Nation roundup for June 26
GOP divided on immigration; House uncertain
WASHINGTON (AP) — Senate Republicans are split over the immigration bill steaming toward approval at week’s end, a divide that renders the ultimate fate of White House-backed legislation unpredictable in the House and complicates the party’s ability to broaden its appeal among Hispanic voters.
To some Republicans, the strength of Senate GOP support for the bill is all but irrelevant to its prospects in the House. Conservatives there hold a majority and generally oppose a core provision in the Senate measure, a pathway to citizenship for immigrants living in the United States illegally.
Any such impact is “greatly overrated,” said Missouri Sen. Roy Blunt, who previously served as chief vote counter for House Republicans.
But Rep. Paul Ryan, R-Wis., offered a different view. A Senate vote on Monday to toughen border security with thousands of new agents and billions of dollars in technology “obviously makes final legislation more likely,” the party’s 2012 vice presidential nominee said on CBS.
One prominent Democrat, Sen. Chuck Schumer of New York, also says House sentiment can be changed, particularly through the addition of strong border security measures of the kind that resulted from negotiations with previously uncommitted Republicans.
“I believe a large bipartisan vote will wake up our colleagues … in the House,” Schumer said shortly before the Senate inserted a requirement for 20,000 new Border Patrol agents and a total of 700 miles of fencing along the border with Mexico.
“Hopefully, as congressmen look how their senators voted, they will be influenced by it.”
In the key Senate showdown so far, 15 Republicans voted to advance the legislation that toughens border security at the same time it creates a chance at citizenship for 11 million immigrants living in the United States illegally. Another 27 voted to keep the bill bottled up.
Republicans who voted to block the legislation generally did so after saying it would not deliver on its promise of operational control of the border.
“When you look at it, it doesn’t, and they know it,” Sen. Jeff Sessions, R-Ala., said of the bill’s backers, who quickly disputed the charge.
A political pattern emerged, as well.
Among Republicans who are seeking a new term next year and as a result face the risk of a primary challenge, only three voted with supporters of the measure. Eight did not, a group that includes the party’s two top leaders in the Senate, Mitch McConnell of Kentucky and John Cornyn of Texas, as well as Sessions, who has been one of the bill’s principal opponents across three weeks of debate.
While party leaders long have looked to immigration legislation as a way to broaden appeal among Hispanic voters, individual members of Congress report a different perspective.
“It’s hard to argue with the polling they’ve been getting from the national level,” Texas Republican Rep. Kenny Marchant said recently, referring to polls that show support for border security along with legalization. Yet in his own district in the suburbs west of Dallas, he said, proposals along the lines of the Senate bill are “very unpopular.”
The party’s potential presidential contenders also are split, likely a harbinger of a struggle in the campaign for the 2016 nomination.
Two of them, Sens. Rand Paul of Kentucky and Ted Cruz of Texas, oppose the legislation.
For his part, Cruz took a verbal poke at fellow Republicans in remarks on the Senate floor on Monday, saying that some senators in each parties “very much want a fig leaf” on border security to justify a vote for the measure.
Yet one Republican presidential hopeful, Sen. Marco Rubio of Florida, is a member of the so-called Gang of Eight, a bipartisan group that helped draft the bill. Among its provisions are several that impose conditions on immigrants seeking legal status, including payment of fines, pay outstanding taxes and undergo a background check.
In recent months, Rubio has sought to reorder the political circumstances rhetorically, asserting that the status quo amounts to “de facto amnesty” for those in the country illegally since it is unlikely they will be forced to leave. The phrasing marks an attempt to neutralize long-time claims that legalization confers amnesty. Increasing numbers of Republicans now employ similar rhetoric.
Among the unknowns is how much impact Rubio and the other Republicans in the Gang of Eight — Sens. Jeff Flake and John McCain of Arizona and Lindsey Graham of South Carolina — will have on House Republicans whose votes will determine the fate of legislation to overhaul the immigration system.
Rubio has met with members of the House Republican leadership as well as with Ryan and members of the conservative Republican Study Group.
Among House Republicans, supporters of legalization in any form, citizenship or otherwise, is scarce, although Blunt predicted there would be “an incredible amount of reasonableness” on that subject once lawmakers thought the border had truly been secured.
The House Judiciary Committee has approved two immigration bills recently, one of which echoes Mitt Romney’s suggestion in the 2012 presidential campaign that immigrants “self-deport” if they are in the country illegally. It encourages immigrants living in the United States to “depart voluntarily” at their own expense.
