The President explains that while he continues to focus on jobs, it is also profoundly important to address the problems that created this economic mess in the first place. He commends the House of Representatives for passing reforms to our financial system, including a new Consumer Financial Protection Agency, and blasts Republican Leaders and financial industry lobbyists for their joint pep rally to defeat it.
Home prices up, more borrowers Underwater. CNBC's Diana Olick reports that while home prices show a slight gain, about 25 percent of homeowners owe more on their mortgages than they are worth.
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House kills Bankruptcy Mortgage Relief in Wall Street bill
The House has rejected an effort to expand a Wall Street regulation bill with mortgage relief that would let debt-ridden homeowners reduce their payments in bankruptcy court. The vote was 241-188 to reject.
The provision would have revived a previous bill that passed the House but later failed in the Senate.
Democrats hoped that by inserting the provision in the regulatory legislation they would have had another opportunity to make it law. Aiding homeowners through bankruptcy had been a key feature of President Barack Obama's foreclosure fighting proposal, but the president did not push for it.
Banks and credit unions have lobbied against the bankruptcy measure. They say it would force a flood of bankruptcy filings and ultimately drive up mortgage rates.
US House Passes Broad Wall Street Regulatory Overhaul
The House passed the most ambitious restructuring of federal financial regulations since the New Deal on Friday, aiming to head off any replay of last year's Wall Street failures that plunged the nation deep into recession.
The sprawling legislation would give the government new powers to break up companies that threaten the economy, create a new agency to oversee consumer banking transactions and shine a light into shadow financial markets that have escaped the oversight of regulators.
The vote was a party-line 223-202. No Republicans voted for the bill; 27 Democrats voted against it.
While a victory for the administration, the legislation dilutes some of President Barack Obama's recommendations, carving out exceptions to some of its toughest provision. The burden now shifts to the Senate, which is not expected to act on its version of a regulatory overhaul until early next year.
The president praised the House action Friday, and called on Congress to act swiftly to get the bill to the White House for his signature.
"The crisis from which we are still recovering was born not only of failure on Wall Street, but also in Washington," Obama said. "We have a responsibility to learn from it and to put in place reforms that will promote sound investment, encourage real competition and innovation and prevent such a crisis from ever happening again."
The legislation would govern the simplest payday loan and the most complicated high-finance trades. In its breadth, the measure seeks to impose restrictions on every house of finance, from two-teller neighborhood thrifts to huge interconnected conglomerates.
Democratic leaders had to fend off a last-minute attempt to kill a proposed consumer agency, a central element of the legislation and one the features pushed by the White House. The agency would take over consumer protection powers from current banking regulators, and big banks and the U.S. Chamber of Commerce vigorously opposed the idea.
Democrats said the broad legislation would help address problems that led to last year's calamitous financial crisis. Republicans argued that it overreached and would institutionalize bailouts for the financial industry.
"Let's put it to the American people: Do you prefer the Republican position of doing literally nothing to rein in these abuses or should we try to rein them in?" Rep. Barney Frank, who led the Democratic effort on the bill, asked moments before the final vote.
Republicans cast the regulatory bill as a burden to business and argued that it would continue to protect companies considered too big to fail. They offered an alternative that called for special bankruptcy proceedings to dismantle failing financial institutions. That alternative failed.
"This house has been on a spending spree, a bailout spree and a regulatory spree that I could never have imagined in any of my prior 18 years here in Congress," Republican Leader John Boehner of Ohio said.
Consumer advocates cheered the survival of the consumer protection agency but said the overall legislation fell short, especially in the regulation of complex investment instruments known as derivatives.
The legislation aims to prevent manipulation and bring transparency to the $600 trillion global derivatives market. But an amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, created an exception for nonfinancial companies that use derivatives as a hedge against price, currency and interest rate changes rather than as a speculative investment.
The amendment also provided an exception for businesses that are considered too small to be a risk to the financial system.
A Democratic effort to make more companies subject to derivatives regulations and to abusive-trading rules failed.
When the Obama administration first proposed a package of regulations, it called for regulations of derivatives without any exceptions. But a potent lobbying coalition that included Boeing Co., Caterpillar Inc., General Electric Co., Coca-Cola and other big companies persuaded lawmakers to dilute the restrictions.
"It does fall well short of what the administration promised and what everybody assumed we would get," said Barbara Roper, director of investor protection for the Consumer Federation of America. "It's a weakness in the bill and a win for Wall Street. Hedge funds and others that are not bona fide hedgers of commercial risk will slip through this language."
The bill would create a Financial Services Oversight Council made up of the Treasury secretary, the Federal Reserve chairman and heads of regulatory agencies to monitor the financial markets for potential threats to nation's system.
It would identify firms and activities that should be subject to heightened standards, including requirements that they place more money in reserve. Companies would have to plan for their own demise, detailing how they would be dismantled if they failed. The government could dismantle even healthy firms if they were considered a grave risk to the economy. Large firms with assets of more than $50 billion, and hedge funds with at least $10 billion in assets, would pay into a $150 billion resolution fund that would cover the costs of dismantling such a company.
