Obama urges biggest financial reforms since 1930s

Banks face tightest regulations ever
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By Kevin Drawbaugh
WASHINGTON (Reuters) - President Barack Obama laid out his vision for reshaping U.S. financial regulation on Wednesday, aiming to tighten oversight of large firms whose excessive risk-taking triggered a global economic slump.
The proposals, under development over the past six months are headed next for debate in the U.S. Congress and include closing one bank regulator and creating government watchdogs for big-picture economic risk and financial product safety.
The administration takes on tough jobs, such as forcing large firms to boost their capital cushions and regulating over-the-counter derivatives and securitized instruments.
But it only partially tackles a task once seen as vital -- a top-to-bottom revamp of financial regulatory agencies.
No merger of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is being proposed, for instance, due largely to political obstacles.
"With the reforms we are proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse," Obama said in a White House speech.
"We seek to create a framework in which markets can function freely and fairly, without the fragility which in normal business cycles bring the risk of financial collapse, a system that works for businesses and consumers," he said.
EMPOWERING THE FED
Obama called for putting the Federal Reserve in charge of monitoring "systemic risk" to the economy posed by the largest financial firms, with the aim of preventing a repeat of the banking and capital markets crisis of the past year.
He also appealed for the creation of an agency that would seek to protect consumers of financial products, ranging from home loans to credit cards.
"My administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression," he said.
Months of congressional debate loom. Senate and House of Representatives committees will hold more than a dozen hearings on regulatory reform between now and mid-July, and conservative House Republicans have already offered a rival plan.
"There are clearly some ideas that we agree with," House Republican leader John Boehner told reporters. "But I do think that this idea of having this consumer board is very cumbersome, will limit the number of new financial products that come to the market and will give the government an awfully strong presence in an industry that's been very creative."
Obama defended the plan as a balanced approach that restrains excessive risk, but doesn't clamp down so hard that firms would be prevented from helping drive economic growth.
The president and his top economic advisers see the current financial upheaval as the latest in a series of crises going back decades, so their regulatory reform intends to correct problems beyond just those blamed for the latest episode. Continued...
Source: Reuters

Tarnished Republican drops leadership post

By Thomas Ferraro
WASHINGTON (Reuters) - Republican U.S. Senator John Ensign, a social conservative who had been seen as a potential 2012 presidential contender, admitted on Wednesday that he had an extramarital affair with a female aide.
The admission by Ensign, a member of the Senate Republican leadership, was an embarrassment for his party, which touts family values and is scrambling to rebound from losing the last two congressional elections as well as the White House in 2008.
"Last year I had an affair," Ensign said in a statement he read in a televised appearance back home in Nevada after privately informing Senate Republican colleagues.
"I violated the vows of my marriage. It is the worst thing I have ever done in my life."
Ensign lead failed efforts for Republicans to pick up seats in last year's Senate elections which left Democrats in control of the chamber with 59 of the 99 filled Senate seats. He ranks fourth in the Senate Republican leadership as chairman of the Republican Policy Committee.
Ensign, 51, indicated he plans to remain in Congress, saying in his statement, "I am committed to my service in the United States Senate and my work on behalf of the people of Nevada." He is up for re-election to a third term in 2012.
The senator had recently sparked speculation he may seek the party's 2012 presidential nomination with a visit to Iowa where initial contests for the White House are held every four years.
There was no immediate word if Ensign would step down as chairman of the Republican Policy Committee, a party aide said, declining to predict the political future of the two-term senator who had earlier been seen as a rising Republican star.
"No idea," another Republican aide said.
The Las Vegas Sun, a Nevada newspaper, quoted an unidentified Ensign aide as saying the affair took place between December 2007 and August 2008 with a campaign staffer married to an employee in Ensign's Senate office and that both have since left his office.
The newspaper reported Ensign's wife said in a statement: "Since we found out last year we have worked through the situation and we have come to a reconciliation. This has been difficult on both families. With the help of our family and close friends our marriage has become stronger."
A Republican aide who asked not to be identified noted the hypocrisy of Ensign's action since the Nevada senator had scorned colleague Larry Craig after the Republican lawmaker from Idaho was arrested in 2007 and accused of trying to solicit sex in a men's room.
"This is the guy who called Larry Craig a disgrace," the aide told Reuters.
(Reporting by Thomas Ferraro, Editing by Jackie Frank)

Source: Reuters

Clinton says U.S.-India ties need "upgrade"

By Sue Pleming
WASHINGTON (Reuters) - U.S. Secretary of State Hillary Clinton said on Wednesday Washington's relations with India needed an "upgrade" and urged closer cooperation on security, trade and other issues.
Clinton is set to visit India next month and she said she hoped the two nations could work together to solve global challenges from climate change to securing Afghanistan.
"As we pursue an enhanced bilateral relationship, we should recognize that, compared to other metrics of our cooperation, our official ties are past due for an upgrade," Clinton said in a speech to the U.S.-India Business Council.
"We need the bilateral cooperation between our governments to catch up with our people-to-people and economic ties."
Last year, India and Washington signed a landmark civil nuclear deal, overturning a 30-year ban on global nuclear commerce with India.
That deal will allow India to procure nuclear technology and fuel for its reactors from the international market.
To improve ties, she said Washington and New Delhi must overcome mistrust and address what she said were lingering uncertainties in the relationship.
She said some Americans feared that greater economic ties with India would mean lost jobs and falling wages, while Indians felt a closer partnership ran counter to the country's strong tradition of independence.
She also pledged closer economic and trade ties and said negotiations would begin soon on a bilateral investment treaty, creating more opportunities for trade between the two countries.
"President Obama has been clear that the United States has learned the lessons of the past. We will not use the global financial crisis as an excuse to fall back on protectionism," she said.
Without providing details, Clinton said the two countries needed to increase cooperation in fighting terrorism and improve intelligence-sharing.
"The president and I are committed to enhancing India's ability to protect itself," she said, adding that six Americans died in the November attacks on India's financial capital, Mumbai.
She welcomed Tuesday's meeting between the leaders of India and Pakistan, their first talks since the Mumbai attacks, which New Delhi blamed on the Pakistan-based Lashkar-e-Taiba militant group.
"As Pakistan now works to take on the challenge of terrorists in its own country, I am confident India, as well as the United States, will support that effort," Clinton said.

