budget that was balanced only due to accounting gimmicks and significant cuts to education and health service programs. On the same day, Gov. Mark Sanford (R-SC) vetoed a bill raising the state’s lowest-in-the-nation cigarette tax. (Fortunately, the state senate overrode his veto.)

These two governors, even when their states were staring at deficits in the wake of the Great Recession, refused to accept common sense tax increases that would at least mitigate the debilitating effects of budget cuts. And today, they have a new member of their team — Gov. Chris Christie (R-NJ), who has promised to veto the state legislature’s attempt to implement a new tax bracket for those making more than $1 million. The legislature plans to approve the increase today.

New Jersey is facing a $10.7 billion budget deficit, and has the second highest average personal income in the country, yet Christie derided the tax as a “cute idea” that “doesn’t work.” For a household making $1.2 million annually, the tax would amount to an additional $11,598, according to projections from the the state’s nonpartisan Office of Legislative Services.

That’s not an insignificant amount of money, by any stretch, but raising taxes on the wealthy is one of the only options for states facing huge budget holes, and it’s better than slashing social services and education funding to bits. As the Center on Budget Policy and Priorities pointed out, tax increases on the very wealthy “can yield a significant amount of money from small rate increases that involve a relatively low number of taxpayers — those that are best able to afford the cost”:

This is because wealth in the United States has become concentrated among the nation’s richest households to an extent not seen since the late 1920s…If every state with an income tax increased its rates by 1 percentage point on incomes above $500,000, it would raise about $8 billion nationwide — funds that could be used as an alternative to some of the deep cuts in education, health care, and other important services being made in many states and considered in others.

Since 2008, 18 states have increased income taxes on their wealthiest residents, including New York, North Carolina, Oregon, and Connecticut. Proponents of an income tax increase in Washington state are currently gathering signatures, hoping to put the issue on the ballot in November.

“Progressive taxation is a state’s most effective antirecessionary tool. It gets money moving through the economy again, jump-starting the economic recovery that is the principal engine of state fiscal health,” explained Karen Kraut, director of the Tax Fairness Organizing Collaborative. But Christie and Pawlenty prefer to push the brunt of the recession onto their state’s most vulnerable residents.

Yesterday, Senate Majority Leader Harry Reid (D-NV) attempted to invoke cloture on Sen. Chris Dodd’s (D-CT) financial regulatory reform bill. However, due to the absence of Sen. Arlen Specter (D-PA), Sen. Scott Brown (R-MA) changing his vote, and Sens. Maria Cantwell (D-WA) and Russ Feingold (D-WI) refusing to end debate without consideration of provisions that would strengthen the bill, cloture was defeated 57-42, setting up another try today. (Sens. Susan Collins (R-ME) and Olympia Snowe (R-ME) voted in favor of cloture.)

One of the issues that Cantwell has with the bill is a loophole in the proposed derivatives regulations, first identified by Zach Carter, which allows derivatives traders to circumvent new regulations without penalty. One of the key parts of derivatives reform is the institutionalizing of central clearinghouses, which ensure that both parties have adequate collateral backing their trade. As Carter explained, “under the current bill, there is no penalty for anybody who fails to centrally clear their trades — even though the bill labels this activity illegal. What’s more, even though this behavior is illegal, the trade itself is still valid.”

Essentially, the law as written gives banks the choice of whether or not to follow the new rules, which is obviously problematic. Cantwell, along with Sen. Blanche Lincoln (D-AR), who authored the derivatives reform portion of the bill, have an amendment clarifying the language to remove this hole. But they can’t bring it up for a vote, fueling Cantwell’s opposition to the bill, because Republicans won’t let it come to the floor:

To underscore the Democrats’ point that Republicans were the ones blocking the bill, Mr. Dodd returned to the Senate floor asked for unanimous consent of the Senate to allow a vote on Ms. Cantwell’s derivatives amendment. Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, objected.

Ever since regulatory reform seemed inexorably headed for the finish line, Republicans have been objecting to consent to move any amendments that would strengthen the bill. They objected to Sens. Carl Levin (D-MI) and Jeff Merkley’s (D-OR) amendment institutionalizing the Volcker rule, as well as Sen. Byron Dorgan’s (D-ND) amendment banning naked credit default swaps.

Already, Brown has said that he will likely flip back and support cloture today, and Specter has returned to town, which should be enough to ensure a successful cloture vote. But the problem that Cantwell wants addressed is a key one and there’s no reason for Shelby to be standing in the way, unless he thinks the new laws that the Senate is considering should remain unenforceable.

Tony Hayward, CEO of oil giant BP, is betting that the environmental impact of the Deepwater Horizon disaster will be “very, very modest.” Even though a million gallons of crude have flooded into the Gulf of Mexico every day since the exploratory rig exploded nearly a month ago, Hayward told Fox News sister network Sky News on Tuesday that he is largely unconcerned:

I think the environmental impact of this disaster is likely to be very, very modest. It is impossible to say and we will mount, as part of the aftermath, a very detailed environmental assessment as we go forward. We’re going to do that with some of the science institutions in the U.S. But everything we can see at the moment suggests that the overall environmental impact of this will be very, very modest.

Watch it:

“The Gulf of Mexico is a very big ocean,” Hayward told the Guardian last week. “The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.”

Independent experts estimate that about 32 million gallons of toxic oil have spewed from the broken well, partially broken up into invisible plumes by more than 600,000 gallons of toxic chemical dispersants, produced by a company with close ties to BP.

