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Wall Street Banks Tricking Little Guys Into Lobbying for Them

2009-11-11T17:40:43Z

Wall Street titans, recognizing that they have something of a credibility problem when it comes to opposing regulatory reform, are enlisting more sympathetic, everyday folks to lobby on their behalf on Capitol Hill.

Bankers, brokers and swaps dealers have been browbeating their clients -- farmers, fuel companies, airlines, municipal power companies -- who are the "end users" of financial derivatives: Lobby Congress against reform of the derivatives market, the bankers say, or the cost of your derivative deals will skyrocket.

"There are many end users who just don't understand the issue, so they're heavily influenced by anybody who does," said Jim Collura of the New England Fuel Institute.

"Many of these guys are influenced by one or both of the following: It's either someone from the financial community whom they've known or respected. It may be their broker, their financial adviser, their swap dealer, whoever. Or they're a member of a trade group and they're getting hammered constantly with: 'You're going to be put out of business; you're not going to be able to hedge; you're not going to be competitive anymore' -- including some of my members," Collura said.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he sees evidence of the bankers' influence when end users lobby him. "The end users have been basically used by the major investment banks," he told HuffPost Tuesday.

Dodd explains to them that, contrary to what they may have been told, one purpose of regulating derivatives is to protect people like them against predatory bankers. "When you tell them how they benefit from this, they say, 'Well, no one told us this part.'"

The question being debated: Should derivatives - oil or corn futures, or foreign-currency or interest-rate swaps, for instance - be traded in the light of day on a regulated exchange? Or should this multi-trillion dollar market that was a major cause of the last financial crisis continue to just swash around in the dark?

So far, the forces of darkness are prevailing with the end users. Early last month, the International Swaps and Derivatives Association (ISDA) pulled together a coalition of end users who drafted a letter to Congress repeating the precise fears that brokers have been instilling in them. "[S]ome reform proposals would place an extraordinary burden on end-users of derivatives in every sector of the economy--including manufacturers, energy companies, utilities, healthcare companies and commercial real estate owners and developers. Specifically, proposals that would require all OTC derivatives used by business end-users to be centrally cleared, executed on exchanges or cash collateralized or subject end-users to capital charges, would inhibit companies from using these important risk management tools in the course of everyday business operations. These proposals, which would increase business risk and raise costs, are at cross purposes with the goals of lowering systemic risk and promoting economic recovery," reads a letter signed by several pages worth of end users and provided by ISDA.

Such arguments worked wonders in the House. The reform legislation in the lower chamber contains gaping carve-outs for end users, which could effectively undermine any effort to bring light to the dark pools of capital that the system nearly drowned in last fall.

Dodd's bill, unveiled Tuesday, contains no such loophole. "I don't have any [carve-outs]," he said. "I mean, you start down that road, it's endless."

Wall Street traders, however, are very keen on taking Congress down that endless road, which is why they've encouraged each individual user to lobby for a specific exemption.

"Some of our heating oil dealers have heard directly from their investment companies and their traders that they work with," said Sherri Cabrera of the Petroleum Marketers Association of America. Those traders, she said, have pushed the companies to lobby their representatives for an exemption from the regulated derivatives exchange for heating-oil companies.

Sean Cota is the president of Cota & Cota, Inc. a small fuel company in Bellow Falls, Vermont - just the kind of firm that has influence and credibility with home-state lawmakers.

"We had a consensus amongst everybody that this was all a great thing," he said of reform efforts, "until ISDA, the International Swaps and Derivates Association, with the big players and the money in the over-the-counter market, said 'You've got to figure out who your biggest accounts are and start telling them that it's going to get really expensive to do these hedging programs for you folks in the physical market. So you need to make sure that financial reform doesn't happen,'" said Cota.

There's nothing intrinsically wrong with derivatives. Lots of companies rely on them to hedge against risk. A farmer or oil producer may want to lock in a future price to avoid the fluctuations of the market and enable financial planning and budgeting. Manufacturers concerned about interest-rate fluctuations or the rise or fall of the dollar can minimize risk by using currency or interest-rate swaps.

But major investors who don't care at all about the price of corn can also game the system by overwhelming a market and driving the price in one direction. Remember $4 gas? Right now, finding out who is doing what in the over-the-counter derivatives market is as hard as determining who's controlling the drug trade.

Financial players in the derivatives market are hugely leveraged, sometimes as much as 400 times -- meaning they have very little of their own money actually in the game. Hundreds of trillions of dollars are traded in the derivatives market -- many times the size of the global GDP.

Having such massive amounts of money floating in the dark can lead to a system-wide seizure if investors' confidence in the scheme suddenly wanes. Reformers are pushing to have all derivatives put on exchanges similar to the New York Stock Exchange.

Such a reform would mean smaller profits for banks and would deprive them of a market that's remarkably easy to manipulate with enough money. But it wouldn't require much, if any, sacrifice from end users.

But that's not what they're being told by people they trust. "First we heard it with the large natural gas users, particularly the municipal systems. That was the first one. And then we've heard it from a number of other large players in the market, saying, 'You know, we're all for this reform. It's going to be good for everybody - but except for me.'"

Cota and others say the persuasion goes on under the radar -- from a trusted adviser to a longtime client.

"It's been targeted. Nothing in writing. Just personal calls. I've had to answer a few folks to explain what the scenario was and that it's going to cost them less because these derivatives have their credit built into them right now. They understand it once I explain it to them," he said. "So we have to defend ourselves against them within our own board of governors...My suspicion is it's happening all over."

Sen. Jon Tester (D-Mont.) said he's been lobbied by end users and has gotten the sense that Wall Street is behind what they're saying.

"They're going to use anybody they can to try to influence us," he told HuffPost, saying that he's in the unusual position of reverse lobbying. "I think, as with anything, it's going to be an education process."

In order to get a handle on the derivatives market, there have to be consequences for betting billions or trillion and losing, said Tester. But banks can use those potential consequences to frighten companies into opposing reform.

"It's clear we have to do some things to add more transparency and have some people get some skin in the game in this thing. And I'm sure that's exactly what they're going to tell their farmers and their businesspeople, that, 'You know, you're going to have to put money up front.' But the truth is, there has to be skin in the game on this or otherwise we're going to be in the same boat. And we don't want to have another situation like we had a year ago."

And yet, while banks tell their clients that reform means they'll have to put money down up front, what they don't often tell them is that same amount of money - sometimes more - is baked into the fees and costs they already pay brokers.

Sen. Maria Cantwell (D-Wash.), whose background in the business sector gives her an advantage in discussions with colleagues, is pushing to make sure there are no loopholes and that all derivatives are traded through an exchange.

Right now, she's working to educate the lobbyists themselves that reform is in their best interests. "There are people who have been around for a long time who saw how damaging a dark market can be to the price of their business. And while some people have made a lot of money off of it, others have suffered greatly.

"I think these individual users [being] used as a façade to push more loopholes instead of properly regulating this market is a mistake," she told HuffPost. "So we hope to bring some of them out to talk about why it's so important to actually have transparency."

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Fannie and Freddie Fire Their Own Inspector General

2009-11-10T23:19:02Z

There is no independent auditor overseeing the federal agency responsible for some $6 trillion in home mortgages, because the Department of Justice's Office of Legal Counsel ruled that the agency's inspector general didn't have authority to operate, according to internal memos obtained by the Huffington Post.

The ruling came in response to a request from the Federal Housing Finance Agency itself -- which means that a federal agency essentially succeeded in getting rid of its own inspector general.

The FHFA is home to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, which are jointly responsible for purchasing or guaranteeing more than 80 percent of new mortgages issued since the middle of 2008, according to FHFA numbers.

In September, the Department of Justice ruled that FHFA Inspector General Ed Kelley did not have authority to investigate wrongdoing or other abuses related to the agency, according to an internal DOJ Office of Legal Counsel memo signed by Deputy Assistant Attorney General Daniel Koffsky.

The ruling was made on complicated technical grounds. The current agency was created by a 2008 act that abolished the Federal Housing Finance Board and replaced it with the FHFA. FHFB employees automatically became FHFA employees and retained their "same status, tenure, grade, and pay."

