Fed May Cut Interest Rate Again This Week
If rates go down again, will inflation go up again?

NO SURPRISE: MORTGAGE INDUSTRY SEEKS TO STOP NEW REGULATION
NEW LIBERAL ISRAELI LOBBY ORGANIZES TO COUNTER AIPAC
GAS COULD SHOOT TO $10 A GALLON, CANDIDATES DEBATE GAS TAX RELIEF

The NY Times report on how bankers and mortgage brokers are resisting calls for regulation in the aftermath of the subprime scandal was at once shocking and predictable. These interests have already watered down a Senate bill intended to provide relief for homeowners facing foreclosure, and were able earlier to use their clout to deregulate their own industries which is what allowed this calamity to occur. The NY Times did lead with this story but a leading financial blogger who runs the web site Naked Capitalism was surprised that they were surprised:

What did they expect?

This is an industry that has been minimally regulated for at least the last dozen years, which given high turnover in many banks, is almost a lifetime. Anyone who remembers life in the bad old days is by definition a dinosaur.

But what amazes me is not the reaction of the industry, which was predictable, or the litany of arguments against new rules. Some of my favorites:

“We have heard from commenters who have expressed concern that in the current market environment, the proposed trigger could cover the market too broadly, and we will carefully consider the issues they raise and other possible approaches to achieve our objective,” Mr. Kroszner said last month at a conference of the National Association of Hispanic Real Estate Professionals.

Please. By definition, there is never a good time to implement new rules, at least according to those who will have to live with them. Either the industry is suffering, so it’s not the time to inflict more pain, or it’s doing well, and therefore the rules are obviously misguided and unnecessary. The intent IS to cover the market broadly; anything else leaves the barn gate open for the horse to leave again.

The new rules would apply extra protection to any mortgage with an interest rate three percentage points above Treasury rates. Officials said that they would cover all subprime loans, which accounted for about a quarter of all mortgages last year as well as many exotic mortgages known in the industry as “Alt-A” loans.

These loans are made to people with relatively good credit scores but who might provide little documentation of their income or assets, or who make smaller than usual down payments or purchase loans that have unusual terms, like interest-only payments for an initial period.

Many mortgage brokers and bankers complain that the lower threshold would unnecessarily include many borrowers who are not at risk from abusive practices.

Oh, no, those borrowers are merely at risk of becoming deadbeats, which means society as a whole has to eat the risk due to costly rescue operations that involve hidden or explicit taxpayer subsidies. Alt-As are showing high default rates; to maintain that no docs are a good practice that should continue boggles the mind.

One common industry criticism is that at a time of tight credit, tighter rules could make many mortgages more expensive by creating more paperwork and potentially exposing lenders to more lawsuits.

Um, expensive new paperwork? Much of this is a requirement to do the sort of documentation and analysis banks did once upon a time, when it was understood that lending was a risky business. And the protests confirm that the industry want the right to make risky loans (note the lawsuits point is valid, and by design: Sheila Bair believes the current standards are skewed too far in favor of lenders. So greater risk of being sued is a feature, not a bug.

But what is most surprising about the piece is the spin the Times puts on it, It voices surprise at the vehemence of the response (the only thing that is surprising is how shameless and self-serving it is), when what is really stunning is how fast the powers that be are making concessions. Is this a symptom of how we really do have the best government money can buy, or of how deeply anti-regulatory sentiment has been internalized?

Contrast the US coverage with the reporting and editorial outrage in England about the role played by the banks. Here’s an example, a lead editorial in the Daily Mail: “WE’RE ALL PAYING FOR THE BANKERS’ GREED.”

It is an extraordinary irony that savers and borrowers are both expected to rescue banks and building societies from a crisis of their own making.”

The Mail is NOT a leftwing newspaper.

SUPREME COURT MAKES IT HARDER FOR PEOPLE TO VOTE

The Republican dominated court upheld Indiana’s law requiring photo ids for voters 6-3.

Comments Mark Crispin Miller:

This decision was supposed to come in June, but Roberts et al. didn’t want to wait that long. Why? Perhaps because they want the law in place when Indiana Democrats turn out to (try to) vote in their primary on May 6 (next Tuesday). And certainly because they want to give the GOP in other states a chance to ram through laws like Indiana’s. (There are already similar laws in several other states. They aren’t as strict as Indiana’s–so maybe now they can be made still more draconian in time for the election.)