Already, toxic sludge has started to ooze onto Louisiana’s fragile wetlands, and oil globs and tar balls have been found on barrier islands and beaches along the northeastern Gulf Coast. The federal government closed 19 percent of the Gulf to fishing on Monday when the slick doubled in size, caught by the Loop Current that is now dragging oil to the Florida Keys. Dozens of endangered Kemp’s ridley sea turtles have washed up dead.

It will be years before the toxic legacy of this disaster is known to a region defined by its coasts. According to scientists, this is “the worst time” of year that this disaster could have begun, as this is the peak of the spawning and nesting season for marine wildlife in the Gulf, from fish to turtles to dolphins. BP officials say they will be able to shut down the well blowout by July, well after the start of the hurricane season.

Cross-posted on The Wonk Room.

I’ve been complaining that Sens. Blanche Lincoln (D-AR) and Jon Kyl’s (R-AZ) quest to cut the estate tax — spending up to $80 billion to reduce tax bills for the richest of the rich — has suffered from a severe lack of perspective. No one in Congress has been questioning whether the estate tax is, in fact, too low, or whether there are far better things to do with that much money. Fortunately, today, Sens. Bernie Sanders (I-VT) and Bob Casey (D-PA) provided a modicum of reason:

CASEY: I think it would be a big mistake when everyone’s yelling about spending and deficits to let a lot of very wealthy people get off the hook.

SANDERS: The idea that we would make significant exemptions within the estate tax to give more tax breaks to the top three-tenths of 1% is nauseating. I will do everything I can to stop that.

Casey also added that “the idea that we’re going to give an incredible economic advantage to less than 1 percent of our taxpaying population is really offensive to me, to understate it dramatically.”

It’s about time that some lawmakers began to say that spending $80 billion to provide a tax cut to the richest 0.2 percent of households is an absurd waste of money. (62.5 percent of estate tax revenue comes from estates worth more than $20 million.) Objections from Democratic lawmakers, in fact, seem to have scuttled a deal that Lincoln and Kyl had worked out yesterday with the Senate Finance Committee’s chairman and ranking member, Sens. Max Baucus (D-MT) and Charles Grassley (R-IA).

Of course, Republicans are now complaining about Democrats blowing up whatever agreement was in place yesterday. “We no longer have an agreement, because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor, at least not voluntarily,” said Kyl. “It’s very frustrating because we thought we had a deal,” added Sen. Orrin Hatch (R-UT). “We thought we put it together in a way we thought was acceptable, and the Democrats are backing off on resolving it.”

But it’s worth remembering that it was Republicans who, in their zeal to slash the estate tax, scuttled a compromise offered to them in December. At that time, Baucus wanted to permanently set the estate tax at the 2009 level of 45 percent with a $3.5 million exemption (as opposed to letting the law run its course, which has the currently expired tax coming back next year at a 55 percent rate with a $1 million exemption). But Senate Minority Leader Mitch McConnell (R-KY) and Kyl blocked that move, leaving the current law untouched.

Lincoln today characterized her and Kyl’s cut as a “reasonable compromise.” But it isn’t. It is the furthest right-wing position, short of complete repeal. Accepting a permanent extension at the 2009 level was a compromise (to which the House of Representatives has already agreed). There’s no reason for the Senate to swallow Lincoln-Kyl, simply because they’ve been the loudest voices on this issue.

Last week, House Republicans launched a gimmicky website called “YouCut,” which asked visitors to vote on which item out of a pre-chosen set they would like to see axed from the federal budget. Republicans promised to bring a bill to the House floor nixing the item that received the most votes.

The problem with this is two-fold. For starters, eliminating every single one of the proposed YouCut items would amount to cutting 0.017 percent of the federal budget. This highlights the fundamental unseriousness of Republican claims that you can significantly reduce the federal budget deficit by targeting small-ball spending programs. But second, the ultimate “winner” of the contest is a successful jobs program that was fundamentally mischaracterized and misunderstood by the GOP.

With about 29 percent of the 280,000 votes cast, the Temporary Assistance for Needy Families Emergency Contingency Fund led the pack. House Republicans called the fund a “backdoor way to undo” welfare reform that “incentivizes states to increase their welfare caseloads.” Of course, phrased that way, the program sounds absolutely awful!

But as the Center on Budget and Policy Priorities pointed out, neither of those claims are actually true. While the Emergency Fund does provide payments to families facing financial emergencies, it does so with stringent work requirements. In addition, it’s enabling states “to place 186,000 unemployed individuals in subsidized jobs by the end of the summer”:

It’s the largest subsidized employment effort states have ever taken under TANF, the national block grant created by the 1996 welfare reform law. A large share of the jobs are in the private sector…Individuals receiving TANF assistance funded through the Emergency Fund must meet the same stringent work requirements imposed on other TANF recipients. They have 12 weeks to find a job — an extremely difficult task in today’s labor market — after which they must meet their work requirement through other work activities, such as unpaid work.

“The recession has caused unprecedented need for many struggling families with children and the TANF Emergency Contingency Fund helps states meet that demand but is also responsible for directly funding 185,000 jobs. I can think of few ideas Republicans have floated that have been as devoid of compassion and commonsense as this one,” said Rep. Jim McDermott (D-WA).

Even Gov. Haley Barbour (R-MS), no liberal darling, has said that the program provides “much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities.” But House Republicans are set to put it on the chopping block, because of an online gimmick.

