The House is in recess until the week of May 23 for a District Work Period. The Senate will convene at 2:00 p.m. on Monday, May 16 for morning business.
- Senate FY2012 Budget Proposals. Senate Budget Chairman Kent Conrad (D-ND) continues to re-write his FY2012 Budget Resolution to satisfy Committee Democrats and Independent Bernie Sanders (I-VT). The latest draft would raise taxes by $2 trillion (including a 3 percent surtax on millionaires) and cut spending by $1.5 trillion ($900 billion from Defense; $300 million from non-security discretionary; and $300 million from mandatory spending) over 10 years. The proposal does not address any changes to Social Security. Meanwhile, Senate Majority Leader Harry Reid (D-NV) has not yet scheduled a vote on the House FY2012 Budget Resolution.
- House Appropriations Committee Establishes 302(b) Allocations. On Wednesday, May 11, the House Appropriations Committee released its FY2012 302(b) allocations, which limit the total spending on each of the 12 appropriations bills. Defense is the only subcommittee set to receive an increase (3 percent), whereas the Labor-HHS-Education (-12 percent), Agriculture (-13 percent), Transportation-Housing (-14 percent), and State-Foreign Operations (-18 percent) subcommittees are again targeted to receive the most significant cuts, as they did in the final FY2011 Continuing Resolution.
- House Appropriations Subcommittees Begin Markups. On Friday, the House Military Construction-Veterans Affairs and Homeland Security Appropriations Subcommittees held the first FY2012 markups. The House has a District Work Period scheduled for next week, but will resume appropriations work the week of May 23 with a full committee markup of these bills and a subcommittee markup of the Agriculture spending bill.
OTHER BUDGET, APPROPRIATIONS NEWS
- Bi-Partisan Deficit Reduction Panel. The bi-partisan panel led by Vice President Joe Biden continues to hold meetings aimed at reaching a consensus on a plan to reduce the deficit.
- ESEA Reauthorization. On May 10, Senator Patty Murray (D-WA) re-introduced the Literacy Education for All, Results for the Nation (LEARN) Act (S. 929), which is considered by many to be the essential literacy piece of any ESEA reauthorization bill. Despite the recent introduction of a number of other ESEA-related bills in the Senate, the chamber is behind on its timeline for a rewrite of No Child Left Behind. The HELP Committee missed its self-imposed deadline of mid-April for a draft bill but continues negotiations and hopes to introduce a bill soon. The House meanwhile continues to bring its 11 new committee members up to speed on reauthorization issues but is ready to move a series of smaller bills on education policy. One measure which may be introduced in the coming days includes an effort to trim the U.S. Department of Education by eliminating a number of smaller programs deemed ineffective.
- For-profit Colleges. The U.S. Department of Education sent its proposed gainful employment rule to the Office of Management and Budget (OMB) last week for final approval. On May 10, the Leadership Conference on Civil and Human Rights weighed in, urging OMB to quickly approve the rule.
- Oil Industry Taxes. Now that the House has passed the Restarting American Offshore Leasing Now Act (H.R. 1230), the Putting the Gulf Back to Work Act (H.R. 1229) and the Reversing President Obama’s Offshore Moratorium Act (H.R. 1231) to expedite and expand domestic oil production, Senate Democrats might vote this week on a bill (S. 940) to eliminate $21 billion in oil industry tax credits to reduce the federal deficit. We do not believe proponents can overcome the 60-vote hurdle that stands in the way of movement on the legislation.
- Congressional Hearings. On May 17, the Senate Energy and Natural Resources Committee will hold a hearing on Chairman Bingaman’s recently introduced bills to facilitate appropriate oil and gas development on the Outer Continental Shelf (OCS) (S. 916) and to reform Outer Continental Shelf Lands management (S. 917). The Committee will also receive testimony on a bill to extend OCS leases to accommodate permitting delays (S. 516) and establish OCS permit processing coordination offices (S. 843). On Thursday, the committee will receive testimony on bills to promote advance vehicle technologies (S. 734) and to deploy electric vehicles (S. 948). Two subcommittees will also hold separate legislative hearings on over two dozen stand-alone measures next week.