Source: Reuters

Obama lays out financial regulation overhaul plan

Banks face tightest regulations ever
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By Kevin Drawbaugh
WASHINGTON (Reuters) - President Barack Obama will lay out on Wednesday his vision for reshaping U.S. financial regulation, aiming to tighten oversight of the largest firms whose excessive risk-taking triggered a global recession.
The proposals will include closing one bank regulator and creating new overseers for big-picture economic risk and consumer financial product safety, according to a document detailing the administration's proposal.
In a package of reforms that takes on many tough jobs while avoiding at least one, the administration proposes putting the Federal Reserve in charge of monitoring the largest financial firms in the hope that holding one agency accountable will prevent a repeat of the severe banking and capital markets crisis that has shaken economies around the world.
"We must act now to restore confidence in the integrity of our financial system," the administration said in the 85-page document.
"The lasting economic damage to ordinary families and businesses is a constant reminder of the urgent need to act to reform our financial regulatory system and put our economy on a track to a sustainable recovery."
Months of debate in the U.S. Congress lie ahead. Committees of both the Senate and the House of Representatives have scheduled more than a dozen hearings on regulatory reform between now and mid-July. Conservative House Republicans have already offered their own rival plan.
Obama will present his proposals at 12:50 p.m..
Obama and his top economic advisers see the current financial upheaval as the latest in a series of crises going back decades, so their regulatory reform intends to correct problems beyond just those blamed for the latest episode.
CLOSING THRIFT OFFICE, EMPOWERING FED
Treasury Secretary Timothy Geithner, members of Congress, regulators and representatives from the financial industry and consumer groups will join Obama at the event "to lay out a comprehensive regulatory reform plan to modernize and protect the integrity of our financial system," the White House said.
The Obama plan will call for closing the Office of Thrift Supervision, a Treasury Department unit, and eliminating the federal charter under which savings and loans operate, with the objective of streamlining bank supervision.
In addition, the Federal Reserve would be assigned new duties to monitor risks that could threaten the entire financial system, working in conjunction with a council of other regulators to be chaired by Treasury.
The goal is to make sure a failure of one large company -- like bailed-out mega-insurer American International Group, for instance -- does not destabilize the broader economy.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the crisis, with the European Union moving on a similar track and more quickly than the United States in some areas.
As the Obama plan has evolved, the administration has backed away from some proposals as politically unachievable, such as a thorough structural revamp of financial oversight. No merger of the Securities and Exchange Commission and Commodity Futures Trading Commission will be proposed, for example. Continued...
Source: Reuters

Russia hopes "down-to-earth" Obama drops Star Wars

By Dmitry Solovyov
MOSCOW (Reuters) - Russia hopes U.S. President Barack Obama will not pursue his predecessor's plan to deploy weapons in space but Moscow is ready to respond appropriately to any such moves, a senior Russian general said on Wednesday.
Russia, negotiating with the United States a new treaty to curb nuclear arms to replace the Strategic Arms Reduction Treaty (START-1) expiring in December, has argued against the "weaponization of space."
President Dmitry Medvedev, due to receive Obama next month on his first visit to Moscow, has said Russia's conditions for new nuclear arms accords include banning arms in space.
"As far as I know, today's U.S. administration has somewhat different plans -- they have become more down-to-earth and more realistic," one of Russia's deputy defense ministers Vladimir Popovkin, in charge of weapons, told a news conference.
He said Russia could find a cheap way of dealing with any potential U.S. space defense system.
"There is a more adequate response, and for this there is no need to put weapons in space," he said. "It is not a big deal to shoot down a space satellite, and the Chinese have proven this by conducting a relevant experiment."
Popovkin recalled how then U.S. President Ronald Reagan's attempts to create a space-based anti-missile system had accelerated the Cold War arms race and helped precipitate the collapse of the Soviet Union.
"We were dragged into this escapade called 'Star Wars' under (U.S. President Ronald) Reagan, and you know well what the result was -- this was one of the causes behind the collapse of the Soviet Union. We squandered a huge amount of money," he said.
Former President George W. Bush ordered the Pentagon to start researching new anti-missile systems four years ago as a guard against a launch from North Korea or Iran.
Congress agreed a $5 million study of a possible space-based missile defense last October, a potential baby step toward a "Star Wars" system. The U.S. has spent more than $100 billion developing anti-missile systems on land, at sea, and in the air.
Russia believes the United States is concerned primarily about the safety of its orbital group of satellites which are vital for coordinating U.S. troops deployed around the globe and in leading wars in Iraq and Afghanistan, Popovkin said.
The deputy defense minister also said that Russia expected to successfully finish testing of its much-delayed Bulava strategic nuclear missile this year and make the first flight of its new fifth-generation fighter jet.
"The task is this year we must complete all flight tests of Bulava including from aboard the Yury Dolgoruky (nuclear submarine)," Popovkin said.
"As for the fifth-generation aircraft, it is set to take off this year and we have no reason to postpone this deadline. Its engine will be 4+++ but the plane itself and many of its key elements will be definitely fifth generation."
(Editing by Louise Ireland)

Source: Reuters

Obama pushes reform to restore investor confidence

By Kevin Drawbaugh
WASHINGTON (Reuters) - President Barack Obama will unveil on Wednesday his plans for reshaping U.S. financial regulation, with proposals to close one bank regulator and create new overseers for big-picture economic risk and consumer financial product safety.
In a package of reforms that takes on many tough jobs while avoiding at least one, the administration will call for tighter oversight aimed at preventing a repeat of the severe banking and capital markets crisis that has shaken economies around the world.
Months of debate in the U.S. Congress lie ahead. Committees of both the Senate and the House of Representatives have scheduled more than a dozen hearings on regulatory reform between now and mid-July. Conservative House Republicans have already offered their own rival plan.
Obama will present his proposals at 12:50 p.m. EDT on Wednesday, the White House said.
Treasury Secretary Timothy Geithner, members of Congress, regulators and representatives from the financial industry and consumer groups will join Obama at the event "to lay out a comprehensive regulatory reform plan to modernize and protect the integrity of our financial system," the White House said.
A senior administration official said on Tuesday that the Obama plan will call for closing the Office of Thrift Supervision, a Treasury Department unit, and eliminating the federal charter under which savings and loans operate, with the objective of streamlining bank supervision.
In addition, the Federal Reserve would be assigned new duties to monitor risks that could threaten the entire financial system, working in conjunction with a council of other regulators to be chaired by Treasury.
The goal is to make sure a failure of one large company -- like bailed-out mega-insurer American International Group, for instance -- does not destabilize the broader economy.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the crisis, with the European Union moving on a similar track, and more quickly than the United States in some areas.
As the Obama plan has evolved, the administration has backed away from some proposals as politically unachievable, such as a thorough structural revamp of financial oversight. No merger of the Securities and Exchange Commission and Commodity Futures Trading Commission will be proposed, for example.
Obama will call for establishment of an independent consumer financial products watchdog agency, and for requiring financial firms to hold more capital so they can better survive tough times.
More transparency and accountability would be mandated for exotic financial markets that in recent years expanded far beyond the government's ability to keep track of them.
Under the plan, the government would be empowered to seize and unwind large, troubled companies that are not banks, modeling the process on the Federal Deposit Insurance Corp's existing power to unwind failing banks.
The administration will also urge reining in markets for securitized debt and over-the-counter derivatives, as well as more regulation of money market mutual funds, credit rating agencies and hedge funds.
It will push for changes in corporate governance that could give shareholders more power to restrain executive compensation. Continued...
Source: Reuters