Senate Majority Leader Harry Reid (D-NV) is hoping to invoke cloture on Sen. Chris Dodd’s (D-CT) financial regulatory reform bill tonight, limiting the remaining debate to 30 hours and, in a perfect world, setting up a final vote on the bill for late this week. However, that plan has been all but derailed by Republicans objecting to various important amendments, preventing them from coming to the floor for a vote. Debate up to this point has been moving along at a (relatively) brisk pace, but with the endgame in sight, Republicans are stepping up to defend Wall Street and the financial services industry.

As I noted yesterday, Sen. Richard Shelby (R-AL), on behalf of a bunch of unnamed colleagues, objected to the motion to bring Sens. Carl Levin (D-MI) and Jeff Merkley’s (D-OR) amendment institutionalizing the Volcker rule to the floor. But that was just the beginning of GOP obstructionism last night.

Shelby also objected to an amendment proposed by Sen. Kay Hagan (D-NC) that would limit the number of times payday lenders could roll over a loan to a particular borrower and an amendment from Sen. Byron Dorgan (D-ND) banning what are known as naked credit default swaps. For good measure, Shelby objected to Sen. Ron Wyden (D-OR) bringing up his amendment ending secret holds, which was blocked by Sen. Jim DeMint (R-SC) last week. Watch a compilation:

These amendments would reel in some of the riskiest practices of federally insured banks and ensure fair regulation of one of the most pernicious forms of lending. Yet, Republicans won’t even allow them to come to the floor for a vote, nevermind pass.

Levin and Merkley have said that they won’t vote for cloture without receiving a vote on their amendment, so the GOP’s refusal to allow their amendment onto the floor may very well result in Democrats scuttling their own cloture attempt. “‘It does’ jeopardize the bill,” Levin said. “I’m not inclined to vote for cloture if we can’t get a vote on this.” (To be fair, Dodd has also played a role in preventing votes on amendments, publicly sparring with Dorgan over whether his amendment would ever see a vote.)

Meanwhile, as the New York Times noted, Republicans are reprising their “government takeover” talking point, used so consistently during the health care reform debate, to deride financial reform. “Increasingly, the majority seems to be doing what they did on health care now to Main Street,” said Sen. Lamar Alexander (R-TN). “It looks like another Washington takeover.”

One of the most important amendments to Sen. Chris Dodd’s (D-CT) financial regulatory reform bill that has yet to receive a vote is a proposal from Sens. Jeff Merkley (D-OR) and Carl Levin (D-MI) that would institutionalize what has become known as the Volcker rule. The amendment would ban banks from engaging in proprietary trading (trading for their own benefit) with federally insured dollars, thus removing the government backstop that such risky trading currently enjoys.

Yesterday, Ryan Grim reported that Republicans were threatening to filibuster the Levin-Merkley amendment. This would force it to face a 60 vote threshold, unlike many of the other amendments to the bill that have already been considered and which needed a simple majority to pass. Don Stewart, a spokesman for Minority Leader Mitch McConnell (R-KY), told Grim that the charge was overblown. “That amendment’s not even pending,” he said.

However, today, Dodd asked for unanimous consent to bring up the Levin-Merkley amendment (thus putting it into the voting queue, so to speak), but Sen. Richard Shelby (R-AL), on behalf of unnamed colleagues “who are not on the floor,” objected. Watch it:

If the Levin-Merkley amendment doesn’t receive a fair vote on the floor, it will be a real blow to the financial reform effort, as it’s imperative that regulatory reform force banks that receive federal support back into the traditional banking business — making loans and taking deposits. As Mike Konczal put it at New Deal 2.0, “if you are a bank you need to be regulated like a bank, and part of that involves not running hedge funds that put depositors and taxpayers at risk.”

The amendment takes Dodd’s bill, which gives regulators discretion in implementing a proprietary trading ban, and makes it a hard and fast rule. This is important because, as Volcker himself has said, “it’s very unlikely that the regulators and supervisors would evoke a strict prohibition until a crisis came and then it’s too late.”

Five former Treasury Secretaries have penned a letter to The Wall Street Journal saying that the Volcker Rule is “a key element in protecting our financial system and will assure that banks will give priority to their essential lending and depository responsibilities.” The rule, as written in the Levin-Merkley amendment, also has the support of Dodd himself and of the Obama administration. Yet, Republicans are preventing it from coming to the floor for a vote, going to bat for the big banks that want to trade on the backs of American taxpayers.

After it finishes financial regulatory reform, one of the next items on the Senate docket is addressing the currently expired estate tax. The House of Representatives has already passed a bill retroactively setting the estate tax at the 2009 level (45 percent, with a $3.5 million exemption), but Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) have been pushing to cut the tax to 35 percent with a $5 million exemption.

Lincoln and Kyl have said that they are including spending offsets in their bill (since the additional $60-80 billion cost of their cut is subject to pay-go laws), meaning that they will raise revenue somewhere to pay for a tax cut for the heirs of multimillionaires. Unfortunately, National Journal is reporting that Lincoln and Kyl have “reached a general agreement” with Sens. Max Baucus (D-MT) and Charles Grassley (R-IA) to go along with their plan. Kyl said that the only remaining questions regard “when the new rate and exemption level would kick in — a cheaper option is to phase them in over time — and how to offset the difference between the new parameters and 2009 law.”

If true, this means that both the Chairman and the ranking member of the Senate Finance Committee are okay with finding $80 billion in spending offsets and wasting them on a tax cut for the heirs of multimillionaires. And while Baucus, Kyl, and Lincoln don’t have enough money to come even close to paying the estate tax under the 2009 law, as it exempts the first $3.5 million in assets, Grassley is another story entirely.

