April Unemployment Rises to 9%

On Friday, the Department of Labor announced that the United States economy added 244,000 jobs in April, but the unemployment rate rose to 9 percent from 8.8 percent in March. The jobs numbers beat forecasts estimates of an expected gain of 185,000 jobs.

Bank Regulators to Testify on Dodd-Frank in Senate

The Senate Banking Committee announced that next Thursday, May 12, Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp Chairman Sheila Bair, Commodity Futures Trading Commission Chairman Gary Gensler, Securities and Exchange Commission Chairman Mary Schapiro, Acting Comptroller of the Currency John Walsh and Deputy Treasury Secretary Neal Wolin will testify on the implementation of the Dodd-Frank financial oversight law. The hearing is slated to focus on monitoring systemic risk and promoting financial stability and will likely include questions over a recent settlement bank regulators entered into last month with large banks over mortgage servicing abuses.

Roemer Is Newest Rumor to be Next Commerce Secretary

As current Commerce Secretary Gary Locke prepares to depart for his new assignment as Ambassador to China, former Representative and current Ambassador to India Timothy Roemer’s name has surfaced as Locke’s possible successor. Roemer was an early backer of President Obama’s 2008 presidential campaign. Obama is also rumored to be considering current U.S. Trade Representative Ron Kirk and General Electric CEO Jeffrey Immelt for the position.

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House to Pass Funding Cuts

This week the House debated an extension of the current fiscal year’s funding resolution that expires on March 4th. While the measure is not expected to pass until tonight, among the largest funding cuts passed so far are a $336 million cut to the School Turnaround Grant program, a $22.5 million cut to the National Endowment for the Arts, a $131 million cut to the Securities and Exchange Commission, as well as defunding of the Federal Communications Commission’s implementation of the so-called “Net Neutrality” rules and defunding portions of the Equal Access to Justice Act. The House plans to vote on over 100 more amendments today ranging from funding cuts to the healthcare law, the IRS, and the CFPB among others. While the Senate has already recessed for the President’s Day District Work Period, after the House passes the pending funding resolution, it will also recess until the week of February 28. When both bodies return, the will attempt to resolve differences between their respective funding bills before the March 4th deadline.

Issa Issues Subpoenas to Bank of America for Countrywide Documents

On Tuesday, House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) issued subpoenas regarding Countrywide Financial’s VIP program. The subpoenas ask for Bank of American to turnover all communications and documents relating to government officials in the VIP loan program by March 7th.

OCC Pushes for Mortgage Probe Settlement

On Wednesday, Federal Housing Administration Commissioner David Stevens announced that the Office of the Comptroller of the Currency (OCC), the federal bank regulator which oversees the nation’s banks, is pushing for a settlement to the months-long federal and state probes into abusive mortgage practices to take place in the next month. The federal review involves the OCC and other bank regulators, as well as the Departments of Justice, Housing and Urban Development and the newly formed Bureau of Consumer Financial Protection. The 50-state probe involves state attorneys general and state bank regulators.  According to sources, the OCC is negotiating an agreement that would cost the industry less than $5 billion in fines and mortgage modifications for troubled homeowners.

Corporations Campaign For Foreign Revenue Repatriation Deal

A group of multinational corporations is planning a campaign for a tax holiday that would allow them to repatriate their estimated $1 trillion in current foreign revenue. Specifically, the companies’ aim is to win a one-year tax amnesty on their foreign earnings, allowing them to repatriate that money at a tax rate of 5%, instead of the current 35% rate. In 2004, multinationals were successful in convincing Congress to approve a similar one-year foreign revenue tax holiday.

Corporations Weigh in On New SEC Whistleblower Program

In 2010, the Dodd-Frank Wall Street Reform Act created a new corporate whistleblower program within the Securities and Exchange Commission (SEC). With the SEC set to release the final rules in April, more than two dozen companies Fortune 500 companies have written letters asking the agency to revise its proposed rules for awarding workers who report information about corporate fraud or wrongdoing. The letters express concern that employees will bypass hot lines and other internal reporting mechanisms and thus hurt the companies’ internal efforts to encourage employees’ compliance with the law. Under the current law, the SEC offers awards of at least $100,000 and as much as 30% of the penalties and recovered funds to people who report knowledge of a fraud. To qualify for an award, the information must lead to a successful enforcement action with sanctions of at least $1 million. Under the SEC’s draft rules proposed in November, whistleblowers would not be required to report suspected wrongdoing to their employers in order to win a reward. In an effort to address the companies’ concerns, the SEC proposed to encourage internal reporting by giving credit to informants for first reporting the wrongdoing through company channels in setting the size of the award.