It was that fund that Republicans argued amounted to yet another bailout pool.
The Federal Reserve, criticized for not spotting last year's crisis, would lose power in the legislation. The measure would limit the Fed's unilateral ability to inject large amounts of money into financial institutions. It also would take away the Federal Reserve's consumer regulation authority and would subject it to a broad audit by Congress' investigative arm.
The legislation also takes on Wall Street compensation. Company shareholders would get a nonbinding vote on the pay of top executives. Federal banking regulators would have to approve compensation practices, though not actual pay, at banks and bank holding companies.
Dems paint Wall St. vote as big win
Not a single Republican cast a “yes” vote for the Wall Street reform bill in the House Friday.
Democrats could hardly contain their glee.
“Seriously?” was the subject line of an asked the headline of an e-mail from Democratic National Committee communications director Brad Woodhouse after the House vote.
“Representative Mary Bono Mack has apparently learned nothing from the near-collapse of big banks and financial institutions that put our entire economy at risk,” read the e-mail sent to Mack’s California district and more than three dozen other target GOP incumbents by the Democratic Campaign Committee, slamming the incumbents for backing Wall Street over consumers.
With polls showing voters furious at Wall Street and their big fat bonus checks, Democrats smell an opportunity to turn their political fortunes around with the help of the financial reform legislation that’s moving through Congress.
The DCCC is raising money to produce “hard-hitting” spots against Republicans who sided with financial lobbyists “trying to kill reform,” according to a Nov. 10 fundraising e-mail. And the rhetoric during and after the debate this week made clear, Democrats – at least in the House – will try to turn their Republican opponents into Wall Street’s lapdogs and saddle them with the populist outrage still burning in the heartland.
The pitch may not be as easy as it sounds. Sure, opposing legislation that cracks down on greedy bankers, enhances consumer protection and puts an end to taxpayer bailouts sounds like political suicide. But Republican strategists disagree that this was a bad vote for their party.
“Opposing Barney Frank is not going to be a political liability” in swing districts, said GOP pollster Adam Geller, who worked for Christopher Christie’s successful 2009 New Jersey gubernatorial campaign. Voters see Frank – and House Speaker Nancy Pelosi, the other major face of the bill – “as kind of on the left extreme,” he said.
And a closer look at Friday’s votes shows the issue isn’t that black and white in every Democratic district.
Quite a few Democrats in tough reelection races bolted off the party line to oppose the bill, undermining the notion that Democrats have the undisputed political high ground on this one. The 27 Democrats who opposed the bill included highly vulnerable members such as Reps. Bobby Bright (D-Ala.), Eric Massa (D-N.Y.), Zach Space (D-Ohio) and Tom Perriello (D-Va.) – who took flak at home for voting “yes” on Democrats’ climate change bill. There were also a number of less-imperiled but still-worried Democrats that voted no.
And Democratic party brass also tacitly acknowledged that the politics on this aren’t so clear cut when they agreed to give Idaho freshman Walt Minnick a floor vote on his controversial amendment to gut the new consumer protection agency at the heart of the legislation. While the bulk of their rank-and-file opposed the measure, leadership wanted to give moderate Democrats the vote to help insulate themselves against industry-financed attacks next fall, leadership aides said, giving these lawmakers a chance to vote with the Chamber of Commerce – a strong opponent of the newly created consumer-protection agency that highlighted the vote politically.
After some tough whipping, Democratic leaders were able to defeat the amendment, 223-208, with 33 Democrats supporting it. But they were scared for a few hours that they might not be able to, said leadership aides.
Those votes suggests that voters in some of these tough Democratic districts the Republican arguments that the legislation amounts to a perpetual bailout, harmful government control of the economy and job-killing layers of bureaucracy might be more likely to resonate.
“As in the case of health care and energy policy, this bill was about empowering the government and not the individual. Government control and command was not what made America the largest and most successful economy in the world,” said Rep. Spencer Bachus (R-Ala.). “The array of new regulations and taxes on consumers, investors and businesses will destroy jobs and further undermine the fragile economy.”
Nonetheless, Democrats’ own polling gives them reasons for optimism. A recent survey done by Democratic polling firm Anzalone Liszt for Americans United for Change found that 70 percent of voters – Democrats, Republicans and independents alike – want to see major reform of the financial system.
Most Americans aren’t aware of the reform measures put forward by the Obama White House, but when voters heard descriptions of the proposals to beef up oversight of big banks, create a new consumer protection watchdog and crack down on corporate abuses, support shot up from 35 percent to 60 percent, the poll found. Independents were particularly supportive of the plan after hearing the description.
“This creates an opportunity for the President and members of Congress to address major financial concerns of voters and to be seen as standing up for working families,” said a memo from pollsters John Anzalone and Matt Hogan.
