Tech giants say SOPA piracy bill is 'draconian'

Tech companies say Congress' anti-piracy bills are 'draconian' and 'deeply flawed.' NEW YORK (CNNMoney) -- A proposed new bill intended to combat online piracy has sparked a giant backlash from big tech companies, including Google and Facebook, who say the proposals are far too strict and rife with unintended consequences. The Stop Online Piracy Act (SOPA), which was introduced in the House of Representatives in late October, aims to crack down on copyright and trademark issues. Its targets include "rogue" foreign sites like torrent hub The Pirate Bay. Print Comment Protecting content is a worthy goal, but here's the flip side: Opponents say SOPA -- and a similar bill called the Protect IP Act that is making its way through the Senate -- effectively promotes censorship. If SOPA passes, copyright holders would be able to complain to law enforcement officials and get websites shut down.

The law would also force intermediaries like search engines and payment processors to withhold their services from targeted websites. That would be quite a change from the 1998 Digital Millennium Copyright Act, which mandates that companies "act in good faith" to remove content that infringes on copyrights and other intellectual property laws. Google ( GOOG , Fortune 500) executive chairman Eric Schmidt called the bill "draconian" during a speech in Boston on Tuesday. Google and other tech behemoths -- AOL ( AOL ), eBay ( EBAY , Fortune 500), Facebook, LinkedIn ( LNKD ), Mozilla, Twitter, Yahoo ( YHOO , Fortune 500) and Zynga -- also lodged a formal complaint on Tuesday in the form of a letter sent to key Senate and House lawmakers. "We support the bills' stated goals," the letter reads. "Unfortunately, the bills as drafted would expose law-abiding U.S. Internet and technology companies to new uncertain liabilities [and] mandates that would require monitoring of web sites." The companies are asking Congress to "consider more targeted ways to combat foreign 'rogue' websites." SOPA's critics -- some of the Internet's most heavily trafficked sites -- launched an awareness campaign on Wednesday. Hundreds of sites adopted black "STOP CENSORSHIP" logos, including BoingBoing, Reddit and the Electronic Frontier Foundation. One site tried to annoy consumers into action. Blogging site Tumblr blacked out words in its content feeds, and a message at the top of users' dashboards read: "Stop The Law That Will Censor The Internet!" "Congress is holding hearings today and will soon pass a bill empowering corporations to censor the Internet unless you tell them no," Tumblr wrote in a post Wednesday, calling the bills "well-intentioned but deeply flawed." Meanwhile, SOPA has drawn support from groups including the Motion Picture Association of America and the Recording Industry Association of America, which say that online piracy leads to job loss. Proponents of the bill dismiss accusations of censorship. The legislation would "[prevent] those who engage in criminal behavior from reaching directly into the U.S. market," Judiciary Committee Chairman Lamar Smith, who introduced the bill, said in a statement Wednesday. "We cannot continue a system that allows criminals to disregard our laws."  

How to keep the power on during a storm

It took over two weeks for the millions who lost power in October's freak blizzard to get their electricity back. Burying power lines may help, but it costs a million dollars a mile. NEW YORK (CNNMoney) -- October's freak blizzard knocked out power for over 2 million people in the Northeast. In Connecticut, the hardest hit state, all the power lines weren't fixed until just last week. Storms have always wreaked havoc on the power grid.

But thanks to new technology and a growing trend to bury power lines underground, utilities are hoping to both cut the number of people who lose power in a storm and the length of time they are in the dark. Print Comment The best way to make a power line more resistant to an outage is to bury it. In Connecticut, 90% of power outages are caused by falling tree limbs, said Connecticut Light and Power spokeswoman Katie Blint. Underground lines fix the tree problem. But there's a catch, says Connecticut Light and Power: It costs at least a million dollars a mile to bury an overhead power line. Connecticut Light and Power is a subsidiary of Northeast Utilities Company ( NU , Fortune 500). It's hard to get an estimate as to just how much it would cost nationwide -- there are over 3,000 utilities in the country. Often, they each use different technology from one another. The power struggle for Wyoming's wind In Connecticut alone, 75% of Connecticut Light and Power's 17,000 miles of line are above ground. At a million a mile, that's nearly $13 billion to put them all underground. "It's a very, very expensive proposition," said Jim Owen, spokesman for the Edison Electric Institute, the national utility trade association. "At the end of the day, customers would have to bear the price of it." And burying lines comes with its own problems. While fool-proof against falling trees, they are still subject to outages caused by moisture. And when they fail they are harder to find and fix. Still, spurred by greater reliability and a desire for better aesthetics, most towns nationwide now require power lines in new housing developments to be buried along with other utilities like phone, Internet, water and sewage systems. It's more expensive than running the lines above ground, said Owen, but not nearly as expensive as burying an existing system. Fortunately for customers, there are other technologies in the works that aim to make above-ground lines more resilient. As part of the smart grid revolution, interconnected sensors are being added to power lines. The sensors can both limit the number of homes affected by an outage and shorten the time it takes to get the power back on. Known as 'self-healing' technology, so-called smart grids employ devices such as a recloser, which can reclose the electric circuit and restore power to areas past a downed tree, said Ben Kellison, a smart grid analyst at GTM Research. 0:00 / 2:20 Making sense of the Smart Grid Reclosers have been around for over 40 years, said Kellison, but not in widespread deployment. Other devices can be helpful too. Line sensors can detect changes in electrical wave formations, indicating where blowing tree limbs are getting too close to the power line. Utilities can hopefully be alerted to a potential problem months in advance and send a crew out to clear the branches. Line sensors have also been around for a while, but what's now rapidly advancing is the analytical software necessary to alert the utility to the problem in advance. With this new technology, "The number of customers affected is going to change dramatically," said Kellison, "as is the time." But this all may take a while to roll out. Thanks to the number of different utilities out there, and that fact that they all use quite different technology, Kellison said these types of smart grid innovations will be gradually added to the electric grid over a period of one or two decades.  

Keystone pipeline delayed by Obama until 2013

Decision on Keystone oil sands pipeline delayed until 2013. Environmentalists hope it will scuttle the project. NEW YORK (CNNMoney) -- Bowing to public pressure, the Obama administration said Thursday it will delay a decision on the controversial Keystone oil sands pipeline expansion until at least 2013. Citing concern over the proposed route through Nebraska's Sand Hills region and over the Ogallala Aquifer, the State Department said it needs more time to study the issues and look at possible alternative routes. Print Comment "Given the concentration of concerns regarding the environmental sensitivities of the current proposed route through the Sand Hills area of Nebraska, the Department has determined it needs to undertake an in-depth assessment of potential alternative routes in Nebraska," the State Department said in a statement.

