April 19, 2024

Obama to Name Melvin Watt to Oversee Fannie and Freddie

Mr. Watt would replace Edward J. DeMarco, who has been acting director of the Federal Housing Finance Agency for more than three years.

Mr. Watt is a lawyer who has represented North Carolina in Congress for the last two decades. If he won Senate confirmation, he would become a powerful economic policy maker, as the housing market recovers and the White House contemplates the government’s future role in it.

Between Fannie, Freddie and other agencies, the government is currently backstopping about nine out of 10 new mortgages, stepping in to foster a functioning mortgage market as the effects of the housing downturn linger. The two financing agencies, which required a massive government bailout in 2008, have returned to profitability and are in the process of repaying taxpayers, who are still owed more than $100 billion.

Thus far, the Obama administration and Congress have shown little interest in restructuring or winding Fannie and Freddie down, lest they disturb the nascent housing recovery. But with the market starting to normalize, what to do with Fannie and Freddie – and what role the government should be playing in the mortgage market more broadly – look certain to become more hotly contested issues.

For months, members of Congress, housing activists and Democratic state attorneys general have campaigned for Mr. Obama to replace Mr. DeMarco, who has blocked an administration proposal to allow underwater homeowners — those who own more on their loans than their house is worth — to reduce the principal on their mortgages.

Such principal reductions could save Fannie and Freddie money by reducing the rate of homeowner default and foreclosure, and many Democrats argue that it would be an important salve for the broader housing market. But the plan might end up costing the taxpayers money, as the Treasury Department would pay increased incentives to Fannie and Freddie to get them to participate.

Mr. DeMarco has argued that he is responsible for protecting taxpayers writ large, and not just for fixing Fannie and Freddie’s books – and thus he has resisted the White House plan. That has stoked liberal frustration with the White House for allowing Mr. DeMarco to remain at the helm of the housing agency.

Mr. Watt looks certain to face a confirmation fight. A prior White House nominee for the position, Joseph A. Smith Jr., a North Carolina banking commissioner, failed to win the support of the Senate. Many Republican members of Congress have expressed skepticism about the principal-reduction plan because it might cost taxpayers money and might make homeowners more likely to default on their mortgages.

Still, Mr. Watt is well known in Congress, and sits on the powerful House Financial Services Committee. He is also known for promoting lending to low-income and minority borrowers, but is not considered unfriendly to banks: financial firms and insurers are among his biggest donors, in no small part because Charlotte, part of which is in Mr. Watt’s district, is a major banking center. Should Mr. Watt fail to win Senate confirmation, the White House could name him as a recess appointment.

Article source: http://www.nytimes.com/2013/05/02/business/obama-to-name-melvin-watt-to-oversee-fannie-and-freddie.html?partner=rss&emc=rss

Your Money: Even Capitol Hill Gets the Financial Blues

With their salaries of $174,000 (or more for those in leadership roles), senators and members of Congress are paid more than most of us. These days, many of them need enough money in the first place to jump-start their campaigns.

But there have to be some lawmakers who have suffered as much as many of their constituents in the last four years, have changed the way they legislate because of it and learned some lessons worth sharing, right?

Representative Robert Turner, a Republican from New York City, lost his house in a fire after the storm this week. So for him the wound is still raw.

Senator Mike Lee, a Republican from Utah who may have the lowest net worth of the 100 senators, sold his home in a short sale. I hoped to speak to him about it, but his media representative, Brian Phillips, said in an e-mail that my column idea “has to be the silliest thing I’ve ever heard.”

Then there is Representative Joe Walsh, a freshman Republican who represents the suburbs northwest of Chicago. He proudly claims the mantle of America’s poorest congressman, telling Chicago magazine that he’s “No. 1 in poverty.” In the last few years, he’s had to answer for his tax liens, a foreclosure and an accusation that he owed more than $117,000 in past-due child support.

What do we see of ourselves in him? And what does his opponent’s efforts to brand him a deadbeat tell us about what we ought to be willing to tolerate in our elected officials?

There isn’t much in the historical record on these questions, but one example from 20 years ago is instructive. That was when the public learned that many members of Congress were helping themselves to free overdrafts from banklike government accounts.