Neither of the bills cleared by the committee offers the prospect of legalization for immigrants in the country illegally, either citizenship or a step short of it.
House Speaker John Boehner, R-Ohio, has pledged not to bring legislation to the floor for a vote that does not have the support of at least half the GOP lawmakers in the chamber, a commitment made under pressure from restive conservatives that virtually rules out any measure envisioning legalization.
Some GOP lawmakers are hoping no immigration bill passes, to avoid the possibility of a final compromise with the Senate that goes further than they want.
Boehner also has said the entire House will “work its will” on the issue. It’s a comment that takes into account the potential impact of House Democrats, some of whom are already clamoring for a chance to vote on the bill that clears the Senate this week.
Republicans command a 234-201 majority, meaning that as few as 17 GOP defections could change the outcome of any vote.
Market rises: less on Fed chatter, more on economy
NEW YORK (AP) — Wall Street got back to focusing on the economy instead of the Federal Reserve on Tuesday, sending stocks higher.
Four reports showed a brightening U.S. economy. Housing and manufacturing continued to improve, and consumer confidence hit its highest level in 5 1/2 years.
The major U.S. stock indexes closed higher. The Dow Jones industrial average shot up 100.75 points, or 0.7 percent, to 14,760.31. The Standard & Poor’s index rose 14.94 points, or 1 percent, to 1,588.03. The Nasdaq composite climbed 27 points, 0.8 percent, to 3,347.89.
The triple-digit rise in the Dow continues a bout of market volatility caused by investors and traders who are worried about the Fed ending its economic stimulus. Last Wednesday, Fed Chairman Ben Bernanke said he expects the Fed to end its bond buying by the middle of 2014 if it feels the economy can manage without that stimulus.
The Dow then plunged by triple digits on three of the next four trading days, with investors worried that the market would struggle without the Fed propping it up.
Some investors concluded that the recent sell-offs were overblown.
“This is the day where the dust appears to be settling,” said Jonathan Lewis, chief investment officer at Samson Capital Advisors in New York.
Quincy Krosby, a market strategist at Prudential Financial, guessed that shorter-term traders bought stocks Tuesday because they judged that parts of the market were “oversold.”
Among the biggest gainers were big dividend payers like phone and power companies. These are stocks that have been hit the hardest by the recent sell-off.
Long-term investors were likely still sitting on the sidelines, waiting for further signs that markets are becoming less volatile, Krosby said.
The stronger economic news for the U.S. led investors to sell U.S. government bonds, a sign that they’re more comfortable putting money in stocks. The yield on the 10-year Treasury note, a benchmark for many types of loans, rose to 2.6 percent from 2.54 percent late Monday.
The big economic reports Tuesday revealed.
—Orders for durable goods rose 3.6 percent in May, matching April’s gain. The gauge is important because U.S. manufacturing has generally struggled this year as demand for American exports slows in other parts of the world.
— U.S. home prices jumped 12.1 percent in April compared with a year ago, according to the Standard & Poor’s/Case-Shiller 20-city home price index. That was the biggest year-over-year gain since March 2006. For a fourth straight month, prices rose from a year earlier in all 20 cities in the index. Twelve cities posted double-digit price gains.
— The Conference Board’s consumer confidence index jumped to 81.4 in June, the best reading since January 2008. The May reading, however, was revised down to 74.3 from the original estimate of 76.2.
— Sales of new homes rose in May to a seasonally adjusted annual rate of 476,000, the Commerce Department said. That was the fastest pace since July 2008. Though sales of new homes remain below the 700,000 annual rate that most economists consider healthy, the pace has jumped 29 percent from a year ago.
Chris Baggini, senior portfolio manager at Turner Investments in Berwyn, Penn., said investors had used Bernanke’s statements last week as an excuse to get out of the market — something they wanted to do anyway, given its steady run-up for most of the year.
The S&P 500 is up 11 percent for the year. But at its peak last month, it was up 17 percent.
Among stocks making big moves:
—Walgreen, the nation’s largest drugstore chain, slipped after reporting earnings and revenue that missed analysts’ expectations. Walgreen’s stock fell $2.83, or nearly 6 percent, to $45.22.
—Barnes & Noble plunged after reporting a loss that more than doubled in the latest quarter. The bookseller struggled to compete with online retailers and its Nook e-book continued to lose money. The stock fell $3.21, or more than 17 percent, to $15.61.