The Nebraska legislature convened a special session last week with many state lawmakers calling for a change in the pipeline's course. Protesters encircle White House, demanding halt to pipeline project Based on previous pipeline permitting experience, the State Department said the review process "could be completed as early as the first quarter of 2013." In a separate statement, President Obama said he supported the State Department's move. "The final decision should be guided by an open, transparent process that is informed by the best available science and the voices of the American people," said Obama. The news set off a firestorm of comments from the pipeline's supporters and opponents, and shows just how political the issue has become. While the decision has been put off until after the presidential election, it will no doubt be seized upon by the president's supporters and opponents during the election season. House Speaker John Boehner criticized the delay. "More than 20,000 new American jobs have just been sacrificed in the name of political expediency. By punting on this project, the president has made clear that campaign politics are driving U.S. policy decisions -- at the expense of American jobs." However, the news was praised by environmentalists, who have been protesting the pipeline for months and hope the delay will ultimately lead to a scrapping of the plan altogether. "This is a major victory," said Daniel Kessler, spokesperson with Tar Sands Action. "It's a testament to the thousands of people who came out to protest in the streets, and we think the president responded to that." "We hope that the end result of the new review will show that the pipeline is not in the nation's best interest and it will be rejected," said Susan Casey-Lefkowitz, director of international programs at the Natural Resources Defense council. But TransCanada ( TRP ), the company that wants to build the $7 billion pipeline, showed no indication of scrapping the project, even though it previously said the added expense of trying to get new permits, plus the loss of customers who have signed up to take delivery of the oil, could lead the company to kill it altogether. "We remain confident Keystone XL will ultimately be approved," said Russ Girling, TransCanada's president and chief executive officer. "This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed." Indeed, the company confirmed it has already bought $1.7 billion worth of steel pipe. The 1,700-mile pipeline is supposed to take oil from Canada's oil sands region in Alberta to refineries on the U.S. Gulf Coast. 0:00 / 2:24 Lady roughnecks in North Dakota man-camps Environmentalists hated the project from the get-go, fearing the pipeline not only risks spills but would lock the U.S. into dependency on oil sands, a particularly dirty form of oil. Oil sands are just that -- oil mixed with sand. To get a useful type of crude, heat is used to separate the oil from the sand. The process results in anywhere from 5% to 30% more greenhouse gas emissions than extracting conventional oil would generate. There are also concerns that oil sands developments -- many of which look like giant open-pit strip mines -- decimate forests and pollute rivers and streams. Just this week the International Energy Agency warned that the world risks locking itself into dirtier forms of energy and will ultimately have to spend much more to clean itself up, unless more investments in renewable energy are made today. Nonetheless, the Obama administration was expected to approve the pipeline up until just a few weeks ago, largely on the grounds of energy security and economic development. IEA sees danger in rising oil, coal use But the intensity of the protests turned up the heat on the Obama administration, and put it in the uncomfortable position of having to choose between two important constituencies. Some saw Thursday's announcement as a chance to delay making that hard choice until after the upcoming presidential election. "This is a surprise to us and counter to our existing call that the approval was still likely and only the timing was in question," said Kevin Book, managing director of research at ClearView Energy Partners. "This does indeed suggest a political, not practical, choice to 'kick the can' into 2013." Pipeline supporters, including many in the business community, the construction trades, and nearly everyone in the oil industry, say the United States could use the 700,000 barrels a day the pipeline would carry. Many of the world's biggest oil companies, including ExxonMobil ( XOM , Fortune 500), Royal Dutch Shell ( RDSA ) and BP ( BP ), have been ramping up production from the oil sands and need a way to get it out. While oil sands crude might be dirtier than some other forms of oil, they say, at least it comes from Canada, where environmental and human rights rules are generally strict and enforced. Backers also said the pipeline would create 20,000 construction jobs in the short term and generate $5 billion in property tax revenue over the next century. "This decision is deeply disappointing and troubling," American Petroleum Institute President Jack Gerard said in a statement. "Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers." But in highly visible protests over the last few weeks, critics had been picking apart the pipeline's promised benefits. The jobs number, they say, is actually closer to 5,000. One study from Cornell said the pipeline could actually cost jobs by hurting the development of alternative energy and allowing for the export of oil from the Midwest, driving up the cost of gasoline in that region. Opponents also questioned the validity of the State Department's approval process, noting that several lobbyists for the industry have close ties to the administration. In a letter to the State Department's inspector general last month, several lawmakers said they were uncomfortable with reports saying the firm hired by the State Department to conduct the environmental review for the pipeline also has a business relationship with TransCanada. The inspector general's office began a review of the approval process last week. 

Home prices

NEW YORK (CNNMoney) -- Home prices continued a winning streak in August, the fifth straight month of price gains, but remain lower on a year-over-year basis. A gauge of home prices featuring 20 major cities, the S&P/Case Shiller index, reported Tuesday that prices rose 0.2% in August but were still down 3.8% year over year. Print Comment "Even though the [year-over-year] rates are improving, national home prices are still below where they were a year ago," said David Blitzer, a spokesman for S&P. Overall, the market is treading water and there doesn't seem to be any reason to suspect that's going to change soon. "As long as the economy remains weak, foreclosures are still a problem and lending standards stay stringent, we're not going to see much movement in home prices," said Mike Larson, a real estate analyst for Weiss Research.

"You just haven't gotten yet the rocket fuel needed to send housing soaring again," he said. Among individual metro areas, Washington saw the biggest gain -- 1.6% in August. Detroit and Chicago were close behind at 1.4%. In the past 12 months, Washington prices have gone up 0.3%. In Detroit prices were up 2.4% since August 2010, more than any other area. The Atlanta metro area recorded the steepest decline, down 2.4% for the month. Year-over-year prices were off 6.3%. Minneapolis home prices recorded the worst 12-month drop of 8.5%. The home price report comes on the heels of changes in the Home Affordable Refinance Program (HARP) announced Monday by the Obama administration. The changes will enable many homeowners to refinance high-interest mortgages more easily, making their monthly payments more affordable. The plan should enable some to avoid default. Ed Mermelstein, a New York-based real estate attorney, broker and developer, doubts that the HARP changes will have much impact on home prices or sales. "The economy and jobs have to come back. That's what's going to help the housing market," he said. Larson pointed out that even if they work as planned, HARP's main focus is helping existing homeowners stay in their homes; it won't spur new sales. Newport said he thinks that housing market weakness will continue improving. How to rescue the housing market: foreclosures "The key reason is that more distressed homes are coming onto the market and will be selling," he said. "That tends to drag home prices down." Fiserv, which provides real estate financial analytics to industry, is projecting a further home price decline of 3.6% through the end of June 2012. If that forecast comes true, it would mean home prices will plumb a new, post-bubble bottom over the next nine months, down 34% from the mid-2006 peak. 

Bernanke doesn't get treated 'ugly' in Texas

Fed Chairman Ben Bernanke NEW YORK (CNNMoney) -- Take that Rick Perry! Ben Bernanke headed down to Texas to rally the troops Thursday, and didn't get treated so "ugly" after all. The Federal Reserve Chairman spoke to soldiers at Fort Bliss, offering up tips to improve their job prospects and personal finances. His speech -- along with a question-and-answer session -- came about three months after Perry, the Texas governor and a Republican presidential candidate, mildly threatened Bernanke and called him "almost treasonous." Print Comment "If this guy prints more money between now and the election, I dunno what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas," Perry said back in August. According to CNN's El Paso affiliate KFOX, Bernanke greeted about 250 soldiers before sunrise after they flew home from Iraq.

He was also given a tour of one of the base's training centers, which offers classes in financial planning. Bernanke urged soldiers to take advantage of any available training programs to boost their job skills and personal finance know-how, and upon leaving the military, to use the G.I. Bill to fund a college education. "While you are in the military, take advantage of training opportunities," Bernanke said in his prepared remarks. "Many specific skills learned in the military -- nursing and healthcare, mechanics, computer programming, police and security work -- transfer to civilian jobs." Bernanke's comments are part of a push in Washington to help America's military. Veterans from the recent wars in Afghanistan and Iraq have a 12.1% unemployment rate, well above the national 9% average. Overall, 240,000 Americans who served in the military from 2001 on are currently unemployed. 0:00 / 01:55 Bernanke's mixed outlook in 2 min Earlier this week, the Senate voted to take up a bill aimed at helping unemployed veterans. The bill gives employers tax credits of up to $5,600 for hiring those who have been unemployed longer than six months. It would also give employers a tax credit of up to $9,600 for hiring long-unemployed disabled veterans. Bernanke didn't delve into that topic as part of his speech Thursday, and also spoke very little of monetary policy, other than to explain to the soldiers what the Federal Reserve's role in the economy is. "Supporting job creation is half of our marching orders, so to speak; the other half is controlling inflation," he said, adding that while high unemployment remains a challenge, he at least expects inflation to remain low for the "foreseeable future." Bernanke chides Occupy Wall Street misconceptions Europe's debt crisis also remains a threat to U.S. economic growth, Bernanke said. "I don't think we'd be able to escape the consequences of a blow-up in Europe," he said. Bernanke has recently borne heated criticism from not just Perry but most of the Republican presidential candidates. Mitt Romney has said he would be "looking for somebody new" to run the Fed, while former House Speaker Newt Gingrich and businessman Herman Cain have pledged to fire Bernanke. Meanwhile, Texas Congressman Ron Paul has been saying for years he wants to dismantle the Fed altogether. On Thursday, a marine in the audience asked Bernanke to respond to those criticisms, urging him to explain what a world without the Fed would look like. "It's not a very realistic proposal," Bernanke said. "Essentially, every country in the world has a central bank." 

Senate passes jobs bill to help veterans

Sen. Jon Tester, a Montana Democrat, speaks to veterans and lawmakers about his jobs proposal. WASHINGTON (CNNMoney) -- Heading into Veterans Day, the Senate unanimously passed a bill to help unemployed veterans seeking jobs as well as federal contractors facing a new tax burden in 2013. The Senate voted 95-to-0 Thursday to pass the first and so far only piece of President Obama's jobs package to get out of the chamber. The House is expected to take up the bill and pass it next week.

