The Wonk Room

The WonkLine: February 27, 2009

Welcome to The WonkLine, a daily 10 a.m. roundup of the latest news about health care, the economy, national security and climate policy. This is what we’re reading. Tell us what you found in the comments section below.

 

Economy

The Treasury Department has reached a deal “to take a stake of 30 to 40 percent in Citigroup as part of a third bailout of the embattled bank.”

The federal insurance fund protecting bank deposits “is being drained by a sharp rise in bank failures and has dwindled to its lowest level since 1993“; in response, the FDIC may double the fees it charges banks.

Speaker Nancy Pelosi (D-CA) “is pledging to refuse campaign contributions from banks in the wake of their resistance to a mortgage bill that she considers a top priority.”

Climate

George Will lashes out at New York Times reporter Andrew Revkin for “meretricious journalism” in a column that attempts to justify his significant factual errors.

In an interview, Washington Post editorial page editor Fred Hiatt defended George Will, saying he is simply “drawing inferences from data that most scientists reject,” and calling critics “irresponsible.”

Power Shift 2009 begins today in Washington, with speakers from Nancy Pelosi and EPA Administrator Lisa Jackson to Van Jones and Billy Parish greeting “nearly ten thousand students from across the country.”

National Security

Secretary of State Hillary Clinton said yesterday that the United States, Afghanistan, and Pakistan plan to hold a regular “trilateral meeting of allies in the seven-year-old Afghan war.”

President Obama issued a directive outlining the plans for his National Security Council, which “is by far the most expansive” of any other president because it deals with “economic, climate, energy and cyber-threats.”

With a newly funded, 18-acre training site, Palestinian forces are being trained by the United States to increase security in the region. The U.S. hopes to have a “well-trained battalion based in each of eight West Bank cities.”

Health Care

The Obama administration “will move to rescind a controversial rule that allows health-care workers to deny abortion counseling or other family-planning services if doing so would violate their moral beliefs.”

The health benefits for retired autoworkers “may be the envy of most Americans,” but it’s a deal “that’s not likely to last long” after GM announced a $30.9 billion loss for 2008.

Medical research institutions “scored a major coup” with $10.4 billion for the National Institutes of Health in the stimulus bill, “but their advocates are not stopping there.”

One Response to “The WonkLine: February 27, 2009”

1. jps Says:

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   Dear Wonks,

   Please help!

   After a few weeks of sharp declines at the beginning of February, excess reserve balances are once again on the rise at the Federal Reserve, and have been for the past couple weeks. I shouldn’t have to explain that when the Fed pays banks to keep more than their required amount of reserves (excess reserve balances) on deposit, that sets an effective floor on the overnight funds rate, the target for which has been below that floor of 0.25% for months now.

   Here is a copy of the email I recently sent to my congresswoman’s legislative assistant, the Inspector General of the Federal Reserve System, and some officials at the CBO:

   Date: Sun, 22 Feb 2009
   To: Emma dot Moburg-Jones at mail dot house dot gov, Beth dot Coleman at frb dot gov
   Cc: Tom dot Woodward at cbo dot gov, jonathan dot schwabish at cbo dot gov, Margaret dot DeBoer at frb dot gov…. OIGHotline at frb dot gov

   Dear Emma, Beth, et alli:

   I noticed that while excess reserve balances down-ticked since the
   last half of January, there was another uptick last week:
   http://research.stlouisfed.org/fred2/series/WRESBAL

   This coincided with the Fed’s announcement that they had revised their
   economic projections downward. Is it any wonder that they revised
   their projections downward at the same time that banks increased their
   excess reserve balances, forming the effective floor of 0.25% on the
   overnight funds rate even though the Fed’s target continues to be
   below that floor?

   What reason would the Fed have to revise their projections anything
   but downward when they are paying so much money to continue to
   strangle the credit markets in the midst of the credit crisis? I do
   not believe that Congress ever intended anything more than the payment
   of interest on required reserve balances, and this is clearly a case
   where the spirit of the law in the existing economic context is far
   more important than whatever a judge might interpret as the letter of
   the law. If the Fed continues to pay unauthorized, unappropriated
   sums of such magnitude in such contractionary ways, those who are
   responsible need to be held responsible and called to account for
   their actions.

   People such as Ms. DeBoer and her employer, Ben Bernanke, need to
   explain to the American people why they continue to pay banks 0.25% on
   excess reserve balances to remove money from the credit markets,
   wreaking further havoc on the primary goods and services sectors of
   the economy. The employees of the Fed need to explain why they allow
   Ms. DeBoer and Mr. Bernanke to continue their disastrous practice
   while at the same time announcing forecasts turned downward instead of
   working to correct the underlying problem.

   I consider this to be a matter of national economic security.

   Sincerely,

   [jps]

   February 27th, 2009 at 2:40 pm

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