- Wind and Solar on Federal Lands. On May 25, the House Committee on Natural Resources will hold a second full committee oversight hearing in a series titled, "American Energy Initiative: Identifying Roadblocks to Wind and Solar Energy on Public Lands and Waters." The hearing intends to examine the policies and actions, such as permitting delays, which may be blocking or delaying the development of renewable energy sources on federal lands and waters. This hearing follows a May 13 hearing in which the Director of the Bureau of Land Management of the U.S. Department of Interior, Bob Abbey, and the Director of the Bureau of Ocean Energy Management Regulation and Enforcement, Michael Bromwich, testified.
- 2012 Farm Bill. On May 31, Chairwoman Debbie Stabenow (D-MI) of the Senate Committee on Agriculture, Nutrition and Forestry intends to hold the first field hearing on the upcoming FY2012 Farm Bill titled, “Opportunities for Growth: Michigan and the FY2012 Farm Bill.” The focus of the hearing will be on the reauthorization of the Farm Bill and topics will include: agriculture, energy, conservation, rural development, research, forestry and nutrition policies.
- Public Lands and Forest Bills. On May 18, the Senate Committee on Energy and Natural Resources, Subcommittee on Public Lands and Forests intends to hold a hearing concerning bills addressing reforestation; protection of old growth forests; management of national forests; land conveyances and land exchanges; wilderness designations; wild and scenic river designations; recreational uses of National Forest System land subject to ski area permits; mining lands; establishment of the volcano early warning system; establishment of conservation areas; surface mining considerations; and expanding departments’ authority to provide service opportunities for American youth.
- Black Carbon Review Panel. The EPA Science Advisory Board (SAB) Staff Office is announcing a public teleconference of the Black Carbon Review Panel. The teleconference will be held on June 27, 2011 to discuss a draft advisory report titled, “Review of EPA's Draft Report to Congress on Black Carbon.” EPA, in consultation with other federal agencies, prepared a comprehensive report to Congress on the climate and public health effects of black carbon and the potential utility and cost-effectiveness of mitigation options.
- Toxic Substances Control Act Compliance. EPA is suspending the next Inventory Update Reporting submission period required by the Toxic Substances Control Act (TSCA). Inventory Update Reporting requires manufacturers, including importers, of certain chemical substances included on the TSCA Chemical Substance Inventory to report current data on the manufacturing, processing and use of the chemical substances. EPA is suspending the next submission period to allow additional time to finalize the proposed modifications to the Inventory Update Reporting regulations.
- Pesticide Tolerances. EPA has issued a final rule which removes certain established tolerances and establishes new tolerances for residues of saflufenacil, propiconazole and glyphosate in or on multiple commodities. Potentially affected parties of this ruling include agricultural producers, food manufacturers or pesticide manufacturers. EPA has revised proposed commodity terms and tolerance levels for several commodities and determined that established tolerances for certain livestock commodities should be increased.
- Senate Banking Committee to Review the Export-Import Bank of the United States. On May 17, the Senate Banking Committee (Tim Johnson (D-SD), Chairman) will hold a hearing titled, “Oversight and Reauthorization of the Export-Import Bank of the United States.” The Honorable Fred P. Hochberg, Chairman and President, Export-Import Bank of the United States will testify.
- Senate Banking Committee to Review the State of Securitization. On May 18, the Senate Banking Securities, Insurance and Investment Subcommittee (Jack Reed (D-RI), Chairman) will hold a hearing titled, “The State of the Securitization Markets.”
- House Financial Services Committee to Address Derivatives Legislative Proposal. The House Financial Services Committee (Spencer Bachus (R-AL), Chairman) has rescheduled until May 24, the markup of legislation to extend the deadline for implementation of the Dodd-Frank Act’s provisions regarding derivatives (H.R. 1573, which was approved by the House Agriculture Committee on May 4).
- SEC Staff to Hold Open Meeting. On May 18, the SEC will hold an open meeting to consider whether to propose new rules and amendments to rules to implement provisions of Subtitle C of Title IX of the Dodd-Frank Act, “Improvements to the Regulation of Credit Rating Agencies.” These proposed rules would apply to credit rating agencies registered with the Commission as nationally recognized statistical rating organizations, providers of third-party due diligence services for asset-backed securities and issuers and underwriters of asset-backed securities.