According to the latest financial disclosures, compiled by the Center for Responsive Politics, Grassley’s net worth is between $2.1 and $5.2 million. If his actual worth is on the higher end of that spectrum, the Lincoln-Kyl legislation could cut — and perhaps negate entirely — any estate tax liability that he has. (To what extent depends on how much of his net worth is officially in his spouse’s name. The only reported income from Grassley’s spouse is her salary.)

Under 2009 law, 99.8 percent of estates owe no estate tax at all, and 62.5 percent of estate tax revenue comes from estates worth more than $20 million. And because the exemption is so high, the average effective rate — the amount paid as a percentage of the entire estate — for those subject to the tax is about 14 percent.

It’s already going to cost $250 billion over ten years to keep the 2009 level in place, as current law calls for the tax to reset to the 2001 level (55 percent, with a $1 million exemption) in 2011. There’s simply no reason for spending another $80 billion on top of that to further reduce the tax burden on the richest of the rich.

Last night, Senate Majority Leader Harry Reid (D-NV) filed a procedural motion last night, setting up a final vote on Sen. Chris Dodd’s (D-CT) financial regulatory reform legislation for later this week (potentially Thursday). In the meantime, there are still a handful of important amendments set for votes, including Sen. Sam Brownback’s (R-KS) misguided attempt to exempt auto dealers from new consumer protections and Sens. Jeff Merkley (D-OR) and Carl Levin’s (D-MI) institutionalization of the Volcker rule.

In order to ultimately pass the bill, Reid and Dodd are going to have to scrounge up sixty votes to cut off debate. Sen. Bob Corker (R-TN) has been at the heart of bipartisan negotiations over financial reform for months, but announced on CNBC today that he is not going to support the bill, “unless there’s something miraculous that occurs here in Washington”:

I think we’ve always known that a financial regulation bill was going to pass, and it is. I’m not going to vote for it, unless there’s something miraculous that occurs here in Washington over the next 36, 48 hours, which I know is not going to be the case. I’m just being honest with you. We’re going to have a financial reg bill. I don’t support it, but I’m only one of a hundred senators.

Watch it:

Corker did say that expects the bill to pass, because “we’ve got about four or five Republicans that are going to vote for it.”

Corker has had a very on-again, off-again relationship with the financial reform bill, and evidently he has jumped off the bandwagon one more time. However, his opposition is interesting considering that he told Politico just yesterday that Dodd is planning to adopt “as many as 40 Republican amendments” into his manager’s amendment, which is the result of ongoing negotiations between him and the Republican leadership. It will be presented to the Senate before the vote for final passage of the bill.

In addition to those 40 or so GOP ideas that Dodd is including, 17 Republican amendments have received votes during Senate debate, with 8 ultimately being adopted. Another 3 amendments with a sponsor from each party have been passed on the Senate floor. Corker himself is still attempting to change the bill, putting forth an amendment giving national banks blanket immunity from state consumer protection laws.

Despite all this, Corker is claiming that “no real attempt” at bipartisanship has been made by Dodd and the Democrats, deriding the bill, and promising to withhold his support unless an unspecified miracle occurs. Which really makes one wonder what on Earth would have been enough to get him to sign on and what he hoped to achieve by dragging out negotiations with Dodd for weeks on end.

Even as some government and BP officials downplay the extent of the growing oil disaster in the Gulf of Mexico, a terrible threshold has been crossed: the slick has been captured by the Loop Current, which draws water from the Gulf through the Florida Keys and into the Gulf Stream along the Atlantic coast. SkyTruth president John Amos, one of the first independent experts to warn the official estimates of the leak were radically too small, calls Monday’s satellite imagery “disturbing“:

Today’s MODIS / Terra satellite image is the most cloud-free we’ve seen in many days, and what it reveals is disturbing: part of the still-massive Gulf oil slick has apparently been entrained in the strong Loop Current, and is rapidly being transported to the southeast toward Florida. The total area covered by slick and sheen, at 10,170 square miles (26,341 km2), is nearly double what it appeared to be on the May 14 radar satellite image, and is bigger than the state of Maryland.

See the satellite image overlaid with a model of the Loop Current in the Gulf of Mexico:

Composite image of MODIS satellite image and National Weather Service HYCOM ocean current model. Constructed by Brad Johnson, ThinkProgress.

The current travels at about four miles per hour, and is acting in concert with faster winds at the surface to draw oil toward the Cuban and Florida coasts. Eric Hoffmayer, a marine scientist with the University of Southern Mississippi Center for Fisheries Research and Development, told the ThinkProgress Wonk Room two weeks ago of the frightening consequences of the slick getting caught in the Loop Current:

If it gets entrained into the Loop [Current], it’s up into the Atlantic. And who knows where it’s going to go from there. As it moves around Florida, the next or another critical area would be the Florida Keys and the coral reefs we have down there. I don’t even want to think about that area being covered in oil. Once it works its way up the East Coast and potentially crossing the Atlantic, it could be far-reaching.

The oil pollution “could endanger Florida’s shoreline mangroves, seagrass beds and the third-longest barrier reef in the world, the 221-mile-long Florida Keys National Marine Sanctuary.” Additionally, “pollutants can smother and kill corals — living creatures that excrete a hard exterior skeleton — or can hinder their ability to reproduce and grow. That, in turn, could harm thousands of species of exotic and colorful fish and other marine life that live in and around reefs.” Already, tar balls are washing up on Key West’s beaches.

Over 625,000 gallons of toxic dispersants have been sprayed on the oil slick, including 45,000 gallons of dispersants injected directly at the wellhead — creating an invisible toxic cloud of unknown size a mile below the sea surface.

Cross-posted on the Wonk Room.