Voters who had no such privileges at their own local banks weren’t pleased. Within one election cycle, according to Gary C. Jacobson, a political science professor at the University of California, San Diego, and Michael A. Dimock, then a graduate student at the university, who later published an academic paper about the scandal, the worst abusers were about three times as likely not to be in Congress anymore as incumbents who steered clear of the issue. This was equally true of Republicans and Democrats, though Democrats were the more egregious of the two parties in this instance.

It wasn’t until after Mr. Walsh won his Republican primary in 2010 that some of his biggest financial troubles emerged. He triumphed with the help of strong Tea Party backing. And given his call for fiscal restraint, it was only natural that local reporters would look at his personal finances.

Sure enough, right after the primary, The Daily Herald discovered that Mr. Walsh had recently lost a condominium to foreclosure. “This experience helped me gain a better appreciation for the very real economic anxieties felt by Eighth District families, many of whom are just a paycheck or two away from facing similar difficulties,” Mr. Walsh told the paper via e-mail.

Voters fed up with the goings-on in Washington seemed to empathize with this and revelations of tax liens he dealt with more than a decade ago, or at least they were willing to hold their noses and look past it. He beat the Democratic opponent in his race by just a couple of hundred votes.

But the revelations didn’t end there. Last year, The Chicago Sun-Times reported that Representative Walsh’s former wife had filed court papers seeking more than $117,000 in what she claimed was past-due child support. She also said that he failed to make his payments at the same time that he was personally lending money to his campaign, putting politics over paternity, in effect. Representative Walsh countered that there was a verbal agreement between him and his former wife that allowed him to skip the monthly payments because he wasn’t earning much money at the time.

Earlier this year, the two resolved the dispute and issued a joint statement saying that “we now agree that Joe is not and was not a ‘deadbeat dad’ and does not owe child support.”

At the time of the initial revelation, Representative Walsh’s lawyer, R. Steven Polachek, told The Sun-Times that he’d “had no more problems with child support than any other average guy.”

About 40 percent of the 500,000 or so child support cases that the Illinois Department of Health Care and Family Services handles involve late payments at any given moment. The half-million cases tend to involve households with lower income, according to a spokesman, where there may be more frequent income disruptions.

Whether the questions about Representative Walsh’s child support make him Everyman or not, however, it’s the original suggestion that he prioritized his campaign over his children that may give voters the most pause.

Article source: http://www.nytimes.com/2012/11/03/your-money/even-capitol-hill-gets-the-financial-blues.html?partner=rss&emc=rss

Web Piracy Bills Invite a Protracted Battle

But few people in Silicon Valley or Hollywood consider the battle over.

The Motion Picture Association of America, which represents Hollywood studios and is a principal proponent of the antipiracy legislation, suggested that it would continue to push the administration to approve a modified version of the bills, known as the Stop Online Piracy Act and the Protect Intellectual Property Act. “Look forward to @whitehouse playing a constructive role in moving forward on #sopa #pipa,” the association posted on its Twitter feed Saturday night.

Some leaders of the movie industry were not as diplomatic. The chief executive of News Corporation, Rupert Murdoch, in a flurry of Twitter messages in the hours after the White House announcement, accused President Obama of capitulating to the technology industry. “So Obama has thrown in his lot with Silicon Valley paymasters who threaten all software creators with piracy, plain thievery,” he posted on his Twitter feed.

The antipiracy bills presented a difficult test to a young, disorganized and largely politically inactive technology industry. It is unclear that companies like Facebook and Google, left to themselves, could have swayed members of Congress or the White House without using the Internet to marshal opposition from technologists, entrepreneurs and computer-adept consumers. Opposition came from a vast spectrum, including computer security specialists who worried about a provision to tinker with Internet addresses and venture capitalists who feared the legislation would thwart the innovation of technology start-ups.

The opposition has been fueled by some of the most innovative pieces of the Internet — Twitter, Facebook, Reddit.com and even the I Can Haz Cheezburger? sites. “Looks like the Internet is winning a battle against some really bad potential law,” wrote Craig Newmark, the founder of Craigslist, the online classified advertising site, in a blog post on Sunday.

Markham C. Erickson, executive director of NetCoalition, whose members include Google and Yahoo, said Sunday that it was too soon to dismiss entirely the House or Senate versions of the antipiracy bills. “I think the White House statement is very strong and it helps, but, no, I don’t think it’s dead,” Mr. Erickson said by telephone from Washington. “We will continue to have to educate as many members as possible.”

He said it was still an open question whether his group would seek to kill the bills or push for major changes.

