March 28, 2024

Obama to Urge Fiscal Vote in Senate if Two-Party Talks Fail

But after a one-hour meeting with Congressional leaders at the White House, Mr. Obama warned that if the two sides did not agree on a bill, he would urge the Democratic-controlled Senate to put forward a measure anyway, in essence daring Republicans in the House and Senate to block a floor vote on tax cuts.

“I believe such proposals could pass both houses with a bipartisan majority as long as both leaders will allow it to come to a vote,” Mr. Obama said. “If members want to vote no, they can.”

Senators broke from a long huddle on the Senate floor with Senator Mitch McConnell of Kentucky, the Republican leader, to say progress had been made. Mr. McConnell, White House aides, and Senator Harry Reid of Nevada, the majority leader, were set to continue talks on Saturday aiming for a breakthrough as soon as Sunday.

“We’re working with the White House, and hopefully we’ll come up with something we can recommend to our respective caucuses,” Mr. McConnell told reporters.

Mr. Reid also said that there had been some progress but he warned that in assembling a measure that can win support from both parties, “what we come up with is going to be imperfect.”

For all the cautious optimism, the president also expressed exasperation that four days before a looming deadline, which lawmakers have known about for a year and a half, the two sides are still far apart.

“This is déjà vu all over again,” he said. “America wonders why it is that in this time, you can’t get stuff done in an organized timetable. The American people are not going to have any patience for a politically self-inflicted wound to our economy.”

Mr. Obama took steps to keep the pressure on throughout the weekend, scheduling an appearance on Sunday’s “Meet the Press” on NBC.

The emerging path to a possible resolution, at least Friday, appeared to mirror the protracted stalemate over the payroll tax cut last year. In that conflict, House Republicans refused to go along with a short-term extension of the cut, but Mr. McConnell struck a deal that permitted such a measure to get through the Senate, and Speaker John A. Boehner essentially forced members of the House to accept it from afar, after members had left for Christmas recess.

This time, the consequences are even more significant, with more than a half-trillion dollars of tax increases and across-the-board spending cuts just days from going into force, an event most economists warn would send the economy back into recession if not quickly reversed. With the House set to return to the Capitol on Sunday, Mr. Boehner has said he would place any Senate-passed bill before his chamber — perhaps amended — and let the chips fall, with or without Republicans on board.

“I’ve got a positive feeling now,” said Senator Kay Bailey Hutchison, Republican of Texas, who said a burst of deal-making talk broke out as soon as the leaders returned to the Capitol.

This was the first time in weeks that Mr. Obama met with the four Congressional leaders — Mr. Reid, Mr. McConnell, Mr. Boehner and Representative Nancy Pelosi, the Democratic leader.

The meeting started with the president reiterating his demand for an extension of tax cuts on incomes below $250,000.

That opening offer lowered expectations on Capitol Hill that a breakthrough could be pending, but behind the scenes, talks continued, focusing on a possibly higher threshold of $400,000. Senator Max Baucus of Montana, chairman of the Senate Finance Committee, said sentiment is “jelling” around a new offer, and a source familiar with the negotiations said the president would ask Republican and Democratic leaders what proposal could win majority support in the House and Senate.

Article source: http://www.nytimes.com/2012/12/29/us/politics/key-meeting-looms-as-scaled-back-fiscal-deal-is-explored.html?partner=rss&emc=rss

House Moves Toward Vote on Boehner’s Backup Plan

With broader budget talks between the speaker and President Obama stalled, the speaker told reporters he would instead force through a measure that would extend Bush-era tax cuts on income below $1 million in an effort to put pressure on the Democrat-controlled Senate to avert a year-end collision of automatic tax increases and spending cuts.

“After today, Senate Democrats and the White House are going to have to act on this measure,” Mr. Boehner said as the House prepared for a tense series of votes.

The vote on what the speaker has dubbed “Plan B” is expected to be close and is unlikely to draw much Democratic support. But Republican leaders predicted it would pass along with a separate measure to cancel automatic Pentagon cuts in 2013 with even deeper cuts to domestic programs. With just days to go before more than a half trillion dollars in tax increases and spending cuts kick in, a chasm separates congressional Republicans from President Obama, even though the latest deficit offers from the president and speaker are numerically very close.

“We House Republicans are taking concrete actions to avoid the fiscal cliff,” Representative Eric Cantor of Virginia, the No. 2 House Republican, said Thursday. “Absent a balanced offer from the president, this is our nation’s best option, and Senate Democrats should take up both of these measures immediately.”

Senator Harry Reid of Nevada, the Senate majority leader, accused House Republicans of wasting almost a week on “pointless political stunts” and said he would not bring the House measure to the Senate floor even if it passed the House. He was making plans to bring the Senate back after Christmas in case of a breakthrough as the fiscal deadline approached.

“Get back and start talking to the president,” he told House Republicans.

What happens next will determine whether Washington can avert that so-called fiscal cliff in the first days of the new year.