Print Comment Lawmakers are touting the bill as a bipartisan jobs creator that is fully paid for and would even reduce federal deficits by $2 billion over the next decade, according to the Congressional Budget Office. "The bills won't solve our jobs crisis," said Senate Minority Leader Mitch McConnell on Thursday. "But this attempt at bipartisanship has been used to help get them over the finish line and represents our best shot at making progress on jobs in the economy." The bill gives employers tax credits of up to $5,600 for hiring veterans who have been unemployed longer than six months. It would also give employers a tax credit of up to $9,600 for hiring long-unemployed disabled veterans. The October unemployment rate for veterans who left the military after 2001 was 12.1%, leaving about 240,000 veterans out of work, according to the White House. The measure to help veterans is a small piece of President Obama's job package. "Let's work together to get this bill passed, because it's the least we can do for those whom we owe so much," said Sen. Jon Tester, a Montana Democrat and sponsor of the veterans' measure. Bernanke doesn't get treated 'ugly' in Texas The bill also expands an education and jobs retraining program for unemployed veterans. And it creates a new project that directs the Labor Department to figure out ways for veterans to use their specialized training to get licenses in different fields in the civilian work force. Republican Jim DeMint of South Carolina was the only lawmaker who voted against the amendment adding the veterans measure to the bill, saying he didn't think the government programs for veterans work. But, he voted in favor of then overall bill with the veteran tax credits on final passage. Maine Republican Olympia Snowe voted "present" on the bill. The Senate plans to pay for the tax credits by keeping special fees that the Department of Veterans Affairs charges veterans for guaranteeing mortgages at current levels. Those fees had been scheduled to get cheaper for veterans. By keeping the fees at current levels, the federal government can tap that revenue stream. The bill also repeals a George W. Bush-era tax accountability law that would have allowed the federal, state and local governments to withhold 3% of contractor pay, allowing those dollars to be applied as a credit toward federal income taxes. That law was supposed to take effect on Jan. 1, 2013. 0:00 / 1:30 Homeless vet starts small business Congress initially passed the withholding requirements back in 2006 to ensure that the government collected all taxes owed by contractors. Big business groups, including the U.S. Chamber of Commerce, have been pushing to repeal the measure. The House overwhelmingly passed that bill last month with a vote of 405-16. The cost of repealing the tax withholding measure is about $11 billion. Congress would pay for the repeal by changing a part of the new health care reforms. The government would redefine who is eligible for federal help under new health care reforms, making it more difficult for some to qualify for Medicaid or subsidized health care coverage. The bill raises the threshold level to qualify for government help by including nontaxable Social Security benefits, as well as the taxable portion, as income. The White House issued a statement on Thursday supporting the measure, saying it would "reduce unemployment and ensure that our veterans leave the military with the tools they need to succeed in the civilian workforce." 

IEA sees danger in rising oil, coal use

International Energy Agency says the world is embarking on oil and coal projects and will 'lock itself into an insecure, inefficient and high-carbon energy system.' NEW YORK (CNNMoney) -- The International Energy Agency warned Wednesday that the world faces serious dangers from global warming unless it radically alters its planned investments in new oil and coal facilities. Under current policies, oil use will rise 14% by 2035 and coal use will surge 65%, mostly from the developing world. Print Comment The resulting greenhouse gas emissions over the next 25 years will be equal to three-quarters of the total emissions from the previous 110 years combined, and will cause a 3.5-degree Celsius (6.3 Fahrenheit) rise in global temperatures, well above the 2% increase set as a target by global leaders. "Without a bold change of policy direction, the world will lock itself into an insecure, inefficient and high-carbon energy system," IEA said in its annual World Energy Outlook. "Governments need to introduce stronger measures to drive investment in efficient and low-carbon technologies." It's a particularly strong warning from an agency whose main task is to coordinate global stockpiles of oil in developed countries, in case there's a supply disruption.

It also comes at a pertinent time for the energy debate in the United States. Critics of the proposed $7 billion Keystone pipeline expansion, slated to carry oil from Canada's oil sands to ports on the U.S. Gulf Coast, are using this argument as a key point in their opposition to the project. IEA also said that unless countries in the Middle East and North Africa invest $100 billion a year over the next five years in new oil infrastructure, the world could see oil prices jump to over $150 a barrel "in the near term." Investments of that magnitude will be a challenge for many of those countries, especially in light of the disruptions and social spending promises made during the Arab Spring uprisings. Keystone oil sands pipeline construction in doubt The report noted that while oil use is expected to jump 14%, actual cars on the road are expected to double -- again, mostly from demand in the developing world. Those new cars are expected to be more efficient than today's models helping to curtail the rise in oil consumption. Still, the world will need to produce 99 million barrels of oil a day to meet that new demand, up from 87 million currently. IEA says that 90% of that new supply will have to come from Middle East and North African countries. Underestimating technology's impact: Forecasting agencies like the IEA are often criticized by those in the industry for making conservative predictions and underplaying the role of technology. Indeed, many in the oil industry argue that new technologies enabling the development of shale oil, as well as deepwater drilling and other enhanced technologies, will allow for much greater oil production from places like Canada, Brazil and the United States. Similarly, those in the solar industry predict their panels will be cost competitive with coal in the next few years, facilitating a massive shift away from fossil fuels and towards renewable energy. But IEA does not see things that way. The agency is calling for renewables to make up just 18% of world energy supply by 2035, up from 13% today. 0:00 / 2:15 Small town, big oil: The heart of a boom But it's clear IEA wants to see more renewables. Although the agency didn't call for specific policies, typically "stronger measures to drive investment" would include things that make fossil fuels more expensive so renewables can compete, or mandates to use more renewable power. Making fossil fuels more expensive could be done by enacting a tax on carbon emissions or laws limiting their release. Europe has such policies, as does Japan and, more recently, Australia. Even China and India have enacted strong mandates for renewable energy use. Land a job in a North Dakota boomtown Policies in the United States to drive investments in renewables include a 30% tax credit for wind and solar projects and a mandate requiring greater fuel efficiency from vehicles and the use of more biofuel. The Obama administration, along with some Democrats in congress, has been trying to pass laws limiting the amount of carbon that can be emitted and a mandate requiring utilities to buy a certain percentage of their power from renewable sources like wind and solar. The idea is that by providing a market for renewables, the price will come down as they reach economies of scale. But those efforts have been foiled by Republicans and some Democrats in Congress, who argue it would raise energy prices too much and that the technologies will be adopted when they can compete in an open market.  

Keystone oil sands pipeline construction in doubt

Concerns over the water and air could derail the $7 billion Keystone pipeline project that promises thousands of jobs, millions of barrels of oil and billions in tax revenue. NEW YORK (CNNMoney) -- Twenty thousand construction jobs. $5 billion in tax revenue. 700,000 barrels of additional oil a day. All these things are now in doubt as opposition mounts to the expansion of the Keystone pipeline, a 1,700-mile long conduit that would carry crude from Canada's Alberta oil sands region to the U.S.

Gulf Coast. Print Comment Just a few weeks ago analysts thought the jobs and economic benefits would easily outweigh environmental concerns and push the Obama administration to approve the $7 billion project. But now Nebraska is balking at the pipeline's route, and rumblings of discontent are being heard from South Dakota as well. The public pressure is being turned up too. Protestors, concerned about green house gas emissions associated with Canada's oil sands and doubtful of its promised benefits, have been rallying against the project all summer. On Sunday, thousands joined hands and literally encircled the White House. "Once thought to be a shoo-in, a near-term presidential approval of the pipeline looks less secure as opposition and headlines mount," Whitney Stanco, an energy analyst at the Washington Research Group, wrote in a note Monday. "We continue to believe the odds favor approval, but an extended delay is looking more and more possible." Last week the state of Nebraska, through which the pipeline would pass, convened a special legislation to address the issue. Keystone pipeline: Why the oil sands conduit will get built This week several bills are expected out of the state legislature. Those bills could require stricter construction standards where the pipeline would pass close to water resources. They could also attempt to alter the course of the pipeline, directing it away from the Sand Hills region. The Sand Hills sit atop the massive Ogallala Aquifer, sacred to farming interests in the state. "Nebraskans are concerned, and so am I, on why would you put a pipeline over the Ogallala Aquifer and risk an oil spill or leak," Nebraska Gov. Dave Heineman, a Republican, recently told a local paper. The concern from Nebraska is causing analysts to rethink their position on the pipeline. "Risks for Keystone XL at the US federal level remain low, but are rising at the state level in Nebraska," Robert Johnston, director of energy and natural resources at the political risk consultancy Eurasia Group wrote in a recent research note. TransCanada ( TRP ), the company that wants to build the pipeline, maintains that pipelines are the safest way to carry crude oil. 0:00 / 2:15 Small town, big oil: The heart of a boom The company has already agreed to install extra protections around the pipeline when it passes near water resources, and has put up a multi-million dollar bond to cover expenses should a spill occur. But TransCanda is opposed to any rerouting of the pipeline, saying it would take years to obtain the new permits and cost million of dollars. Last week the company posted a detailed legal analysis saying the federal government has sole authority over the pipeline's route now, and any attempt by the states to change it would be unconstitutional. "If individual states could make these decisions, the decisions would be based on the limited interests of those states, potentially defeating broader national interests," the analysis said. Because the pipeline crosses international borders its approval rests with the State Department. Pipeline critics were heartened last week when President Obama indicated he'd take a direct role in the approval process. Obama had previously maintained a low profile on the issue. Critics say building the pipeline not only risks spills but would lock the U.S. into dependency on a particularly dirty form of oil. Oil sands are just that -- oil mixed with sand. To get a useful type of crude, heat is used to separate the oil from the sand. The process results in anywhere from 5% to 30% more greenhouse gas emissions than conventional oil would generate. There are additional concerns over the effects on the land. Oil sands are often mined like coal, in huge open pits that destroy the forest and can contaminate the nearby rivers. The companies that operate in the region, including the world's largest oil companies like ExxonMobil ( XOM , Fortune 500), Royal Dutch Shell ( RDSA ) and BP ( BP ), have gotten better at mitigating the impacts, but concerns remain. Pipeline opponents also allege the approval process at the Sate Department has been tainted by lobbyists for TransCanada that have close ties to the administration. On Monday the State Department's inspector general's office said it is conducting a review of the process. Critics also dispute the benefits the pipeline would bring, pointing to a study from Cornell that said the pipeline could actually cost jobs by hurting the development of alternative energy and allowing for the export of oil from the Midwest and driving up the cost of gasoline in that region.  

