THE FACTS: An independent arbiter is no more bound to the government’s wishes than an oil company’s. In that sense, there is no certainty BP will be forced to make the Gulf economy whole again or that taxpayers are off the hook for the myriad costs associated with the spill or cleanup. The government can certainly press for that, using legislative and legal tools. But there are no guarantees and the past is not reassuring.

It took 20 years to sort through liability after the Exxon Valdez oil spill in Alaska, and in the end, punitive damages were slashed by the courts to about $500 million from $2.5 billion. Many people who had lost their livelihoods in the spill died without ever seeing a check.

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OBAMA: “In the coming days and weeks, these efforts should capture up to 90 percent of the oil leaking out of the well.”

THE FACTS: BP and the administration contend that if all goes as planned, they should be able to contain nearly 90 percent of the worst-case oil flow. But that’s a big “if.” So far, little has gone as planned in the various remedies attempted to shut off or contain the flow. Possibly as much as 60,000 barrels a day is escaping. BP would need to nearly triple its recovery rate to reach the target.

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OBAMA: Temporary measures will capture leaking oil “until the company finishes drilling a relief well later in the summer that is expected to stop the leak completely.”

THE FACTS: That’s the hope, but experts say the relief well runs the same risks that caused the original well to blow out. It potentially could create a worse spill if engineers were to accidentally damage the existing well or tear a hole in the undersea oil reservoir.

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OBAMA: “From the very beginning of this crisis, the federal government has been in charge of the largest environmental cleanup effort in our nation’s history.”

THE FACTS: Early on, the government established a command center and put Coast Guard Adm. Thad Allen in charge of coordinating the overall spill response. But officials also repeatedly have emphasized that BP was “responsible” and they have relied heavily on BP in making decisions from hiring cleanup workers to what oil dispersing chemicals to use. Local officials in the Gulf region have complained that often they don’t know who’s in charge _ the government or BP.

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OBAMA: “We have approved the construction of new barrier islands in Louisiana to try and stop the oil before it reaches the shore.”

THE FACTS: Louisiana Gov. Bobby Jindal and local officials pleaded for weeks with the Army Corps of Engineers and the spill response command for permission to build about 40 miles of sand berms along the barrier islands.

State officials applied for an emergency permit to build the berms May 11, but as days went by Jindal became increasingly angry at federal inaction. The White House finally agreed to a portion of the berm plan on June 2. BP then agreed to pay for the project.

The corps was worried that in some cases such a move would alter tides and drive oil into new areas and produce more harm than good.

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OBAMA: “Already, I have issued a six-month moratorium on deepwater drilling. I know this creates difficulty for the people who work on these rigs, but for the sake of their safety and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue.”

President Obama has nominated Berwick to be administrator of the Centers for Medicare and Medicaid, the federal agency that runs these two massive proto-socialist health care programs. If confirmed, he will oversee the massive cuts that Obamacare mandated in Medicare.

…

Within days after President Obama signed the law on March 23, companies filed reports with the Securities and Exchange Commission, saying the tax change would have a material adverse effect on their earnings.

Moreover, it said, “these one-time charges were required by applicable accounting rules.” The committee staff said this view was confirmed by independent experts at the Financial Accounting Standards Board and the American Academy of Actuaries.