Obama Budget Includes New CFTC User Fees

On Monday, President Obama released his FY 2012 Budget which included proposed user fees as an option to help the Commodity Futures Trading Commission (CFTC) carry out its derivatives oversight. The user fees, which require congressional approval, would raise $117 million in the 2012 fiscal year and $588 million through 2016. The CFTC would assess the fees on “the regulated community” to pay for the CFTC’s non-enforcement activities. The user fees represent an alternative source of funds for the CFTC, which is now funded through annual funding legislation.

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Warren Interviews AGs for Consumer Protection Agency

Reports this week indicate that Elizabeth Warren, who is interim head of the U.S. Consumer Financial Protection Bureau, has interviewed four Democratic state attorneys general to be her permanent successor. The four AGs reportedly in the running are Tom Miller of Iowa, Lisa Madigan of Illinois, Roy Cooper of North Carolina and Martha Coakley of Massachusetts. The bureau is scheduled to officially start work on July 21. Under the Dodd-Frank Wall Street Reform Act, which President Obama signed in July, the bureau must have a Senate-confirmed director to perform certain functions such as the supervision and regulation of non-bank financial firms.

House Republicans Release Top Line Budget Numbers

With President Obama set to release his FY 2012 budget on February 14, House Republican leaders on Thursday announced they would seek $32 billion in spending cuts from the resolution currently funding the government. Republicans framed their proposal as cutting $74 billion from President Obama’s 2011 budget request.  However, because Obama’s budget was never approved by the last Congress, the cuts would actually be made against a continuing resolution now funding the government. That resolution is to expire on March 4, and if lawmakers do not agree on another short-term measure or one funding the government for the rest of the year, they risk a government shutdown. The spending ceiling announced by House Budget Committee Chairman Paul Ryan (R-WI) represents a $58 billion cut in non-security discretionary funding. While details of the specific department cuts were not announced on Thursday, the House Appropriations Committee next week will release its bill detailing the specific department budgets based on the spending ceiling. Reports indicate that the Democratic majority in the Senate is opposed to the House Republican budget cuts.

TARP Program Breaks Even with Fifth Third Bank Repayment

On Thursday, the Treasury Department announced that Fifth Third Bank has now fully repaid its $3.4 billion in TARP loans and that total repayments and other income from programs within TARP (approximately $243 billion) have nearly surpassed total disbursements under those programs (approximately $245 billion). The Treasury Department also announced that current estimates indicate that bank programs within TARP will ultimately provide a profit of nearly $20 billion to taxpayers.

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Immelt Appointed Chairman of Council on Jobs and Competitiveness; Volcker Resigns

On Friday, President Obama announced that General Electric CEO Jeff Immelt will serve as Chairman of the newly created “Council on Jobs and Competitiveness.”  The Council will advise the President on job creation policies and on the establishment of a long-term growth strategy.  Immelt previously served on the board of the President’s Economic Recovery Advisory Board (PERAB).  On Thursday, the President also announced the resignation of PERAB Chairman Paul Volcker and dissolution of the PERAB.

SEC Issues New Rules on Asset Backed Securities

On Thursday, the Securities and Exchange Commission (SEC) approved new regulations regarding asset-backed securities. Among a series of new rules which will take effect in 2012, one requires that financial firms that issue asset-backed securities assess and disclose the quality of the underlying assets, including mortgages, credit card debt and student loans. The rule, which the SEC first proposed in October, passed in a 3-2 vote. The agency’s two Republican commissioners, Kathleen Casey and Troy Paredes, opposed the changes. Another new rule requires that banks and other issuers disclose the number of requests they have received to buy back troubled assets. Starting in February 2012, the issuers will have to report how many loans they have repurchased, dating back three years.

Geithner Declines First House Republican TARP Hearing

On Wednesday, House Oversight and Government Reform Committee Chairman Darrell Issa invited Treasury Secretary Timothy Geithner to testify next week before the Committee regarding the Troubled Asset Relief Program (TARP). Geithner declined Issa’s invitation but offered to send in his place Tim Massad, an acting Assistant Treasury Secretary. While Issa could have issued Geithner a subpoena, he instead accepted the offer of Massad’s testimony for next week’s hearing.