Obama budget aide doesn't see shutdown

Budget chief Jack Lew says he's optimistic Congress will say no to federal shutdowns. WASHINGTON (CNNMoney) -- White House budget director Jacob Lew said Thursday he's optimistic that Congress will avoid any more threats of federal shutdowns later this month over a 2012 budget. "After living through April and July, any reasonable person would have to say there's risk" of a shutdown crisis, said Lew, director of the White House Office of Management and Budget in a forum sponsored by Politico. "(But) I generally don't believe that Congress wants to be in that kind of a showdown. I'm optimistic they'll work through these issues and make the right choice." Print Comment Congress came the closest to shutting down federal government due to political gridlock over passing a stop-gap budget measure in April, and then again in August over a measure to give the government more room to borrow to keep paying bills.

Lew said those episodes taught Congress that Americans want both parties to work together. "The American people have told Congress it's unacceptable," Lew said. But he tempered his predictions with a warning to Republicans against using the budget to debate "ideology." Lew said that the White House opposes any effort to use the budget bill to debate repeals of current laws such as financial or health care reform. He pointed to a letter he sent lawmakers in October that said if the president gets a bill that "undermines critical domestic priorities or national security," he will veto the bill. "We don't take those words lightly," Lew said. 0:00 / 1:48 Who is getting squeezed by the debt deal? The federal government is running on a stop-gap budget that expires Nov. 18, while Congress works on the 2012 budget, which officially started Oct. 1. Most congressional veterans expect Congress will pass another stop-gap measure to give them more time to get a 2012 budget in place. The Senate made progress on that front Tuesday, when it passed a smaller $182 billion budget package that funds housing, transportation, NASA, FBI as well as the departments of Agriculture and Commerce. That bill is among a dozen that need to be passed by both chambers. Lawmakers need to make some smaller cuts from this year's budget while bigger, longer-term cuts are being debated by a so-called super committee. That committee has until Nov. 23 to make at least $1.2 trillion in cuts to annual deficits. 

Fed perks up (a bit) on economy

0:00 / 01:55 Bernanke's mixed outlook in 2 min NEW YORK (CNNMoney) -- The Federal Reserve issued a slightly better outlook on the economy Wednesday, but cut its economic growth forecast for the year overall. Following a two-day policy meeting, the central bank voted 9-to-1 to make no changes to the Fed's ongoing stimulus program, and maintain its pledge to keep interest rates at record lows "at least through mid-2013." The Fed has held rates near zero since December 2008. Print Comment "Economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year," the Fed said in its statement. Because of weak growth in the first half of the year, the central bank chopped its forecasts for 2011 as a whole. The Fed expects the country's gross domestic product to grow between 1.6% and 1.7% for the year, down from its earlier estimates of 2.7% to 2.9%.

Meanwhile, the Fed expects the unemployment rate to stay around its current level of 9.1% through the end of the year, and not fall below 8% until at least 2013. The Fed also noted in its statement that household spending has increased at a faster pace recently, as business investment has also expanded. The housing market continues to be a drag though, and risks to economic growth, including strains in global financial markets, still persist. Read the Fed statement At its last meeting in September, the Fed launched a program known as Operation Twist, swapping $400 billion in short-term bonds for longer term securities. The program was intended to bring down long-term interest rates, making it cheaper for businesses, consumers and potential homebuyers to secure cheap loans. By coupling that plan with investments in mortgage-backed securities, the Fed has also been targeting the housing market specifically, by trying to bring down record-low mortgage rates even further and giving homeowners an incentive to refinance their existing mortgages. The effects of those ongoing programs have yet to be fully realized, but already some Federal Reserve officials have been making a case for more stimulus. Last month, Fed Governor Daniel Tarullo and New York Fed President William Dudley both called for more efforts to prop up the housing market. Janet Yellen, second in command to Fed chairman Ben Bernanke, said another round of asset purchases could be necessary to boost U.S. economic growth. And Chicago Fed President Charles Evans has been pushing for the central bank to do more to fix the jobs crisis. While the Fed decided not to act on any of those ideas in their latest meeting, all that campaigning has outsiders wondering if the central bank could be preparing to act at its upcoming meeting in December. Evans dissented against the Fed's decision Wednesday, because he would have preferred the central bank take additional action. He was the only Fed member to formally dissent. Speaking to reporters Wednesday, Bernanke acknowledged that the Fed has discussed various options for further stimulus, but he fell short of endorsing any particular plan. "We are prepared to take further action," he said. "We have the tools to do more, if that's appropriate." One example Bernanke gave was the "communications tool," which refers to the Fed attempting to influence the economy merely by being more transparent about its targets for inflation or economic growth. But Bernanke said the committee had not reached a decision on such a policy yet. Bernanke also addressed the Occupy Wall Street protests, which in many parts of the country have included backlash against the Fed. "I fully sympathize with the notion that the economy is not performing as we would like it to be," he said. But Bernanke pushed back against the idea that the Fed is part of the problem. "I think that the concerns about the Fed are based on misconceptions," he said. "Certainly, we are doing our part to try to create more jobs and create more opportunities in America." 

GOP and taxes: Mixed message

A lot of work but not a lot of time left: Debt committee leaders Jeb Hensarling and Patty Murray and member Jon Kyl. NEW YORK (CNNMoney) -- Republicans on Capitol Hill gave conflicting messages to the debt committee this week. Yes, we will accept increases in tax revenue as part of a debt reduction plan. Print Comment Um, no, we won't. Yes: On Wednesday, 40 House Republicans -- along with 60 Democrats -- signed a letter urging the committee to "go big" by crafting a $4 trillion deficit reduction plan that includes spending cuts and tax revenue.

A day later, House Speaker John Boehner, who has publicly told the so-called super committee that tax increases should be "off the table," nevertheless said he appreciated the signers' efforts to deal with the debt problem. And he seemed to dismiss Grover Norquist, calling him "a random person in America" -- even though Norquist created the anti-tax pledge signed by virtually every sitting Republican lawmaker, including Boehner. No: In the same breath, Boehner reiterated that Republicans are "opposed to tax hikes because we believe that tax hikes will hurt our economy and put Americans out of work." Also on Thursday, 33 Republican senators sent a letter to the super committee, asking that anything the panel proposes include "comprehensive tax reform that lowers rates and promotes economic growth, with no net tax increase." So which is it? The House letter and some of Boehner's remarks seemed to open the door to a super committee deal that Democrats could sign on to. And the Senate letter seemed to shut that door. But longtime observers of the Washington budget game aren't so sure the GOP letter signals that. Rather, they say, it's more a statement of preference than an absolutist demand that revenue increases are out of the question. The letter says "we ask" not "we won't vote for any deal unless," said Joe Minarik, a former chief economist of the House Budget Committee and the White House budget office. Indeed, it's more like "they're saying, 'This is what we'd like but it's not necessarily the only thing we can accept,' " said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. (Watch: Debt committee under pressure) What's more, the letter's message isn't necessarily incompatible with a go-big strategy like the kind some of the signers -- notably Sens. Tom Coburn, Mike Crapo and Saxby Chambliss -- have publicly supported in the past. That's because they believe pro-growth tax reform can generate an increase in tax revenue, as can the elimination of tax breaks such as lobbyist-won loopholes for special interests. And that increased revenue can be used to pay for lower tax rates. Because if anything is crystal clear about the GOP position on taxes these days, it's that raising tax rates is a no-can-do. 

G20 agree to 'action plan' for global economy

World's top economic leaders stand together for a 'family portrait' at the G20 summit in Cannes. CANNES, France (CNNMoney) -- After a summit dominated by concerns about Europe, the world's most powerful political leaders produced a two-page "action plan" for the global economy that builds largely on existing policies previously stated goals. The Group of 20 Summit in Cannes, France, ended on a rainy Friday with broad promises from leaders to work together on economic challenges that must be addressed in different ways by different countries. Print Comment In their official communiqué, the G20 leaders welcomed the plan European leaders agreed on last month to address the debt crisis in the eurozone. They also praised Italy for agreeing to have the International Monetary Fund oversee the nation's progress on fiscal reforms.