Obama, Lee warn North Korea; missile on the move

United front against North Korea
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By Jack Kim
SEOUL (Reuters) - The leaders of South Korea and the United States told North Korea to drop its atomic ambitions and stop threatening the region while media reports on Wednesday said Pyongyang was moving ahead with plans to launch a long-range missile.
After a summit with South Korean President Lee Myung-bak in Washington on Tuesday, U.S. President Barack Obama said a nuclear-armed North Korea would pose a "grave threat" to the world. He vowed new U.N. sanctions imposed for North Korea's May 25 nuclear test would be strictly enforced.
"Given the belligerent manner in which they are constantly threatening their neighbors, I don't think there's any question that that would be a destabilizing situation that would be a profound threat to not only the United States' security, but to world security," Obama said at a news conference.
Obama vowed to end a cycle of allowing North Korea to create a nuclear crisis, then get concessions in the form of food, fuel and other incentives in return for backing down, only to later see Pyongyang renege on its promises.
"This is a pattern they've come to expect," Obama said. "We are going to break that pattern."
Obama also reaffirmed Washington's commitment to the defense of South Korea, including keeping it under the U.S. "nuclear umbrella," a move likely to anger Pyongyang, which accuses Washington of scheming to mount a nuclear attack against it.
Analysts say the North's provocative moves are partly aimed at building internal support for leader Kim Jong-il, who appears to be laying the foundation for his youngest son to eventually take over the impoverished nation. The 67-year-old leader is believed to have suffered a stroke last year.
MISSILE TRAIN ON THE MOVE
North Korea has also threatened to launch an intercontinental ballistic missile after being earlier punished for a long-range rocket launch in April, which was widely seen as a disguised missile test that violated U.N. resolutions.
A South Korean newspaper said the North's special train for moving intercontinental ballistic missiles (ICBM) had made a trip to an east-coast missile base, weeks after it was seen moving a missile to a new site on the west coast.
U.S. and South Korean authorities believe the train may have moved a long-range rocket to the Musudan-ri base on the east coast, used to launch two long-range rockets in the past, the Chosun Ilbo newspaper said.
"A U.S. spy satellite spotted a special ICBM transport train moving from the manufacturing plant (near Pyongyang) to the Musudan-ri test site and staying there for a few days before returning," it quoted a government source as saying.
The rocket launched in April flew about 3,000 km (1,860 miles), well short of the 4,800 km needed to reach the Alaskan coast. The rocket, called the Taepodong-2, is designed to fly as far as U.S. territory.
Japan's Sankei newspaper, which did not cite any sources, said there was activity at missile bases on both coasts that appeared to be preparations for launches.
The moves at one site could be a ruse aimed at confusing U.S. and Japanese intelligence, it said. Continued...
Source: Reuters

Obama to unveil plans for financial rules overhaul

By Kevin Drawbaugh
WASHINGTON (Reuters) - President Barack Obama will unveil on Wednesday his plans for reshaping U.S. financial regulation, with proposals to close one bank regulator and create new overseers for big-picture economic risk and consumer financial product safety.
In a package of reforms that takes on many tough jobs while avoiding at least one, the administration will call for tighter oversight aimed at preventing a repeat of the severe banking and capital markets crisis that has shaken economies around the world.
Months of debate in the U.S. Congress lie ahead. Committees of both the Senate and the House of Representatives have scheduled more than a dozen hearings on regulatory reform between now and mid-July. Conservative House Republicans have already offered their own rival plan.
Obama will present his proposals at 12:50 p.m. EDT on Wednesday, the White House said.
Treasury Secretary Timothy Geithner, members of Congress, regulators and representatives from the financial industry and consumer groups will join Obama at the event "to lay out a comprehensive regulatory reform plan to modernize and protect the integrity of our financial system," the White House said.
A senior administration official said on Tuesday that the Obama plan will call for closing the Office of Thrift Supervision, a Treasury Department unit, and eliminating the federal charter under which savings and loans operate, with the objective of streamlining bank supervision.
In addition, the Federal Reserve would be assigned new duties to monitor risks that could threaten the entire financial system, working in conjunction with a council of other regulators to be chaired by Treasury.
The goal is to make sure a failure of one large company -- like bailed-out mega-insurer American International Group, for instance -- does not destabilize the broader economy.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the crisis, with the European Union moving on a similar track, and more quickly than the United States in some areas.
As the Obama plan has evolved, the administration has backed away from some proposals as politically unachievable, such as a thorough structural revamp of financial oversight. No merger of the Securities and Exchange Commission and Commodity Futures Trading Commission will be proposed, for example.
Obama will call for establishment of an independent consumer financial products watchdog agency, and for requiring financial firms to hold more capital so they can better survive tough times.
More transparency and accountability would be mandated for exotic financial markets that in recent years expanded far beyond the government's ability to keep track of them.
Under the plan, the government would be empowered to seize and unwind large, troubled companies that are not banks, modeling the process on the Federal Deposit Insurance Corp's existing power to unwind failing banks.
The administration will also urge reining in markets for securitized debt and over-the-counter derivatives, as well as more regulation of money market mutual funds, credit rating agencies and hedge funds.
It will push for changes in corporate governance that could give shareholders more power to restrain executive compensation. Continued...
Source: Reuters