FINANCIAL SERVICES NEWS
- President Obama Nominates Mark P. Wetjen to Serve as CFTC Commissioner. President Obama has nominated Mark P. Wetjen to serve as a Commissioner at the CFTC. Upon Senate confirmation, Mr. Wetjen would replace retiring Commissioner Michael Dunn. Mr. Wetjen has served as Counsel and Senior Policy Advisor to Senate Majority Leader Harry Rein (D-NV) since 2004. Prior to serving in the Senate, Mr. Wetjen was a lawyer in private practice in Nevada and California. Mr. Wetjen earned his J.D. from the University of Iowa College of Law and his B.A. from Creighton University.
- Sheila Bair’s Official FDIC Departure Date. Sheila C. Bair’s official departure from the FDIC will be effective on July 8. The FDIC will hold a board meeting during the first week of July; this will be Chairman Bair’s final board meeting. Martin J. Gruenberg, the current Vice Chairman of the FDIC Board of Directors and previous Acting Chairman, still appears to be the frontrunner for the White House nomination to succeed Sheila Bair as FDIC Chairman.
International, Defense, Homeland Security
- Trade Developments. Obama Administration officials, Senate Finance Committee staff and House Ways and Means Committee staff continue to conduct line-by-line technical “walk-throughs” of the texts of the Colombia, South Korea and Panama Free Trade Agreements (FTAs) to produce accompanying implementing legislation. So far, the walk-throughs have produced no major complications. Meanwhile, the Senate Finance Committee held a hearing on the Colombia FTA on Wednesday, at which Deputy U.S. Trade Representative (USTR) Miriam Sapiro, Chairman Max Baucus (D-MT) and other Committee Members signaled their intention to try to pass the agreement before the August recess. However, continuing Democratic and Republican jockeying over a renewal of augmented Trade Adjustment Assistance (TAA), along with concurrent discussions on the debt limit and other issues, means that meeting that deadline is by no means assured. In the meantime, Senate Finance is tentatively scheduled to hold hearings on the Panama and Korea FTAs the week of May 23.
On the House side, yesterday’s Agriculture Committee hearing on the three FTAs produced some illuminating commentary on Members’ positions on the agreements. Congressman Randy Neugebauer (R-TX), Congresswoman Martha Roby (R-AL), Congressman Rick Crawford (R-AR), Congressman Marlin Stutzman (R-IN), Congressman Jim Costa (D-CA) and Congressman Leonard Boswell (D-IA) voiced more skepticism than anticipated about various aspects of the FTAs. Ranking Member Collin Peterson (D-MN) and Congresswoman Marcia Fudge (D-OH) are clearly conflicted as well. On the other hand, Chairman Frank Lucas (R-OK), Congressman Austin Scott (R-GA), Congressman Kurt Schrader (D-OR) and others offered their vocal support, particularly for the Korea FTA (KORUS).
Issues causing concern among Members at the hearing included: 1) alleged potential access to the U.S. market under the KORUS for North Korean goods produced at the Kaesong Industrial Complex; 2) exclusion of rice from KORUS; 3) textile rules of origin for all three FTAs; 4) access to the Korean beef market; and 5) labor rights in Colombia. USTR Ron Kirk and others addressed all of these concerns in turn, noting, for example, that KORUS does not allow goods produced at Kaesong, and both the U.S. and South Korean governments and legislatures would have to agree to any future change in that provision. Still, it is clear that some undecided Members still need further convincing on the merits of the FTAs before final votes occur this summer or fall.
