Politics and Legislation
Domestic Fuels Protection Act Will Shift Cost to Consumers, Taxpayers
- CONTACT: Sara Sciammacco firstname.lastname@example.org, 202-939-9122
- FOR IMMEDIATE RELEASE: April 19, 2012
Washington, DC – The Domestic Fuels Protection Act of 2012 (H.R. 4345) and its companion bill, the Domestic Fuels Act of 2012 (S.2264) would create a broad exemption from liability for a number of favored interests: fuel producers, engine manufacturers and retailers of virtually all transportation fuels and fuel additives such as gasoline blended with 15 percent ethanol, or E15.
“The ethanol industry’s push for these bills is a glaring admission that E15 is a faulty product,” said Sheila Karpf, a legislative and policy analyst at the Environmental Working Group. “Rather than creating a better fuel, the ethanol industry wants consumers and taxpayers to foot the bill for any harms caused by E15.”
Obama to nominate nuclear official that Reid accused of lying
President Obama’s decision to re-nominate Republican Kristine Svinicki to the Nuclear Regulatory Commission puts him at odds with Senate Majority Leader Harry Reid (D-Nev.), a vocal critic of the nuclear official.
Reid stressed his opposition to Svinicki’s re-nomination at a press conference Thursday and did not say whether he’d allow a floor vote on the nomination.
“[T]hat’s why we have a Congress, and there’ll be hearings held, and we’ll approach that when we have to. That’s just not right now,” he said, pointing to Sen. Dean Heller’s (R-Nev.) opposition to the nomination.
Reid’s office alleged this week that Svinicki lied to Congress about her previous work on the Yucca Mountain nuclear waste repository, a long-delayed project that the majority leader strongly opposes.
“Senator Reid opposes Commissioner Svinicki’s re-nomination because she lied to Congress about her past work on Yucca Mountain,” Reid spokesman Adam Jentleson said in a statement.
“Furthermore, Commissioner Svinicki has an abysmal record on nuclear safety, demonstrating that she puts the interests of the nuclear industry ahead of the safety of American citizens. Senator Reid has consistently supported qualified Republicans for the commission and is open to supporting others, but Commissioner Svinicki has disqualified herself and does not deserve to be re-nominated.”
A White House official told The Hill earlier Thursday that Obama intends to re-nominate Svinicki, whose first term expires June 30. White House press secretary Jay Carney later confirmed the news.
Sen. Kerry: ‘Powerful interests’ standing in the way of progress on energy
Sen. John Kerry (D-Mass.) says the collapse of the climate change and energy bill he floated with Sen. Joe Lieberman (I-Conn.) in 2010 is a lesson in why the United States lacks a comprehensive energy policy.
The senator took aim at coal-reliant power companies and the 2010 Supreme Court decision in Citizens United v. FEC that allows unlimited corporate spending in elections.
“The reason we don’t have a solid energy policy in America, I have come to believe after leading the effort two years ago to try and get one, is that there are powerful interests in the country that spend an enormous amount of money to preserve the status quo,” Kerry said Friday on MSNBC’s “Morning Joe.”
“We had an agreement a couple years ago … with the utilities, with the nuclear industry, with the major oil people, and unfortunately some major coal-fired power plant people were able to spend a lot of money, influence a lot of people and say we are simply not going to move forward with pricing carbon or doing anything that puts America into a better position because they like the cash-cow power plants that they have now fired by coal, and so that’s what freezes it,” he added.
Currency Wars: Gambling With Other Peoples’ Money
If running out of your own money wasn’t bad enough, policy makers are increasingly spending other peoples’ money to bail their country out. At the upcoming G-20 meeting, finance ministers from around the world will contemplate an increase to the resources of the International Monetary Fund (IMF). At stake for politicians is whether they can continue to do what they know best – to play politics. In contrast, at stake for investors may be whether currencies will retain their function as a store of value.
Let’s highlight Spain, as the country may be the key to understanding how dynamics may play out. Last November, Spaniards voted for change by electing conservative Prime Minister Rajoy, handing him an absolute majority in parliament, displacing the previous, socialist government. The election may cause former British Prime Minister Thatcher to change her view, that socialism is doomed to fail, as ultimately you run out of other people’s money. It doesn’t take a socialist to run out of money. In the case of Spain, if you run out of your own people’s money, there may always be other peoples’ money.