Obama to axe bank agency in financial overhaul

By Kevin Drawbaugh
WASHINGTON (Reuters) - The Obama administration plans to streamline U.S. bank oversight and put the Federal Reserve in charge of monitoring big-picture economic risks in a sweeping regulatory overhaul to be formally unveiled on Wednesday, a senior administration official said.
The Office of Thrift Supervision, a Treasury Department unit, would be closed and the federal charter under which savings and loans operate eliminated under the plan, the official told reporters on a conference call on Tuesday.
The Fed would work in conjunction with a council of other regulators, to be chaired by Treasury, on monitoring "systemic risk" under the plan.
The aim is to avert future problems like the severe banking and capital markets crisis that has hammered economies worldwide since early 2008, without shackling firms so tightly that they cannot drive economic growth.
"There is going to be streamlining, consolidation ... so that you don't find people falling through the gaps," President Barack Obama told reporters earlier on Tuesday.
"Whether it's on the consumer protection side, the investor protection side, the systemic risks ... It's going to be a much more effectively integrated system than previously," he said.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the crisis, with the European Union moving on a similar track, more quickly in some areas than the United States.
Months of debate lie ahead in the U.S. Congress, with many of the proposed changes requiring legislation. Senate and House of Representatives committees have scheduled more than a dozen hearings between now and mid-July.
Obama on Wednesday will also call for establishment of an independent consumer financial products watchdog agency to write and enforce rules on fair lending and other matters.
Other administration goals include forcing financial groups to hold more capital so they can better survive tough times, and bringing more transparency and accountability to exotic financial markets that in recent years expanded far beyond the government's ability to keep track of them.
OBAMA SEES 'HEAVY LIFT' ON REFORM PLAN
The president pledged to pursue major changes, but warned it will be a "heavy lift" politically with special interests already offering opposition. Earlier on Tuesday, the U.S. Chamber of Commerce, the nation's largest business lobbying group, said it opposes key parts of the plan.
The administration wants to give the Fed new powers to police systemic risk as a way to make sure that the failure of one large company -- like bailed-out mega-insurer American International Group, for instance -- does not destabilize the broader economy.
It also will propose empowering the government to seize and unwind large, troubled companies. Part of the proposal would require large, "Tier One" companies to maintain contingency plans for their unwinding in case of future trouble.
The administration will also seek to rein in markets for securitized debt and over-the-counter derivatives, as well as more regulation of money market mutual funds, credit rating agencies and hedge funds. Continued...
Source: Reuters

Sen. John Ensign admits extramarital affair

By Thomas Ferraro
WASHINGTON (Reuters) - Republican U.S. Senator John Ensign, a social conservative who had been seen as a potential 2012 presidential contender, admitted on Wednesday that he had an extramarital affair with a female aide.
The admission by Ensign, a member of the Senate Republican leadership, was an embarrassment for his party, which touts family values and is scrambling to rebound from losing the last two congressional elections as well as the White House in 2008.
"Last year I had an affair," Ensign said in a statement he read in a televised appearance back home in Nevada after privately informing Senate Republican colleagues.
"I violated the vows of my marriage. It is the worst thing I have ever done in my life."
Ensign lead failed efforts for Republicans to pick up seats in last year's Senate elections which left Democrats in control of the chamber with 59 of the 99 filled Senate seats. He ranks fourth in the Senate Republican leadership as chairman of the Republican Policy Committee.
Ensign, 51, indicated he plans to remain in Congress, saying in his statement, "I am committed to my service in the United States Senate and my work on behalf of the people of Nevada." He is up for re-election to a third term in 2012.
The senator had recently sparked speculation he may seek the party's 2012 presidential nomination with a visit to Iowa where initial contests for the White House are held every four years.
There was no immediate word if Ensign would step down as chairman of the Republican Policy Committee, a party aide said, declining to predict the political future of the two-term senator who had earlier been seen as a rising Republican star.
"No idea," another Republican aide said.
The Las Vegas Sun, a Nevada newspaper, quoted an unidentified Ensign aide as saying the affair took place between December 2007 and August 2008 with a campaign staffer married to an employee in Ensign's Senate office and that both have since left his office.
The newspaper reported Ensign's wife said in a statement: "Since we found out last year we have worked through the situation and we have come to a reconciliation. This has been difficult on both families. With the help of our family and close friends our marriage has become stronger."
A Republican aide who asked not to be identified noted the hypocrisy of Ensign's action since the Nevada senator had scorned colleague Larry Craig after the Republican lawmaker from Idaho was arrested in 2007 and accused of trying to solicit sex in a men's room.
"This is the guy who called Larry Craig a disgrace," the aide told Reuters.
(Reporting by Thomas Ferraro, Editing by Jackie Frank)

Source: Reuters

U.S. House clears $106 billion war funding, Senate next

By Jeremy Pelofsky
WASHINGTON (Reuters) - The House of Representatives on Tuesday narrowly backed a $106 billion bill to pay for the U.S. wars in Iraq and Afghanistan and extend billions in new credit to the International Monetary Fund.
The legislation also includes extras like vouchers to spur U.S. car sales, and comes after a series of political battles that exposed the sharp fissures between President Barack Obama's Democrats and the Republican minority.
The spending bill, which now heads to the Senate for consideration, marks a step forward for Obama's agenda for winding down the Iraq war and boost operations in Afghanistan where militants are entrenched.
Obama and his fellow Democrats who control both chambers had to fight hard for the bill. But in the 226-202 vote, they managed only to get five Republican votes and saw 32 Democrats vote against it.
Almost all Republicans withdrew support for the war funding bill because provisions were added by the Senate to provide $108 billion in new credit lines for the IMF to help the agency ease countries through the global financial downturn.
Some Democrats appeared to question Republican support for the troops since it was largely focused on funding the wars.
"Eighty percent or more of this bill is to support the young men and women, and some not so young, who we have sent in harm's way in Iraq and Afghanistan to confront terrorism," House Democratic Leader Steny Hoyer said during floor debate.
But Republicans countered that the IMF funding should have been considered separately and expressed concern it could lend to U.S. foes like Iran or Venezuela -- even though the IMF currently has no loan programs with these countries.
"Republicans support our troops, period," said Republican Representative Eric Cantor, who helped lead the opposition. The legislation also authorizes U.S. support for the IMF's plan to sell 400 tons (12.97 million ounces) of its gold reserves.
CASH FOR CLUNKERS
Lawmakers also tussled over $1 billion inserted in the bill to spur car sales through vouchers of up to $4,500 for Americans to junk less fuel-efficient vehicles and buy new cars that get better mileage.
Both Republicans and Democrats have complained that the bill's requirements for improving mileage are too small -- as little as two miles per gallon -- and have questioned inserting it into the war funding measure. Republican Senator Judd Gregg has said he may try to strip the program from the bill.
The bill also dealt with Obama's plans to close the U.S. prison at Guantanamo Bay, Cuba. A compromise was struck to permit Guantanamo terrorism suspects to be brought to the United States for trial but not for permanent detention.
The overall bill includes $79.9 billion for the wars plus $2.7 billion for eight Boeing Co C-17 military transport aircraft and seven Lockheed Martin C-130 planes that the Pentagon did not request.
It also has $1.4 billion in foreign aid to Pakistan, half for its counterinsurgency effort against militant Taliban forces. Continued...
Source: Reuters