- AT&T/T-Mobile Merger. Federal Communications Commission (FCC) Commissioner Robert McDowell told the House Energy and Commerce Subcommittee on Communications and Technology last week that the agency needs to reform its merger review process. "The Commission should not impose conditions that do not narrowly cure consumer harm arising directly out of the transaction,” he said. “In the same spirit, the FCC should honor its 180-day merger review shot clock.” McDowell and his FCC colleagues discussed reform of FCC processes at a hearing that coincides with the Commission’s review of AT&T’s proposed acquisition of T-Mobile USA. House Republicans have called on the FCC to refrain from adding unrelated conditions to the transaction. GOP members of the Subcommittee have said the FCC used the Comcast-NBC Universal merger to further the Democratic policy agenda, including securing a net-neutrality commitment in that merger. McDowell also called for inclusion of market analysis during rulemaking processes.
Earlier in the week, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held the first in what is expected to be a series of hearings on the AT&T-T-Mobile merger. The hearing examined the merger’s impact on competition, innovation, prices for wireless services and devices and the proper market (i.e., local or national) for merger analysis. Although no Senator said the deal should be blocked, Senators and witnesses engaged in a vigorous debate about the proper market analysis. AT&T’s chief executive Randall Stephenson argued that the Justice Department historically has determined that buying decisions are made at the local level and that is the proper market for analysis. Senator Al Franken (D-MN) asked Stephenson: “You don’t think Apple would have given you this [iPhone contract] if you weren’t a national carrier?” Stephenson acknowledged that it was “not as likely” that AT&T would have secured the exclusive contract had it been a regional carrier. Subcommittee Chairman Herb Kohl (D-WI) asked T-Mobile’s CEO Phillipp Humm: “AT&T does not view T-Mobile as a close competitor…Is T-Mobile a [national] competitor?” Humm replied, “We compare ourselves with Sprint,” noting that during the past year T-Mobile has identified 33 “regions” in which it competes directly against companies like Cricket and MetroPCS. Democratic and Republican Subcommittee Members questioned AT&T’s Stephenson about whether his company would commit to certain conditions should the company’s proposed acquisition of T-Mobile be approved by regulators. Asked by Chairman Kohl whether AT&T would accept a merger condition that would prevent the company from using Universal Service Fund money to pay for a major broadband deployment, Stephenson said yes. In addition, Senator Klobuchar asked Stephenson whether AT&T would commit to maintain T-Mobile customers’ contracts post-merger, but he said the company would not extend the T-Mobile pricing plan to AT&T customers after the merger.
In addition to the FCC review of the merger, the Department of Justice (DOJ) will undertake an antitrust analysis of the proposed deal. DOJ recently requested more information and documents from AT&T and T-Mobile, which the companies are expected to submit by mid-June.
Spectrum. Expect to see bipartisan spectrum legislation soon from Senate Commerce Committee Chairman Jay Rockefeller (D-WV) and Ranking Member Kay Bailey Hutchinson (R-TX), who aim to mark up a bill by the month’s end. The compromise legislation would combine Chairman Rockefeller’s bill, the Public Safety Spectrum and Wireless Innovation Act (S.28) with Ranking Member Hutchinson’s draft Wireless Innovation and Spectrum Enhancement (WISE) Act, allocate the 700 MHz D-block to public safety and grant the FCC authority to conduct incentive auctions. A key issue of discussion continues to be how to fund the nationwide public safety network, including whether to provide funding for maintenance and operation of the network; a national governance structure to oversee the national broadband network; and the range of spectrum auctions whose proceeds would help fund the public safety network.