The IG for the new agency, according to the law, needed to be appointed by the president and confirmed by the Senate, but Kelley argued that the purpose of keeping the employees in the same positions was to make sure the agency could continue to operate and that therefore the law applied to him, too.

Kelley still works for the FHFA, but in a non-independent "internal auditor" position in which he must report to the agency head. A message left with FHFA wasn't returned.

On Monday, HuffPost called the main number listed on the FHFA website for people who want to report "a violation of any law, rule or regulation, gross mismanagement, a gross waste of funds, an abuse of authority, or substantial and specific danger to public safety or complaints regarding the programs and operations of the agency."

The phone rang.

"Ed Kelley," said the voice on the other end of the line.

Kelley now heads the Office of Internal Audit and he said he has two employees: an office administrator and a person who oversees the contractors who review financial records. He estimated his budget for contractors was between $100,000 and $150,000.

As IG, he ran into trouble the way most independent investigators do -- by investigating things people didn't want investigated.

Kelley's office had been working with SIGTARP Neil Barofsky, the Special Inspector General overseeing the bank bailout -- the Temporary Asset Relief Program -- when the agency head challenged his authority to operate and asked the FHFA General Counsel's office to look into it.

"I hate to use the word challenge, because the question they raised was whether the statute was clearly established at the Office of the Inspector General," said Kelley.

He declined to get into the specifics of investigations that were cut short. "I don't really want to get into some of these, but obviously there are some programs out here. There's the TARP IGs that are heavily involved in looking at criminal activity surrounding the Make Home Affordable program and different other aspects in the programs they've rolled out [to address] foreclosures and so forth," said Kelley.

"Many of those are projects that would be worth jointly investigating between the TARP office and the IG's office here at FHFA." Kelley's office was starting to do just that when "the question of whether or not we were legally the IG's office came up, and we had to withdraw," he said.

In late February, Barofsky warned that the mortgage modification plan was vulnerable to already existing fraudulent foreclosure rescue schemes. On April 6, he announced that progress was being made as part of a multiagency crackdown.

A month later -- less than four months after Obama's inauguration -- the FHFA started questioning Kelley's legal status. An internal memo -- which HuffPost did not get from Kelley, originally dated May 12, 2009 and updated on June 23, provided the FHFA's opinion that Kelley had no authority to conduct such investigations.

"It's a serious gap in oversight," Barofsky told HuffPost of Ed Kelley's loss. "It does impact what we do. Ed was a member of our TARP IG council and a partner in our investigative work." Barofsky said he still investigates areas of FHFA, but his mandate only covers "a sliver of what they do."

"Fannie and Freddie are awfully big," Barofsky said. "The idea that the agency responsible for conservatorship of Fannie Mae and Freddie Mac doesn't have an inspector general should be a serious cause of concern."

The agency put the blame on the law as written. "Congress did not intend for FHFA to have an Acting or interim IG pending the confirmation of a [presidentially-appointed] IG," writes Janice Kullman, assistant general counsel, in the memo, which was approved by Isabella Sammons, deputy general counsel, and forwarded to General Counsel Alfred M. Pollard.

It's been 16 months since the law took effect.

Obama has yet to nominate a new IG. Kelley said he'd heard that a few candidates were being vetted and wouldn't comment on whether he was one. He guessed there might be a nomination within the next month.

"Given the uncertainty at FHFA, it did not become clear until mid-September that the Inspector General's office required a new nominee," said a White House spokesman. "We are currently working actively to nominate an individual to the position as soon as possible. The process of announcing nominees does take some time given the rigor of the process to ensure that important positions like this one are filled by the highest quality people."

But if that's the case, the White House has been vetting candidates without consulting Sen. Chris Dodd (D-Conn.), the chairman of the Banking, Housing and Urban Affairs Committee. Dodd told HuffPost Monday night that he was unaware that FHFA had no IG and promised to look into the matter.

In the meantime, Kelley has essentially put a halt to investigations.

"We're in an internal audit office, versus an office of the inspector general, and there's a big difference between the two," he said. "An internal audit office operates at the pleasure of the head of the agency... At the end of the day, no matter how independent I am in conducting myself, we have an organizational independence problem, which anybody who looked at it, if people have problems with what we said, we would probably be viewed as not being independent, and probably not being very reliable."

In practice so far, Kelley said, no one has interfered with him as an internal auditor -- but he knows that could change at any moment. "Now, in terms in actuality of whether I'm independent, I feel like I can do what I need to do. I don't feel the discomfort, but that's until the first time you have a disagreement with the head of the agency. And over the years, I've certainly had my share of those. So at this point, there's nothing at the internal audit office I would want to do, that I feel like I can't do. But there are some things I wouldn't attempt at the internal audit office," he said.

The mortgage industry is one of the most susceptible to fraud, yet one of the areas Kelley said he doesn't get into is criminal investigation.

"We don't have the authority to do criminal investigations," he said. "It's the very reason why they set up IG offices themselves, [as opposed to] internal audit offices."

Fannie and Freddie are burning through cash at a staggering rate. Fannie reported a loss of $18.9 billion in the third quarter of 2009, four billion more than it lost the second quarter.

FHFA requested $15 billion from Treasury to plug the hole.

What's it spending money on?

"The company continued to concentrate on preventing foreclosures and providing liquidity to the mortgage market during the third quarter of 2009, with much of our effort focused on the Making Home Affordable Program," boasts the press release accompanying the announcement of the massive loss. "As of September 30, 2009, approximately 189,000 Fannie Mae loans were in a trial period or a completed modification under the Home Affordable Modification Program."

Those are the precise programs that Kelley was looking into when his own agency shut him down.

Health Care PASSES: The Scene In The House When It Happened

2009-11-08T05:38:43Z

CORRECTION: From my vantage point in the press gallery, it looked as if Rep. Don Young (R-Alaska) was leaning on Cao to oppose the bill. But according to a local Alaska paper, Young, who himself has often bucked the GOP party line, was in fact urging him to do what he needed to do for his district, which is overwhelmingly Democratic. Young was by Cao's side the entire time and as the critical moment approached, Young sat to Cao's left, with an arm draped on his leg; Cantor sat to his right.

From the Alaska Dispatch, which a reader sent in:

So Saturday night, our own Young, with all of his glowering presence, stood next to Cao during the whole vote and worked to protect him and keep the party leaders at bay. It worked. Cao reportedly didn't want to be the deciding vote, but once it was sure to pass, with Young on one side, and another protectorate Rep. Frank Wolf (R-Va.), on the other, Cao was free to be the lone Republican to vote 'aye.'

Young had an active Saturday night on the floor. He shouted at Pelosi as she announced the historic vote total. Earlier, as Rep. Bruce Braley (D-Iowa) spoke in opposition to a GOP amendment involving trial lawyers, Young repeatedly shouted "trial lawyer!" him. Young was apparently moved by the irony that Braley is a former trial lawyer himself.

But Young's irony-detection abilities failed him when he shouted at Braley: "They have been lining your pocket!" Young, of course, is under federal investigation for the allegedly ample lining of his own pockets.

-----------------

The House floor erupted in one of the loudest cheers the chamber has heard in years when Rep. Maxine Waters (D-Calif.), an hour before midnight, cast the 218th and deciding vote on landmark health care reform.

There were still six minutes and fifty-two seconds on the clock and the chair made a move to gavel the vote closed.

Democrats waived their opposition, keeping the vote open.

Almost every eye in the chamber darted to the far end of the GOP side, where the last possibility for a bipartisan bill sat wedged between Minority Whip Eric Cantor (R-Va.) and Rep. Don Young (R-Alaska), both of whom were leaning on him, both literally and figuratively. [See the correction below; it turns out Young was defending Cao from Cantor.]

The White House, two sources told HuffPost, had been working hard to win the vote of Rep. Joseph Cao (R-La.), a freshman in a strongly Democratic district. The pro-life Cao's vote came into play when an amendment from Rep. Bart Stupak (D-Mich.) passed overwhelmingly, greatly restricting reproductive rights.

After several minutes, Cao cast a yes vote from his seat, making the bill bipartisan. Reps. Jim Oberstar (D-Minn.) and Mike Honda (D-Calif.) waded into the Republican side of the aisle to get to Cao, rub his shoulders and slap him on the back.

Cantor stormed out as the Democrats applauded their defector.