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December Unemployment 9.4%

On Friday, the Labor Department announced that the United States economy ended the year with 9.4% unemployment in December. The agency also revised estimates from October and November saying that 210,000 jobs were created in October instead of 172,000 and 71,000 in November, instead of 39,000.

Obama Appoints Daley, Sperling To Key Posts

On Thursday, President Obama announced that William Daley will serve as his new chief of staff. Daley is the former U.S. Secretary of Commerce in the Clinton Administration and brother of Chicago Mayor Richard Daley. Daley replaces interim chief of staff Pete Rouse, who will become a Counselor to the President. Rouse replaced Rahm Emanuel, who stepped down to make a run for mayor of Chicago. On Friday, President Barack Obama also announced that Gene Sperling will be the new Director of the National Economic Council replacing Larry Summers. Sperling had previously served as Counselor to Treasury Secretary Tim Geithner and Deputy Director of the National Economic Council and National Economic Adviser for President Clinton.

Tax Reform Debate Gains Steam

On Thursday, Senate Majority Leader Harry Reid (D-NV) announced that the Senate Finance Committee would hold hearings on tax reform in the near future. Senate Minority Leader Mitch McConnell (R-KY) followed Reid’s comment by saying that he also welcomed discussions about how to improve the country’s tax code. House Majority Leader Eric Cantor (R-VA) also said that tax reform was one issue that he believes could garner bipartisan support and hopes the President addresses it in the State of the Union at the end of the month. While tax reform was initially thought to be a second or third tier issue, it could now become the next big issue for Congress to tackle this year after the debate on raising the national debt ceiling.

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Senate Passes Small Business Tax Credits Bill

On Thursday, the Senate passed a long-stalled small business tax credit measure, 61-38, with all fifty-nine Democrats and two Republicans, George Voinovich (Ohio) and George LeMieux (Fla.), voting for the bill. The bill will extend a number of tax provisions, including liberalized and expanded expensing for 2010 and 2011, revived bonus depreciation for 2010, a five-year carryback of unused general business credits for eligible small businesses, removal of cell phones from the listed property category, and liberalized Code Sec. 6707A penalty rules. The bill now heads back to the House where it is expected to pass and then be signed into law by the President.

Warren Appointed as Special Adviser to the Bureau of Consumer Financial Protection

On Friday, President Barack Obama formally appointed Elizabeth Warren as a “Special Adviser” to temporarily lead the new Bureau of Consumer Financial Protection. In her interim post, which will eventually be filled by a permanent chief, Warren will oversee all aspects of the Bureau’s creation, including staff recruitment and immediate decisions about the Agency. While many Congressional Democrats praised the appointment, Senator Chris Dodd (D-CT), who sponsored the financial reform bill which created the Bureau, said that Warren was too liberal to win Senate approval for the job on a permanent basis and therefore only the interim post was possible.

Basel Committee Passes New Global Bank Capital Standards

As expected, last Sunday the Basel Committee passed new rules ordering banks to raise their minimum core tier one capital from 2 percent to 7 percent of their risk weighted assets by 2019 or face restrictions on pay and bonuses. This new protocol more than tripled the old requirement of 2 percent to force banks to hold more top quality capital against potential losses. Banks will also be required to subtract items such as goodwill, some tax credits and minority investments from equity and retained earnings.

 Geithner Testifies on Chinese Currency Policy

On Thursday, Treasury Secretary Timothy Geithner testified before the Senate Banking Committee and the House Ways and Means Committee on China’s trade and currency policies. During his testimony, lawmakers demanded a crackdown on Beijing’s policies, and Geithner vowed to push China on trade and currency reforms. Geithner said the United States would use a Group of 20 Summit in November to mobilize trading partners to pressure Beijing to allow the Yuan to rise. Lawmakers are weighing new legislation to punish China for practices they say keep the Yuan artificially low. The consensus in Congress seems stronger than ever for new rules targeting China, but the tight legislative calendar leaves little time to pass a bill in the coming weeks. Geithner said the Obama administration has not endorsed the current House bill that would slap duties on goods from countries with “fundamentally misaligned” currencies.

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If you have any questions regarding any of these issues, please contact:

Matt Jessee
Policy Advisor
matt.jessee@bryancave.com
1 314 259 2463