- Privacy. On May 10, the Senate Judiciary Subcommittee on Privacy, Technology and the Law held a hearing to examine geo-tracking and data breaches involving mobile applications. The hearing also focused on common privacy concerns, such as consumer notice and disclosure and liability faced by companies that fail to take appropriate safeguards to protect information from hackers or leaks. Most government and industry witnesses agreed on the need for comprehensive federal privacy legislation, which seems to be a reverberating call in Congress. In his opening statement, Senate Judiciary Committee Chairman Patrick Leahy (D-VT) voiced concern about recent reports that the Apple iPhone, Google Android Phone and other mobile applications may be collecting, storing and tracking user location data without the user consent. “I am also concerned about reports that this sensitive location information may be maintained in an unencrypted format, making the information vulnerable to cyber thieves and other criminals,” Leahy said. Witnesses from the Federal Trade Commission (FTC) and Justice Department were asked by Democratic Members whether Congress should afford consumers a private right of action against companies that do not safeguard their personal information and whether companies should be subject to civil penalties for privacy violations. The FTC’s Jessica Rich said the agency has no position on a private right of action, but that it strongly supports data breach legislation with authority for the FTC to impose civil penalties. When asked by Senator Sheldon Whitehouse (D-RI) what disclosure requirements should apply to mobile applications, Ms. Rich said the FTC has urged the industry to simplify disclosures so that consumers know what information is being shared with third parties. During testimony, Justin Brookman of the Center of Democracy and Technology noted the lack of comprehensive privacy laws, leaving the private sector with a “patchwork of outdated laws” to guide them. Brookman cited, for example, Communications Act protections against sharing of customer proprietary network information (CPNI), but that protections do not extend to data plans and mobile applications. Additional discussion centered on the collection of data during mapping and geolocating reviews. In response to questions by Senator Blumenthal about additional measures or remedies that Congress should consider, Brookman said the FTC needs authority to impose civil penalties for data breaches. He added that Congress should also focus on data minimization and destruction of data after it was no longer needed. Chairman Leahy has noted that the Judiciary Committee will be updating the Electronic Communications Privacy Act this year. Meanwhile, several other privacy measures, including Do Not Track bills introduced by Senate Commerce Committee Chairman Jay Rockefeller (D-WV) and Congresswoman Jackie Speier (D-CA) in the House, promise to keep Congress focused on consumer privacy for the remainder of the year.
- Cybersecurity. On May 12, the White House unveiled cybersecurity recommendations that are notable for their lack of mention of a "kill switch" for portions of the Web or an explanation of the extent of the President's powers during a cyber-emergency. A senior White House official told the press that the President has sufficient authority to respond to a cyber-emergency and that the proposal does not seek expansion to those powers. In the past, the White House has pointed to a provision in the Communications Act passed shortly after the 1941 attack on Pearl Harbor as the source of the President's authority in those instances. Industry stakeholders are still processing the White House guidance. In its detailed legislative guidance, the Obama Administration highlighted the growing threat of cyber-attacks to the nation's economic and physical security in an age when everything is connected by computer networks. Prior attempts at comprehensive cybersecurity legislation have gotten bogged down when attempts are made to define the President's powers during cyber-emergencies, leading to accusations the government is attempting to craft a "kill switch" for the Internet similar to crackdowns during the recent political turmoil in Egypt and Tunisia.
- FCC Commissioner Baker Resigns. Federal Communications Commission Chairman Julius Genachowski said he is not concerned about the potential appearance of impropriety arising from Republican Commissioner Meredith Attwell Baker's planned departure from the agency to join Comcast/NBC Universal. He told reporters last week that there are rules to govern such situations, and that Baker consulted with the general counsel to ensure she was following them. Baker had voted to approve the merger of Comcast and NBCU.
- FCC Open Meeting. The FCC’s adopted the following measures at its May 12 meeting:
- A Notice of Proposed Rulemaking to extend outage reporting requirements to interconnected VoIP and broadband service providers to promote the resiliency of the 9-1-1 system and critical communications infrastructure;
- As part of the Commission's regulatory reform efforts, a Notice of Proposed Rulemaking to remove outdated regulations governing the exchange of telephone traffic between U.S. and foreign carriers that are no longer necessary to protect consumers and competition, while strengthening protections against anticompetitive practices by foreign carriers; and
- As part of the Commission's Data Innovation Initiative, a First Report and Order and Further Notice of Proposed Rulemaking to eliminate unnecessary reporting requirements regarding international telephone service, while streamlining international data reporting.
- SAFETEA-LU Reauthorization. The authorizing committees in the House and Senate continue to draft SAFETEAL-LU reauthorization, with increasing indication that the House Transportation and Infrastructure Committee is aiming for release of a bill by the end of the month with the Senate Environment and Public Works (EPW) Committee to follow soon thereafter. Indications are that the Senate EPW has been involved in bi-partisan negotiations for several months and is using the Administration’s draft text as a platform for the bill they will release. A complete but unofficial and undated draft of the Administration’s bill has been circulating as previously reported by Capital Thinking. As reported, the Administration has stated that this is a preliminary draft that does not reflect the input of senior Administration officials. However, given the alignment between the funding levels in the bill and the Administration’s FY2012 Budget Proposal, there are also indications that the bill is relatively well developed and has been through some OMB review.