The majority party had seen plenty of defections earlier. A stunning sixty-four Democrats joined with the GOP to pass Stupak's amendment, 240-194.

Stupak, during the vote on the final bill, didn't stick around long. He cast his vote quickly and shook the hand of Majority Leader Steny Hoyer (D-Md.), then headed over to the GOP side, where he was warmly welcomed.

Rep. Patrick McHenry (R-N.C.), a strident partisan, was the first to greet him, shaking his hand and slapping him on the back. Stupak then found Cantor and Young, shook their hands, and retired from the floor to the Republican cloakroom.

Cao's vote was a mere bonus for Democrats, whose spontaneous floor celebration radically outdid the reaction of the Yankees to winning the World Series recently. The normally stoic Pelosi had tears streaming down her cheek. Rep. Rosa DeLauro (D-Conn.) bent over and vigorously pumped her fist. Arms were thrown in the air; hugs all around.

As the clock hit ten seconds, Democrats counted down the time, finishing with an even louder cheer as Pelosi read out the tally: 220-215.

Not even the extreme pro-life amendment could dampen enthusiasm. "We'll live to fight that battle," said Rep. Louise Slaughter (D-N.Y.), a passionate supporter of reproductive freedom. "It took a hundred years to do health care. Nothing can dim that."

Majority Whip Jim Clyburn (D-S.C.) said it was the hardest vote he'd ever whipped. "We crossed a threshold tonight," he said. "This was a tough deal."

Rep. Keith Ellison (D-Minn.), who'd fought for a stronger public option, was fired up, too. "I'm ecstatic. I think it was great," he said, before adding that he wasn't happy with the Stupak amendment or the weaker public option.

As he spoke, Rep. Dennis Kucinich (D-Ohio) walked by, handing reporters a statement explaining why he'd been the only liberal to oppose the bill.

Would you have changed your vote if yours was the deciding tally?

"No," said Kucinich. He then added cryptically: "I could've been, but that would've been up to the White House." Kucinich is pushing for inclusion of an amendment that would allow individual states to implement single-payer health care without being sued by insurance companies.

His measure and others, as well as the surprisingly strong showing by pro-life Democrats and the ever-looming immigration issue, threaten the fragility of the bloc of 220.

But for now, Democrats were basking in the moment.

As Speaker Pelosi walked with her leadership team to a press conference, a reporter asked her how she felt as she passed by.

Her eyes filling with tears, she turned and slowed her walk. "I feel great," she said.

Compromise Reached On Health Care Bill: Anti-Abortion Amendment To Be Given Floor Vote

2009-11-07T05:13:59Z

As the House of Representatives inches toward a final vote on comprehensive health care reform this weekend -- the most dramatic domestic policy debate in several generations, a reorganization of a sixth of the economy -- the only thing the parties can talk about is abortion and immigration.

"It tells you something about our country," remarked one distressed member of Congress, who didn't want to be named speaking ill of this fine land.

What it tells isn't pretty: The ranks of the uninsured are steadily being filled, with the number approaching 50 million. Health care costs are rising at a rate several times that of inflation, eating into the take-home income of the majority of the American people and threatening to break the federal budget in less than a decade.

Yet the talk is of abortion and immigration.

All day on Friday, House leaders struggled to reconcile the pro-life and pro-choice wings of the Democratic Party. Over the last several weeks, the pro-choice bloc, consisting of nearly 200 Democrats, had gradually come to terms with an amendment authored by Rep. Lois Capps (D-Calif.).

The intent of the amendment was to keep the debate about health care rather than abortion and it would make clear that -- as is current law -- no federal funds would be used for abortion. "Our hope was that we could continue the current ban on federal funding for abortion so the issue wouldn't bog down the overall health reform legislation," wrote Capps at the time.

But that wasn't enough for pro-life Democrats. On November 3, Rep. Brad Ellsworth (D-Ind.) offered a more conservative compromise, one that restricted abortion in a bunch of extra ways and would require at least one private plan in the exchange not to cover abortion.

In reality, most insurance plans -- even using pro-life numbers -- already do not cover abortion.

Still, pro-choice Democrats swallowed the compromise -- while saying they'd go no further. Health care reform, said Rep. Lynn Woolsey (D-Calif.), a staunch pro-choicer and co-chair of the Congressional Progressive Caucus, should not be a vehicle to drive a pro-life social agenda.

That's when Rep. Bart Stupak (D-Mich.) re-entered the debate. Stupak is a longtime pro-life advocate and had been pressing his concerns upon House leadership. On Friday, Ellsworth withdrew his compromise language from negotiations, according to several House sources, sending the debate back to the starting line, where Stupak was waiting.

Stupak, in meetings with Pelosi and other members of leadership, pressed to include, instead, his own amendment that would ban the public health insurance option from funding abortion and also ban any private plan operating within the exchange from funding abortions. Under Stupak's plan, a woman buying private insurance from within the exchange with her own money would not have a choice of a plan that covered abortion.

During the early afternoon, Pelosi was leaning toward including some more moderately blended version of Stupak and Ellsworth's amendment's as part of the health care bill that would be sent to the floor, several aides told HuffPost. Just before 5:00 PM, Stupak and Rep. Henry Waxman (D-Calif.), who battled over abortion while the bill moved through Waxman's Energy and Commerce Committee, huddled on the House floor. Leaving the floor, the generally talkative Waxman gruffly brushed off reporters, asserting his alleged right "not to be swarmed."

Tempers flared. A Democratic congressman told House Republicans, who then told the Huffington Post, that Rep. Diana DeGette (D-Colo.) was asked to leave a leadership meeting where the pro-life agreement was being considered. DeGette is firmly pro-choice and it was thought, the source said, that she would not agree to the deal. "False," said a leadership aide, saying that "she had to leave to attend another meeting. Other pro-choice members [were] in there with leadership, as well as Waxman."

Either way, the question came down to who had the votes. Stupak's driving argument was that he had more than the 40 members he needed to "take down the rule" -- legislative lingo for defeating a bill on the House floor before it comes for a final vote. No one was sure whether Stupak actually had the 40 votes, but pro-choice Democrats were skeptical.

As the night and the meetings wore on, Pelosi shifted, multiple aides said, and was leaning toward allowing a floor vote on the Stupak-Ellsworth amendment rather than inserting it into the bill. The logical conclusion is that Pelosi determined she would lose too many pro-choice and progressive votes in the process of harnessing pro-life Democrats.

Shortly after midnight, Stupak addressed the Rules Committee and requested a floor vote on the amendment, ending a day of drama, but leaving open questions that will be answered Saturday: Does his amendment have enough votes to pass? If it does, will pro-choice Democrats flee and sink the bill?

The thinking among leadership is that allowing a vote -- regardless of the outcome -- helps win votes for final passage. If it passes, then pro-lifers line up behind health care reform. If it fails, at least they had their vote. For pro-choicers, if the amendment passes they can still fight to remove it during negotiations with the Senate -- which rejected tough abortion restrictions.

Meanwhile, aides from both parties say, the GOP is planning out how it will game the language in its motion to recommit -- an alternative measure aimed at stamping out the bill that the minority is entitled to introduce. The GOP could include language supporting Democrat-backed proposals, such as single-payer health care or a robust public option -- and then vote present, allowing a majority of Democrats to carry the vote to victory and complicate things for leadership.

Or the GOP could toss out anti-immigration language. That effort could garner the support of a big enough bloc of Democrats to give Pelosi genuine concern that it could prevail. Here we wander further from reality: undocumented workers currently get free medical care at great expense to the American people at emergency rooms across the country. The GOP's alternative approach, as it's been described in the past, denies that reality while simultaneously turning businesses into immigration-enforcement arms. People here illegally, however, would still be able to go to the emergency room for free.

Lost in the back and forth are the tens of millions without insurance and the nation's broken health care system. More surprising than the behavior of Congress, perhaps, is the fact that it has gotten as far as it has.

Civil War In Corporate America: Banks Battling The Chamber On Accounting Rules

2009-11-05T22:59:42Z

Amid the ongoing financial regulation overhaul, the banking industry is hoping to pull off a quiet power grab that has eluded its grasp since the Great Depression, by stripping the independence of the board that sets financial accounting standards.