This week, the Senate will likely vote on Sen. Sam Brownback’s (R-KS) amendment to Sen. Chris Dodd’s (D-CT) financial regulatory reform legislation, which would exempt auto dealers from regulations set by the proposed Bureau of Consumer Financial Protection. The amendment has some outspoken opponents, including the Obama administration and the Pentagon, which said that having the Bureau police auto lending “will assist us in reducing the concerns [service members] have over their financial well-being.”

Brownback, however, is not backing down, and has fired off a letter to the Department of Defense asking “is it the position of the department that auto dealers pose a specific threat to military readiness?” Brownback also demanded “any records the Pentagon keeps of actual complaints or problems ‘that would document the scope of the threat to readiness.’”

As the Dow Jones Newswire put it, “Brownback’s challenge to the Pentagon is just the latest indication of how intense the auto dealer fight has become.” Indeed, as the New York Times profiled today, “through their lobbying arm, the National Automobile Dealers Association, the dealers have hired a crisis communication team, taken out full-page newspaper advertisements, and organized trips to Washington for dealers…to buttonhole lawmakers and make their case.”

But the Pentagon has already preempted Brownback’s question about military readiness, saying that yes, it does feel that auto dealers ripping off service members has a detrimental effect on troop readiness. As Secretary of the Army John McHugh wrote:

In surveys conducted by the Department of Defense, finances rank among the primary causes of stress for most military Families. As auto loans are often the most significant financial obligations of our soldiers — particularly within the junior enlisted grades — we believe that greater government oversight of auto financing and sales for our Soldiers will help protect them and reduce unnecessary financial strain on our already overburdened Army Families. Soldiers who are distracted by financial issues at home are not fully focused on fighting the enemy, thereby decreasing mission readiness. Protection from unprincipled auto lending enables our Soldiers to concentrate on their primary mission — protecting our great Nation.

The Cambridge Winter Center for Financial Institutions Policy has pointed out that “auto finance is demonstrably susceptible to unfair and deceptive practices” — including mark ups and a host of fees — which are “demonstrably not held in check by private market forces alone.” The National Consumer Law Center has also found that auto financiers routinely charge higher markups on loans to minority borrowers.

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.” But Brownback is still willing to take on the Pentagon and the administration in order to exempt auto dealers from rules that, should financial reform pass, all other financiers will have to follow.

Currently, House and Senate negotiators are trying to work out the differences between each chamber’s respective bill reauthorizing the Federal Aviation Administration. One key difference between the bills is that the House version corrects an inequity in labor law that allows Federal Express to operate under the Railway Labor Act (RLA), which poses higher barriers to union organizing than the National Labor Relations Act (NLRA). FedEx’s competitors, such as the United Parcel Service, are governed by the NLRA. The Senate bill does not contain the change.

FedEx has been waging an intense campaign in order to preserve its special treatment, led by CEO Fred Smith, who was George W. Bush’s fraternity brother and has said that “I don’t intend to recognize any unions at Federal Express.” And according to Roll Call, in 15 months the company spent $21.1 million lobbying Congress:

Last year, it ranked 14th among all groups and companies in lobbying budgets, spending more than oil giant BP and defense contractor Lockheed Martin. The Memphis-based company also has tapped politically connected assistance, contracting with 14 outside lobbying firms that employ a number of former Senators. Not only is the Breaux Lott Leadership Group working for FedEx, but its founders, former Sen. John Breaux (D-La.) and former Senate Majority Leader Trent Lott (R-Miss.), are listed on the lobbying disclosure forms as personally working on the account. FedEx hired the international public relations firm Burson-Marsteller to work specifically on this issue.

FedEx has successfully lobbied multiple times to remain classified as an airline (and thus under the RLA), rather than having its ground operation qualified as such, pulling it under the NLRA. This time around, it has threatened to blunt its own growth and scaremongered about medical supply deliveries being delayed if the change in labor law is made.

Tennessee’s two Republican senators, Lamar Alexander and Bob Corker, have also pledged to defeat the change. But there’s simply no reason for this inequity to remain law. FedEx’s pilots have already unionized, without the dire consequences that Smith warned about. And in the meantime, FedEx’s drivers are subject to a law that makes it all but impossible to organize and collectively bargain, as they would have to unionize literally the entire company (across the entire country), instead of being allowed to organize at the local level.

Last week, the National Mediation Board — which oversees labor-management relations under the RLA — did away with one inequitable aspect of the antiquated RLA, ensuring that uncast votes in union elections no longer count as votes against the union. Congress would do well to keep the ball rolling, enacting the change taking away the unjustified competitive advantage that FedEx now enjoys.

It’s no secret that Sen. Blanche Lincoln (D-AR) — along with her Republican counterpart, Sen. Jon Kyl (R-AZ) — are on a quest to cut the estate tax, slashing taxes for the heirs of multimillionaires. Instead of reinstating the currently expired estate tax at the 2009 level (45 percent, with a $3.5 million exemption), Lincoln and Kyl want to cut the rate to 35 percent and raise the exemption to $5 million.

As I noted earlier this week, Lincoln and Kyl have been searching for offsets to pay for their tax cut, as if there aren’t a host of better things that we could do with $60-$80 billion. And judging by a quote she gave to The Hill, Lincoln either isn’t entirely clear how the estate tax works or is relying on a false characterization of it to build support:

“I don’t think there’s any American out there who believes you should work all of your life to find that when you die, 55 percent of [your estate] has got to go to the government,” the senator said. “Coming up with more balanced exemptions and rates is critical.”