1. Creates a protected class of “too big to fail” firms. Section 113 of the bill establishes a “Financial Stability Oversight Council,” charged with identifying firms that would “pose a threat to the financial security of the United States if they encounter “material financial distress.” These firms would be subject to enhanced regulation. However, such a designation would also signal to the marketplace that these firms are too important to be allowed to fail and, perversely, allow them to take on undue risk. As American Enterprise Institute scholar Peter Wallison wrote, “Designating large non-bank financial companies as too big to fail will be like creating Fannies and Freddies in every area of the economy.”[1]
2. Provides for seizure of private property without meaningful judicial review. The bill, in Section 203(b), authorizes the Secretary of the Treasury to order the seizure of any financial firm that he finds is “in danger of default” and whose failure would have “serious adverse effects on financial stability.” This determination is subject to review in the courts only on a “substantial evidence” standard of review, meaning that the seizure must be upheld if the government produces any evidence in favor of its action. This makes reversal extremely difficult.
3. Creates permanent bailout authority. Section 204 of the bill authorizes the Federal Deposit Insurance Corporation (FDIC) to “make available … funds for the orderly liquidation of [a] covered financial institution.” Although no funds could be provided to compensate a firm’s shareholders, the firm’s other creditors would be eligible for a cash bailout. The situation is much like the scheme implemented for AIG in 2008, in which the largest beneficiaries were not stockholders but rather other creditors, such as Deutsche Bank and Goldman Sachs[2]—hardly a model to be emulated.
4. Establishes a $50 billion fund to pay for bailouts. Funding for bailouts is to come from a $50 billion “Orderly Resolution Fund” created within the U.S. Treasury in Section 210(n)(1), funded by taxes on financial firms. According to the Congressional Budget Office, the ultimate cost of bank taxes will fall on the customers, employees, and investors of each firm.[3]
5. Opens a “line of credit” to the Treasury for additional government funding. Under Section 210(n)(9), the FDIC is effectively granted a line of credit to the Treasury Department that is secured by the value of failing firms in its control, providing another taxpayer financial support.
6. Authorizes regulators to guarantee the debt of solvent banks. Bailout authority is not limited to debt of failing institutions. Under Section 1155, the FDIC is authorized to guarantee the debt of “solvent depository institutions” if regulators declare that a liquidity crisis (“event”) exists.
7. Limits financial choices of American consumers. The bill contains a new “Bureau of Consumer Financial Protection” with broad powers to limit what financial products and services can be offered to consumers. The intended purpose is to protect consumers from unfair practices. But the effect would be to reduce available choices, even in cases where a consumer fully understands and accepts the costs and risks. For many consumers, this will make credit more expensive and harder to get.[4]
8. Undermines safety and soundness regulation. The proposed Bureau of Consumer Financial Protection would nominally be part of the Federal Reserve System, but it would have substantial autonomy. Decisions of the new bureau would not be subject to approval by the Fed. New rules could be stopped only through a cumbersome, after-the-fact review process involving a council of all the major regulatory agencies. This could impede efforts of economic (or “safety and soundness”) regulators to ensure the financial stability of regulated firms, as the new, independent “consumer” regulator would establish rules that conflict with that goal.
9. Enriches trial lawyers by authorizing consumer regulators to ban arbitration agreements. Section 1028 specifically authorizes the new consumer regulatory agency to ban arbitration agreements between consumers and financial firms. By reducing the use of streamlined dispute resolution procedures, more consumers and businesses would be forced to pay the costs of litigation—to the benefit of trial lawyers.
10. Subjects firms to hundreds of varying state and local rules. Section 1044 limits pre-emption of state and local rules, subjecting banks and their customers to confusing, costly, and inconsistent red tape imposed by regulators in jurisdictions across the country.
11. Subjects non-financial firms to financial regulation. Regulation under this legislation would extend far beyond banks. Many firms largely outside the financial industry would find themselves caught in the regulatory net. Section 102(B)(ii) of the bill defines a “nonbank financial company”” as a company “substantially engaged in activities … that are financial in nature.” The phrase “financial in nature” is defined in existing law quite broadly. According to former Treasury official Gregory Zerzan, it includes things such as “holding assets of others in trust, investing in securities … or even leasing real estate and offering certain consulting services.”[5] As a result, a broad swath of private industry may find itself ensnared in the financial regulatory net. As Zerzan explains: “An airplane manufacturer that holds customer down payments for future delivery, a large home improvement chain that invests its profits as part of a plan to increase revenues, and an energy firm that makes markets in derivatives are all engaged in ‘financial activities’ and potentially subject to systemic risk regulation.”
12. Imposes one-size-fits-all reform in derivative markets. The bill would subject derivatives now traded over-the-counter by banks and other financial institutions to regulation by the Commodity Futures Trading Commission and/or the Securities and Exchange Commission (SEC). It would require most derivative contracts to be settled through a clearinghouse rather than directly between the parties. Yet derivatives are already increasingly being traded on clearinghouses thanks to private efforts coordinated by the New York Fed.[6] The Senate’s bill, however, would require virtually all derivatives to be so traded. Applying such ill-designed blanket regulation would make financial derivatives more costly, more difficult to customize, and, consequently, less widely used—which would increase overall risk in the economy.[7]
13. Allows activist groups to use the corporate governance process for issues unrelated to the corporation or its shareholders. Section 972 of the bill authorizes the SEC to require firms to allow shareholders to nominate directors in proxy statement. Such proxy access turns corporate board elections from a process designed to ensure that each board has a good mix of skills and experience into a popularity contest where the long-term interests of the stockholders become secondary to political agendas or corporate raiders. The process can also be used by labor unions, politicians who manage public pension funds, and others to force corporations to respond to pet social or political causes.
14. Does nothing to address problems at Fannie Mae and Freddie Mac. These two government-sponsored housing giants helped fuel the housing bubble. When it popped, taxpayers—because of an implicit guarantee by the U.S. Treasury—found themselves on the hook for some $125 billion in bailout money. Not only has little of this amount been paid back, but the Treasury Department recently eliminated the cap on how much more Fannie and Freddie can receive. Yet the bill does nothing to resolve the problem or reform these government-run enterprises.

2. You are young and healthy and want to pay for insurance that reflects that status? Tough. You’ll have to pay for premiums that cover not only you, but also the guy who smokes three packs a day, drink a gallon of whiskey and eats chicken fat off the floor. That’s because insurance companies will no longer be able to underwrite on the basis of a person’s health status. (Section 2701).

3. You would like to pay less in premiums by buying insurance with lifetime or annual limits on coverage? Tough. Health insurers will no longer be able to offer such policies, even if that is what customers prefer. (Section 2711).

4. Think you’d like a policy that is cheaper because it doesn’t cover preventive care or requires cost-sharing for such care? Tough. Health insurers will no longer be able to offer policies that do not cover preventive services or offer them with cost-sharing, even if that’s what the customer wants. (Section 2712).