The move could effectively let banks set their own accounting standards in rough economic times.

Astonishingly, at a time when the public is crying out for greater regulation to limit excessive risk-taking by financial institutions, the banks are trying to get Congress to agree that the next time there's a big downturn, they should have the ability to alter their accounting standards -- essentially, fudge the numbers -- so that the public and investors won't be able to tell how insolvent they really are. By ignoring their declining asset values, they can avoid the standard requirement of raising more capital.

The mechanism is contained in an amendment set to be introduced in mid-November by Rep. Ed Perlmutter (D-Colo.) that would move final authority over the Financial Accounting Standards Board (FASB) from the Securities and Exchange Commission to a new body, a so-called "oversight" board, that would include the officials charged with managing systemic risks to the financial markets.

[UPDATED: Scroll down for the legislative language, which surfaced Friday and goes even further than suspected.]

These regulators would have the authority to override FASB's accounting guidelines by taking into account economic conditions.

The move is so radical that it has split corporate America. The bankers and members of Congress who support it have earned themselves an unlikely enemy: the U.S. Chamber of Commerce.

A typical business or investor, after all, prefers honest, independent accounting, because they buy and sell real things based on real value.

"Washington isn't thinking straight," said Josh Rosner, managing director of Graham, Fischer & Co, a New York-based financial analyst who advises regulators and institutional investors. "Financial statements are for the benefit of investors."

Indeed, allowing banks to alter accounting standards when they run into trouble is incentive to take more risk and, in essence, institutionalizes fraud. The regulators would now be under enormous political pressure -- and sometimes under direct orders -- to allow banks to remain in business long after they've become insolvent, in the hopes that things will turn around and they'll grow again.

And rather than stabilize the system, removing accounting independence destabilizes it in the long run, as investors and other banks have little confidence in the veracity of financial statements.

Perlmutter told the Huffington Post that under his proposal, the FASB "would stay with the SEC, but in instances where an accounting procedure or a way it's being implemented poses a threat to the financial system by exaggerating what's going on -- is pro-cyclical to a point that it, too, threatens the system -- then the financial regulator, the systemic regulator, could look in to it.

"For virtually every situation you can think of, there's no change, but [there would be a change] in the event that there's a threat to the system, like the dysfunctional market we had from October through March, and that the accounting procedures just didn't fit for a system where there was no market," Perlmutter said.

Leslie Oliver, a spokeswoman for Perlmutter, said backers of the amendment haven't been surprised at the opposition from certain sectors of corporate America.

"That's understandable for a company that has tangible assets," she said. Perlmutter said he has yet to hear directly from the Chamber.

That the banking industry finds itself in opposition to large sectors of the business community is evidence that a historic power struggle for control of the economy is underway.

The issue is stirring up the House Financial Services Committee. "It's caused a great deal of controversy," said committee chairman Barney Frank (D-Mass.). Frank has yet to take a position, he said, waiting until Perlmutter finishes meeting with members of the committee. "I told him I would wait until he finishes his conversations," Frank told HuffPost.

FASB is fighting to keep its independence. "The amendment that's being considered represents a shift that threatens to fundamentally challenge the objectives of financial accounting and politicize the process and harm financial system," said FASB spokesman Neal McGarity. "The mission of bank regulators is to ensure the safety and soundness of the banking system. We have a different mandate. That's why this is of considerable concern."

A powerful subcommittee chairman already opposes it. "I'm for keeping the independent FASB and I see no reason to change it," Rep. Paul Kanjorski told HuffPost.

The Chamber joined with investors and auditors in opposing the Perlmutter amendment.

From a letter sent to top committee members by representatives of the Center For Audit Quality; the Chamber of Commerce; and the Council of Institutional Investors:

"By placing the FASB under the jurisdiction of a structure charged with managing systemic risks to the financial markets, accounting rules will be viewed though the narrow lens of a few large companies from specific industries, rather than considerate of the applicability of financial reporting policies to over 15,000 public companies. Such a narrow focus can skew standards such that it makes understanding of transactions that businesses engage in on a daily basis more difficult and undermine the confidence of investors. We believe that the SEC has been and continues to be best suited to provide the oversight of the FASB for such a broad and diverse economy."

The American Bankers Association stands on the other side. "A Systemic Risk Oversight Council could not possibly do its job if does not have oversight authority over accounting rulemaking," top bank lobbyist Ed Yingling testified before the committee on October 29. "This is a major deficiency in the draft legislation. Accounting policies are increasingly and profoundly influencing financial policy and the basic structure of our financial system. Thus, accounting standards must now be part of any systemic risk calculation. To do anything less creates the potential to undermine any action taken to address a systemic risk. The Financial Accounting Standards Board should continue to function as it does today, but it should no longer report only to the Securities and Exchange Commission (SEC). The SEC's view is simply too narrow. Accounting policies contributed to the crisis, as has now been well documented, and yet the SEC is not charged with considering systemic and structural effects."

Yingling said the ABA "strongly supported" the approach taken by Perlmutter. "We thank Representatives Perlmutter and [Frank] Lucas [R-Okla.] for their foresight and leadership on this critical issue."

While the big banks would be pleased by the change, Frank said, the major push has come from community banks. Perlmutter said that his amendment was one of the community bankers' highest priorities.

Community banks are a popular and powerful political force in Congress. They didn't heavily trade the exotic products that nearly brought down the global economy; they received little in the way of bailout money; they don't give multi-billion-dollar bonuses; they tend to take more responsibility for loans that they issue; and they're generally respected members of the local community.

"Many members of the committee are supportive of community banks," said Rep. Maxine Waters (D-Calif.), one of the most progressive members of the committee and a subcommittee chair. "The big banks have been such an outrageous, scandalous story about how they operate and what they have done that we tend to want to support the community banks in whatever they ask us to do."

Waters told HuffPost she supports Perlmutter's amendment.

And winning the support of community bankers is in essence a necessary condition for Democrats who want to pass reform legislation through the Financial Services Committee. The Perlmutter amendment could be a way to win community banks over to the idea of a systemic regulator, a priority of the administration.

But working to loosen accounting rules could come back to hurt the Democratic Party: When the system goes down again, voters will want to know why.

When HuffPost asked Frank if Wall Street was pushing Perlmutter's measure, he responded emphatically.

"You have this caricature in your heads. You literally don't understand the way the world works," he said. "It's the community banks, the credit unions, who are driving this...Seriously, the community banks have the political clout here. Not the Wall Street banks."

Frank said the ABA was likely pushing for the amendment to win favor with community banks in its rivalry with the Independent Community Bankers of America.

Perlmutter agreed. "It's the community banks I've been working with. I'm not hearing it from the Wall Street guys," he said.

While the ABA has traditionally been associated with large Wall Street banks, it also represents small banks and is attempting to expand its membership by signing up more community bankers.

It works well for the big banks when their interests are aligned with the little ones, as is the case here. When their interests are not aligned, the little banks often win. Community banks, for instance, won an exemption from examinations -- though not the rules -- related to the Consumer Financial Protection Agency.

The ICBA wants to use its clout and the distrust of the big banks to move Perlmutter's amendment even further in their direction. "We're not buying and selling all the time. We hold a lot of things for the long term.... So we'd like to build in some additional sensitivity to community banks so would like to make that more explicit," Steve Verdier, an ICBA senior vice president, told HuffPost. "We're going to get in touch with [Perlmutter] to see if there are more things that can be done to tweak it in our direction."

Much of the debate around the amendment comes down to what is called the mark-to-market accounting requirement. Banks -- both big and small -- have long sought to avoid marking their assets down to market prices when those market prices are too low. Marking down the assets requires the bank to take a loss on its books, which then requires it to raise more capital by selling off assets at low prices. Banks claimed that in the fall, the market had frozen and that they couldn't sell assets. Another way of putting it is that the market price was lower than they wanted to accept.

Regardless, forced selling at low prices creates a downward spiral that banks and the GOP blame for the financial crisis last fall. The GOP called for a study of the effect of mark-to-market accounting on the economic collapse as part of the bailout. That report found the accounting practice did not cause the collapse. Either way, the banks hope to avoid that cycle when the commercial real estate market collapses and they find themselves with bad loans again.