One of the major concerns is Spain’s regional government debt. Spain consists of 17 autonomous regions, whose total debt almost doubled in the past three years, due to economic recession and a housing market collapse. In many ways, Spain reflects a microcosm of how the Eurozone as a whole is structured:
•Spanish regions have the power to issue public debt. The central government has little ability to interfere with regional government spending and is prohibited by Spanish law to bailout regional governments.
•While regions enjoy high autonomy on spending, the central government retains effective control over regional government revenue.
•Spain has its own peripheral problems: the most indebted region, Catalonia, recorded 20.7% debt-to-regional-GDP ratio and 3.6% deficit-to-GDP ratio in 2011. Its 10-year bond yield recently breached 10%, far beyond the yield on 10-year Spanish government bonds, which yield around 6%. In 2011, the total debt of 17 regional governments rose to €140 billion, accounting for 13.1% of Spain’s GDP. This number is up from 6.7% by 2008.
•Spanish law forbids the central government from rescuing regional governments (in much the same way that the Maastricht Treaty prohibits bailouts of EU countries). In practice, the central government appears to have implicitly helped Valencia, Spain’s 2nd most indebted region, with a €123 million loan repayment to Deutsche Bank.
More broadly known are Spain’s banking woes. Unlike much of Europe, a housing boom propelled much of Spain’s recent growth, causing Spain’s regional banks, in particular, to become overly exposed to the mortgage sector. Spain’s banks are very dependent on liquidity provided by the European Central Bank (ECB). The recent 3 year long-term refinancing operation (LTRO) by the ECB at first took pressure of the Spanish banking system, but has since been seen more critically, as Spain’s banks may be using the liquidity to buy Spanish government debt, thus increasing inter-dependency and potentially making nationalization of Spanish banks (read: the Spanish government taking on the obligations of its banks) more, rather than less likely.
The tensions between Spanish regions and its national government are nothing new. And that’s really the main lesson here: it’s business as usual in Spain! As of late, Rajoy’s government appears to be reining in regional control over budgets in earnest. However, Spaniards are used to eternal debates on where subsidies should come from, how to stop regions from spending, and – conversely – how to find ways around restrictions. In brief, Spaniards are pros at this battle. Not surprisingly, when there’s a threat of market headwinds, Rajoy is publicly committing to reform. The moment the pressure abates, it appears those promises are forgotten. Spain is proof that the only language policy makers may be listening to is that of the bond market.
As painful as it is, volatile markets are necessary to keep policy makers focused. Whenever Spanish bonds come under pressure, Spain moves further from talk and closer to action, with respect to implementation of more austerity measures, as well as the pursuit of structural reforms. Spain – like so many developed countries – has rigid bureaucracies aimed at protecting the old (companies and employees) at the cost of preventing the new, stifling innovation and fostering massive youth unemployment. Structural reform is politically painful. What is striking about Spain is that it has an enviable position of a government with an absolute majority. Yet, even such a seemingly strong government is dragging its feet in implementing reform. In the process, political support is eroding, thus making it increasingly difficult to pursue reforms as the economic environment worsens.
Politicians always appear to consider the cost of acting versus the cost of inaction. As long as more money is lined up: be that from the central government for the regions; be that from a European stability fund for the government; or be it from the IMF, incentives for reforms are taken away. In many ways, Catalonia should be getting the message that its budget is unsustainable, but with help on the way from Madrid, the region may continue its bad habits.
China Buying Gold At Discount
China has been trying to diversify her foreign exchange reserves for some time. We are all familiar with the figures released by the likes of the World Gold Council about Chinese gold investment demand, as well as statistics showing official gold imports through Hong Kong into the Chinese mainland. Chinese reserves contain only 2% gold, compared to nearly 10% for India and Russia, and figures in the 70th percentile for developed nations such as the USA and Germany.
China is getting out of paper and into gold as fast as she can, because she simply doesn’t have enough of old yella’. Any effort to internationalise the RMB will not work until it is a trusted enough currency. One of the key ways to achieve trust is larger gold reserves.
It is not just the PBOC that is on the gold rush, since opening up the domestic gold market individuals are also allowed to invest in gold. The Chinese still have a limited range of savings and investment options open to them (one of the reasons why so much money flowed into their property bubble), and gold continues to shine when other investment options (especially the Chinese stock market) are being questioned.
The President Of Iceland Tells Us How He Had The Balls To Stand Up To Britain
The president of Iceland sits in his study drinking tea from an immaculate china set.