South Korea trade deal needs more work: Obama

By Doug Palmer
WASHINGTON (Reuters) - President Barack Obama said on Tuesday that auto, beef and other trade issues with South Korea must be resolved before he will ask Congress to vote on a two-year-old free trade agreement with the longtime ally.
"We want to make sure that we have ... an agreement that I feel confident is good for the American people, that President Lee feels confident is good for the Korean people, before we start trying to time when we would present it," Obama said at a press conference with South Korean President Lee Myung-bak.
He paired South Korea's concern about beef imports with U.S. concerns about the pact's auto provisions, saying both were "understandable, legitimate issues for negotiation."
Obama and Lee issued a joint statement saying they were "committed to working together to chart a way forward" for the agreement, which was signed in June 2007.
Toward that goal, the two countries agreed to begin "working-level consultations," Lee said.
"Once we have resolved some of the substantive issues, then there's going to be the issue of political timing and when that should be presented to Congress. But I don't want to put the cart before the horse," Obama said.
Obama opposed the free trade deal during last year's campaign on the grounds that its auto provisions were unfairly tilted in favor of South Korea, which already runs a huge auto trade surplus with the United States.
That won him favor with U.S. auto workers but disappointed a wide swath of manufacturing, service industry and farm groups that expect the agreement would boost their exports.
U.S. OPEN TO "CREATIVE" SOLUTION
The U.S. Trade Representative's office has been meeting in recent weeks with Congress and other stakeholders to hear their concerns and hopes to have a proposal ready "in the near future" to present to Seoul, a U.S. trade official said.
South Korea has been clear that it would be very difficult for them to formally reopen the pact because of the demands some domestic farm groups would make for changes in the agreement, the official said.
"We're open to being creative on finding a way forward," the official said, adding that could be accomplished through a variety of means, including an exchange of letters to outline additional commitments.
U.S. Trade Representative Ron Kirk and South Korean Trade Minister Kim Jong-hoon will have several opportunities in the coming months to discuss the pact, including a meeting of Asia-Pacific trade ministers on July 21-22 in Singapore.
Obama's insistence on changes to the trade deal comes as he is committing tens of billions of dollars in taxpayer money to prop up U.S. automakers Chrysler and General Motors. Ford, the only U.S. automaker not to accept U.S. government aid, has led opposition to the Korea deal.
"Ford deeply appreciates President Obama's strong commitment to ensuring a correction in the huge imbalance in U.S.-Korean automotive trade before an FTA will be considered," Stephen Biegun, vice president of international government affairs, said in a statement. Continued...
Source: Reuters

Obama to merge bank agencies in reform plan: source

By Kevin Drawbaugh
WASHINGTON (Reuters) - The Obama administration plans to merge two banking regulators and create a federal watchdog on consumer financial products as part of a sweeping reform plan to be formally unveiled on Wednesday.
The U.S. Office of Thrift Supervision will merge with the Office of the Comptroller of the Currency, both bank overseers, a congressional aide said, citing a briefing given by Treasury Department officials.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the worst global financial crisis in generations. An OTS-OCC merger had been seen as likely to be included in its plan.
President Barack Obama will formally unveil the proposals on Wednesday. Treasury officials were giving briefings in both the Senate and the House of Representatives on Tuesday evening.
Obama pledged earlier on Tuesday in remarks at the White House that he would pursue major changes in financial oversight, but warned it will be a "heavy lift" politically with special interests already offering opposition.
A key element in the plan will be creating an independent Consumer Financial Protection Agency to write and enforce rules on fair lending and other matters.
The administration wants to accomplish a wide range of changes in regulation to try to prevent a recurrence of the crisis that has been hammering economies around the world.
Goals include closing gaps in regulation without shackling firms so tightly that they cannot support economic growth; forcing banks to hold more capital so they can better survive tough times, and bringing more transparency and accountability to financial markets that in recent years expanded far beyond the government's ability to keep track of them.
FED TO POLICE SYSTEMIC RISK
The administration wants to give the Federal Reserve new powers to police "systemic risk," in conjunction with a council of regulators, as a way to make sure that the failure of one important company does not destabilize the broader economy.
It also will propose empowering the government to seize and unwind large, troubled companies, and will seek to rein in markets for securitized debt and over-the-counter derivatives.
"There is going to be streamlining, consolidation ... so that you don't find people falling through the gaps," the president told reporters.
"Whether it's on the consumer protection side, the investor protection side, the systemic risks ... It's going to be a much more effectively integrated system than previously," he said.
Months of debate lie ahead. Congress has set more than a dozen hearings on financial reform between now and mid-July.
"We are going to put forward a very strong set of regulatory measures ... We expect that Congress will work swiftly to get these laws in place," Obama said. Continued...
Source: Reuters

U.S. says undecided on Eastern Europe missile plan

By Jim Wolf
WASHINGTON (Reuters) - The Obama administration said on Tuesday it was undecided about a Bush-era plan to put U.S. missile defenses in Eastern Europe, which has been fiercely opposed by Russia and strained bilateral ties.
"No final decisions have been made regarding missile defense in Europe," Deputy Defense Secretary William Lynn told the Senate Armed Services Committee.
Lynn described a plan initiated by former President George W. Bush to install 10 two-stage interceptor missiles in Poland plus a related radar station in the Czech Republic as only "one option" under review.
He said Washington also was exploring expanded missile-defense cooperation with Russia as a possible means of countering a perceived threat from Iranian ballistic missiles.
"The United States will work to identify new areas where our two countries could advance our missile defense cooperation," Lynn said. "For example, there are Russian radars near Iran that would provide helpful early warning detection in the case of an Iranian ballistic missile launch."
The possible use of these radar stations -- in southern Russia and Azerbaijan, one of them only about 60 miles from Iran -- would be discussed when President Barack Obama travels to Moscow from July 6 to 8, Lynn said.
Obama hopes to build on calls from both capitals to "reset" ties strained over the proposed expansion of U.S. missile defense close to Russia's borders among other things.
Moscow, smarting from the entry of several former Warsaw Pact allies into NATO, says the plans are a threat to Russian security.
On April 5 President Barack Obama said the United States would go ahead with a missile-defense system that is "cost-effective and proven" as long as a threat from Iran persists.
"If the Iranian threat is eliminated, we will have a stronger basis for security, and the driving force for missile defense construction in Europe at this time will be removed," he said in a major speech on the subject in Prague.
REPUBLICAN WARNS AGAINST U.S. HESITATION
Obama, a Democrat, has tried to reach out to Tehran after three decades of hostility but turmoil in Iran after last weekend's presidential election have raised new questions about Iran's future and the possibility of U.S.-Iranian talks.
Republican Senator Jeff Sessions said U.S. hesitation over the antimissile plan would "undermine the Poles' and the Czechs' willingness" to host the installations.
The parliaments of the two countries have not yet ratified the proposed installations on their soil. Poland is due to receive U.S.-built Patriot PAC-3 antimissile batteries as part of the deal.
Marine Corps General James Cartwright, vice chairman of the Joint Chiefs of Staff, told the committee that any U.S. missile-defense partnership with Russia likely would be the most effective way to curb an Iranian threat. Continued...
Source: Reuters