In an interview, Anzalone said the financial reform bill could be “the populist issue of the cycle, bringing strong accountability and oversight to Wall Street. There’s no good way to spin this one, except voting for it because it’s a good bill and people think it’s a good bill.”
Republicans who oppose the bill “are going to pay a very heavy price,” DCCC Chairman Chris Van Hollen (D-Md.) warned Thursday on a conference call with reporters. He referred to a much-publicized meeting of banking lobbyists convened by House Minority Leader John Boehner earlier in the week to rally against the bill, saying “it was very clear whose side the Republicans were on, and they were on the side of protecting the special interests and allowing us to once again get ourselves in a mess where the taxpayers are left holding the bag for bad decisions on Wall Street.”
“This Republican recession based on [their] Wild West mentality cost this country millions of jobs and these guys should be ashamed of themselves,” fumed Rep. Ed Perlmutter (D-Colo.), taking a page from the Anzalone polling memo, which urged lawmakers to stress how financial reform will prevent future job losses.
“There is some risk” to voting against legislation framed as a reform of Wall Street, acknowledged Rep. Mike Castle of Delaware, a moderate Republican who is running for Joe Biden’s Senate seat. “Democrats have presented it as such – and I’m not sure it’s a fair presentation. I think it’s up to Republicans to be able to rebut it, maybe better than we have so far.”
Most Republicans dismiss the idea that their vote against the financial package would come back to haunt them.
“Anyone who expects a political advantage by supporting this bill is ignoring the public opposition to the Democrats’ agenda of big government and fewer jobs,” said National Republican Congressional Campaign spokesman Paul Lindsay.
“There’s a political opening on any bill, whether you vote yes or no, somebody can always spin it in a way that’s not advantageous to you,” said Rep. Scott Garrett (R-N.J.).
“Good policy at the end of the day makes good politics. And someone can just as easily argue that this is disastrous policy that would give us too big to fail banks, turning banks into utility companies that hurt the little guy,” said Rep. Paul Ryan (R-Wisc.).
“They’ll use it for ads, absolutely. Of course. You can twist your mind into pretzels on every one of these votes because they can twist, distort and demagogue just about any vote around here. If you let that guide you, then you’re running around in circles around here.”
Federal Judge: ACORN Funding Restored
A Federal Judge in New York ordered that ACORN’s federal funding be restored, rolling back a slew of Congressional actions that sought to stop taxpayer money from flowing to the community group on the heels of a fall full of embarrassments for it.
Nina Gershon, a district judge in New York, issued a preliminary injunction directing the US Department of Housing & Urban Development, the Office of Management & Budget, and the Treasury department to disregard a bill signed into law by President Obama that prohibited federal funding of the Association of Community Organizations for Reform Now.
“The question here is only whether the Constitution allows Congress to declare that a single, named organization is barred from all federal funding in the absence of a trial,” Gershon wrote in her opinion. “Because it does not, and because the plaintiffs have shown the likelihood of irreparable harm in the absence of an injunction, I grant the plaintiffs’ motion for a preliminary injunction.”
Gershon said that “none of the government’s justifications stand up to scrutiny” and that “no non-punitive rational” is obvious.
ACORN was the subject of bi-partisan disdain in September, after undercover videos were released that seemed to show the organization’s employees offering advice on how to break the law. Republicans and Democrats voted to stop federal funding of the group – a measure signed into law by the president on the back of an appropriations bill.
In November, the group sued the federal government, claiming that the provision, attached to the legislative branch appropriations bill, was a bill of attainder – unconstitutional legislation that unfairly punishes one group. As part of this lawsuit, ACORN sought a Restoration of Federal Funding.
With Friday’s injunction, ACORN stands to begin receiving funds once again, including between $40,000 and $60,000 for housing assistance, according to the decision from the district court in eastern New York.
“Today’s ruling is a victory for the Constitutional Rights for all Americans and for the citizens who work through ACORN to improve their communities and promote responsible lending and homeownership,” ACORN CEO Bertha Lewis said in an emailed statement.
It is also is the second in a string of victories for ACORN. An investigation by former Massachusetts Attorney General Scott Harshbarger largely absolved the organization from any wrongdoings or illegalities in a hidden-video scandal which allegedly showed the organization’s employees offering advice on how to dodge taxes while setting up a prostitution ring of underage illegal immigrants.
Republicans are already hammering away at the decision. Rep. Darrell Issa (R-Calif.), a longtime critic of ACORN and author of a report on the group’s problems, framed Gershon as an “activist judge” appointed by former President Bill Clinton.
“This left-wing activist Judge is setting a dangerous precedent that left-wing political organizations plagued by criminal accusations have a constitutional entitlement to taxpayer dollars,” Issa said in a news release. “The Obama administration should immediately move to appeal this injunction.”
Sources: Whitehouse.gov, Politico, Fox News, My Fox33.com, CNBC, ACORN, Youtube
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