Several Internet companies, including AOL, Facebook, Google and Yahoo, endorse an alternative that seeks to punish foreign Web sites that engage in copyright infringement through international trade law. That bill is co-sponsored by Representative Darrell Issa, Republican of California. Last week, Mr. Issa said that his party’s leader, Representative Eric Cantor of Virginia, had assured him that the Stop Online Piracy Act would not come up for a vote until there was consensus. For technology companies, that holds out the promise of returning to the drawing board. For Hollywood and other media companies challenged by piracy, it defers the prospects of antipiracy legislation.

“We have a chance to reset the legislative table to find out what kind of legislation is needed,” Mr. Erickson said. “We have an opportunity to step back, recalibrate and understand what the problem is.”

Several prominent Web sites and start-ups that have been among the most vocal opposition to the bills say they will not let up on their online advocacy soon.

The comments by the administration’s chief technology officials was a sign that government officials were beginning to pay attention to the cries of concern from the technology industry about the bills’ ability to enable censorship and tamper with the livelihood of businesses on the Internet.

“It’s encouraging that we got this far against the odds, but it’s far from over,” said Erik Martin, the general manager of Reddit.com, a social news site that has generated some of the loudest criticism of the bills. “We’re all still pretty scared that this might pass in one form or another. It’s not a battle between Hollywood and tech, its people who get the Internet and those who don’t.”

Mr. Marin said that Reddit is planning a sitewide blackout on Wednesday to protest the bills — an effort joined by a number of other sites, including MoveOn, BoingBoing, a popular technology and culture blog, and the Cheezburger Network, a collection of several dozen Internet humor sites, including I Can Haz Cheezburger? and FailBlog.

In New York, the New York Tech Meetup, an eight-year-old organization of nearly 20,000 people who work in the technology industry throughout the city, is planning a protest Wednesday afternoon outside the Manhattan offices of Senators Charles E. Schumer and Kirsten E. Gillibrand of New York, who co-sponsored some of the proposed legislation.

Nick Bilton contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=5f40bc49ca45e3d09e909bef1103638f

Richard Cordray, New Consumer Chief, Promises Vigorous Agenda

The director, Richard Cordray, who was appointed to the post Wednesday by President Obama, encouraged consumers to contact the agency with their stories and complaints about banks, payday lenders and other financial institutions that they feel have sold deceptive products or engaged in abusive behavior.

“The consumer bureau will make clear that there are real consequences to breaking the law,” Mr. Cordray, who had been in charge of enforcement at the agency, said in a speech at the Brookings Institution.

“We have given informants and whistle-blowers direct access to us,” he said. “We took over a number of investigations from other agencies in July, and we are pursuing some investigations jointly with them. We have also started our own investigations. Some may be resolved through cooperative efforts to correct problems. Others may require enforcement actions to stop illegal behavior.”

Asked whether he would hesitate to use any of the bureau’s new rule-making or enforcement powers given that his recess appointment could draw a legal challenge and has drawn sharp criticism from Republican members of Congress, Mr. Cordray said no.

“The appointment is valid,” he said. “I’m now director of the bureau.”

Mr. Cordray was nominated by President Obama last year, but Senate Republicans blocked his nomination from coming to the floor for a vote. Opponents in Congress and in the banking and business sectors have said that the agency has too much power and autonomy and lacks adequate financial oversight and review of its regulatory actions.

He said that he did not take the Congressional opposition personally. “They, after all, represent the same people that we are serving,” he said. “We really have the same interests, I believe, at heart.” Nor, he said, did he question the motives of critics of the agency, and he said he intended to try to work with members of both parties in Congress.

“I’m not someone who impugns people’s motives,” he said. “That’s not my way. I don’t think that’s helpful. I tend to assume that people are always trying to do what they think is right. We may just disagree at times on what that is.”

The agency will focus most immediately on the so-called nonbank financial companies — money transfer agencies, credit bureaus and private mortgage lenders, for example — that previously have fallen outside the authority of most bank regulators and consumer protection agencies, Mr. Cordray said.

Although the consumer agency was given authority over those types of companies in the Dodd-Frank Act, the regulatory overhaul passed in the wake of the financial crisis, those powers could not take effect until the bureau had a director.

“Today, we are launching the bureau’s program for supervising nonbanks,” Mr. Cordray said. “Many provide valuable services to customers who lack access to other forms of credit. And they are big markets. Nearly 20 million American households use payday lenders and pay roughly $7.4 billion in fees every year.