Republicans plan rival U.S. healthcare plan

By Donna Smith
WASHINGTON (Reuters) - Pushing back against Democratic plans to overhaul the U.S. healthcare system, Republicans on Tuesday readied a less costly alternative they say will make insurance more affordable.
Representative David Camp, the top Republican on the House Ways and Means Committee, said the plan offered significant reforms, including incentives for healthy living, protection for doctors against malpractice lawsuits and tax breaks to encourage small businesses to offer insurance to their workers.
"We obviously think it's important to make healthcare more affordable and to drive down costs," Camp said in an interview before a planned news briefing on the plan on Wednesday.
U.S. healthcare costs nearly 16 percent of gross domestic product, roughly twice what many developed countries pay per capita. Costs are rising much faster than inflation, yet 46 million people are uninsured and have little access to care.
Healthcare reform is a major goal of President Barack Obama, who warned on Monday the system was "a ticking time bomb for the federal budget."
While the minority party in the House has little power to stop a Democratic bill likely to include a new government-run plan to help cover the millions uninsured, Camp said it was important that Republicans offer up a less costly alternative.
"We don't want the solution to cost more than the problem," Camp said. The Ways and Means Committee is one of a number of panels in the Democratic-controlled House and Senate drafting the overhaul that Obama wants to sign into law by October.
Republicans are pointing to new estimates that healthcare proposals taking shape in the Senate could add between $1 trillion and $1.5 trillion to an already bloated U.S. deficit.
Those estimates came as the Senate Health, Education, Labor and Pensions Committee works on its proposal, which will include sweeping insurance market changes as well as a government plan yet to be fleshed out.
Senators said the estimates by the nonpartisan Congressional Budget Office were preliminary and based on incomplete and evolving legislation.
The Senate Finance Committee will offer its proposal later this week and a committee aide said the bill would cost less than $1 trillion over 10 years. That will be paid for mostly by cost savings in the medical system, Senate Finance Committee Chairman Max Baucus told reporters.
In an interview with Reuters on Monday, Baucus said senators were moving close to agreement on a bill that could win support from both Republicans and Democrats -- which could be important for Obama when he seeks to implement the proposed changes.
Lawmakers have been discussing a potential compromise over the role of the government in covering the uninsured. The proposal to create federally chartered nonprofit cooperatives to compete with insurance companies and small businesses is still being discussed, Baucus said.
(Editing by Peter Cooney)

Source: Reuters

Obama frets on debt, sees U.S. unemployment rising

WASHINGTON (Reuters) - President Barack Obama said on Tuesday that worrying about the U.S. government's finances "keeps me awake at night" and the country needed to start planning now to tackle soaring deficits.
In a pair of interviews on CNBC and Bloomberg television, Obama defended increasing government spending to prevent the recession from worsening, and warned the unemployment rate may hit 10 percent this year, a level not seen since 1983.
"There's no doubt that we've got a serious problem in terms of our long-term deficits and debt," he told CNBC. "I make no apologies for having acted short term to deal with our recession."
But he said once the recession ends, "we're going to have to close that gap between the amount of money coming in and the amount of money going out."
The Congressional Budget Office estimated on Tuesday that the federal deficit would hit $1.43 trillion in fiscal 2010 under Obama's budget plan, slightly higher than it had previously forecast.
Obama said unless the United States can contain its long-term debt and deficits, foreign investors may shun U.S. assets, driving up borrowing costs for the government as well as households and businesses.
"I am concerned about the long-term issue of our structural deficit and our long-term debt because if we don't get a handle on that then there's no doubt that at some point whether it's the Chinese, the Koreans, the Japanese, whoever else has been snatching up Treasuries are going to decide that this is too much of a risk," he told Bloomberg.
Rising health care costs put the biggest strain on the budget, so curbing those costs would help shore up U.S. finances, he said. Obama has proposed overhauling the health care system to cover those without insurance, but critics have questioned how he will pay for that without worsening the fiscal position.
He said the pace of job losses was slowing and the economy was "going to turn around," but the unemployment rate would probably rise from its current level of 9.4 percent.
Economists advising the American Bankers Association forecast earlier on Tuesday that the U.S. unemployment rate would peak at 10 percent, although they did not expect it to reach that mark until early in 2010.
"You're starting to see the engines of the economy turn," Obama said on Bloomberg. "It's going to take a long time. We had a huge deleveraging that took place, but I'm confident that if we take the steps that are necessary on healthcare, on energy, on education. If we get a strong financial regulatory system in place so people have confidence in the markets again, that we will end up seeing a recovery shortly."
(Reporting by Emily Kaiser and Karey Wutkowski; Editing by Diane Craft)

Source: Reuters

Republican demands BofA-Countrywide loan emails

By Kim Dixon
WASHINGTON (Reuters) - Bank of America has a Wednesday deadline to disclose any special mortgage terms the bank's Countrywide Financial unit gave to politically influential customers over an eight-year period, a senior Republican said on Tuesday.
In a letter to Bank of America Chief Executive Ken Lewis, Representative Darrell Issa said the House Oversight and Government Reform Committee was probing deeper into Countrywide's program of preferential mortgage rates.
"Interviews conducted by the committee have given cause for concern about the intent and reach of Countrywide's VIP loan program," Issa said in the June 2 letter released on Tuesday. "In many cases, Countrywide facilitated and expedited the loan process for VIPs by ignoring the company's lending standards."
Bank of America bought Countrywide, which has come to symbolize the excesses of the lending industry, for a fire-sale price of $2.5 billion last July 1. It had collapsed under the weight of bad mortgages and defaults.
A Bank of America spokesman said the bank would reply to the lawmaker by the deadline.
Issa is the top Republican on the House Oversight and Government Reform Committee, which last week grilled Lewis about Bank of America's acquisition of Merrill Lynch. The panel plans to call Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson to testify at a future hearing on the matter.
In the letter to Lewis, Issa asked for VIP loan program documents from 2000 through 2008, including emails and correspondence from lobbyists. He set a June 17 deadline for the bank to turn over materials related to what was also known as the "Friends of Angelo" program, after Countrywide founder Angelo Mozilo.
The committee chairman, Democrat Edolphus Towns, did not sign the letter.
Democrat Christopher Dodd, chairman of the Senate Banking Committee, last year said he regretted obtaining two mortgages from Countrywide in 2003 under the VIP program, which triggered a Senate ethics investigation. Dodd denied receiving any special favors from Countrywide and said he believed the VIP program was "nothing more than enhanced customer service."
Earlier this month, the U.S. Securities and Exchange Commission filed a lawsuit accusing Mozilo of insider trading and misleading investors about the deteriorating of the lender's underwriting standards. Mozilo has denied any wrongdoing.
(Reporting by Kim Dixon)