But the official statement made only passing mention of Greece, which has dominated behind-the-scenes talks here over the last few days. Greece caused a stir before the summit even started by announcing a controversial referendum, only to reverse course a few days later. The government of Prime Minister George Papandreou faces a confidence vote Friday. President Obama acknowledged the political drama in Greece, but sounded optimistic about the ability of European leaders to get the crisis under control. "I think that there are going to be some ups and downs along the way," he said. "But I am confident that the key players in Europe -- the European political leadership -- understand how much of a stake they have in making sure this crisis is resolved." Italian bonds at 'scary' levels Italy has also been the source of much hand-wringing here. The nation has seen its borrowing costs rise to unaffordable levels recently amid concerns in the global financial markets about the government's ability to get out of debt. The G20 urged "rapid elaboration and implementation" of the so-called comprehensive plan to address the debt and banking crisis threatening the euro currency and global economy. "We welcome the euro area's determination to bring its full resources and entire institutional capacity to bear in restoring confidence and financial stability, and in ensuring the proper functioning of money and financial markets," the communiqué states. European leaders were expected to unveil details of the plan, agreed to after an all-night meeting that ended Oct. 27, at this week's summit. But key aspects of the agreement remain unresolved and there are concerns about policymakers' ability to follow through. Europe: So many ways for things to go wrong The G20 also pledged to ensure that the IMF has sufficient resources to support economies that get into financial trouble. U.S. officials have repeatedly said that the IMF has sufficient resources to achieve its objectives. But the increasing threat of a government default in Europe has raised calls to beef up its capacity. The leaders tasked their finance ministers to explore "various options" to increase the fund's flexibility, including bilateral contributions, the use of Special Drawing Rights -- a currency like instrument administered by the IMF -- and creation of a trust fund for voluntary contributions. Meanwhile, the action plan is made up of broad policy prescriptions for the global economy, many of which have already been discussed by G20 members. It starts with Europe implementing the Oct. 27 plan, including debt relief for Greece, new capital requirements for banks and a stronger "firewall" to protect vulnerable euro area economies. 0:00 / 2:20 Should China bail out Europe? To ensure a "balanced" global recovery, the G20 called for advanced economies to continue with "appropriate" fiscal consolidation programs. The United States agreed to support its economy through government investments, tax reforms and job creation programs. At the same time, the U.S. government will continue to take steps to cut deficits and reduce debt under its "medium term fiscal consolidation" program. G20 nations that have large budget surpluses, such as China, "will take steps to support domestic demand," according to the action plan. China also agreed to move towards "gradual convertibility" of its currency, the yuan, and will slow the rate at which it accumulates reserves.  

Many companies pay no income tax

NEW YORK (CNNMoney) -- The corporate tax rate is 35%. But an examination of 280 of the nation's largest corporations suggests that many aren't paying anything close to that. The real tax rate paid by a slew of major corporations averages closer to 18.5%, according to a study released Thursday by two liberal tax research groups. Print Comment The report issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy paints the corporate tax code as wildly inefficient, filled with loopholes and subject to the influence of lobbyists who carve out special provisions for the companies they represent. The study looked at 280 companies in the Fortune 500 that were profitable for all three years between 2008 and 2010.

The results: 111 companies paid effective tax rates of less than 17.5% over the three-year period; 98 paid a rate between 17.5% and 30%; and 71 paid more than 30%. The average rate? 18.5%. Some companies paid zero. And 30 actually owed less than nothing in income taxes over the three years. How does that happen? At the root of the problem is a system of inverted incentives that encourages corporations to lobby for special tax breaks -- and politicians to insert them into the tax code. Corporations pay lobbyists. Lobbyists convince lawmakers to add tax breaks. Lawmakers modify the tax code. 0:00 / 5:10 Southwest CEO to Obama: Don't tax us more It wasn't always like this. The corporate tax code was cleaned of special tax breaks during the Reagan administration. The clean slate didn't last long, and over time, special provisions have been added back in. NASCAR racetrack owners are allowed to write off the costs of their racetracks. There's the sweet deal for companies that make Puerto Rican rum. Some of the biggest breaks go to companies that are allowed to write off investments in equipment more quickly than they actually depreciate. The American tax machine And certain companies enjoy incentives geared specifically at their businesses. The oil and gas industry, for example, is allowed to write off some drilling and exploration expenses. All the breaks add up -- sometimes eliminating a company's tax burden altogether. Other companies reported so many "excess tax breaks" that their tax burden went "negative," the study said. According to the study, utility Pepco Holdings and conglomerate General Electric have the highest negative income tax rates. Pepco's profits totaled $882 million over the three-year period, while the company had a negative tax rate of 57.6%. GE earned $10.5 billion, with a negative rate of 45.3%, according to the study. Pepco ( POM , Fortune 500) said Thursday that it always operates within the law, and that the IRS audits every income tax return filed by the company. "Pepco Holdings pays all its required taxes, including but not limited to income, sales, use, property, and gross receipts taxes, in all the taxing jurisdictions within which it operates," the company said in a statement. The truth about GE's tax bill GE ( GE , Fortune 500), which runs an extremely complicated multi-national operation, took issue with the study, calling it "inaccurate and distorted." "GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30% in 2011," the company said in a statement. "We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world." GE is not alone in calling for reform. Most lawmakers acknowledge the system is broken. President Obama called for corporate tax reform in his State of the Union address and the concept has support among lawmakers on both sides of the aisle. 0:00 / 2:58 Why tax repatriation is a bad idea The idea of reform is to lower the corporate tax rate while greatly scaling back tax breaks, loopholes and other provisions of the tax code that allow most corporate income to avoid taxation. Despite the general consensus that something must be done, lawmakers are not likely to tackle the issue anytime soon. It's possible that the congressional super committee, now trying to find a way to cut the deficit, will make reform recommendations. But don't count on too much action. The political atmosphere on Capitol Hill has prevented movement on many fiscal and tax issues in recent months. Daniel Shaviro, a tax professor at New York University School of Law, said he doesn't anticipate big changes in the corporate tax code, at least in the near term. "There is widespread sympathy for lowering the corporate rates," Shaviro said. "But I I tend to doubt it happens anytime soon."  

Occupy Oakland's general strike call: 'Shut down the 1%'

The Occupy Wall Street movement in Oakland, Calif., plans a citywide general strike Wednesday. NEW YORK (CNNMoney) -- The Occupy Wall Street movement is about to enter new territory: The strike zone. By a vote of 1,484 to 46, the General Assembly of Occupy Oakland voted last week to call a citywide general strike for Wednesday. Print Comment "[W]e invite all students to walk out of school. Instead of workers going to work and students going to school, the people will converge on downtown Oakland to shut down the city," the group's manifesto read.

"We liberate Oakland and shut down the 1%." After striking, demonstrators plan to converge Wednesday evening on Oakland's port, one of the country's largest and the city's most visible symbol of commerce. (Read: Occupy Wall Street applies for trademark) Occupy Oakland's call to strike follows a crackdown on protesters last Tuesday. Police loosed smoke grenades and rubber bullets, and Iraq war veteran Scott Olsen suffered a fractured skull after being struck by what protesters say was a tear gas canister. "Tens of thousands" will turn out for Wednesday's general strike, Occupy Oakland organizer Tim Simons predicted. Top 1% are getting even richer Virtually all prominent local labor unions have issued statements of support, Simons said, and "we have confirmations of student walkouts throughout the city." "We even know of some motorcycle gangs that will participate." Though a mix of contracts and laws forbid major unions from officially joining the strike, determined rank-and-file will probably take part through vacation days, sick days or other furloughs, union officials speculated. "We're calling it a day of action, so we're encouraging people to participate," said Roxanne Sanchez, the president of SEIU 1021, one of the largest unions in the area. Should any employer in Oakland punish an employee for striking, they'll hear from Occupy Oakland. The group's Strike Assembly has voted to "picket and/or occupy" any companies that sanction employees for participating in the strike. 0:00 / 2:29 Occupy Wall Street's money man Strikes by individual unions or staffs are familiar, though uncommon, in the United States, but general strikes are rare. The last true general strike occurred in 1946, according to Georgetown University labor historian Joe McCartin, and also occurred in Oakland -- a fact not lost on Occupy Oakland. About 100,000 workers walked off the job in solidarity with employees of two department stores, whose bid to unionize had been put down. The Oakland strike call shows the "historic levels of anger and frustration among lots of people," McCartin said. Various Occupy satellites will hold solidarity actions to coincide with Oakland's strike. Occupy Philadelphia is planning a 99-minute strike from noon to 1:39 p.m. on Wednesday, the duration a play on demonstrators chants that they represent "the 99%." Occupy Wall Street ... mansions Occupy Oakland organizers say their strike is as much about trying to take the Occupy movement to the next level as responding to recent police overzealousness. The Occupy movement has "sort of reached the limits of only sitting in squares and parks and we need to start showing the real potential of these people who are mobilizing now," Simons said. Other Occupy satellites have reached a similar conclusion. In Cincinnati, Occupy-ers have mulled striking to draw attention to their dissatisfaction with Cincinnati-headquartered bank Fifth Third, spokeswoman Kristin Brand said. While the general strike is without recent precedent in America, it has been in vogue globally of late. General strikes over austerity measures have sporadically paralyzed sections of the Greek, Spanish and Italian economies this year. European general strikers have had significantly more practice than Occupy Oakland. "Those countries all have traditions of general strikes that are more lively and up to the recent time, whereas in the United States general strikes were always more rare," McCartin said. 