“Many subprime loans during the housing bubble were made by nonbank mortgage brokers,” he added. “Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them. But we must establish clear standards of conduct so that all financial providers play by the rules.”

Mr. Cordray asked consumers to contact the agency directly through its Web site, consumerfinance.gov. “Our team is taking complaints about credit cards and mortgages, with other products to be added as we move forward,” he said. “Our work will support the honest businesses in financial markets against those who deceive consumers or otherwise break the law.”

The public appearance by Mr. Cordray, who has kept a low profile since being nominated to the post, was arranged quickly after the announcement Wednesday of Mr. Cordray’s appointment, which was made without Senate approval under the constitutional provision for making appointments when lawmakers are in recess.

Mr. Cordray’s remarks seemed intended to show that the agency would move promptly and aggressively, in the hope that getting public support could quell some of the criticism from members of Congress.

Several members of Congress vowed on Wednesday to try to overturn the appointment, and one House subcommittee summoned Mr. Cordray to a hearing on Capitol Hill to discuss his agency and how he intends to manage it.


Article source: http://feeds.nytimes.com/click.phdo?i=6e53a87ba42b2626cab15181f6374cdf

In Rural America, Fears That Beloved Post Offices Will Close

Janet Blackburn, Neville’s postmaster for 39 years, paid him no mind, wondering aloud: “Do you know what happened to the plaques on the war monument?”

Part of the town memorial to two dozen soldiers who died in the world wars, the brass plaques, Ms. Reid said with regret, had been badly damaged by a cleaning man using the wrong chemicals. Meanwhile, the door of the white clapboard building opened and in walked Norma Bowling, a retired nurse’s aide, carrying a plastic bag. “Here are the bell peppers I promised you,” she said, handing the gift to Ms. Blackburn.

In Neville, and in many towns around the country these days, homespun conversations over post office counters are often turning from the latest gossip to a worrisome, newly pressing issue: the United States Postal Service has warned 3,700 communities, many of them in rural areas, that it is considering shuttering their local offices over the next few months.

“I just wish that they would leave our post office alone,” Ms. Bowling said. “If I couldn’t come here to get my mail every morning, I’d feel a big part of me has died.”

Townspeople in places like Neville are fuming and fighting back, often writing letters to Washington and enlisting members of Congress. Many say their post offices — Neville’s was founded in 1816 — have served as the gathering spot and heart of the town for generations, and that the closings would force residents, many of them elderly, to drive several miles to another post office.

If Neville’s closes, the nearest one remaining would be in Moscow, four miles to the north. Other nearby towns, Higginsport and Chilo, immediately east of Neville, also face closings, prompting residents to ask why the Postal Service seems to be picking on these communities along the Ohio River. “You’re throwing the little people, the rural people, under the bus,” said Dan Burke, a marketing representative who goes to the Chilo post office once or twice a day to mail proposals to potential customers.

The Postal Service ran a deficit of nearly $10 billion in the fiscal year that just ended, with much of that stemming from health care and pension obligations and from e-mail driving down the volume of first-class mail. Insisting that they desperately need to cut costs, postal officials have called for ending Saturday delivery, laying off 120,000 workers, and shutting rural post offices like the one in Neville, a town with barely 100 people — down from 500 when it was a booming river town in the steamboat era. Periodic floods have driven away many residents.

Many here note that the people who would be hurt most by the closings — the rural elderly — often do not use computers or e-mail.

Susan Brennan, a spokeswoman for the Postal Service, defended the proposed closings. “Regarding rural America, the fact is that our network of post offices was established decades ago to serve populations that in many, many cases moved on years ago,” she said. “The residents in these communities already go to neighboring towns to shop for food, go to the drugstore, purchase gas, go to the bank — they can take care of their postal needs there.” Postal authorities have also proposed installing branches in some retail stores, with Ms. Brennan suggesting that the move might buoy ailing small-town shopkeepers.

Inside Neville’s post office building, which was once a grocery store, the Postal Service’s notice of “possible closing or consolidation” remains tacked to the bulletin board. Citing a “declining workload,” the Postal Service letter noted that the branch’s “walk-in revenue” declined to $15,487 in fiscal 2010, down from $21,806 the previous year. A closing, it estimated, would yield savings of $347,126 over 10 years — almost all from eliminating Ms. Blackburn’s job.