"It's about easing the pressure to reduce the value of their assets in community banks, so they don't have to raise more capital," Frank said.

Asking accountants to change standards based on economic conditions could very well make their heads explode, however. It's not their job, they say, to keep the system from collapsing. It's their job to give honest numbers. If a company is bankrupt, it's bankrupt.

"Accounting standards are not policy," remarked one person involved in the fight.

But they have become policy. In the spring, Kanjorski's subcommittee hauled the head of FASB in for a hearing and demanded the number-crunchers change their mark-to-market standards within three weeks or Congress would do it for them. FASB's head pushed back during the hearing, saying that banks who called him asking for such a change were usually bankrupt fairly quickly.

"They practically dragged him into the hallway and beat him to death," said Rep. Brad Miller (D-N.C.), a committee member skeptical of the Perlmutter amendment.

Three weeks later, they eased their accounting rules. But it wasn't simple for the banks. Even with the intense congressional pressure, the change only sneaked by by a single vote and created tension on a board accustomed to a freedom from politics. The Perlmutter amendment would make such a battle unnecessary for the banks.

"There are a lot of banks that are in a lot of trouble and have a lot of exposure to commercial real estate," Miller said. "You can't fix that with accounting."

Rep. Alan Grayson (D-Fla.) fought a lonely battle last spring to stave off the loosening of the accounting rules and opposes this more dramatic shift, as well. Banks may have good reason to want to overstate the value of their assets, he said, and it may work for a time. But an economy can't be run indefinitely on imaginary numbers. "I enjoy reading fiction, but not in financial statements," he said.

UPDATE: HuffPost obtained a copy of the amendment language that is circulating among lobbyists. Perlmutter's spokeswoman confirmed its authenticity.

The amendment would empower the council overseeing FASB to "recommend to the SEC, either publicly or privately to take such action as is necessary, including but not limited to suspension, modification or elimination of such accounting principles, standards or procedures as they may apply to the stability of the financial system or the safety and soundness of financial companies, as a whole, for such duration as is reasonable and appropriate."

If the SEC doesn't follow the "recommendation," according to section (c) of the amendment, the council can order it to do so.

In other words, for the sake of financial stability, bank regulators could secretly order the "elimination" of accounting standards.

SEC. 1103. PRUDENTIAL OVERSIGHT OF ACCOUNTING PRINCIPLES AND STANDARDS THAT POSE SYSTEMIC RISKS.
(a) IN GENERAL.--In the event that any member of the Council believes that an accounting principle, standard or procedure threatens the stability of the United States financial system or companies, as a whole, then the Council shall investigate and by a majority vote, determine whether any corrective action, emergency or otherwise, is necessary to prevent or mitigate any adverse effects from such principle, standard or procedure. In the event that the Council determines that corrective action is necessary then, the Council shall recommend to the SEC, either publicly or privately to take such action as is necessary, including but not limited to suspension, modification or elimination of such accounting principles, standards or procedures as they may apply to the stability of the financial system or the safety and soundness of financial companies, as a whole, for such duration as is reasonable and appropriate.

(b) ADOPTION OF COUNCIL RECOMMENDATIONS BY SECURITIES AND EXCHANGE COMMISSION.--the Securities and Exchange Commission shall ensure that the prudential standards recommended by the Council are implemented within 60 days of the Council's recommendation or within such other time period specified by the Council.

(c) FAILURE TO ADOPT STANDARDS.--If the Securities and Exchange Commission fails to ensure that the prudential standards recommended by the Council are implemented within the time period specified in paragraph (b), the Council is authorized to direct that any recommendations issued pursuant to paragraph (a) be implemented for the purposes of generally accepted accounting principles."

UPDATE II: The SEC and the American Institute of Certified Public Accountants both oppose the amendment, as well. "Accounting should be about accounting, and not about anything else," writes SEC chair Mary Schapiro in a letter to Frank sent Thursday.

From a letter from the AICPA:

It is our understanding that Congressman Ed Perlmutter (D-CO) is considering language to amend the Financial Stability Improvement Act of 2009, which would undermine the independent accounting standard process as currently carried out by the Financial Accounting Standards Board (FASB). The American Institute of Certified Public Accountants (AICPA) strongly opposes this amendment and any attempt that would serve to undermine the independence of accounting standard setting. The purpose of public company financial reporting is to provide investors with clear, objective, and transparent financial information. This helps investors make informed investment decisions. Any attempt to divert financial reporting from its primary investor-focused objectives to other policy objectives with regard to financial institutions damages investor protections.

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Former BlueCross Pitchman Switches Sides, Comes Out For Public Option

2009-11-05T21:02:11Z

Andy Cobb has had enough. A former pitchman for BlueCross Blue Shield of Florida, Cobb is breaking with the firm and speaking out in favor of health care reform and a public health insurance option.

"This is the time when Americans have to choose which side we're on," Cobb told HuffPost, quoting Rep. Dennis Kucinich (D-Ohio). "Is it the insurance companies or the American people?"

Cobb calls on what he dubs his fellow "spokes-jerks" -- singling out the FreeCreditReport.com guy -- to stop hawking products that hurt the American people.

Cobb teamed with Brave New Films to create the short video.

"I do know that 19 percent of every dollar of our premiums goes to administrative costs, for executive compensation and people like me. We can't afford people like me any more in this country," he said.

WATCH:

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Reid Picks Pelosi's Pocket To Pay For Business Tax Break

2009-11-05T17:25:18Z

In order to fund business tax breaks and an extension of a first-time homebuyers tax credit this week, Harry Reid swiped one of Nancy Pelosi's revenue generators, leaving the House Speaker scrambling at the last minute to find billions to cover a funding gap in her health care reform bill.

As the Senate Majority Leader attempted to move an unemployment-benefits extension through his chamber, he sugared the brew to make it more palatable to the GOP, adding the tax breaks and credit. But he needed money to pay for the billions being spent. In legislative lingo, he needed a "pay-for."

He found it across the Capitol in the House health care bill. To help pay for her bill, Pelosi was proposing a complicated change to the tax code that involves interest expenses and foreign tax-credit limits. A summary of it follows this story for the curious, but the short of it is that the House had found a way to raise $20 billion over ten years. That was just about what Reid (D-Nev.) needed.

The unemployment extension, along with the billions for business, passed the Senate Wednesday night and, Pelosi said, will pass the House on Thursday.

Pelosi laughed when asked by HuffPost about the pocket-picking. "It just goes to show you've got to get down to that floor right away," she said.

Pelosi, however, had another pay-for ready. Due to some legislative bungling in the past, the paper industry is paid about $8 billion a year by the federal government to add diesel fuel to a paper-making process that does not, in fact, require diesel fuel.

The loophole was exposed by Nation reporter Chris Hayes and has been targeted by House lawmakers, but the paper industry, along with unions representing industry workers, fought back, arguing that rescinding the giveaway would cost jobs. That argument had carried well enough to prevent the closing of the loophole -- that is, until Pelosi found herself in need of the cash.

* * * * *

Here's the legislative summary of the provision that the Senate housed from the House:

Delay implementation of worldwide allocation of interest - In 2004, Congress provided taxpayers with an election to take advantage of a rule for allocating interest expense between United States sources and foreign sources for purposes of determining a taxpayer's foreign tax credit limitation. Although enacted in 2004, this election was not available to taxpayers until taxable years beginning after 2008. Last year, the phase-in of this rule was delayed for two years (for taxable years beginning after 2010). This proposal would delay the phase-in of this rule for an additional seven years (for taxable years beginning after 2017). This proposal is estimated to raise $20 billion over 10 years.

Pelosi: Single-Payer Amendment Breaks Obama's Health Care Promise

2009-11-05T16:52:45Z

An amendment to allow states to pursue single-payer health care without incurring insurance-industry lawsuits was stripped from the House bill, Speaker Nancy Pelosi (D-Calif.) said Thursday, adding that it would break President Obama's commitment to people keeping their current insurance plan if they like it.

She also said that she had yet to decide whether to allow a vote on a separate amendment from Rep. Anthony Weiner (D-N.Y.) that would replace the entire health care bill with a single-payer system. "We are probably going to be addressing some of those issues in the next 24 hours," she told HuffPost.