Source: Reuters

Autos "clunker" bill likely to face Senate obstacle

WASHINGTON (Reuters) - Auto industry supporters in Congress are bracing for a last-minute challenge this week to a legislative proposal that is designed to spur U.S. vehicle sales.
Republican Senator Judd Gregg of New Hampshire said he hopes to raise a procedural motion on the Senate floor to strip the provision from a bill that continues funding for the Iraq and Afghanistan wars.
"As the nation's debt continues to climb to unsustainable levels, it is troubling that Congress is looking for even more fiscally reckless ways to subsidize the auto industry," Gregg said in a statement.
The so-called "cash for clunkers" plan approved in House/Senate negotiations on the larger spending bill would offer consumers up to $1 billion in vouchers toward the purchase of fuel efficient vehicles when they trade in older, less efficient models.
Supporters hope the plan that would run through September 30 will generate up to 250,000 new car sales, boosting a severely depressed industry that has seen two U.S. manufacturers -- General Motors Corp and Chrysler -- seek bankruptcy protection since April.
Gregg argues the proposal is not only fiscally irresponsible but procedurally flawed, too, because it was not included in full House or Senate votes on the wartime appropriations bill.
Supporters in the Senate say the challenge could come as early as Wednesday.
Senator Debbie Stabenow of Michigan, a lead advocate of the auto proposal, said the measure was of prime importance to automakers and related businesses.
"This is our one chance opportunity to help dealers," Stabenow said.
The House of Representatives approved a separate "clunkers" bill while the Senate never took it up. The measure was inserted into the spending package during negotiations last week to reconcile other differences in the spending legislation.
The House could vote later on Tuesday on the appropriations bill.
(Reporting by John Crawley and Jaeremy Pelofsky; Editing Bernard Orr)

Source: Reuters

Obama, Lee warn North Korea brinkmanship won't work

N. Korea's anti-sanctions rally
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By Matt Spetalnick and Doug Palmer
WASHINGTON (Reuters) - U.S. President Barack Obama and South Korean President Lee Myung-bak presented a united front to North Korea on Tuesday, saying Pyongyang must abandon its nuclear weapons program and will not be rewarded for provoking a crisis.
With Lee at his side in the White House Rose Garden, Obama said a nuclear-armed North Korea would pose a "grave threat" to the world and vowed that new U.N. sanctions against the reclusive communist-ruled nation would be strictly enforced.
"Given the belligerent manner in which they are constantly threatening their neighbors, I don't think there's any question that that would be a destabilizing situation that would be a profound threat to not only the United States' security, but to world security," Obama said.
He promised to end a cycle of allowing impoverished North Korea to create a nuclear crisis, then granting concessions in the form of food, fuel and other incentives to get Pyongyang to back down, only to later see it renege on its promises.
"This is a pattern they've come to expect," Obama said. "We are going to break that pattern."
While talking tough, Obama -- who took office in January pledging a new approach of talking to America's enemies -- also extended an olive branch.
"I want to be clear that there is another path available to North Korea ... including full integration into the community of nations," Obama said. "That destination can only be reached through peaceful negotiations that achieve the full and verifiable denuclearization of the Korean peninsula."
North Korea, which last month conducted a nuclear explosion and missile tests in defiance of international pressure, said at the weekend it would start a uranium enrichment program and weaponize all its uranium in response to new U.N. sanctions.
Lee said the U.N. Security Council's vote last week to expand sanctions on North Korea showed the global community's firm resolve.
He said South Korea, along with the United States, Japan, China and Russia -- members of stalled six-party talks with Pyongyang -- will be seeking new measures to get the North to "irrevocably dismantle" all nuclear weapons programs. The White House declined to say what actions were being considered.
The South Korean leader has followed a tough line on North Korea, even before Pyongyang raised tensions in recent weeks by test-firing missiles, restarting a plant to produce arms-grade plutonium and conducting a nuclear test on May 25.
As a stark message to Pyongyang, Obama re-committed to Washington's defense of South Korea, including keeping it under America's "nuclear umbrella."
NORTH KOREAN HEIR
Japan's Asahi newspaper reported on Tuesday that the youngest son of North Korean leader Kim Jong-il secretly visited China last week and his hosts were told he had been appointed heir to the ruling family dynasty.
The report, citing unidentified informed sources, said Kim Jong-un met Chinese President Hu Jintao and other leaders of the ruling Communist Party when he flew to Beijing around June 10. Continued...
Source: Reuters

White House says no to California budget help

WASHINGTON (Reuters) - The White House on Tuesday dashed hopes that the federal government would help California overcome a mammoth budget crisis that has brought the state dangerously close to an economic meltdown, saying the state will have to solve the problem on its own.
"It's obviously not an easy time for the state of California," White House spokesman Robert Gibbs told a briefing when asked if the administration would provide emergency financing for the state.
"We'll continue to monitor the challenges that they have, but this budgetary problem unfortunately is one that they're going to have to solve," Gibbs said.
California's revenues are plunging amid recession, rising unemployment and the prolonged housing crisis, and the state is unable to borrow its way out of its immediate financial trouble by issuing debt because of its budget gap.
It will run out of cash within weeks if it does not balance its books, according to State Controller John Chiang, who estimated last week California was "less than 50 days away from a meltdown of state government."
One potential rescuer has been the federal government, and for nearly a year California Treasurer Bill Lockyer has pressured the U.S. Congress and the president to help the state with debt markets.
While U.S. Treasury Secretary Timothy Geithner said this spring the administration was looking into assisting California and other states, it has yet to offer any help beyond that included for all states in the $787 billion economic stimulus plan passed in February.
"Obviously many states throughout the country because of the slowdown in our economy find themselves with severe budgetary constraints," Gibbs said. "The president believed and addressed part of this in the recovery and reinvestment plan by ensuring the largest amount of fiscal relief that we've seen move to states in the history of our country."
Gibbs said he didn't "know the degree to which we've analyzed each of California's individual (budget) cuts."
This is not the first time a U.S. president has closed the federal wallet to a struggling state or city.
In 1975 the New York Daily News ran the headline "Ford to city: drop dead," when then President Gerald Ford denied assistance to New York City that would have allowed the U.S. financial capital to sidestep filing for bankruptcy.
WASHINGTON'S REBUFF ADDS TO DEBT MARKET WOES
Standard & Poor's ratings agency on Monday put $67.1 billion of California's debt on alert for a possible ratings cut because the state may run out of cash by the end of July.
Dick Larkin, director of credit analysis at Herbert J. Sims & Co Inc in Iselin, New Jersey, predicted a downgrade.
"To say they've got big problems is an understatement. The budget problems are too large for the rating agencies to be comfortable with single-A ratings on the state."
Washington's view toward California is one more reason to not hold the state's debt, said Tom Tarabicos, a financial adviser at Wells Fargo Financial Advisors Network in Roswell, Georgia. Continued...
Source: Reuters