Article source: http://feeds.nytimes.com/click.phdo?i=6ac3ddb2afa9ca17ae6cdd0459eb5fc4

Economix Blog: Pressuring the Fed Can Backfire

In a statement this afternoon, the Federal Reserve announced that it was engaging in more stimulus, by extending the average maturity of the securities on its balance sheet. This was basically what markets had expected, even though the Republican Congressional leadership wrote a widely reported letter to Ben S. Bernanke, the Fed chairman, urging him not to engage in any more easing.

Scratch that: “Even though” may not convey the right causal relationship between those two events. Some may argue that the letter could have encouraged the Fed to issue another round of monetary stimulus.



Dollars to doughnuts.

The Federal Reserve is officially an independent body, and its autonomy is intended to shield it from short-term political interests that may be popular now but bad for the economy later.

Truth be told, though, efforts to put political pressure on the Fed go back much farther than this week. There have been many letters sent by Congressional committees and individual senators and members of Congress in just the last few years telling Fed officials to do or not do something or other, as well as in previous decades.

The letters linked above were generally for less significant decisions, of course. But in Congressional hearings and the like, legislators have attacked interest-rate policy and other important Fed actions, like quantitative easing, as well. Such confrontations, watched by a handful of people on C-SPAN, generally seem to be intended more as grandstanding than efforts that may actually change Fed policy.

When officials from the legislative and executive branches actually expect to influence Fed policy, they’re more likely to voice their arguments out of the public’s view, and in private meetings.

Why? As Bruce Bartlett, a former Treasury official from the George H.W. Bush White House and a contributor to Economix, explained by e-mail:

Historically, one of the main things that has held back politicians from publicly criticizing the Fed is that it can easily backfire and encourage it to do the opposite of what they want it to do. Certainly there have been many times in the ’80s and ’90s when administrations wanted an easier monetary policy. But they knew that the Fed jealously guards its independence and cannot allow itself to be seen as caving to administration pressure. Therefore, administration pressure to ease would force the Fed to remain tight lest it appear that it was caving to pressure. For this reason, administrations quickly learned that the best way to influence the Fed is through back channels. Historically, this has been done through the Treasury. I don’t know if it is still true, but for many years the Treasury secretary and the Fed chairman had breakfast every week, privately, no staff. This is the forum for the administration to tell the Fed what it should be doing.

I asked Mr. Bartlett whether he knew of specific cases where the Fed appeared to take an action precisely because there was pressure to do the opposite. He replied that he suspected such an incident occurred with Mr. Bernanke’s predecessor, Alan Greenspan:

When I worked at Treasury during the Bush 41 years, I had the definite sense that [Treasury Secretary Nicholas F.] Brady’s public criticism of Greenspan caused Greenspan to resist easing, which he might otherwise have done given economic conditions. Of course, I can’t prove it.

In today’s case, I doubt that the Fed decided to ease because of the Republicans’ letter; as I mentioned above, markets seem to think this was a sure bet already.

But because markets thought more easing was a sure bet, not easing after receiving this letter definitely would have made the Fed look as if it were caving to political pressure. In that sense, the Republicans’ attempt at exerting pressure seemed doomed to fail.

Article source: http://feeds.nytimes.com/click.phdo?i=d7ebb460ba95844543e780deab59ef58

Economic View: The Sickness Beneath the Slump

News accounts of the economic crisis rarely put it in these terms. They tend to focus on distinct short-term developments or on the roles of prominent people like Federal Reserve governors, members of Congress or Wall Street financiers. These stories grab attention and may be supported by some of the economic statistics that the government and private institutions collect.

But the economic situation is primarily driven by hard-to-quantify sociological factors that play out over many years.

The uptick in the unemployment rate, to 9.1 percent from 8.8 percent two months earlier and the drop in stock prices over the last month have attracted notice, yet in a sense they are symptoms of a deeper economic sickness.

Real estate prices have been a significant indicator of this ailment. An unprecedented bubble in American home prices started in 1997 and ended five years ago. Home prices rose 131 percent in that time, or 85 percent in real inflation-corrected terms, according to the S. P./Case-Shiller National Home Price index. (I helped to develop that index, along with Karl Case of Wellesley College.)

Around the same time, there were bubbles in the nation’s commercial real estate and farmland. And there were real estate bubbles in many other countries, too.