Weiner is outwardly optimistic he'll get a vote. "She made a commitment back when the consideration of this bill was first contemplated. She agreed to have a vote on single payer then because we didn't have it in committee. I'm looking forward to it," he said. "She's an honorable person and she's a good Speaker and she supports single payer. She says it over and over again."

The amendment to allow states to individually implement single-payer was sponsored by Rep. Dennis Kucinich (D-Ohio) and passed the Education and Labor Committee's version of the health care bill. There were shenanigans involved, with Republicans joining Kucinich not because they supported the bill but because they wanted to create mischief. (Asked about the GOP position, Rep. Mike Pence (R-Ind.) said that the party's opposition to single-payer health care trumps its support of states' rights.)

"The three chairmen blended the bills; that was in one of the bills. And in the harmonizing of the legislation, the decision was made not to go forward with that," Pelosi said of the Kucinich amendment. The Ways and Means and Energy and Commerce Committees also passed versions of the health care bill.

Kucinich tells HuffPost that his amendment was scored by the Congressional Budget Office and that it is deficit neutral. The amendment would prevent insurers from suing states after they enact single-payer.

Pelosi said, however, that it was unclear what the overall effect of it would be. It's hard to know, of course, whether and when states would enact single-payer systems.

"All of our decisions are based on what we have to be answerable for in terms of the Congressional Budget Office, about what the cost will be," she said.

"And what does that mean? What does it mean to Medicare? What does it mean to others: If you like what you have now, you can keep it. The President made that commitment and our legislation honors that commitment."

Kucinich, told about the Speaker's comment, said he hasn't given up. "The Speaker's a friend of mine. The president's a friend of mine. I talked to the president about this on several occasions, including last week. This is a decision that has to be made by Congress. And I'm hopefull we'll be able to get the Kucinich amendment reinstated," he said.

The president, Kucinich said, didn't commit one way or the other to his amendment, but understands how important it is to progressives.

"There's a national movement behind us. There's tens of thousands of calls that have been directed into this Capitol in the last few days in support of protecting the right of states to pursue their own single payer plan," Kucinich said, pledging to continue the pressure. He had a meeting scheduled with the Speaker for one p.m. Thursday, along with other progressives, he said.

House leadership may not have realized, Kucinich ventured, how important the amendment was to securing the support of a number of progressive members. If those votes are needed to move the bill to the president's desk, he said, the amendment could come back in play.

"There's still a chance that it could get back in the bill," he said.

GOP Folds On Unemployment Benefits Fight: 14-Week Extension Passes

2009-11-04T23:46:07Z

The GOP called for the check Wednesday night, having had enough of the fight over an extension of unemployment benefits that the party had held up for several weeks.

While the Senate was stuck in parliamentary limbo, some 200,000 people actively looking for work lost their unemployment benefits. The bill extends unemployment benefits for an additional 14 weeks across the country, and in some states with the highest unemployment the extension goes to 20 weeks. More on the bill here.

The extension itself was not controversial and passed 98-0. Getting there, however, was a Herculean parliamentary task that provides insight into just how hard it is to pass even popular legislation in the Senate with a minority party intent on opposing the majority's agenda step by laborious step.

Earlier Wednesday, Senate Majority Leader Harry Reid (D-Nev.) called for the third cloture vote on the bill to break a GOP filibuster. It passed 97-1. (That would be one Jim DeMint (R-S.C.) as the lone Republican to object in public on this round.)

At that point, the GOP could have elected to require 30 hours of debate, plus an intervening day, before moving to final passage -- as they had insisted several times before, even after the pot had been sweetened for them. But later in the evening, they called it quits and agreed to move to a final vote.

Democrats charge that Republicans are chewing up the clock to oppose their overall agenda. But the Republicans say they weren't opposing unemployment or any other Democratic priority, but were rather standing up for their rights as senators in the minority.

"What the Republican leader was objecting to was the Democratic leader picking our amendments. That's what he insisted on doing and that's why there was a hold up," Sen. Lamar Alexander (R-Tenn.) told HuffPost.

"We believe that the essence of the Senate is the right to offer amendments. We understand about limiting amendments, making them relevant and agreeing to a time agreement so we can get our business done," said Alexander, a member of GOP leadership.

Reid did, in fact, object to several GOP amendments aimed at ACORN and the financial industry bailout, arguing that the ACORN issue has been litigated to death and that the bailout amendment was an attempted distraction.

On Wednesday, Sen. Patty Murray (D-Wash.) said she simply couldn't understand what constituency Republicans thought they were benefiting by holding up unemployment benefits.

"Who are they representing?" she wondered.

UPDATE: The House passed the extension Thursday afternoon by a 403-12 vote and it now heads to the president's desk for his signature. The no votes can be found here. Most of those nays participated in Thursday's Tea Party protest.

Maine Voters First To License Medical Pot Shops

2009-11-04T05:01:45Z

Maine voters became the first to license nonprofit organizations to sell medical marijuana on Tuesday, with the state's Question 5 cruising to a landslide victory. With roughly half of the precincts reporting, six in ten Maine voters had tallied in favor of allowing state-licensed nonprofits to distribute pot to approved patients.

Two other states -- Rhode Island and New Mexico -- have approved such nonprofits, but Maine is the first to do so through the ballot box. In California and Colorado, the dispensaries are not specifically regulated as pot shops, but rather as businesses in compliance with state laws.

Rhode Island, New Mexico and Maine, by more tightly regulating distribution, present a model counter to California's. As more states approve licensed dispensaries, the debate will shift from whether medical marijuana should be legal to how it should be produced and distributed - a resounding victory for advocates and patients.

Thirteen states permit the medical use of marijuana.

Maine's election result can be partially credited to President Obama's announcement that he would not raid or prosecute patients or dispensaries in compliance with state laws. The decision was first announced in February and codified in a memo on October 19.

In Breckenridge, Colorado, meanwhile, voters overwhelmingly approved the use of marijuana not merely for the ill, but the well, too. With 72 percent in favor, the townsfolk voted to allow the possession of bongs, other paraphernalia and up to an ounce of marijuana.

Ryan Grim is the author of This Is Your Country On Drugs: The Secret History of Getting High in America

Final House Health Care Bill Unveiled

2009-11-04T01:15:29Z

House Speaker Nancy Pelosi (D-Calif.) unveiled a revised health care reform bill -- known as a manager's amendment -- Tuesday evening after taking the concerns of her caucus into account.

Pelosi said late last week that she was leaning against allowing individual floor amendments, so what you see here is likely what you get.

If it passes the House, it'll be merged with the Senate version in conference committee and then will come back for one final vote before heading to the president's desk.

Rival factions within the party still differ on how far the bill should go to prevent any money that has somehow come into contact with federal money from then funding abortions, whether undocumented workers can somehow participate in the health care system short of getting treated for free in hospital emergency rooms, and whether states should be allowed to choose to move to a single-payer system if they decide to, among other differences.

The House health care bill unveiled Thursday was stripped of a provision that would allow individual states to implement single-payer health care if they elected to. HuffPost readers read through it and found that it also requires chain restaurants with more than 20 locations to post calorie information on the menu. It bars the federal government from bailing out the public option and adds that there "shall be no administrative or judicial review of a payment rate or methodology" established by the head of the public insurance plan. And it addresses health disparities while making specific reference to protecting populations discriminated against due to sexual orientation or gender identity.

The stripping of the single-payer provision, which Rep. Dennis Kucinich (D-Ohio) originally moved through the Education and Labor Committee, particularly galled HuffPost readers as well as Kucinich himself. Kucinich tells HuffPost that the Congressional Budget Office scored his amendment as having zero effect on the federal budget, a sign that it was at least considered to be included in the manager's amendment.

Kevin McKeown, a city councilmember from Santa Monica, California, wrote in to protest the removal, arguing that if California passes single-payer legislation, it ought to be allowed to become law. "This year I had our city finance department calculate how much money single-payer would save just our city, just on health care for our own employees," said McKeown. "States poised to enact their own single-payer should not be disempowered by this bill."

Another reader, Jake Orlando, noted that the bill specifically mentions gay, lesbian, bisexual and transgender people in a section dedicated to addressing health disparities. "It's a quite small mention, but at least worth noting in the LGBT community," Orlando writes. "We know the Republicans would have gone out of their way to exclude us from mention of existence."