Lincoln is likely right that Americans don’t think 55 percent of any estate should go to the government upon the owner’s death. Fortunately, that is not a policy that anyone is proposing, nor would it be the case if the estate tax was simply allowed to reset to 2001 levels (as it will if Congress fails to act).

Because the estate tax — like the personal income tax — is calculated on marginal income, the particular percentage is only levied on amounts above the exemption. So if the exemption is $3.5 million, the first $3.5 million of the estate is passed on entirely tax free. Tax is only paid on the first dollar in excess of that. So an estate worth $3,500,001 would have a tax bill of .45 cents under 2009 law.

The effective tax rate — the amount paid as a percentage of the entire estate — owed by people who actually had to pay any estate tax at all in 2009 was about 14 percent. There were no grieving widows who have to hand over half of everything they own to the government.

Lincoln also employed the common conservative argument that “small businesses don’t have the profit margins to survive” a higher estate tax. But virtually no small businesses face the estate tax. In fact, 98 percent of estates pay no estate tax at all (because they don’t come even close to exceeding the exemption). Only 0.2 percent of the money that Lincoln and Kyl want to spend on their tax cut will wind up with actual small businesses. The rest will go towards lowering tax bills for the richest of the rich.

During the debate over health care reform, a favorite Republican tactic was to try slowing down the process by claiming that they were being frozen out by the Democrats, and that none of their ideas were being included in the legislation. This was repeatedly revealed to be completely untrue, as Democrats spent months negotiating with the GOP and included scores of its ideas, but still, the talking point persisted.

Now that financial regulatory reform is inching its way toward the finish line, Republicans may be looking to resurrect the same strategy:

“I think we all realize that there’s no real attempt for a bipartisan bill,” [Sen. Bob] Corker (R-TN) said. “We’re outnumbered.” He said there may be a few Republicans who are satisfied with the bill but he’s “not going to vote for a bad bill.”

Corker was singing a very different tune just a few months ago, when Senate Banking Committee Chairman Chris Dodd (D-CT) specifically reopened negotiations with him, after previous talks with the committee’s ranking member, Sen. Richard Shelby (R-AL), wound up going nowhere. Dodd then included many of the provisions that he and Corker worked out when he brought his bill to committee markup. He also gave the Republicans ample opportunity to offer amendments during the markup, which the Republicans chose not to do. (Corker later called this a “major strategic error.”)

Even during the amendment process on the Senate floor, Republicans are getting a very fair shake. So far, the Senate has voted on 26 amendments. Of these, 14 were sponsored by Republicans, 9 were sponsored by Democrats/Independents, and 3 had a sponsor from both parties. So 17 of the 26 amendments had Republican backing:

Republican Amendments: Snowe #3755 (passed, voice vote); Snowe #3757 (passed, voice vote); Shelby #3826 (failed, 38-61); Ensign #3869 (failed, 35-59); Vitter #3760 (failed, 37-62); McCain #3839 (failed, 43-56); Corker #3955 (failed, 42-57); Snowe #3918 (passed, voice vote); Chambliss #3816 (failed, 39-59); Crapo #3992 (passed, voice vote); Lemieux #3774 (passed, 61-38); Sessions #3832 (failed, 42-58); Thune #3987 (failed, 40-55); Collins #3879 (passed, voice vote)

Democratic/Independent Amendments: Boxer #3737 (passed, 96-1); Brown #3733 (failed 33-61); Sanders #3738 (passed, 96-0); Dodd #3938 (passed, 63-36); Merkley #3962 (passed, 63-36); Reed #3943 (passed 98-1); Landrieu #3956 (passed, voice vote); Franken #3991 (passed, 64-35); Durbin #3989 (passed, 64-33);

Sponsor From Both Parties: Shelby-Dodd #3827 (passed 93-5); Tester-Hutchison #3749 (passed, 98-0); Hutchison-Klobuchar #3759 (passed, 90-9)

Thus far, 9 Republican-sponsored amendments have been accepted, as well as 11 Democratic sponsored amendments. And let’s not forget, Republicans spent three days filibustering the motion to simply start debate on the bill. Considering the circumstances, Dodd has been extremely accommodating.

In fact, when Dodd decided to begin admonishing other Senators about the plethora of amendments slowing down the bill, he went at members of his own party, dressing down Sen. Byron Dorgan (D-ND)! There hasn’t been a peep about Sen. Jim DeMint’s (R-SC) attempt to bring up a completely unrelated amendment requiring completion of a border fence.

According to Politico, Sen. Majority Leader Harry Reid (D-NV) wants to file cloture on the financial reform bill next week, limiting the remaining debate to 30 hours. But Republicans have said that doing so would be “premature” and “force a showdown.” At this point, though, they only have themselves to blame for sucking up valuable debate time with filibusters and nonsensical amendments.

This week, the National Mediation Board (NMB) announced a rule change making union elections under the Railway Labor Act (RLA) more democratic. Previously, under the RLA, workers who did not cast votes in an election were counted as having voted against unionization. Now, though, they will simply not be counted at all, like non-voters in any election for political office.

This change has upset airlines governed by the RLA — particularly Delta Airlines, which is largely non-union — prompting them to launch a lawsuit in an attempt to block the rule change. And these corporations have some allies in Congress, who have launched a concurrent attempt to legislatively prevent the change.

The charge is being led by Sen. Johnny Isakson (R-GA), whose number one campaign contributor this election cycle is Atlanta-based Delta. He is circling a “resolution of disapproval,” which, if adopted by both the Senate and the House and signed by the President within 60 days of a rule being published, negates that rule’s effect. “I will use all available tools at my disposal…to see that this assault on employee rights does not stand,” Isakson said.