Consider this: Home prices rose nearly 10 percent a year on average in the United States from 1997 to 2006, long enough for many people to become accustomed to the pace and to view it as normal. The conventional 30-year fixed mortgage rate averaged 6.8 percent over those years, far below the appreciation rate on housing, so even if you had a substantial mortgage, you were becoming wealthier by the day, at least on paper. People who owned a home over that period had reason to feel pretty well off and proud of their investment acumen. That fed a contagion of optimism and helped to drive the speculative bubble, propelling the economy and the stock market in a feedback loop that repeated year after year.

Professor Case and I have conducted annual spring surveys of home-buyer attitudes for many years. We ask about long-term expectations: “On average over the next 10 years how much do you expect the value of your property to change each year?”

The survey we conducted in spring 2005, near the end of the bubble, included 407 home buyers. In it, the median expectation for home price appreciation over the next decade — until 2015 — was 7 percent a year. That is substantially less than the 10 percent a year that Americans had recently experienced.

But expected increases of 7 percent a year still implied another doubling of home prices by 2015. And about a quarter of our respondents in 2005 anticipated increases of at least 15 percent a year for the next decade. Something was very wrong with this picture, but few noticed it.

As it turned out, of course, those expected increases didn’t happen. Instead, home prices tumbled 34 percent nationally from the peak in the first quarter of 2006 to the first quarter of 2011 — or 40 percent in real terms — and they still appear to be falling. The brief “recovery” in home prices of 2009 and 2010 was most likely spurred by federal housing stimulus measures like the home buyer tax credit. After that stimulus ended, prices resumed their downward trend.

During the bubble, the sense of rising wealth and high expectations gave people a good reason to spend and a greater willingness to plunge into investment, too. Government policy makers breathed in the same optimism, which no doubt encouraged them to be lax on regulatory restraint.

The mood is far different now. Our latest survey, covering April and May of this year, included 296 home buyers, and their median expectation for annual home price appreciation over the next decade was down sharply, to just 3 percent. And, in comparison with the 2005 results, few people had extravagant expectations.

The 3 percent figure is well below prevailing rates for 30-year mortgages, now hovering between 4.5 and 5 percent. Amid such low expectations, buying a home with a mortgage certainly isn’t being viewed as a way to get rich.

Even for people who have other reasons to buy a house, there may be little urgency to do so. Our 2011 survey found that the median expectation for home price appreciation next year is just 1 percent. So it won’t be surprising if new home sales remain abysmally low and few jobs are created in the hard-hit construction industry. And it shouldn’t be a shock if the personal savings rate stays at around 5 percent, as it has recently, up from around 1 percent in 2005. This would mean that consumer spending will not drive a strong recovery.

A half-century ago, there was a lively discussion among economists about the dynamics of price expectations. For example, Alain C. Enthoven, then of the Massachusetts Institute of Technology, and Kenneth J. Arrow of Stanford wrote in 1956 that expectations that extrapolate past price increases can produce economic instability. But that thinking was largely cast aside in the 1960s, when my profession embraced the theory that efficient markets formed by people holding rational expectations could explain virtually all economic activity.

As a result, economists in recent decades have not developed expectations theory much further. That needs to be corrected in coming years. In the meantime, this failing helps explain why the current crisis was generally unpredicted, and why its future course is so poorly understood.

Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets.

Article source: http://feeds.nytimes.com/click.phdo?i=a239fbe8a3febfdb8f426afe171c0b17

Foreign Money Fuels Faltering Bid to Push Online Poker

Former Senator Alfonse M. D’Amato, Republican of New York, has been the public face of the effort, which has included charity poker tournaments featuring members of Congress, as well as hundreds of thousands of dollars in campaign contributions to a disparate assortment of lawmakers, including Representative Barney Frank, Democrat of Massachusetts, and Senator Harry Reid, Democrat of Nevada, the majority leader.

But late last week, the United States Justice Department delivered an unexpected thunderbolt to this huge lobbying campaign when it indicted top executives at PokerStars, Full Tilt Poker and Absolute Poker, accusing them of fraud and money laundering. In doing so the government has taken on a politically powerful industry that for a while seemed like it might transform gambling around the world.

As evidence of the industry’s shifting fortunes, major gambling operators like Wynn Resorts are already distancing themselves from the three Internet gambling companies, canceling planned business alliances. ESPN has removed poker-related content from its own Internet site.