—Clothing chain Men’s Wearhouse rose after saying it had fired executive chairman George Zimmer, the company’s founder and star of its TV commercials, because he had advocated for “significant changes that would enable him to regain control,” according to the company. The stock rose $2, or nearly 6 percent, to $37.13.
Texas senator filibusters against abortion bill
AUSTIN, Texas (AP) — Wearing pink tennis shoes to prepare for nearly 13 consecutive hours of standing, a Democratic Texas state senator on Tuesday began a one-woman filibuster to block a GOP-led effort that would impose stringent new abortion restrictions across the nation’s second-most populous state.
Sen. Wendy Davis, 50, of Fort Worth began the filibuster at 11:18 a.m. CDT Tuesday and passed the halfway mark in her countdown to midnight — the deadline for the end of the 30-day special session.
Rules stipulate she remain standing, not lean on her desk or take any breaks — even for meals or to use the bathroom. Colleagues removed her chair so she wouldn’t sit down by mistake.
If signed into law, the measures would close almost every abortion clinic in Texas, a state 773 miles wide and 790 miles long with 26 million people. A woman living along the Mexico border or in West Texas would have to drive hundreds of miles to obtain an abortion if the law passes.
In her opening remarks, Davis said she was “rising on the floor today to humbly give voice to thousands of Texans” and called Republican efforts to pass the bill a “raw abuse of power.”
Democrats chose Davis to lead the effort because of her background as a woman who had her first child as a teenager and went on to graduate from Harvard Law School.
In the hallway outside the Senate chamber, hundreds of women stood in line, waiting for people in the gallery to give up their seats. Women’s rights supporters wore orange t-shirts to show their support for Davis, and Lt. Gov. David Dewhurst had to remind those in the gallery that interrupting the proceedings could results in 48 hours in jail.
To stay sharp, Davis slowly circled her desk, pausing occasionally to read from a large binder on her desk. When a male protester stood in the Senate gallery and shouted, “abortion is genocide,” Davis continued talking uninterrupted as the man was removed by security.
If the filibuster succeeds, it could also take down other measures. A proposal to fund major transportation projects as well as a bill to have Texas more closely conform with a recent U.S. Supreme Court decision banning mandatory sentences of life in prison without parole for offenders younger than 18 might not get votes. Current state law only allows a life sentence without parole for 17-year-olds convicted of capital murder.
Twice in the first six hours, anti-abortion lawmakers questioned her about the bills, presenting their arguments that the measure will protect women or that abortions were wrong. Davis answered their questions, but did not give up control of the floor as she stood next to her desk.
“This is really about women’s health,” said Sen, Bob Deuell, who introduced a requirement that all abortions take place in surgical centers, “Sometimes bad things can happen.”
Davis questioned then why vasectomies and colonoscopies aren’t also required to take place in such clinics.
“Because I’ve been unable to have a simple question answered to help me understand how this would lead to better care for women, I must question the underlying motive for doing so.”
Davis used up large chunks of time reading into the record testimony from women and doctors who would be impacted by the changes, but were denied the opportunity to testify in a Republican-controlled committee because the chairman said the it was becoming repetitive.
During one heart-wrenching story describing a woman’s difficult pregnancy, Davis choked up several times and wiped tears, but kept reading.
A petite woman who stays in shape by jogging and cycling, Davis tried to stay comfortable and sharp by shifting her weight from hip to hip and slowly walking around her desk while reading notes from a large binder on her desk.
Republicans watched her closely for any rules slipup that would allow them to break the filibuster and call the bill for a vote.
The bill would ban abortion after 20 weeks of pregnancy and force many clinics that perform the procedure to upgrade their facilities and be classified as ambulatory surgical centers. Also, doctors would be required to have admitting privileges at a hospital within 30 miles — a tall order in rural communities.
“If this passes, abortion would be virtually banned in the state of Texas, and many women could be forced to resort to dangerous and unsafe measures,” said Cecile Richards, president of Planned Parenthood Action Fund and daughter of the late former Texas governor Ann Richards.
Sen. Dan Patrick, R-Houston, said the Democrats never should have been allowed to put Republicans “in a box” and complained that many in the Senate GOP were “flying by the seat of their pants.”
But the bill’s bogging down began with Republican Gov. Rick Perry, who summoned lawmakers back to work immediately after the regular legislative session ended May 27 but didn’t add abortion to the special session to-do list until late in the process. The Legislature can only take up issues at the governor’s direction.
