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Financial Services Update

Financial Services Update

November 22, 2010

Authored by: Matt Jessee

Debate Over Extension of Bush Tax Cuts Continues

On Thursday, House Majority Leader Steny Hoyer (D-MD) and House Speaker Nancy Pelosi (D-CA) told House Democrats at a closed door meeting that the House would vote before the end of the year on extending the Bush tax cuts for only those individuals making less than $250,000. However, even if such a measure were to pass in the House, it is unclear whether the Senate will agree to such a vote. There is still the possibility the bill may not pass the House if Republicans are able to successfully pass a procedural response, known as a “motion to recommit,” that could force a House vote on a full extension of the Bush tax cuts.  According to sources, Pelosi told President Barack Obama that House Democrats remain firmly committed to allowing Bush-era tax cuts to expire for earners making more than $250,000, which complicates the Administration’s efforts to reach a compromise with Senate Republicans.

Preview of Next Year’s Budget Fight

On Thursday, Senate Minority Leader Mitch McConnell (R-KY) announced he would oppose the pending omnibus appropriations bill, thereby forcing Congress to rely on another stopgap “continuing resolution,” or CR, to keep the government funded after December 3. If Republicans are able to block the omnibus spending bill, it would set up an early confrontation with President Obama next year over not just deeper cuts from the President’s 2011 budget but also tens of billions of dollars in rescissions from prior years. The White House is seeking a continuing funding resolution which would cover the next 10 months of the fiscal year until September 30, which would deny House Republicans a chance to defund portions of the healthcare bill early next year.

Fed Orders New Stress Tests

On Wednesday, the Federal Reserve announced plans to scrutinize the nation’s top 19 banks through a second round of “stress tests.” The stress tests will require the bank-holding companies to submit capital plans by early 2011 proving their capability to handle losses under a set of conditions including “adverse” economic conditions and continuing real estate-related problems. In its announcement, the Fed said it plans to perform such reviews regularly on an ongoing basis. The Fed also issued a road map for banks that want to raise dividends or buy back stock saying firms must show they have sufficient capital in place to withstand losses over the next two years and demonstrate an ability to satisfy new, tougher global capital requirements.

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Financial Services Update

Financial Services Update

November 12, 2010

Authored by: Matt Jessee

Obama Trade Mission to Asia

On Friday, President Obama landed in Japan, the last leg of his 10-day, four-nation trade mission which included previous stops in India, Indonesia, and South Korea. The most recent stop in Seoul was marred by negotiators’ failure to finish a long-delayed U.S.-South Korea free trade agreement and squabbling at a G-20 summit over U.S. monetary policy. In Japan, Obama will attend an Asia-Pacific economic summit in Yokohama, which will set the stage for the next APEC summit scheduled for 2011 in Hawaii. He will also meet with Japan’s new prime minister, Naoto Kan, to discuss Japan’s potential membership in the U.S.-backed Transpacific Partnership free-trade initiative. However, Kan faces opposition from Japan’s politically powerful farm groups who oppose Japan’s membership in the trade measure.

Axelrod on Taxes and Healthcare

On Wednesday, White House Senior Advisor David Axelrod acknowledged during an interview that President Obama might agree to extend the Bush tax cuts for all income brackets. In the interview with the Huffington Post, Axelrod said ” we have to deal with the world as we find it. The world of what it takes to get this done. There are concerns that Congress will continue to kick the can down the road in the future by passing temporary extensions for the wealthy time and time again. But I don’t want to trade away security for the middle class in order to make that point.” Axelrod also said that President Obama would veto repeal of the recently passed health care reform law, which was the first time that a top Administration figure had issued such a threat on the record.

Deficit Commission Releases Preliminary Report

On Wednesday, Deficit Commission co-chairs former Clinton White House Chief of Staff Erskine Bowles and former Sen. Alan Simpson (R-WY) unveiled their preliminary report that would cut $200 billion in spending by 2015, raise taxes by $100 billion, and continue deficit cutting until 2020. However, Bowles and Simpson did not bring the report to a vote of the 16 other members of the commission because they acknowledged its passage was unlikely. The 18-member commission appointed by President Barack Obama earlier this year was supposed to produce a 14-vote majority around a deficit reduction plan – a margin that would have required Congress to vote on the package unchanged. But the commission was dominated by current Members of Congress who staked out inflexible partisan positions. The seven Republicans office-holders, including Sen. Judd Gregg of New Hampshire and Rep. Jeb Hensarling of Texas said they would not support a plan that raises taxes. The Democratic lawmakers on the commission, including Sen. Dick Durbin, D-Ill., said they would not agree to Social Security adjustments or Medicaid benefit cuts.

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