5. You are an employer and you would like to offer coverage that doesn’t allow your employers’ slacker children to stay on the policy until age 26? Tough. (Section 2714).

6. You must buy a policy that covers ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; chronic disease management; and pediatric services, including oral and vision care.

You’re a single guy without children? Tough, your policy must cover pediatric services. You’re a woman who can’t have children? Tough, your policy must cover maternity services. You’re a teetotaler? Tough, your policy must cover substance abuse treatment. (Add your own violation of personal freedom here.) (Section 1302).

7. Do you want a plan with lots of cost-sharing and low premiums? Well, the best you can do is a “Bronze plan,” which has benefits that provide benefits that are actuarially equivalent to 60% of the full actuarial value of the benefits provided under the plan. Anything lower than that, tough. (Section 1302 (d) (1) (A))

8. You are an employer in the small-group insurance market and you’d like to offer policies with deductibles higher than $2,000 for individuals and $4,000 for families? Tough. (Section 1302 (c) (2) (A).

9. If you are a large employer (defined as at least 101 employees) and you do not want to provide health insurance to your employee, then you will pay a $750 fine per employee (It could be $2,000 to $3,000 under the reconciliation changes). Think you know how to better spend that money? Tough. (Section 1513).

10. You are an employer who offers health flexible spending arrangements and your employees want to deduct more than $2,500 from their salaries for it? Sorry, can’t do that. (Section 9005 (i)).

11. If you are a physician and you don’t want the government looking over your shoulder? Tough. The Secretary of Health and Human Services is authorized to use your claims data to issue you reports that measure the resources you use, provide information on the quality of care you provide, and compare the resources you use to those used by other physicians. Of course, this will all be just for informational purposes. It’s not like the government will ever use it to intervene in your practice and patients’ care. Of course not. (Section 3003 (i))

12. If you are a physician and you want to own your own hospital, you must be an owner and have a “Medicare provider agreement” by Feb. 1, 2010. (Dec. 31, 2010 in the reconciliation changes.) If you didn’t have those by then, you are out of luck. (Section 6001 (i) (1) (A))

13. If you are a physician owner and you want to expand your hospital? Well, you can’t (Section 6001 (i) (1) (B). Unless, it is located in a country where, over the last five years, population growth has been 150% of what it has been in the state (Section 6601 (i) (3) ( E)). And then you cannot increase your capacity by more than 200% (Section 6001 (i) (3) (C)).

14. You are a health insurer and you want to raise premiums to meet costs? Well, if that increase is deemed “unreasonable” by the Secretary of Health and Human Services it will be subject to review and can be denied. (Section 1003)

15. The government will extract a fee of $2.3 billion annually from the pharmaceutical industry. If you are a pharmaceutical company what you will pay depends on the ratio of the number of brand-name drugs you sell to the total number of brand-name drugs sold in the U.S. So, if you sell 10% of the brand-name drugs in the U.S., what you pay will be 10% multiplied by $2.3 billion, or $230,000,000. (Under reconciliation, it starts at $2.55 billion, jumps to $3 billion in 2012, then to $3.5 billion in 2017 and $4.2 billion in 2018, before settling at $2.8 billion in 2019 (Section 1404)). Think you, as a pharmaceutical executive, know how to better use that money, say for research and development? Tough. (Section 9008 (b)).

16. The government will extract a fee of $2 billion annually from medical device makers. If you are a medical device maker what you will pay depends on your share of medical device sales in the U.S. So, if you sell 10% of the medical devices in the U.S., what you pay will be 10% multiplied by $2 billion, or $200,000,000. Think you, as a medical device maker, know how to better use that money, say for R&D? Tough. (Section 9009 (b)).

The reconciliation package turns that into a 2.9% excise tax for medical device makers. Think you, as a medical device maker, know how to better use that money, say for research and development? Tough. (Section 1405).

17. The government will extract a fee of $6.7 billion annually from insurance companies. If you are an insurer, what you will pay depends on your share of net premiums plus 200% of your administrative costs. So, if your net premiums and administrative costs are equal to 10% of the total, you will pay 10% of $6.7 billion, or $670,000,000. In the reconciliation bill, the fee will start at $8 billion in 2014, $11.3 billion in 2015, $1.9 billion in 2017, and $14.3 billion in 2018 (Section 1406).Think you, as an insurance executive, know how to better spend that money? Tough.(Section 9010 (b) (1) (A and B).)

18. If an insurance company board or its stockholders think the CEO is worth more than $500,000 in deferred compensation? Tough.(Section 9014).

19. You will have to pay an additional 0.5% payroll tax on any dollar you make over $250,000 if you file a joint return and $200,000 if you file an individual return. What? You think you know how to spend the money you earned better than the government? Tough. (Section 9015).

That amount will rise to a 3.8% tax if reconciliation passes. It will also apply to investment income, estates, and trusts. You think you know how to spend the money you earned better than the government? Like you need to ask. (Section 1402).

20. If you go for cosmetic surgery, you will pay an additional 5% tax on the cost of the procedure. Think you know how to spend that money you earned better than the government? Tough. (Section 9017).