As Steve Rosenfeld has reported (in, among other articles, his essay in the new book Loser Take All), the aim of steps like this one–by SCOTUS and the DoJ–is to pre-empt as many votes as possible. In other words, it isn’t only the machines that will be used to slash the Democratic vote. It’s also the strategic use of neo-Jim Crow laws and regulations, meant to neutralize as many adverse votes as possible before the fact.

In short, the more votes you undo before Election Day, the less the party must rely on those notorious machines. A “win-win” for the party–and a fatal lose-lose for American democracy.

Will Obama make some noise about this heinous move? (I rather doubt that Clinton will.) When will his campaign wake up, and face what’s happening?

SIGNS OF INCREASING TENSION WITH IRAN

Retired Air Force Colonel Sam Gardiner lays it out:

” Petraeus Briefing. The most significant and concerning item of the week was Admiral Mullen’s, the Chairman of the Joint Chiefs of Staff, announcement that General Petraeus was preparing a briefing that would be given soon to show Iran’s increased involvement in Iraq. This sounds like setting a major event. The problem with this kind of presentation, particularly if it comes from Patraeus, is that it becomes an action-forcing speech.

Admiral Mullen said on Friday, “The Iranian government has pledged to halt such activities some months ago. It’s plainly obvious they have not.” The President said three weeks ago that he would protect US troops from being killed by Iranians. This briefing has the feel of showing the Iranians have crossed the President’s red line.

Hell-Bent on Nuclear Weapons. Secretary Gates said in a speech at West Point on Monday that Iran is “hell-bent on acquiring nuclear weapons.” The President, Vice President and now the Secretary of Defense have said the National Intelligence Estimate is wrong.

Courses of Action. On Friday Admiral Mullen said “potential military courses of action” were being prepared for an operation against Iran. This has to been seen as a threat. The standard answer when there is no threat intended is “the military are always working on options.”

Forces. Two carrier groups are now in the Gulf area, the Truman and the Abraham Lincoln. Truman is close to completing its deployment. We would expect the Truman to head home. If that does not happen, it will be a major indicator. The Nimitz group has recently completed two port visits in the Pacific, Hong Kong and Guam. She departed Guam over the weekend with an unspecified destination. I’m watching press reports on where she’s headed. She could be the third carrier in an Iran operation.

B-2’s have been taken off their flying pause.

What’s happening? The senior focus and threats are beginning to match those of a year ago. Then the Administration seemed to have wanted to put pressure on Iran and others to support another sanctions package. That is a possibility. The other possibility is the Administration is preparing the US and world audiences for military action against Iran. The briefing that is being prepared to show Iranian involvement in Iraq, that they are killing our troops, is the most important piece of evidence for me.

I believe we are seeing the elements of a strategic communications plan that leads to military operations against Iran.

PROTEST AGAINST CHINA IN SOUTH KOREA

SEOUL, South Korea (AP) — A North Korean defector tried to set himself on fire to halt the Olympic torch relay through Seoul Sunday, while thousands of police guarded the flame from protesters blasting China’s treatment of North Korean refugees.

Hundreds of China supporters waving the Chinese flag greeted the torch, throwing rocks at anti-Beijing demonstrators. Police ran alongside the flame and rode horses and bicycles on the relay across the city, which hosted the 1988 Olympics.

The torch relay has become a lightning rod for anti-China demonstrations. At other stops, protesters have focused their ire on Beijing’s recent crackdown on anti-government riots in Tibet. But in South Korea, China’s treatment of North Korean defectors has taken center stage.

Thousands of North Koreans, fleeing lives of hardship in a country that restricts all civil liberties, have escaped across the loosely controlled Chinese border, rather than attempt the heavily fortified frontier with the South. Many live in hiding in China, where if caught, they are deported back home to face imprisonment in life-threatening conditions.

The man who tried to immolate himself, 45-year-old Son Jong Hoon, had led an unsuccessful public campaign to save his brother from execution in the North, where he was accused of spying after the two met secretly in China. About an hour into the relay, Son poured gasoline on himself and tried to light himself on fire, but police stopped him.