Democrats — and many Republicans — hope a vote on the Boehner backup plan will usher in a last and final round of negotiations between the speaker and President Obama over a broad deficit reduction deal that raises more than $1 trillion in taxes over ten years while locking in another $1 trillion in savings from entitlements like Medicare and other federal programs. Mr. Cantor pointedly said he will not send House members home for the holidays after Thursday night’s vote.

“It’s always darkest before the dawn,” said Senator Charles E. Schumer of New York, the third-ranking Democrat. “A grand bargain is more likely than not before the end of the year.”

But other lawmakers fear most House Republicans will see passage of legislation that extends Bush-era tax cuts for household incomes below $1 million as their final offer in efforts to avert a fiscal crisis. House Republican leadership aides made clear that if the bill passes, the speaker believes the next move will have to come from Senate Democrats and the president. Senate Democrats could simply take up and pass the House bill or amend it more to their liking and send it back to the House.

“The House is going to pass a bill that protects more than 99 percent of Americans from a tax hike Democrats want to slap them with in two weeks,” Senator Mitch McConnell of Kentucky, the Senate Republican leader, said Thursday. “The president is determined to leap off the cliff. Well, we’re not going to let him take the middle class with him.”

Article source: http://www.nytimes.com/2012/12/21/us/politics/house-moves-toward-vote-on-boehners-backup-plan.html?partner=rss&emc=rss

As Vote Looms, Leaders Court Skeptics

With only hours left before Tuesday’s looming deadline that carries the threat of a federal default, Vice President Joseph R. Biden Jr. arrived at the Capitol on Monday morning for back-to-back, closed-door meetings with Democratic lawmakers in the House and Senate. Republicans in the House and Senate also huddled in advance of the votes.

The last-minute wrangling on Monday morning reflected the lack of enthusiasm for the debt deal as lawmakers, party activists and pundits expressed relief but little excitement for a compromise that appears to have left few partisans eagerly promoting the deal as the one they wanted.

On the Senate floor on Monday, Senator Harry Reid of Nevada, the majority leader, said: “People on the right are upset. People on the left are upset. People in the middle are upset.”

But he called it a “remarkable agreement which will protect the long-term health of our economy.”

In his first public comments since the deal was reached Sunday night, Mr. Boehner on Monday hailed the agreement for providing a path toward a balanced budget amendment to the Constitution.

“It gives us the best shot that we’ve had in the 20 years that I’ve been here to build support for a balanced budget amendment,” he said.

Representative Eric Cantor of Virginia, the majority leader, said the deal is “not perfect,” but said its passage will begin the process of changing the political culture in Washington.

“The big win here for us, and for the American people, is the fact that there are no tax hikes in this package,” Mr. Cantor said. “The last thing we need is tax hikes.”

The House moved Monday toward an afternoon vote, but it remained unclear whether the Senate would follow suit by the end of the day. Mr. Reid told his colleagues Monday afternoon that a final vote on the measure could be brought up Monday night or Tuesday.

A sense of exuberance over the weekend compromise gave way to a daylong expression of grievances.

Mr. Biden spent hours on Capitol Hill, listening and gently persuading Democrats to vote for the plan. His meeting with House members lingered far beyond its allotted time, as several representatives voiced their strong objections to what they perceived as a deal cut on the back of poor and working-class Americans, with no sacrifice by the rich in the form of tax increases.

“I wouldn’t call it anger, but we are perplexed that it has turned out like it has,” said Representative G.K. Butterfield, Democrat of North Carolina, grimacing as he left the meeting. “But we’ve run out of options and we know the consequences. I’ve heard horror stories from the Great Depression. I don’t want my fingerprints on that.”

Representative Nancy Pelosi of California, the minority leader, reminded her fellow Democrats of the consequences if the deal would collapse. She did not twist arms or deliver stern remarks, several legislators said, but rather urged them to vote their conscience.

Representative Elijah Cummings, Democrat of Maryland, said he had deep reservations about the budget compromise, declaring: “This is a hard compromise. But he added that the “ramifications would be long” if the deal did not go through.

Several Democrats said they were reserving judgment until the voting actually began, when it became clear how many votes that Democratic leaders needed to deliver. Republican leaders were embroiled in their own challenge of trying to persuade conservatives to sign onto the plan, reminding them that the deal did not include raising taxes.

Most of the leading 2012 Republican presidential candidates weighed in Monday in opposition to the debt ceiling deal, saying that it did too little to address the nation’s spending problem. Mitt Romney, the former governor of Massachusetts, said the deal “opens the door to higher taxes and puts defense cuts on the table.”

But business groups urged passage as the United States stock market initially rallied before sinking again on disappointing manufacturing news. The U.S. Chamber of Commerce said in a statement that the agreement “takes us a step in the right direction and is the right thing to do.”