So far, Isakson has managed to drum up 27 co-sponsors for his resolution. It’s quite remarkable that these lawmakers are willing to sign their names to a document rendering disapproval of the democratic process. After all, they are explicitly endorsing the idea that uncast votes should be counted one way or the other.

Plus, as United Steelworkers International President Leo Gerard wrote, the process which the NMB overturned provided huge incentives for corporations to inflate their workforce numbers, in order to increase the number of votes necessary to approve the union:

Compounding that supermajority obstacle was the NMB practice of permitting employers to determine who was eligible to vote, then excusing them from providing that list to workers seeking collective bargaining. This created an incentive for employers to “accidently” include the names of workers who’d quit or retired — ineligible voters whose inability to cast ballots created automatic “no” votes. Writing about losing an election in 2008, Delta flight attendant Linda Sorenson said airline officials released its list after the balloting. Among other problems, it included the name of a deceased worker.

These sorts of shenanigans have no place in a fair election process, and the system which the Republicans are trying to preserve obviously incentivizes them. But Isakson is pressing on, undeterred. “We will have the signatures necessary to discharge my resolution of disapproval, to bring about a vote on the floor of the Senate,” Isakson said yesterday. Fortunately, the odds of President Obama signing such a resolution, even if Isakson found 51 votes in favor of it in the Senate, are, I think, effectively nil.

The Senate is slowly but surely chugging its way through the huge stack of amendments to Sen. Chris Dodd’s (D-CT) financial regulatory reform bill. Yesterday, it voted down Sen. Saxby Chambliss’ (R-GA) weak alternative to the derivatives title, while approving amendments that preserve Federal Reserve oversight of small banks and crack down on deceptive lending in the mortgage business.

So far, every major amendment that would weaken the bill has been defeated. Aside from Chambliss’, Sen. John McCain’s (R-AZ) plan to abolish Fannie Mae and Freddie Mac and Sen. Richard Shelby’s (R-AL) consumer protection substitute were both rejected. But there are still a slew of amendments worth watching out for. For instance, Sen. Tom Carper’s (D-DE) amendment giving national banks immunity from state consumer protection laws would be incredibly detrimental to the bill.

An amendment put forth by Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR), meanwhile, has the potential to strengthen it. It has to do with the Volcker rule, named after the former Federal Reserve Chairman, which would ban banks from engaging in proprietary trading (trading for their own benefit) with federally insured dollars.

Right now, Dodd’s bill gives regulators some discretion in implementing the rule, but Levin-Merkley would tighten the language, allowing proprietary trading “only in limited circumstances and if [the banks] set aside additional capital to cover potential losses.” Dodd has given the Levin-Merkley amendment his support.

Removing regulatory discretion when it comes to the Volcker rule is a good move. As Volcker himself said, “it’s very unlikely that the regulators and supervisors would evoke a strict prohibition until a crisis came and then it’s too late.” “Look, I’ve been a regulator for 20 years. So I know how they are,” he added.

New data released this week shows just how much of a roaring comeback proprietary trading has made. Three banks — Goldman Sachs, JP Morgan Chase, and Bank of America — made money on trading every single day of the first quarter this year. Goldman made at least $25 million each day, and pulled in more than $100 million on 35 separate days. “It’s statistically improbable to have three firms batting 1,000 and also pitching a perfect game. You wonder why the rest of America has some suspicion about proprietary trading,” said Matthew McCormick, a banking analyst.

At the same time, the latest report from the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP) shows that big bank lending to small businesses fell by more than 9 percent from 2008 to 2009, even though overall bank lending only fell by 4 percent. The panel’s chair, Elizabeth Warren, called the data “infuriating.”

Banks that benefit from a federal backstop should be engaged in core banking practices — taking deposits and lending — while those that want to trade for their own benefit should shed their federal protection. But right now we’re stuck with the worst of both worlds, where lending dries up but the government is backing the banks while they trade for no benefit but their own. Levin-Merkley would rightly force the banks to go one way or the other.

BP does not know how fast its oil disaster is growing, a top executive testified on Tuesday. Although its claim that the spill is growing at 210,000 gallons a day is widely accepted, BP America chairman and president Lamar McKay said that is just a guess based on the size of the surface slick from the destroyed Deepwater Horizon well. After Sen. John Barrasso (R-WY) questioned why BP’s estimate changed a week after the fatal explosion from 1000 barrels (42,000 gallons) to 5000 barrels (210,000 gallons) a day, McKay said “there’s no certainty around that number” because “you can’t measure what’s coming out at the seabed”:

The volume estimates are based effectively on surface expression, because you can’t measure what’s coming out at the seabed. So this is based on NOAA models and Coast Guard — NOAA, Coast Guard, and BP estimates effectively from surface information, overflights and things like that, and then backed into in terms of the volume. So, there’s no certainty around that number. There’s a large uncertainty bound around 1000, there’s uncertainty around 5000. It’s the best estimate currently.

Watch it:

It’s extremely questionable whether 210,000 gallons a day is, in fact, “the best estimate.” Independent satellite analysis experts Dr. John Amos and Dr. Ian McDonald have estimated from surface imagery that the BP disaster is increasing at a rate of over one million gallons a day:

The last “official” estimate of 210,000 gallons a day was made by the National Oceanic and Atmospheric Administration (NOAA) and accepted by the Coast Guard back on April 29. However, 372,000 gallons of dispersants have been sprayed on the slick, making surface imagery useless for judging the ever-expanding cloud of oil coming from a mile below the ocean. On May 1, the Coast Guard and NOAA stopped trying to estimate the spill rate, with Admiral Thad Allen saying:

Any exact estimation of what’s flowing out of those pipes down there is probably impossible at this time.