NEW CRITICAL ISRAEL LOBBY FORMS

Bill Berkowitz: ‘J Street,’ a new liberal Jewish organization, hopes to challenge AIPAC’s influence over U.S.-Israeli affairs

In its entry on the “The Little Engine That Could,” Wikipedia notes that “the moralistic children’s story … is used to teach children the value of optimism.” Like the little engine that could, “J Street,” a new organization made up of prominent U.S. and Israeli Jews that hopes to shift the debate over the Middle East and U.S.-Israeli policy away from the conservative positions espoused by the mighty American Israel Public Affairs Committee (AIPAC) and towards a pro-peace position, must recognize that it has a huge hill to climb.

And one part of climbing that hill will be to redefine what it means to be “pro-Israel,” a term that conservative Jewish and evangelical Christian organizations have claimed for their own.

“For too long, the loudest American voices on Israel have come from the far right,” noted Jeremy Ben-Ami, a founder and director of both J Street, chartered as a 501(c)(4) organization, and its political-action affiliate, JStreetPac, a political action committee focusing on campaign funding.

“Those voices have claimed that the only way to be pro-Israel is to support military responses to political problems, to refuse to engage one’s adversaries in dialogue and to put off the day of reckoning when hard compromises will be required to achieve a peaceful and secure future for Israel and the entire Middle East,” he told reporters via teleconference in mid-April.

“These are not the kind of smart, tough views that serve the long-term interests of the state of Israel, of the United States — or frankly, the American Jewish community,” Ben-Ami, until recently, senior vice president in the Washington office of Fenton Communications, added.

Israel Might Have Many More Spies Here, Officials Say

By Jeff Stein, CQ National Security Editor

The elderly man arrested last week on charges of spying for Israel years ago was probably still working for the Jewish state’s espionage service in tandem with another, as yet unidentified spy, former U.S. intelligence officials say. The case serves as a reminder that the U.S.-Israeli intelligence relationship runs on two tracks.

POLITICS

Joe Gandelman, The Moderate Voice: There are signs of what could be a shift in the news media conventional wisdom: for the first time in months, some key pundits are hinting and even saying that Senator Barack Obama could lose the Democratic nomination to what has long been described as a seemingly-impossibly behind Senator Hillary Clinton. These kinds of cracks in the conventional wisdom often signal the beginning of a major shift, totally negating what earlier conventional wisdom steadfastly suggested “had” to be true. The catalyst: Clinton’s win over Obama in Pennsylvania. Even though it was expected, the recent bad publicity surrounding Obama on several fronts, his campaign being on the defensive, the unrelenting push by Clinton on several fronts, and the realities of how American politics works in the 21st century have started to change some media thinking.

COMMENT ON HILARY IRAN STANCE IN BOSTON GLOBE (VIA JAYNE STAHL)

AMERICANS have learned to take with a grain of salt much of the rhetoric in a campaign like the current Democratic donnybrook between Hillary Clinton and Barack Obama. Still, there are some red lines that should never be crossed. Clinton did so Tuesday morning, the day of the Pennsylvania primary, when she told ABC’s “Good Morning America” that, if she were president, she would “totally obliterate” Iran if Iran attacked Israel.This foolish and dangerous threat was muted in domestic media coverage. But it reverberated in headlines around the world.

Responding with understatement to a question in the British House of Lords, the foreign minister responsible for Asia, Lord Mark Malloch-Brown, said of Clinton’s implication of a mushroom cloud over Iran: “While it is reasonable to warn Iran of the consequences of it continuing to develop nuclear weapons and what those real consequences bring to its security, it is probably not prudent in today’s world to threaten to obliterate any other country and in many cases civilians resident in such a country.”

A less restrained reaction came from an editorial in the Saudi-based paper Arab News. Being neighbors of Iran, the Saudis and the other Gulf Arabs have the most to fear from Iran’s nuclear program and its drive to become the dominant power in the Gulf.

But precisely because they are most at risk from Iran’s regional ambitions, the Saudis want a carefully considered American approach to Iran, one that balances firmness and diplomatic engagement.

The Saudi paper called Clinton’s nuclear threat “the foreign politics of the madhouse,” saying, “it demonstrates the same doltish ignorance that has distinguished Bush’s foreign relations.”

TOMORROW: THE GREAT GAS TAX DUST UP