Fernando Castro noticed that the bill will require chain restaurants to publish calorie content on the menus. It'll be tough to reduce health care costs, after all, if the obesity epidemic continues apace.

Section 2572 requires that restaurants with more than 20 locations "shall disclose in a clear and conspicuous manner in a nutrient content disclosure statement adjacent to the name of the standard menu item, so as to be clearly associated with the standard menu item, on the menu listing the item for sale, the number of calories contained in the standard menu item, as usually prepared and offered for sale."

Reader Zen Tiger noted that while the government freely bails out Wall Street when it runs into trouble, no such help would be forthcoming for the public health insurance option.

"In no case shall the public health insurance option receive any Federal funds for purposes of insolvency in any manner similar to the manner in which entities receive Federal funding under the Troubled Assets Relief Program of the Secretary of the Treasury," reads the bill.

A high number of readers wrote in surprised that the public option was as limited as it is in the bill. That surprise is partly the fault of reporters - including myself - who haven't been clear that only certain people would be eligible for it. If you have employer coverage, for instance, you're not eligible. However, this FDL post from Jon Walker explains how the number of people eligible for it is liable to expand over time.

Thanks to the many people who read parts of the nearly 2,000 page health care bill last week. If you give this one a look and find anything interesting, let me know at ryan@huffingtonpost.com. If you don't want your name published, please say so. We'll post the bill as soon as it's out.

UPDATE: It's out. The manager's amendment is a scant 42 pages long and amends the bill as introduced.

Snowe, Collins Refuse To Say How They Voted On Maine Gay Marriage Vote

2009-11-03T20:02:24Z

Olympia Snowe and Susan Collins, two Senate Republicans from Maine, have amassed outsized power by playing their legislative cards very tightly and keeping their colleagues guessing about where they stand.

That practice must be addictive -- it extends to their voting habits back at home, too.

The state of Maine is considering a referendum that would overturn the state's new pro-gay-marriage law and restrict the institution to opposite-sex couples. During the lead-up to the election, HuffPost asked both how they planned to vote and both declined to say.

Now that Election Day is here, they are continuing to stay mum -- though both did concede, at least, that they cast a vote by absentee ballot.

"I have never taken a position on state referenda," Collins explained on her way into a weekly GOP meeting. "It's for the people of Maine." But, said HuffPost, the election is underway and you've already voted.

"I have never taken a position on state referenda," she repeated.

The election is, after all, by secret ballot and the senators are within their rights to obscure how they voted. But for a public figure, it's an unusual stance to take, especially on such a cornerstone human rights issue.

Snowe was equally secretive. "I sure did," she said when asked if she voted on the referendum. Can you tell us how you voted?

"No," she said. "That's for the people of Maine to decide."

But aren't you one of the people of Maine?

"Yes. And I did," she said. "I already voted."

As GOP Holds Up Unemployment Extension, Nearly 200,000 Lose Their Benefits

2009-11-03T17:20:32Z

In the world outside the Senate, time is money; inside it, time is everything. Senate Republicans are taking full advantage of that reality, using every parliamentary device at their disposal to slow down an extension of unemployment insurance benefits -- even after Democrats added billions for big business to sweeten the pot.

The saga is a cast study both in the difficulty of passing even popular legislation in the Senate and the lengths to which the GOP is going to slow down the process.

The extension overwhelmingly passed the House 331-83 in late September. Senate Majority Leader Harry Reid (D-Nev.) made a motion to pass it by unanimous consent in early October; it was blocked by GOP objections.

After negotiations, Reid filed for cloture on Oct. 21 to break a GOP filibuster. On October 27, the Senate voted 87-13 on a motion to proceed to consider the bill, breaking the filibuster.

But under Senate rules, the GOP is still allowed 30 hours of "debate." There actually isn't much debate, but the clock is ticking while senators take to the floor to make speeches about whatever they like.

To get things moving, Democrats sweetened the pot, adding in billions in tax breaks for business -- a net operating loss carry-back provision that the GOP has long favored -- and an extension of the homebuyer tax credit. Reid introduced the goodies in a substitute amendment with Sen. Max Baucus (D-Mont.), a champion of the business tax break.

"The two were put together as a means of greasing the skids. You know how things work around here," Sen. Tom Harkin (D-Iowa) told HuffPost. "Could we have gotten UI through otherwise? Yes, we could have, but it would have taken us several days. And we don't have that kind of time. And the minority is then able to, because of the time, demand certain things."

The skids properly greased, Reid filed for cloture again on Oct. 29th. It came to a vote Monday night, Nov. 2nd, where it passed 85-2.

Still, the GOP fights, requesting that the 30 more hours of "debate" elapse. That'll take the Senate to late Tuesday night. If Reid invokes cloture again to proceed to the underlying bill, another 30 hours would take the Senate to Thursday morning at the earliest for -- at last -- a vote on the bill itself.

Following such overwhelming votes, a measure usually passes the Senate by a quick voice vote. "The common practice is when you get cloture on motion to proceed, you quickly allow it to pass," says Jim Manley, senior communications adviser for Reid.

Manley and other Democratic aides argued that the goodies given to big business are acceptable to Democrats as ways to boost the economy rather than pure giveaways. The first-time homebuyer tax credit is wildly popular and Democrats had planned to pass it at some point before it expired at the end of the month.

"There are only so many ways to strengthen the economy that can get 60 votes and get enacted quickly -- these happen to be two of them," said Manley.

The GOP says it's been working constructively with Reid. "Sen. McConnell offered to complete the bill last week on Thursday. Sen. Reid objected," said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.).

The objection came, Manley said, because Republicans were trying to introduce unrelated amendments attacking ACORN and the financial-industry bailout, among other things. Stewart countered that Democrats, having attached a hate-crimes measure to a defense-authorization bill, have little room to talk about unrelated amendments. He added that Republicans offered to withdraw several of the objectionable amendments.

It all sounds complicated, but it's simple: Behind all the bickering back and forth sits the reality that the GOP, as the minority party, has the right to slow down the Senate and is fully exercising that right. With days and days of floor time eaten up by a simple extension of unemployment benefits, chances dwindle that the Senate will be able to complete in time the appropriations bills that fund the government.

"What's really going on is that the Republicans are trying to slow-walk everything, to make it as difficult as possible for Democrats to accomplish much," said Manley. "This won't be the first time that they slow things down as much as possible, then vote for final passage. While they are intent on obstructionism, they don't want the blame for opposing popular policies."

In the meantime, according to a Senate Democratic ticker, more than 185,000 people have lost their unemployment benefits.

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Afghan War Vets Patrol Halls Of Congress To Stop Troop Escalation

2009-11-02T19:11:13Z

A little more than two months ago, Brock McIntosh was fighting in Afghanistan, a member of the Army National Guard. This week, he's walking the halls of Congress, trying to end a war that began when he was 13 years old.

McIntosh, now 21, and four other vets are in Washington for something of a preemptive strike. A new pro-war group calling itself Vets For Freedom plans to begin lobbying Congress Thursday, pushing for an escalation. The anti-war vets hope to head them off.

But if their erstwhile comrades and now political opponents are "for freedom," that raises an unusual question. "What does that make us?" mocks Devon Read, 29, served for eight years and took part in the invasion of Iraq before leaving the Marine Corps in 2008. "Vets Against Freedom? Vets For Terrorism?"

Technically, they're with Veterans For Rethinking Afghanistan, having linked up with Brave New Films president Robert Greenwald, whose documentary project "Rethink Afghanistan" urges a drawdown of the American presence in that country.

As the vets wait outside the office of Rep. Raúl Grijalva, a Democrat who co-chairs the Congressional Progressive Caucus, Jake Diliberto, 27, recounts tales from the first skirmish with Vets For Freedom earlier in the morning.

Diliberto went mano a mano on CNN with VFF rep Thomas Cotton. Cotton had a simple appeal to authority: He's for whatever General Stanley McChrystal wants -- and that's more troops.

Before they went on, says Diliberto, he could hear his opponent prepping himself. "He kept repeating, 'General Stanley McChrystal. General Stanley McChrystal. General Stanley McChrystal.' "

Backers of escalating the eight-year-old war present a variety of complex arguments, but at their heart is Cotton's mantra: "General Stanley McChrystal. General Stanley McChrystal. General Stanley McChrystal."