'Go big' advocates to debt committee: Don't wimp out

Budget experts (left to right) Erskine Bowles, Alan Simpson, Alice Rivlin and Pete Domenici urged the debt committee to lead. NEW YORK (CNNMoney) -- The congressional debt committee, three weeks from its deadline and reportedly deadlocked, got a polite earful on Tuesday from four of the most passionate proponents of a big, balanced and bipartisan deficit-reduction plan. Their key message: Step up and be leaders. Table partisan interests in favor of the country's interests to reduce the risk of a fiscal crisis. In other words, rein in the federal budget across the board, reform the tax code and make sure all but the most vulnerable share in the sacrifices required.

Print Comment And they each expressed caution that ideology and political considerations may scuttle the whole process. "I have great respect for each of you as individuals. But I'm worried you're going to fail, fail the country," said Erskine Bowles, who co-chaired President Obama's debt commission last year with Alan Simpson. If the committee is unable to come to agreement, people would start to assume that Congress can't govern and that the United States is on its way to becoming a second-rate power, Bowles said. Project Compromise: Time for Congress to do right The economic consequences would be grave as well, said Alice Rivlin, who co-chaired the Bipartisan Policy Center's Debt Reduction Task Force with Pete Domenici. "I think we could face a long period of stagnant growth," Rivlin warned. Domenici, a former Republican senator, made clear that if the committee fails because neither side could shed its partisan straitjackets, "you'll be equally complicit in bringing the country to the fiscal brink." Judging from some of the questions from both sides of the aisle, it wasn't entirely clear that the committee members were willing to shed their partisan proclivities just yet. A bipartisan majority of members on the Bowles-Simpson commission -- including 6 lawmakers -- voted for a $4 trillion debt reduction plan that included cuts to spending, containment of health care costs, and increases in tax revenue. The Rivlin-Domenici task force recommended a plan similar in structure, but with $6 trillion in debt reduction over 10 years and more upfront economic stimulus. The $4 trillion to $6 trillion range is what budget experts say is required to stop the country's debt from continuing to grow faster than the economy and to put it on a downward trajectory over time. That's well above the $1.2 trillion minimum target set for the 12-member congressional "super" committee, as it's known. If the members can't agree on at least that much, a series of automatic spending cuts -- primarily in defense and nondefense discretionary spending -- would be triggered in 2013. Those automatic spending cuts, of course, could be repealed by Congress sometime in 2012 before they take effect -- an outcome some observers think is a real possibility. Taxes and debt: Left and right dare to agree Bowles and Simpson laid out the six principles they believe the committee should follow in putting together any package: Don't disrupt the fragile economic recovery Protect the disadvantaged Don't jeopardize the country's security Protect investments in education, infrastructure and research Reform the tax code Cut spending in all areas of the federal budget If the committee cannot propose detailed tax and entitlement reform before its Nov. 23 deadline, the debt committee should recommend some specific measures and agree on the broad parameters for tax and entitlement reform, the witnesses said. "A two-stage approach would maximize the prospects for reaching agreement on at least $1.2 trillion in savings ... and putting in place a process to reduce the deficit by at least $4 trillion over the next ten years," Bowles and Simpson said in written testimony. 

Perry's complicated simple flat tax

Making his flat tax optional solved one problem - its regressive nature. Howard Gleckman is a resident fellow at the Urban Institute and editor of TaxVox, the blog of the nonpartisan research organization Tax Policy Center. The opinions expressed in this commentary are solely those of the writer. One of the biggest problems with Texas Gov. Rick Perry's optional flat tax may be the choice it gives taxpayers.

Print Comment Perry says you can either pay his new tax or pay under today's system, whichever results in a lower bill. That sounds great, but it is a policy disaster. This is the tax code we're talking about, not some TV game show. Perry says he wants a system that is simple. But his option could well make tax filing far more complicated, especially for middle-income households. He says he wants certainty. But the optional tax will create more confusion. He says he wants people to be able to file on a postcard. But his option may require taxpayers to prepare their returns three times. The option does solve one problem -- the regressive nature of any consumption tax. Herman Cain has learned this the hard way as he's struggled with his 9-9-9 tax. Perry's semi-consumption tax has a similar problem. What's a flat tax? And Perry has chosen to cure the regressivity problem by telling lower income people that if his plan doesn't work for them -- which it won't -- they can continue to pay under the current system. This will help blow an even bigger hole in the budget. For Perry, a small government guy, that may be a good thing since it would drive even deeper spending cuts. And, if he can avoid describing what cuts he'd make, it might even be good politics -- at least through the primaries. The trouble is that Perry's choice creates a tax compliance mess. How much of one depends on a detail he has yet to share: How often will we get to choose which tax to pay? If we can pick each April, filing will be an even bigger headache for most Americans than it is today, although the ability to switch yearly would also make it possible for people to maximize their tax savings. On the other hand, Perry could require you to make the choice only once in your life. That would make filing relatively simple. There's just one minor downside: The wrong choice could cost you hundreds of thousands of dollars over your lifetime. A third option could allow you to switch every, say, 10 years, or if you have an important lifecycle event. Time for Congress to do right on the debt The choice between the current tax system and the Perry plan will be a no-brainer for the very rich, who would do much better under his system. And it will be easy for most low-income working-class families, especially if they have kids. They'd be far happier under a system that preserves refundable credits such as the earned income and child credits than under Perry's plan. But for everyone else, picking between the two tax laws will a huge pain in the butt. The only way to get the right answer will be to do your taxes twice. And if you happen to be among the millions at risk for paying the dreaded Alternative Minimum Tax, you'll have the pleasure of doing your returns three times each year. As my former Tax Policy Center colleague Len Burman says, the Perry choice is something like an Alternative Maximum Tax. At least with Perry's AMT, you get to pay the lowest possible tax instead of the highest. 0:00 / 03:20 Would Cain's 9-9-9 hurt the poor? Making a one-time election would avoid this annual headache, of course. But what a choice. When you first start paying taxes on your own, you'd have to anticipate how many kids you're going to have, how much money you're going to make, and whether you're going to itemize decades in the future (and unless Perry exempts dependent filers from the election, some 3-year-olds would be forced to choose). Guess right, and you can maximize your lifetime tax savings. Guess wrong, and you'll be an unhappy camper for a lot of years. Oh, and there is one other question: Which current system do you get to choose from? Does Perry assume the Bush tax cuts are extended indefinitely or do they expire? If the former, the pre-Perry tax code would itself be quite generous. So far, he has not said. Whatever you think of the rest of Perry's plan, giving taxpayers a choice about how much tax to pay is just plain dumb. If Perry really wants to make his tax plan progressive, there are far better ways to do it. 

Savings rate falls, lowest since 2007

NEW YORK (CNNMoney) -- The good news is, a recent pick-up in consumer spending is fending off fears of another U.S. recession. The bad news is, it's coming at the expense of Americans' savings. Print Comment On average, consumers put 3.6% of their hard-earned dough into savings in September, the government reported Friday. It marks the lowest level of saving since December 2007, when consumers stashed away only 2.6% of their income.

But deciphering the meaning of the savings rate is a tricky business. On one hand, many economists had hoped the Great Recession would spark a newfound period of thrift and frugality, lessening consumers' vulnerability to financial shocks in the future. (The recession did have this effect for a while, sending the savings rate as high as 7.1% in mid 2009.) On the other hand, American businesses have argued that without an increase in demand for their products, there's no incentive for them to create more jobs. If consumers continue to save rather than spend their money, why should the restaurant down the street, the local big-box retailer or even large American manufacturers ramp up their hiring? On Thursday, the government's latest report on U.S. economic growth showed that since July, consumers have started to slow down the amount they add to their savings, to ramp up their spending more instead. Adjusted for inflation, consumer spending rose 2.4% in the third quarter. That was not only strong enough to boost overall economic growth in the recent quarter, it also led some economists to boost their forecasts for fourth quarter growth. But at the same time, others are reluctant to carry their optimism into their 2012 forecasts. Mark Vitner, a senior economist at Wells Fargo, points out that the increase in spending has come even as consumers saw their disposable income fall 1.7% in the third quarter (adjusted for inflation and taxes). "The sluggish income growth cast doubts on how sustainable the pickup in economic growth is," he said. "Without an increase in income, consumers can't afford to keep increasing their spending at the the pace that they have." 