Then, House Democrats succeeded in stalling nearly all night Sunday, keeping the bill from reaching the Senate until 11 a.m. Monday.
Debate in that chamber ranged from lawmakers waving coat-hangers on the floor and claiming the new rules are so draconian that women are going to be forced to head to drug war-torn Mexico to have abortions.
At one point, the bill’s sponsor, Republican Rep. Jodie Laubenberg of Spring, errantly suggested that emergency room rape kits could be used to terminate pregnancies.
Senators propose overhaul of housing finance
WASHINGTON (AP) — A bipartisan group of senators on Tuesday proposed an overhaul to the housing finance system that would gradually eliminate Fannie Mae and Freddie Mac, the two government-sponsored mortgage guarantee giants, and shift more mortgage and credit risk to the private sector.
Eight lawmakers from the Senate Banking Committee — four Democrats and four Republicans — said their legislation would protect taxpayers from bearing the costs of housing market downturns as occurred in the 2008 financial crisis when Fannie and Freddie were nationalized and bailed out with $187 billion in taxpayer-funded loans.
“All these years later, nothing has changed,” said Sen. Bob Corker, R-Tenn., “It’s time to end this failed model.”
Sen. Mark Warner, D-Va., who with Corker spearheaded the effort to revamp the mortgage market system, said housing finance was “the last piece of unfinished business remaining after the 2008 economic meltdown.”
White House spokeswoman Amy Brundage said President Barack Obama welcomed the bipartisan effort led by the two senators. “The president strongly supports comprehensive housing finance reform that would forever end Fannie Mae and Freddie Mac’s flawed business model that put the American taxpayers on the hook.”
The legislation would create a new Federal Mortgage Insurance Corporation that would provide backstop insurance available only after a substantial amount of private capital is used up.
Fannie and Freddie currently own or guarantee half of all U.S. mortgages and back nearly 90 percent of new ones. With the revival of the housing market, the two enterprises have returned to profitability, with profits returning to the government. Fannie and Freddie don’t directly make loans, but buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors.
The legislation would wind down Fannie and Freddie operations within five years and require that every mortgage-backed security issued through the new FMIC will have a private investor bearing the first risk of loss and holding at least 10 percent in equity capital for every dollar at risk.
Housing goals which have forced the two government-sponsored enterprises to assure that loans go to those below the median income level would be eliminated, replaced by a market access fund for affordable housing that would be paid for through a user fee.
It would also take measures to ensure that smaller community banks and credit unions would not be squeezed out by the mega-banks in competing for the a share of the secondary mortgage market.
Corker said the Banking Committee was already working on legislation to overhaul the Federal Housing Administration, a government agency that insures housing loans by banks, and said it was a goal to move on the Fannie-Freddie legislation by this fall.
The Bipartisan Policy Center’s Housing Commission, chaired by former Sens. George Mitchell, D-Maine, and Christopher “Kit” Bond, R-Mo., and former Housing and Urban Development secretaries Mel Martinez and Henry Cisneros, commended the senators for introducing the bill and said it was similar to their plan to create a new system that encourages private capital to play a greater role in bearing mortgage-credit risk.
The Securities Industry and Financial Markets Association (SIFMA) said “the time to address the future of mortgage finance is overdue, and we agree with the fundamental premise that private capital must play a larger role than it does in today’s market.”
Illinois’ bad credit costing taxpayers millions
CHICAGO (AP) — Like your cousin who doesn’t pay his bills on time and squanders money he doesn’t have, Illinois is paying the price — in both cash and reputation — for years of ignored warnings about its pension crisis, the worst in the nation.
Largely because of its unfunded retirement plans, Illinois has replaced longtime bottom-dweller California as having the lowest credit rating of any state. So when Illinois tries to borrow money, it faces the same problem as the spendthrift cousin: far higher interest rates.
The state’s financial failings are so well-known, they have inspired a name on Wall Street — the “Illinois effect,” a reference to the fact that cities, universities and other bond-issuing entities here must pay more in interest, even if they are responsible spenders.
“There are investors who won’t buy Illinois or bonds with Illinois labels at any price. They just see it as toxic,” said Brian Battle, director at Performance Trust Capital Partners, a Chicago-based investment firm. That means the state pays “the biggest penalty by a long, long shot.”
Battle compared the Illinois situation to someone who has a good job and plenty of revenue. But “we just spend like crazy, don’t pay our credit cards and haven’t saved for retirement,” he said.