- Obama Administration Draft Bill. The previous Capital Thinking report highlighted the highway, innovative finance and project delivery provisions of the Administration’s draft. Below are highlights of the Administration’s public transportation proposals.
- Transit New Starts. The bill makes significant changes designed to streamline and expedite the New Starts process. It eliminates Small Starts as a separate category as project development for all projects is substantially streamlined. Instead, the process for all projects is streamlined to two phases: Project Development (which consolidates Preliminary Engineering and Final Design) and Construction. The evaluation criteria are also reformed, with the project justification rating now designed as a simplified / streamlined consideration of “transportation effects, environmental effects, economic development effects, and comparison of project effects to cost.” As a result, cost effectiveness now explicitly includes more than just travel time savings and is a comprehensive measure of benefits and costs. The bill also makes a Program of Interrelated Projects eligible under the New Starts program.
- State of Good Repair Formula Program. The bill ends the current Fixed Guideway Modernization formula and discretionary Bus and Bus Facilities program and replaces them with a single State of Good Repair (SGR) formula program. The section-by-section notes that “FTA has not yet developed distribution formulas and expects to work with Congress on the formula.” The bill includes a specific set-aside for buses, although the dollar amount is not provided.
- Urbanized Area Formula Grants. The bill increases flexibility to use funds for operating assistance in “temporary and targeted” instances based on economic conditions.
- Greenhouse Gas and Energy Reduction Programs. The bill effectively repeals the Clean Fuels Program and replaces it with a new program that includes research and competitive deployment and demonstration grants. It continues a TIGGER-like program. It creates a new Clean and Energy Efficient Public Transportation Research Program for nationally significant research, development and demonstration projects. It also establishes a Public Transportation Test Beds Demonstration Program to demonstrate and evaluate innovative technologies at public transportation agencies.
- Livability Demonstration Grants Program. The bill establishes a competitive program for planning and capital projects to demonstrate innovative livability projects that better integrate transit facilities and service into the community, including the development of underdeveloped transit stations and surrounding areas. Eligible activities include station area planning, real estate acquisition, streetscaping, pedestrian and bike facilities and intermodal facilities, among others. Projects are to be evaluated based on the livability principles that have been articulated through the Sustainable Communities Partnership.
- JARC, New Freedom and Other Specialized Grant Programs. The bill creates a new Consolidated Specialized Transportation Grant Program that combines the Section 5310 program (Elderly and Disabled Formula Program), Job Access and Reverse Commute (JARC) and New Freedom programs. States or eligible recipients under Section 5307 are the eligible recipients under this program and may sub-grant to public entities, “operators of public transportation” and nonprofit organizations.
- Rural Transit Formula Program (Section 5311). The bill makes planning and project administration an eligible use of Section 5311 funds. The formula is otherwise continued as it stands, with the exception that the Tribal Transit takedown is eliminated and made its own program.
- Technical Assistance and Workforce Development. The bill consolidates the National Research Programs, National Transit Institute and Human Resource Programs into one program. It establishes a Workforce Development Program to “develop, implement and manage a national transit workforce development program to meet the human resource needs of the public transportation industry.” It will fund innovative workforce development models for public transportation throughout the country. Funding for workforce development begins at $5 million in FY2012 and increases annually to $10 million in FY2017.
- University Transportation Centers. The bill transforms the University Transportation Center program. Nonprofit universities must join together to form consortia of at least two universities to compete for funding. The Department of Transportation will make 20 grants of $4,000,000 to each consortia, with $80 million available per year over the period of the reauthorization. There is a required 100 percent match. The bill makes available an additional $20 million per year for targeted, high-priority multi-modal research grants. These grants will be open to any university participating in a research consortium. The purpose is to have a mechanism for the Department to leverage university resources to address specific cross-modal research priorities in the areas of safety, state of good repair, economic competitiveness, environmental sustainability and livable communities