'Dear Jamie Dimon': O.W.S. writes to bankers

Members of the Occupy Wall Street movement delivered letters on Friday at the Manhattan headquarters of some of Wall Street's biggest banks. NEW YORK (CNNMoney) -- Occupy Wall Street is getting personal. After railing against Wall Street greed for weeks from their encampment at Zuccotti Park in New York, a group went on the move Friday, dropping off thousands of letters addressed to Wall Street executives. Print Comment Although the protestors have based themselves at the park in Lower Manhattan, a number of the biggest "Wall Street" banks actually have their corporate headquarters in Midtown, a few miles to the north. While bank executives did not emerge from their offices to accept the letters, group members outside the bank buildings used their "people's mic" system to ensure that their sentiments were heard loud and clear.

"Every day, the 99% are fighting to survive, and it's the hardest work you can imagine," said Maria Maisonet of Brooklyn, reading out a letter addressed to JPMorgan Chase CEO Jamie Dimon, Bank of America's Brian Moynihan, Citigroup's Vikram Pandit and Wells Fargo's John Stumpf. "My nephews and my son tell me they feel like bums because, even though they're trying and trying, they can't get a job. You are the problem, not us." Who are the 1%? After gathering around 300 people in Bryant Park, organizers broke the marchers into two groups. One traveled to the headquarters of Bank of America ( BAC , Fortune 500) and Morgan Stanley, while the other went to Citigroup and Wells Fargo, before they converged at the imposing JPMorgan Chase building. Police formed a cordon around the group and provided security outside the bank buildings, but the march was a peaceful affair, with a singing protest outside Wells Fargo and a number of marchers in costume ahead of the Halloween weekend. Elsewhere around the country this week, however, similar "Occupy" protests have been faced with disorder. Three protestors in Tampa were arrested Friday after members of the group allegedly shoved a police officer, while 51 people were arrested early that morning in San Diego for violating a park curfew and assembling unlawfully. On Thursday, Oakland mayor Jean Quan apologized after police cracked down earlier this week on a protest in the city in a violent episode that left an Iraq war veteran hospitalized with a fractured skull. 0:00 / 1:54 Occupy Wall Street goes global Prior to the gathering in New York, organizers printed off copies of more then 6,000 letters submitted to the website OccupyTheBoardroom.com over the past few weeks and directed to Wall Street leaders. Upon arriving at Bank of America headquarters, protestors folded copies of the letters into paper airplanes and launched them toward the entrance of the building, where they landed among the police and security guards massed outside. At Morgan Stanley, march organizer Austin Guest left his phone number with security outside. Guest asked that it be given to CEO James Gorman, inviting him to have lunch with some of the demonstrators. "We'll pick up the tab," Guest joked. "We've been doing it for the last few years." The march concluded at JPMorgan Chase ( JPM , Fortune 500) headquarters, where several marchers shared their stories before lining up to deliver their letters as bank staffers looked on from inside the building. Mimi Pierre Johnson, from Elmont, New York, told the crowd that she had been struggling to make her mortgage payments since losing her job four years ago. In a letter directed to CEO Jamie Dimon, Johnson said that despite more than a dozen applications, Chase still has not granted her a mortgage modification. "I am sure that if you came to Southeast Queens and saw the devastation, the vacant houses with their littered lawns and boarded-up windows, you would sing a different tune when it came to mortgage modifications," Johnson said. "Name the time and date, Mr. Dimon, and I will personally escort you through the community." 

Dear China, buy our debt! XOXO, Europe

French president Nicolas Sarkozy and Chinese president Hu Jintao may have to do more than shake hands. Europe wants (and needs) China to invest in the EFSF bailout fund. NEW YORK (CNNMoney) -- New dad Nicolas Sarkozy is apparently hoping for a great baby gift from China president Hu Jintao. A couple of hundred billion euro or so should do. With Sarkozy and other European leaders finally reaching a deal to cut Greece's debt load, bolster the broader EU bailout fund and recapitalize the continent's banks, attention now turns to just who will pay for much of the plan.

Print Comment Once again, the world is hoping China will come to the rescue. One of the most tantalizing parts of Europe's latest proposal is the creation of a special investment vehicle that would allow sovereign wealth funds to invest in the European Financial Stability Facility (EFSF) bailout fund. Sarkozy had a phone conversation with Hu after the debt deal was reached in Brussels early Thursday morning. I'm guessing they weren't sharing war stories about late night changes of poopie diapers. According to a report from Chinese news agency Xinhua , the two leaders spoke about more ways to work together to promote global growth. But there was no mention of China being asked to buy EFSF debt. Still, it looks like Sarkozy won't be the only European official making a pitch to China for much-needed funding. Klaus Regling, the CEO of the EFSF, is said to be planning a trip to China (and possibly Japan as well) in the next few days to meet with potential investors. Why you should be worried about Europe The push to get Asian central banks to invest more in Europe makes perfect sense. For one, the EU is a key export market for both China and Japan. It is not in the best interests of either nation to let Europe sink even deeper into an economic morass. Japan, and to a lesser extent China, have also already invested in the EFSF. According to figures from the EFSF, Japan owns about 20% of the bonds issued by the EFSF so far. There are no specific figures for China but "Asia-ex Japan" nations are listed as sizeable investors in various EFSF issues as well. So making further investments may be merely a case of being in for a penny and in for a pound. Or euro if you will. The EFSF may also be a compelling alternative to U.S. Treasuries. China and Japan are the two largest foreign holders of Uncle Sam's debt, owning $1.14 trillion and $937 billion in Treasury bonds respectively. China has made no secret of its irritation with the U.S. regarding the debt ceiling drama in Congress this summer and how that has impacted China's investments. China also can't be thrilled that the Fed's two rounds of quantitative easing and Operation Twist have left interest rates near historic lows. 0:00 / 1:54 Cork popped on EU deal... hangover later And the EFSF bonds have the Triple A stamp of approval from all the major credit rating agencies -- unlike the U.S. Still, experts said it's not a given that China (or other sovereign wealth funds) will make a big bet on the EFSF. "This is a big question mark going forward. It's probably likely that China and others will participate, but it's not definite. There is some skepticism," said Anthony Valeri, fixed income investment strategist with LPL Financial in San Diego. Valeri said that while China does complain about the many fiscal challenges facing the U.S., China realizes that no matter what Standard & Poor's might say, Treasuries are still a better horse to bet on than European bonds. "China will need a lot of convincing that EFSF bonds are an attractive option for them. At the end of the day, Treasuries may still suit their needs as a safe haven investment," he said. Brazil cuts rates. Is China next? And China and other sovereign wealth funds have complicated objectives, added Bhaskar Chakravorti, senior associate dean of International Business and Finance at The Fletcher School at Tufts University. They have political interests as well as financial motives. That could make negotiations difficult. "The road to a beautiful end game in Europe is paved with potholes. The Chinese will still probably be quite cautious and demand a lot both economically and politically," said Chakravorti. "I'm sure that Germany will not be thrilled about that." But Lionel Mellul, co-partner with Momentum Trading Partners, an independent broker-dealer in New York, thinks China eventually will make an investment. Still, he doesn't think that this is necessarily great news. Mellul argues that it's a sign of how desperate Europe is and how nervous leaders are about the possibility that Italy and Spain may also need bailouts like Greece, Portugal and Ireland did. "It just goes to show how bad the situation is in Europe that they are forced to try and strike a deal with China. Europe needs Asian participation for this to work," he said. And that means that China and other potential investors have the bargaining leverage. Mellul said China could make any EFSF purchases contingent on more favorable trade deals, for example. "China will probably participate, but the question is at what cost?" he said. CNN's Jaime FlorCruz in Beijing contributed to this story. The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.  

For most seniors, a small Medicare rate hike

WASHINGTON (CNNMoney) -- Some 35 million Medicare recipients will have to dig a little deeper into their pockets when they go to the doctor next year. Premiums for office visits and outpatient hospital services will go up by $3.50 a month, the Obama administration announced Thursday. Print Comment At the same time, 12 million recipients who had been paying higher premiums because they are recent enrollees or have higher incomes will see their monthly payments decrease by an average of $15.50 a month. Officials with the Department of Health and Human Services were quick to note that the $3.50 increase for most seniors -- to $99.90 a month -- was "far less" than the $10 hike originally forecast for those who get the so-called Medicare Part B, which also covers home health services. "In 2012, people will find more meaningful choices and overall lower cost," said Donald Berwick, administrator for the Centers for Medicare and Medicaid Services.