Take the $1.3 billion in bonds Illinois is expected to sell this week to improve highways, rebuild a 40-year-old elevated train line in Chicago and buy land for an airport. Battle estimates the state will pay more than $18 million in extra interest each year than states such as Virginia or Maryland, which have high credit ratings.
That’s an additional $450 million over the 25-year life of a bond issue. In personal terms, it’s $36 taken directly from the pockets of each of Illinois’ nearly 13 million residents. And that’s for just one bond sale.
For decades, legislators skipped or shorted payments to state retirement funds, creating a $97 billion pension shortfall and making investors nervous year after year. Yet lawmakers in the Democrat-controlled General Assembly adjourned the spring legislative session last month without a deal. It was the fifth time in 12 months that they left town without solving the crisis.
Within days, two major credit-rating agencies downgraded the state to an all-time low for Illinois. Gov. Pat Quinn called lawmakers back for a special session last week, but they could agree only to form a bipartisan committee to keep working on the problem.
Contributing to the inaction are the state’s strong constitutional protections for pension benefits and a powerful union lobby that has opposed across-the-board cuts.
Still, the seeming lack of urgency dumbfounds some onlookers. Among them is Bill Daley, a former White House chief of staff and U.S. commerce secretary from the famous Chicago mayoral clan. He has focused on the pension debacle as he explores a challenge to Quinn in next year’s Democratic primary.
“You can’t have 13 downgrades in four years … and think people are going to come here and create jobs,” Daley said, questioning the need for repeated legislative sessions that yield no progress. “This is Groundhog Day.”
State leaders insist they are trying to deal with the crisis. But in a place known for backroom deals, compromise can be hard to find, even after years of trying.
House Speaker Michael Madigan, who has overseen a Democratic majority in the Illinois House for 28 of the last 30 years, acknowledges that fixing the pension mess is “extremely important for the future of the state.”
“This is the time to step up and help the state of Illinois,” he said. But the speaker has urged the governor to support Madigan’s own solution, which would save the most money, rather than a rival proposal in the Senate that could stand a better chance of surviving a legal challenge.
In the past 50 years, just three states — California, Louisiana and Massachusetts — have had investment ratings as low as Illinois, but all have taken steps to correct it. Quinn’s office has begged lawmakers do the same, even as the governor endures criticism that he hasn’t done enough to broker a deal.
Abdon Pallasch, Quinn’s assistant budget director, said the additional dollars spent to cover interest and the annual pension payment — $6 billion this year, or almost 20 percent of the state’s general-fund budget — represent money that could be spent to achieve smaller class sizes, hire more police or ease prison overcrowding.
“No more alibis. No more excuses. No more delay. (Lawmakers have) had plenty of time,” the governor said Monday. “Running in place is not a way to go when it comes to the pension crisis.”
Illinois’ interest rates are the result of simple supply and demand: Because fewer investors want to take the risk of buying the state’s bonds, the ones who are willing to do so are able to charge more.
Several factors are behind the reluctance. Some investment funds and trusts have rules that prevent them from buying bonds that are approaching “junk” bond status, as Illinois is, Battle said. Many investors don’t want any names in their portfolio that have made headlines for negative reasons, like Illinois.
The state has a constitutional provision that guarantees it will make its debt payments, but investors also see cities like Detroit reneging on debts or considering filing for bankruptcy and get jittery, said Richard Ciccarone, managing director and chief research officer at McDonnell Investment Management in Oak Brook, Ill.
Illinois’ reputation also hits taxpayers on the local level, even in communities with sound budgets.
Suburban Chicago’s DuPage County, a wealthy, conservative-leaning area, is among the 1 percent of counties nationwide with the highest-possible credit rating from all three major ratings agencies. But officials there estimate taxpayers will pay $4 million more in interest over the life of a recent $67 million bond issue than if Illinois had its financial house in order.
In March, Moody’s downgraded credit ratings for four public universities, noting that the schools rely heavily on state money for operating expenses. The Illinois Sports Facilities Authority, which constructs and renovates sports stadiums such as Chicago’s Soldier Field and U.S. Cellular Field — home of the Chicago White Sox — has been downgraded twice since January. Chicago also has seen its rating on million in bonds lowered.
Last year, Chicago Mayor Rahm Emanuel travelled to the state Capitol to testify in favor of reform, only to see his efforts — like all the others — fall flat.
Kathleen Strand, a spokeswoman for Emanuel, said he continues to stress the urgency of the problem, in hopes a solution can be found.
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