Article source: http://feeds.nytimes.com/click.phdo?i=01b40c80364f098b80b75c80ada4fa68

Economix: The Myth of Resolution Authority

Today's Economist

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

Senator Ted Kaufman, Democrat of Delaware, has been highly skeptical about whether the federal government's power to shut banks can be applied to global megabanks unless an international accord is reached.Andrew Harrer/Bloomberg News Senator Ted Kaufman, Democrat of Delaware, has been highly skeptical about whether the federal government’s power to shut banks can be applied to global megabanks, unless an international accord is reached.

Back when it really mattered – last spring, during the debate over the Dodd-Frank financial regulation – Senator Ted Kaufman, Democrat of Delaware, emphasized repeatedly on the Senate floor that the proposed “resolution authority” (the power to shut banks) was an illusion.

His point was that extending the established Federal Deposit Insurance Corporation powers for “resolving” financial institutions to include global megabanks simply could not work.

At the time, Senator Kaufman’s objections were dismissed by “experts” from both the official sector and the private sector. Now these same people (or their close colleagues) are falling over themselves to argue that resolution cannot work for the country’s giant bank holding companies. The implication, which these officials and bankers still cannot grasp, is that we need much higher capital requirements for systemically important financial institutions.

Writing in the March 29 edition of The National Journal, Michael Hirsch quotes a “senior Federal Reserve Board regulator” as saying: “Citibank is a $1.8 trillion company, in 171 countries with 550 clearance and settlement systems,” and “We think we’re going to effectively resolve that using Dodd-Frank? Good luck!”

The regulator’s point is correct. The F.D.I.C. can close small and medium-size banks in an orderly manner, protecting depositors while imposing losses on shareholders and even senior creditors. But to imagine that it can do the same for a very big bank strains credulity.

And to argue that such a resolution authority can work for any bank with significant cross-border operations is simply at odds with the legal facts. The resolution authority granted under Dodd-Frank is purely domestic; that is, it applies only within the United States.

Congress cannot readily make laws that apply in other countries. A cross-border resolution authority would require either agreement among the various governments involved or some sort of synchronization for the relevant parts of commercial bankruptcy codes and procedures.

There are no indications that such arrangements will be made, or that serious intergovernmental efforts are under way to create any kind of cross-border resolution authority — for example, within the Group of 20.

For more than a decade, the International Monetary Fund has been advising that the euro zone adopt some sort of cross-border resolution mechanism. But European (and other) governments do not want to take this kind of step.

Rightly or wrongly, they do not want to credibly commit to how they would handle large-scale financial failure –- preferring instead to rely on various kinds of ad hoc and spontaneous measures.

I have checked these facts directly and recently with top Wall Street lawyers, with leading thinkers from left and right on financial issues (in the United States, Europe and elsewhere), and with responsible officials from the United States and other countries. That Senator Kaufman was correct is now affirmed on all sides.

Even leading figures within the financial sector now acknowledge this. Mr. Hirsch quotes E. Gerald Corrigan, former president of the Federal Reserve Bank of New York and an executive at Goldman Sachs since the 1990s: “In my judgment, as best as I can recount history, not just the last three years but the history of mankind, I can’t think of a single case where we were able execute the orderly wind-down of a systemically important institution – especially one with an international footprint.”

It is most unfortunate that Mr. Corrigan did not make that point last year – for example, when he (and I) testified before the Senate Banking Committee on the Volcker Rule in February 2010.

In fact, rather tragically in retrospect, Mr. Corrigan was among those arguing most articulately that some form of Enhanced Resolution Authority (as he called it) could actually handle the failure of large integrated financial groups (again, his terminology).

The “resolution authority” approach to dealing with very big banks has, in effect, failed before it even started.

And standard commercial bankruptcy for global megabanks is not an appealing option -– as argued by Anat Admati in The New York Times’ Room for Debate in January.

The only people I have met who are pleased with the Lehman bankruptcy are bankruptcy lawyers. Originally estimated at more than $900 million, bankruptcy fees for Lehman Brothers are now forecast to top $2 billion. (The AmLaw Daily describes this in detail.)

It’s too late to reopen the Dodd-Frank debate –- and a global resolution authority is a chimera in any case. But it’s not too late to affect policies still under development. The lack of a meaningful resolution authority further strengthens the logic of larger capital requirements, as these would provide stronger buffers against bank insolvency.

The Federal Reserve has yet to announce the percentage of equity financing – i.e., capital – that will be required for systemically important financial institutions (the so-called S.I.F.I.’s). Under Basel III, national regulators set an additional S.I.F.I. capital buffer. The Swiss National Bank is requiring 19 percent capital and the Bank of England is moving in the same direction.

Yet there are clear signs that the Fed’s thinking –- both at the policy level and at the technical level –- is falling behind this curve.

This time around, officials should listen to Senator Kaufman. In his capacity this year as chairman of the Congressional Oversight Panel for the Troubled Assets Relief Program (for example, in this hearing), he has been arguing consistently and forcefully for higher capital requirements.

Article source: http://feeds.nytimes.com/click.phdo?i=62590797b842a39b5e9e8fba0711dba7