“If a collapse in the financial sector can bring one of the most stable and secure democracies and political structures to his knees as happened in Iceland,” Ólafur Ragnar Grímsson says to me, “then what could it do in countries that have less stable democratic and political history?”
The tiny country is unique not only in its stunning geography but also in its open democracy. This democracy was pivotal in the choice to let three giant banks fail during the financial crisis.
For Ólafur, the crisis of 2008 was personal. Once the darling of the left wing, he worked as finance minister for several years before he became president of the country in 1996, a largely ceremonial role that he’s inhabited ever since. Like many in the country he was once a cheerleader for Iceland’s financial sector, privatized at the start of the 21st century — and the sudden collapse was a painful reminder that Iceland was a small, isolated place.
Jobs Beat Foreclosures as Housing-Market Guide
Employment levels may affect local U.S. housing markets more than the number of foreclosed homes, according to Shawn Snyder, a Citigroup Inc. economist.
The CHART OF THE DAY shows the performance of the National Association of Home Builders/First American Improving Markets Index, which Snyder cited in a report two days ago to support his conclusion.
April 19 (Bloomberg) — Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., about the latest economic data and the outlook for growth. He speaks with Trish Regan on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)
Housing is gaining ground in 101 metropolitan areas across the country, according to this month’s index. Florida has nine, more than any other state except Texas, even though data from the Mortgage Bankers Association show a bigger inventory of foreclosures there than anywhere else.
Stocks, Commodities, Euro Gain on Earnings, German Data
Stocks extended a weekly advance after earnings beat estimates at companies including General Electric Co. and Microsoft Corp. and German business confidence unexpectedly improved. Commodities gained and the euro strengthened while Treasuries were little changed.
The Standard & Poor’s 500 Index climbed 0.1 percent at 4 p.m. in New York, paring a gain of as much as 0.8 percent as Bank of America Corp. slumped and Apple Inc.’s retreat since April 9 grew to 9.9 percent. The Dow Jones Industrial Average added 65.16 points. The Stoxx Europe 600 Index (SXXP) rose 0.5 percent and the euro appreciated 0.6 percent to $1.3212. Oil added 0.8 percent to $103.05 a barrel. Ten-year Treasury yields were little changed at 1.96 percent after gaining three basis points.
Wars and Rumors of War
Pentagon has ‘successful plan’ with hundreds of Tomahawks deployed near Iran
Published: 20 April, 2012, 23:08
An operational tomahawk missile launch (Reuters / Handout)
Washington has not yet dropped its “all options” stance towards Iran, who, they fear, may be building nuclear weapons. The confirmation was obtained by CNN’s Wolf Blitzer from Panetta on Thursday.
“We are prepared with all options on the table if we have to respond,” Panetta said, adding that “there are plans” to deal with Iran if the country does not give up its nuclear ambitions.
“I don’t think there is any question that if we have to implement that plan, it will be successful,” he added.
This practical approach sees two American aircraft carriers, their battle groups, several submarines and additional Marines deployed to the Gulf waters. Both the US Navy and the Pentagon say the commissions are “routine.”
Nevertheless, assessments made by Interfax news agency say that the group headed by the USS Enterprise alone has taken at least 130 Tomahawk missiles to the Persian Gulf.
Articles of Interest
By: Robert Weissman
Robert Weissman is president of Public Citizen.
The BP disaster taught us many things: Giant corporations cannot be trusted to behave responsibly, and have the ability to inflict massive damage on people and the environment. We need strong regulatory controls to curb corporate wrongdoing. We need tough penalties to punish corporate wrongdoers. There is no way to do deepwater oil drilling safely. And it is vital that citizens harmed by corporate wrongdoers maintain the right to sue to recover their losses.
Unfortunately, Congress and the Obama administration have refused to learn the lessons from the BP disaster:
1. BP’s reckless actions and inactions caused the Deepwater Horizon disaster — a reminder that corporations cannot be trusted to police their own activities.
BP made a conscious decision not to install a $500,000 safety device that could have prevented the blowout. BP pressured its contractors to skirt safety measures, and those contractors made multiple mistakes leading up to the disaster.
The lesson that corporations can’t be trusted to police themselves should be blindingly obvious. Yet the Obama administration is now proposing to take government inspectors out of poultry processing plants — and give Big Chicken responsibility for ensuring poultry safety.
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