Obama wants financial protection agency with teeth

By Karey Wutkowski and Rachelle Younglai
WASHINGTON (Reuters) - The Obama administration intends to propose the creation of an independent Consumer Financial Protection Agency that will be able to write and enforce rules for a wide group of financial firms.
The administration plans to propose that the new agency enforce fair lending laws, and have the authority to require loan originators to retain 5 percent of credit risk.
According to a document obtained by Reuters and later confirmed by an administration official on Tuesday, the agency will "protect consumers of credit, savings, payment and other consumer financial products and services, and to regulate all providers of such products and services."
President Barack Obama has identified consumer protection from shoddy financial products as one of his top priorities. But it had been unclear if that would mean beefing up existing agencies or creating a new one that would write regulations and gain supervisory and enforcement powers.
The administration intends to lay out on Wednesday its plan to overhaul financial regulation, which will include a regulator to monitor risk across the financial system, proposals on capital standards, and additional transparency in derivatives markets.
The idea of a consumer financial protection agency has attracted opposition from some business groups who fear that it will stifle product innovation and undermine financial firms' primary regulators.
Consumer advocates and lawmakers from both political parties have strongly endorsed the creation of a new agency to protect consumers after a credit crisis largely fueled by loosely regulated mortgage products and servicers.
Senator Charles Schumer, a New York Democrat, told reporters on Tuesday that a consumer financial protection agency "makes eminent sense." He added, "The Fed, which was basically doing these types of regulations, did not do a very good job."
As laid out by the administration document, the new agency will define standards for "plain vanilla" products such as mortgages with straightforward terms.
The agency could restrict or ban prepayment penalties on loans and could also ensure that banks, nonbanks, and independent mortgage brokers all play by the same rules.
It would also be responsible for enforcing the Community Reinvestment Act, which encourages banks to make loans in disadvantaged communities.
Further, the agency would have wide power to ban unfair terms for financial products, if the agency determines the benefits of limiting the products outweigh the costs.
The agency's rules will serve as base standards, and states will be allowed to create their own consumer protections to bolster the federal regulations, according to the proposal.
The proposal would likely strip some responsibilities from the Federal Reserve and possibly the Securities and Exchange Commission and the Federal Trade Commission.
Easing the Fed's load could pave the way for it getting new powers, such as being the primary systemic risk regulator. Continued...
Source: Reuters

U.S. House looks for money for healthcare

By Kim Dixon
WASHINGTON (Reuters) - The powerful tax-writing House of Representatives Ways and Means Committee aims to have proposals to raise revenue by Friday to help pay the trillion dollar tab expected to be needed for broad health reform, Chairman Charles Rangel said on Tuesday.
"We're going through the president's revenue raisers and thinking about putting some others on the table," Rangel told reporters after a committee meeting to discuss funding proposals.
The Democrat from New York said he needed to weigh which proposals might cause the party to lose broader support for healthcare reform.
President Barack Obama this weekend proposed cuts to healthcare programs, including trimming hospital funding, that he said could raise more than $300 billion to help pay for reforms. That is on top of about $300 billion in cuts he has already proposed.
Among the proposals Rangel is expected to announce by Friday are cuts to private plans that operate in the Medicare Advantage health program for seniors. Companies, including Humana Inc and UnitedHealth Group Inc would be impacted by these cuts.
Rangel also said the panel was weighing the "depth" of the subsidies that low-income people might get under any health reform legislation.
Ways and Means is one of three committees in the House that is drafting health overhaul legislation. Devising a way to cover them has become a major goal of Obama's presidency.
TAX UP IN AIR
Separately on Tuesday, the director of the nonpartisan Congressional Budget Office wrote to Senate Budget Committee Chairman Kent Conrad noting that, "large reductions in spending will not actually be achieved without fundamental changes in the financing and delivery of healthcare.
"The government can spur those changes by transforming payment policies in federal health programs and by significantly limiting the current tax subsidy for health insurance," Douglas Elmendorf said in a June 16 letter.
Rangel and some Democrats have been cool to the idea of touching the tax subsidy that millions of workers enjoy through their employer-sponsored health insurance. Unions strongly oppose any cap, which could be based on the average cost of healthcare and take into account income and geographic variation of costs.
Democratic Representative Richard Neal, who chairs a revenue subcommittee of the Ways and Means panel, said a cap on the tax free status of employer-sponsored healthcare is still being discussed.
"Everything is in the draft stage," he said, following the meeting.
Two committees in the Senate are charged with the task and the tax-writing Senate Finance Committee, which has laid out the tax as one option to pay for healthcare, is expected to unveil its version later this week.
On Monday, the CBO said one Senate proposal to expand healthcare coverage would increase the federal deficit by about $1 trillion over 10 years and still leave millions without insurance.
(Reporting by Kim Dixon; additional reporting by Donna Smith; editing by John Wallace and Andre Grenon)

Source: Reuters

Obama says issues remain in Korea trade deal

WASHINGTON (Reuters) - President Barack Obama said on Tuesday that auto, beef and other trade issues with South Korea must be resolved before he will ask Congress to vote on a two-year-old free trade agreement with the longtime ally.
"We want to make sure that we have ... an agreement that I feel confident is good for the American people, that President Lee feels confident is good for the Korean people, before we start trying to time when we would present it," Obama said at a press conference with South Korean President Lee Myung-bak.
He paired South Korea's concern about beef imports with U.S. concerns about the pact's auto provisions, saying both were "understandable, legitimate issues for negotiation."
Obama opposed the free trade deal during last year's campaign on the grounds that its auto provisions were unfairly tilted in favor of South Korea, which already runs a huge auto trade surplus with the United States.
That won him favor with U.S. auto workers but disappointed a wide swath of manufacturing, service industry and farm groups that expect the agreement would boost their exports.
Obama's insistence on changes to the trade deal comes as he is committing tens of billions of dollars in taxpayer money to prop up U.S. automakers Chrysler and General Motors. Ford, the only U.S. automaker not to accept U.S. government aid, has led opposition to the Korea deal.
Last year, Lee paid a huge political price when he agreed to U.S. demands to reopen South Korea's market to American beef in an effort to spur action in the U.S. Congress on the pact.
The move stirred massive protests in South Korea and caused Lee's popularity to plummet on concern the deal did not have adequate protections against importing beef from U.S. cattle that could have mad cow disease.
Obama and Lee issued a joint statement on Tuesday saying they were "committed to working together to chart a way forward" for the agreement, which was signed in June 2007.
Toward that goal, the two countries agreed to begin "working-level consultations," Lee said.
"Once we have resolved some of the substantive issues, then there's going to be the issue of political timing and when that should be presented to Congress. But I don't want to put the cart before the horse," Obama said.
(Reporting by Alister Bull and Doug Palmer; Editing by Leslie Adler)

Source: Reuters