This is exactly what the industry was trying to prevent when it set out to block enforcement of a law intended to ban Internet games or to get the law repealed. Interviews show that the companies named in the indictment, while foreign-based, have indirectly been paying more than half of the lobbying and operating bills for a nonprofit organization that is championing Internet gambling in the United States.

Mr. Frank, in an interview on Monday, said he had no plan to back down. “It is a bad law,” he said. “How is it possible that a United States attorney in New York does not have anything more to do than indict people for a full house? He should be indicting people for the empty houses we have around,” referring to the troubles in the mortgage industry.

Mr. Frank and Representative John Campbell, Republican of California, in March introduced yet another bill, backed by the Poker Players Alliance, a Washington-based nonprofit group. Its budget is subsidized by a Canadian trade association whose members include the companies that run Poker Stars and Full Tilt Poker.

As a senator, Mr. D’Amato played a regular poker game that featured lobbyists. On Friday, he said in a statement, “Online poker is not a crime and should not be treated as such.”

An estimated 10 million online poker players in the United States have turned to these Internet sites, helping generate perhaps as much as $5 billion in annual revenues for the companies.

On Friday the Justice Department said the companies had illegally moved their earnings to corporate headquarters in spots like the Isle of Man in Great Britain and Costa Rica by conspiring with middlemen who disguised them as sales of items like flowers, pet supplies and golf clubs.

John Pappas, the executive director of the Poker Players Alliance, pointed out on Monday that the organization is made up of an estimated 1.2 million members in the United States, including both amateur and professional players, who want to be able to bet online. One of the executives indicted, Raymond Bitar, 39, of California and Ireland, is a contributor to the Players Alliance Political Action Committee, donating about $15,000 of the $200,000 the committee has given to members of Congress in the last four years, with Mr. Frank collecting the biggest amounts.

But most of the money the committee gives to politicians here comes from individuals not cited in the indictment. And Mr. Pappas said the power of his group came not from industry giants but from its members.

“It is the 1.2 million members who live and vote in Congressional districts across the country,” he said. He did confirm that more than half of his organization’s budget is supported by industry companies, including those indicted Friday.

But the push in Washington, and much of the fund-raising, is coordinated by Poker Players Alliance, which relies in large part on contributions from the Internet-based operators. The organization spent $1.6 million on lobbying last year, using nine lobbying firms, and lobbyists like former Representative Jon Porter, Republican of Nevada, and Mr. D’Amato.

The Poker Players Alliance is enlisting players around the nation to call or write lawmakers to protest the restrictions. It hosts an annual “fly-in” day, when players fan out across Capitol Hill. And it sent representatives to — and set up a poker tournament at — the Conservative Political Action Conference this year, convinced it could find some recruits to its cause at the popular annual event.

In October 2009, 19 members of Congress signed a letter sent to Treasury Secretary Timothy F. Geithner and Ben S. Bernanke, chairman of the Federal Reserve, urging them to impose a one-year delay on enforcing regulations intended to cut off payments to the Internet poker companies.

One of the lead signers of the letter was Representative Peter T. King, Republican of New York; he calls Mr. D’Amato a friend and mentor, and Mr. D’Amato has served as one of his top fund-raisers. In total, 15 of the 19 signers of the letter received contributions from the Poker Player Alliance political action committee in the last election cycle.

Mr. Frank has been celebrated as one of the industry’s most important champions in Washington. He worked last year to push legislation through the Financial Services Committee, where he served as chairman until this year, that would legalize Internet poker, although the bill never got taken up by the Senate or the full House.

Mr. Frank, no poker player himself, has said he opposes the ban based on his distaste for government intervention into the private lives of citizens. His advocacy, he said, goes back to 2002, even before the Poker Players Alliance was set up.

Mr. Pappas, the executive director of the Poker Players Alliance, delivered $51,200 worth of bundled campaign contributions to Mr. Frank’s re-election campaign in late 2009, according to campaign finance reports. These contributions follow up on at least $30,000 more that Mr. Frank took in from the industry in the prior two years, including contributions from some of the industry’s most famous players, like Annie Duke (“The Duchess Of Poker”), Howard Lederer (“The Professor”) and Andy Bloch (“The Rock”).

For now, the companies that have been indicted — and their Internet site addresses seized by the Justice Department — have stopped taking bets from players in the United States, generating a wave of resentment from the millions of players who turned to the games, many several times a day.