The troops were joined in Grijalva's office by Malalai Joya, an Afghan member of parliament who has been suspended for speaking out against the warlords who run the country. She is appealing her suspension and, in the meantime, promoting her new book, "A Woman Among Warlords." Joya, too, has a simple message: Go home, USA.

"It's much easier to fight against one enemy than two," Malalai Joya tells Grijalva, identifying the two current enemies as the Taliban on the one hand and the United States and the Afghan government it props up on the other.

The Afghan government, she says, is hopelessly corrupt; President Hamid Karzai is in league with powerful warlords and druglords, some of whom are his close relatives. His top opponent, Abdullah Abdullah, is himself a well-known warlord, she says. The election process is controlled by warlords for their benefit. The farce that was the previous election will not lead to a run-off because Abdullah doesn't believe it will be fair.

"It's not important who's voting. It's important who's counting," says Joya, adding that the canceled election matters little since both candidates are representatives of the warlord class. "They both call the Taliban brother."

Both President Obama and General McChrystal have said that the U.S. effort in Afghanistan cannot succeed without a governing partner that is seen as legitimate by the Afghan people. That's a tremendous problem for proponents of a troop escalation, since Karzai is seen as anything but that.

The problem for the war's opponents, however, is that it's hard to comprehend just how corrupt the Karzai regime is. Seeing it first hand persuaded the troops.

"The Taliban isn't their enemy," says Rick Reyes, who served with the Marine Infantry in Afghanistan. "The greatest enemy of the Afghan people is the Afghan government and the occupation forces."

McIntosh, who takes some time to get over his nerves in the congressman's office, tells Grijalva that the Afghan people appreciate the occupation army most for the medical services it provides. Afghan doctors, he says, were poorly trained, because the Taliban banned pictures in text books. The health care makes them dependent, he says, when what they need is training.

"They can do it on their own," he says. "They're fully capable human beings."

Grijalva nods, acknowledging the wisdom from the young man who just recently got the legal right to drink.

The kind of training Afghans don't need, the Marines say, is military. We've been training young men to fight in Afghanistan for decades, they note, and look where it's gotten us. An overwhelming number of men trained by the U.S. go on to fight for the Taliban instead, which was itself originally trained by the U.S., notes Reyes. "So if we train 400,000 soldiers and 200,000 go fight for the Taliban, what have we gained?"

"We don't expect anything good from you," Joya tells Grijalva. "Just stop doing wrong." As she brandishes photos of dead civilians, known warlords, and evidence of Karzai's corruption, her voice gradually rises. With a finger pointed squarely at the progressive congressman, she repeatedly indicts the occupation and those who allow it to continue.

"This is what your government has done," she fumes. "Silence of good people is worse than action of bad people."

Witnessing her rough treatment of Grivala, who agrees with her, it isn't hard to see how she has found herself out of favor among the warlords.

After the meeting, Grijalva says that Joya helped alter his perspective. "Sometimes in our urge to fix things, we just pile money on top of a [friendly] government," he says. But Joya had convinced him, he says, that the U.S. is "funding fundamentally the people who are unraveling the country."

Outside in the hall, the vets assess the meeting. "I don't think he needed a whole lot of convincing," offers Diliberto. Next up: Reps. John Tierney (D-Mass.), Maxine Waters (D-Calif.) and Barbara Lee (D-Calif.). "But we're not just meeting with progressives," assures Leighton Woodhouse, a Brave New Films aide escorting the men. Rep. Dana Rohrbacher (R-Calif.), Adam Smith (D-Wash.), David Price (D-N.C.), Tim Johnson (R-Ill.) and Sylvestre Reyes (D-Texas) were also scheduled to receive the veterans.

One member had previously offered a "walk and talk" with the vets, but had since demoted them to a sit down meeting with the chief of staff.

He might not get off that easy. The vets are neither your typical lobbyist nor your standard anti-war protesters. Diliberto suggested they deal with that congressman in a way that would convey the gravity of their message.

"We should just go to his door," he suggests, 'and say, 'Look, motherfucker.'"

Diliberto will be on Larry King Live tonight on CNN, debating General Wesley Clark and one of the Vets for Freedom. Below, McIntosh and Reyes, who was tweeting from the halls Congress, talk about their experiences in the war. WATCH:

How The Blue Dogs Cost Pharma $14 Billion

2009-10-30T19:12:20Z

As Speaker Nancy Pelosi sat down to put the finishing touches on the House health care bill Wednesday night, the California Democrat was stuck between four competing directives.

The first three, handed down by President Obama, required that the bill must not cost more than $900 billion over ten years, must not add "one dime" to the deficit and must not require the pharmaceutical industry to pony up more than $80 billion, in accordance with a deal struck between the White House, the Senate Finance Committee and the Pharmaceutical Research and Manufacturers of America (PhRMA).

The fourth, foisted on her by her conservative Democratic members, required the public health insurance option to negotiate rates with health care providers. She had been unable to find 218 votes for a more "robust" version of the public plan -- with reimbursements tied to Medicare rates -- which would have saved taxpayers $85 billion over ten years.

That meant Pelosi had to find $85 billion somewhere. The speaker went looking -- and found Big Pharma.

"We just added something Wednesday night," she said on Thursday in response to a question from HuffPost about the deal drug makers cut with the White House. "In order to go to negotiated rates [for the public option] we had to have some changes in coverage because that cost more," she said. "We had always been predicating on the robust, and we took -- How can I say this? Well, it cost PhRMA $14 billion more," Pelosi said. "Fourteen billion dollars to help us keep our coverage, but taking it out of PhRMA."

Pelosi also cut tens of billions more by expanding Medicaid coverage, which is less expensive than most other health care, and billions more trimming subsidies to help people pay for coverage.

The irony here is considerable. Blue Dog Democrats, PhRMA's favorites, demanded the more expensive public option, which the drug makers then had to help pay for.

And PhRMA has been the closest industry ally of the White House during the health care debate -- spending millions on ads supporting reform as well as Democratic candidates. Yet it was the White House's ceiling of $900 billion -- which apparently is more politically palatable than a number that begins with a 't' -- that led to Pelosi's decision.

"We took our costs down by insisting that they give a rebate, demanded a price rebate for low income people," said Pelosi. "In order to go forward today, the coverage, the bill paid for [and] not adding a dime to the deficit, we had to look not only in the close-in years, but the out-years and this additional $14 billion helped us achieve the fiscal place that we wanted to arrive at."

Pelosi said the drug makers were looking at $4.5 to $5 trillion dollars in revenue over the next ten years and could afford to chip in more. "I considered [the $80 billion] an ante. I didn't consider it the full pot that they were going to be participating in," she said, guessing they are "able to do at least double of what that $80 billion was to help us get this all balanced out."

PhRMA senior vice president Ken Johnson said such a critique of the industry misunderstands the costs of research and development. "Industry analysts would disagree with that assessment. They peg the net impact of health care reform on industry revenues as modest at best, ranging from a potential gain of 1% to a loss of 2%," said Johnson. "The number no one on Capitol Hill is talking about is the one pegged to job losses. We are still reviewing the 1,990-page House draft bill, but if enacted -- as is -- it has the potential to kill tens of thousands of jobs in America before the ink is dry at the signing ceremony. That's not a political scare tactic. That's an economic reality. When you start trading someone's job for someone else's health insurance, what have you really gained?"

Things are getting tense. Johnson is also arguing that taking too much from drug makers would mean that cancer, heart disease and diabetes never gets cured. (Baldness remedies would presumably still be found.)

"We can live in a world where there's only generic drugs, if that's what people want. But the sacrifice is the hope of ever curing cancer or diabetes or heart disease. I would not want to be a politician who tells his constituents, 'The good news is, we're saving you some money on your drug bills. The bad news is, we're probably never going to cure cancer in your lifetime.' For patients, in many cases, hope is the only thing they have," Johnson said.

Pelosi has little respect for the White House deal with PhRMA and said she'll fight the Senate -- which is still abiding by the deal -- in conference committee negotiations.

"There's very little interest in our caucus in protecting a deal that we were not a part of and did not approve of," she said.