Despite this uncertainty, the New York Times, Washington Post, CNN, and other media organizations credulously report that the BP disaster has spilled less than five million gallons of oil into the Gulf of Mexico so far, instead of 25 million gallons. The Wall Street Journal and Associated Press have challenged the official undercount, and PBS Newshour has published a running counter which allows users to adjust the estimated leak rate.

It is troubling that BP’s McKay — who likes to describe the efforts to contain the gushers as “open-heart surgery at 5000 feet” — says his company can’t measure the flow rate of the leaks directly, even with multiple undersea robots filming them 24 hours a day. As of today, BP has released approximately 45 seconds of footage of the gushing leaks, including a clip of oil spewing out of the failed containment dome.

Cross-posted on the Wonk Room.

Last year, the House of Representatives adopted a change (included in the Obama administration’s budget) that ends an inequity in the tax code enabling hedge fund and private equity managers to pay lower taxes on their income. Right now, the percentage of a fund’s proceeds that investors pay to the manager — called the “carried interest” — gets taxed as if it’s capital gains (at a 15 percent rate, instead of 35 percent), even though the manager doesn’t have any money at risk. It’s as if we treated movie proceeds given to a film’s lead actor as investment income.

This long overdue change has yet to be taken up by the Senate, as Senate Republicans have been adamantly opposed to it. “I think it will be difficult [to find 60 votes for the change],” said Sen. Chuck Grassley (R-IA). “A lot of hedge funds have gone belly up,” claimed Sen. Orrin Hatch (R-UT). “Frankly, this administration will raise any tax it can.”

However, Congress has a bunch of very popular business tax credits that it would like to extend, but the extensions need to be paid for, so the carried interest break is looking more likely to disappear. Senate Finance Committee Chairman Max Baucus (D-MT) said this week that there’s “a growing sense of inevitability” about the tax hike occurring, despite heavy lobbying from the financial services industry.

Office of Management and Budget Director Peter Orszag agreed yesterday, predicting that “you’re going to see a change in the taxation of carried interest pass the Senate within the next few weeks.” Orszag then took on the common conservative canard that the tax increase would stifle investment:

Mr. Orszag argued that Wall Street would adjust to a higher tax rate on carried interest, saying he was “unaware of any credible evidence that there would be any significant adverse effect from the increase in taxes”…Mr. Orszag asserted that past tax increases — from those on dividends, capital gains and the marginal income tax rates — did not lead to a big dip in investment and that changes in the tax treatment of carried interest would most likely have a negligible impact on investing.

Hedge fund managers make hundreds of millions of dollars (and often billions) annually. Does anyone really think they will suddenly slam on the brakes if they have to pay the same tax rate as the janitors who clean their offices?

The preferential treatment of carried interest is a bizarre fault in the tax code that only persists because of the power of the financial services industry and Republican resistance to any tax hike at any time. But sooner or later, Congress is going to have to start raising money somewhere, and treating carried interest for what it is — normal income — is a good place to start.

Earlier this month, the International Monetary Fund (IMF) and members of the European Union agreed to a $145 billion (110 billion) rescue package for Greece, which has been gripped by economic turmoil and social unrest. Because the United States is the biggest contributor to the IMF, this had led Republicans in Congress to run wild with claims that American taxpayers are bailing out Greece. The GOP has even drafted legislation in an attempt to compel Treasury Secretary Tim Geithner to prevent the IMF from following through on its loan offers.

Over the last two days, a series of Republicans — including House Republican Conference Chairman Mike Pence (R-IN) and Conference Vice Chairwoman Cathy McMorris Rodgers (R-WA) — have gone to the House floor and onto television to condemn the IMF loans in the name of taxpayer protection. Watch a compilation:

First off, the IMF extends loans — not simply lump payments — using a line of credit extended by, among others, the U.S., for which the U.S. receives repayment. To date, no IMF borrower has defaulted on its obligations, so the odds that the U.S. actually loses money are very small. Having a severely weakened European Union — which, counted as a single economy, is the United States’ largest trading partner — would be far worse than extending these loans. Why do we even have the IMF, if not for this express purpose?

Plus, these Republicans refuse to acknowledge that the current mess in Europe is a glaring example of the failure of conservative economics. As my colleague Max Bergmann pointed out, the fiscal response to the economic crisis in Europe has been limited, largely thanks to the economically conservative leadership of Germany, while the European Central Bank “has resisted injecting any life into the broader European economy.” Thus, a problem that should have been headed off was allowed to fester and has now exploded.

Had policymakers in the U.S. followed the fiscal advice of Congressional Republicans — which involved implementing spending freezes of various degrees — the recession would only have been exacerbated and we would be looking much more like Greece. Instead, thanks to the economic stimulus package, the economy is very slowly starting to turn around. To his credit, earlier this year Geithner was urging the IMF to make a loan to Greece, which would have come with a much smaller $40 billion price tag. But Europe dithered, and now finds itself short of options.

Fortunately, the Obama administration doesn’t seem to be taking the GOP’s response seriously at all. Both President Obama and Vice President Joe Biden have offered their support to Europe’s fiscal response. After a meeting with Spanish Prime Minister Jose Luis Rodriguez Zapatero, Biden said that “we agreed on the importance of a resolute European action to strengthen the European economy and to build confidence in the markets. And I conveyed the support of the United States of America toward those efforts.”