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Warren Defends Agency at Chamber of Commerce

WASHINGTON — She never actually uttered “I come in peace,” but Elizabeth Warren, the Obama administration aide charged with setting up the new Consumer Financial Protection Bureau, might have felt like an alien visiting an anxious planet Wednesday when she went to the United States Chamber of Commerce.

“I do not consider myself in hostile territory right now because I believe we share a point of principle: competitive markets are good for consumers and for businesses,” Ms. Warren told about 300 executives at the chamber’s annual conference on capital markets. But, she added, “Markets don’t work in the way they are supposed to unless there are some well-enforced rules.”

The detail and scope of those rules are what worry the members of the chamber and some members of Congress, both of whom have been vocal in their criticism of the regulatory powers given to the new consumer agency by the Dodd-Frank Act, the financial regulation bill signed into law last July.

The disagreements between Ms. Warren and one of her chief critics, Representative Spencer Bachus, Republican of Alabama and chairman of the House Financial Services Committee, grew more heated hours after her address. Mr. Bachus accused Ms. Warren of mischaracterizing her recent participation in the mortgage service industry settlement talks.

Last week, Ms. Warren told the committee that she provided “advice” to the Treasury secretary and others about a possible settlement but was not involved in the negotiations. State attorneys general and federal officials are discussing a settlement with mortgage service companies in response to questionable foreclosure practices.

On Wednesday afternoon, Mr. Bachus released a seven-page document titled “Perspectives on Settlement Alternatives in Mortgage Servicing,” which, in a letter to Ms. Warren, he said demonstrated that she had a larger role than she had indicated to the committee.

“It is plain that the C.F.P.B. has done more than provide ‘advice’ on the proposed servicing settlement,” Mr. Bachus wrote. The letter requested that Ms. Warren consider “if there are any aspects of that testimony related to the C.F.P.B.’s role in the mortgage servicer settlement negotiations that you wish to clarify or correct.”

The letter was co-signed by Representative Shelley Moore Capito, Republican of West Virginia and chairwoman of the subcommittee on financial institutions and consumer credit.

Jen Howard, a spokeswoman for the consumer agency, said that Ms. Warren correctly characterized her participation. “As Elizabeth Warren testified to Congress earlier this month, the consumer bureau provided advice to various officials involved in the mortgage servicing law enforcement matter,” Ms. Howard said in a statement. “She is aware that not everyone agrees with that advice or how to address the serious deficiencies at some of the nation’s largest mortgage servicing firms.”

Mr. Bachus, a consistent critic of both the consumer agency and Ms. Warren, filled that role again Wednesday when he addressed the Chamber of Commerce conference immediately before she spoke.

Noting that he has introduced a bill to change the governance of the consumer bureau from a single director to a five-person, bipartisan commission, he characterized the powers given to the head of the consumer agency as unmatched in government.

“They regulate all financial products and services, so if it involves a dollar changing hands, they can regulate it, or she can, because she actually has total discretion” over consumer financial products, Mr. Bachus said. “If George Washington came back today, or Abraham Lincoln or Warren Buffett signed up, I wouldn’t give that person total discretion.”

Ms. Warren was followed by Thomas J. Donohue, president and chief executive of the chamber, who warned that the consumer agency could choke off economic growth in the United States.

“If not used carefully, the C.F.P.B.’s tremendous power to go after bad actors could cause serious collateral damage to America’s job creators,” he said.

Ms. Warren has disputed the notion that the consumer agency has unbridled power. “There are plenty of checks in place,” she said, including a law governing how federal agencies write and adopt new regulations. Its rules, like those of any agency, can be overturned by Congress or federal courts.

In addition, she said, the consumer bureau is “the only bank regulator — and perhaps the only agency anywhere in government — whose rules can be overruled by a group of other agencies,” specifically the Financial Stability Oversight Council, composed of nine regulatory agency heads and an independent insurance industry expert. A two-thirds vote of the council is required to overturn a consumer agency rule.

Ms. Warren also warned against making the agency subject to annual appropriations of Congress, saying it would inject politics into the regulatory structure and cause banks and other regulated agencies to lobby for looser oversight.

Regulation and competition are not, she said, mutually exclusive. “In fact, when done right, they support each other,” Ms. Warren said. “Are the Chamber’s members, as citizens or business owners and executives, in a better place today because the F.A.A. regulates air safety, because the states regulate insurance companies, because the federal government enforces antitrust statutes? Of course they are. And so is this country.”

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