However, Medicare beneficiaries could be out a bit more if they end up in a hospital or nursing home next year. Medicare Part A -- which nearly all Medicare beneficiaries buy -- is getting a $24 annual hike in the deductible to $1,156. 0:00 / 2:52 Medicare's toll on America's budget The changes announced Thursday will have the biggest impact on Medicare Part B enrollees with higher incomes or who turned 65 in 2008 or later. They've been paying an average of $115.40 a month but will now pay $99.90 a month. In addition, all Medicare Part B enrollees will see their annual deductibles fall by $22 to $140. The reason for the divergence in premiums has to do with the Social Security cost-of-living allowance increase announced earlier this month. Over the past few years, there has been no COLA boost, and Medicare premiums in those years have been capped at $96.40 for most seniors. The $3.50-a-month increase for earlier enrollees helps bring down the rates for those who enrolled more recently. AARP, the lobbying group for seniors, applauded the changes. "Millions of America's seniors are struggling with higher expenses -- particularly higher health care costs, lower incomes, depleted savings and reduced home equity or homes lost to foreclosure, and this small increase is welcome news," said AARP Legislative Policy Director David Certner in a statement.  

Top 1% are getting even richer

Household income for top 1% more than triples, while middle-class incomes grow by less than 40%. NEW YORK (CNNMoney) -- From 1979 to 2007, average household income for the nation's top 1% more than tripled, while middle-class incomes grew by less than 40%, according to a new report from a research arm of Congress. While those at the top have seen their incomes soar over the past three decades, middle-class and lower incomes have stagnated, the report by the Congressional Budget Office found. Print Comment "Over the past three decades, the distribution of income in the United States has become increasingly dispersed -- in particular, the share of income accruing to high-income households has increased, whereas the share accruing to other households has declined," the CBO said. For the top 1% of the population, average inflation-adjusted household income grew by 275%.

The rest of wealthiest fifth of the population, not including the top 1%, saw household income grow by 65% during that time, faster than the rest of the population, but "not nearly as fast as for the top 1%." For middle-class earners, it was a different story. The growing wealth gap Household income grew by just under 40% and the poorest fifth of the population saw their incomes rise by just 18% in a little less than 30 years, according to the study, which was based on IRS and Census data. During that time, income ballooned at the top of the spectrum and government policy did less to redistribute wealth, the CBO found. "The rapid growth in average real household income for the 1% of the population with the highest income was a major factor contributing to the growing inequality in the distribution of household income between 1979 and 2007," the report said. "Shifts in government transfers and federal taxes also contributed to that increase in inequality." 0:00 / 1:54 Occupy Wall Street goes global That's also, in part, what has spurred the recent Occupy Wall Street movement. Protesters refer to themselves as "the other 99%," which suggests that they represent a broad segment of the U.S. demographic, excluding the wealthiest 1% of Americans. Their aim, they say, has been to bring attention to the country's growing economic gap. Occupy Wall Street began on Sept. 17 in Manhattan's Financial District and has since grown into a global movement. 

Troubled homeowners get a lifeline

NEW YORK (CNNMoney) -- In the latest attempt to address the ailing housing market, the government on Monday announced changes to a federal program that will make it easier for struggling homeowners to refinance to today's near-record low rates. Under the new program, homeowners who owe more on their homes than they are worth will be able to refinance no matter how much they are underwater, as long as they are current on their payments. Print Comment More than 1 million homeowners could get cheaper mortgages as a result, officials estimated. The revamped Home Affordable Refinance Program (HARP) will also streamline the refinancing process, doing away with certain types of appraisals and underwriting requirements, and reducing or eliminating fees that prevented homeowners from refinancing in the past. More than 890,000 homeowners have already refinanced under HARP, which is available to borrowers with loans backed by Fannie Mae and Freddie Mac originated before May 31, 2009.

But hundreds of thousands more could not qualify -- mainly because of the previous 125% loan-to-value limit on the program or because banks would not take on the risk. The 4% mortgage -- good luck getting one "We know there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach," said Edward DeMarco, acting director for the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac. Currently, about 11 million borrowers are underwater on their mortgages, with about 4.7 million of those loans meeting or exceeding the 125% loan-to-value limit, according to CoreLogic, a financial analytics company. By the time HARP expires in 2013, the federal housing agency estimates, up to 1 million more borrowers may benefit from the new regulations. Many of those borrowers will be from states like Florida, California, Nevada and Arizona where home values have been hit the hardest. In metro areas like Las Vegas, for example, prices have plunged nearly 60% from their early-2006 peak. The new rules and other details have yet to be finalized, but FHFA said that should all be worked out by Nov. 15. Banks may be able to start issuing refinanced loans by Dec. 1. Lifting the loan-to-value restrictions may still only help a limited number of borrowers, according to Jaret Seiberg, an analyst for MF Global Inc.'s Washington Research Group, which analyzes public policy for institutional investors. 0:00 / 03:12 How Fannie Mae spruces up foreclosures The problem: Mortgage holders still must be current on their payments for the past six months -- with no more than one missed payment in the past 12 months --and they also must be able to qualify for a new loan. However, Seiberg believes, the changes should allow banks to refinance loans without worrying that Fannie Mae ( FNMA , Fortune 500) and Freddie Mac ( FMCC , Fortune 500) will force them to repurchase the loans if the borrower defaults. In the past, banks have been reluctant to refinance loans because they didn't want to take on that liability, explained Shaun Donovan, the secretary of the U.S. Department of Housing and Urban Development. By doing away with that liability, more lenders will compete to refinance the loans, which he believes will make them more affordable for borrowers. That should help remove one of the biggest barriers to refinancing through HARP, said Gene Sperling, director of the National Economic Council. What about us? Responsible homeowners get left out in the cold Under the newly-revamped program, Fannie and Freddie will also reduce the fees they have charged in the past in order to enable borrowers to better afford the new loans. Among the fees that may be reduced or eliminated are those for loan level price adjustments. Going forward, borrowers may not be penalized for less-than-perfect credit scores, for example. Fees will also be waived for some underwater borrowers who refinance into 20-year or other, shorter-term loans. By doing so, it could help homeowners get above water faster. A homeowner who has a $200,000 balance on a 30-year mortgage with a 6.5% rate and a home value of $160,000, for example, currently makes payments of $1,264 a month. If they refinance into a 20-year fixed-rate loan at 4.25%, it will reduce monthly payments to $1,238 and slash the balance to $160,000 in just five-and-a-half years. If they refinance to a 30-year loan at 4.5%, however, their monthly payments will be much lower, $1,038, but it will take 10 years to reach $160,000. "It's an opportunity for borrowers to improve their household balance sheets by repaying their mortgages much quicker," said DeMarco. 

Inflation (CPI)

NEW YORK (CNNMoney) -- Inflation took a bigger bite out of consumers' wallets over the last 12 months, with September marking the biggest rise in three years. But at the same time, monthly price increases are starting to slow. Print Comment The Consumer Price Index, the government's key measure of inflation at the retail level, jumped 3.9% in September from the year before. Higher food and energy prices again were the biggest culprits, with food 4.7% more expensive than a year earlier, and energy prices jumping 19.3%. Even core CPI, which strips out volatile food and energy prices, posted a 2% gain -- the higher end of the range that is generally believed to be acceptable by the Federal Reserve.

But there were also signs that the pace of increase is abating. The one-month change in prices was a rise of 0.3%, down from a 0.4% increase in August. And monthly core CPI increased by 0.1%, down from the 0.2% increase from the previous month and the smallest rise since March. Economists surveyed by Briefing.com had forecast a 0.3% rise for overall CPI in September, and a 0.2% rise for core CPI. Higher prices this year will mean a 3.6% increase in Social Security benefits in 2012, the first increase for recipients since 2009. Little to no inflation following the financial crisis meant that seniors received no cost-of-living increases in 2010 and 2011. 0:00 / 1:39 Why it sucks to be middle class Social security recipients aren't the only ones who have seen their income squeezed in recent years. High unemployment and weak hiring has kept average hourly wages down to a 1.9% annual increase in September. With prices increasing at nearly twice that rate, consumers are seeing their purchasing power erode. And declining wages are not just a result of the Great Recession. Adjusted for inflation, middle class wages, as measured by median household income, have fallen 7% over the last decade. 

Federal Reserve: GOP's whipping boy

Most of these Republicans don't like the Federal Reserve all that much. NEW YORK (CNNMoney) -- The Federal Reserve. It's the one institution almost every Republican presidential hopeful loves to hate. And during the latest CNN debate, the candidates came to play, attacking the central bank with rhetorical broadsides usually reserved for enemies of the state. Print Comment Rick Perry reiterated that Ben Bernanke might be guilty of treason for instituting a bond buying program.

Michele Bachmann said she wants to put the central bank on "such a tight leash that they're going to squeak." Other complaints: The Fed should be audited. Its policies are weakening the dollar. It has almost unlimited power. And Ron Paul -- a notorious Fed basher -- wasn't even asked to weigh in! Of course, this isn't the first time in the central bank's history it has been criticized by influential politicians in a very public setting. But now, the frequency of the criticism suggests the Fed is becoming a primary issue. And that's just what the bank doesn't want. "The Fed tries as mightily as it can to make its monetary policy decisions as apolitical as it knows how to do," said William Poole, a senior fellow at the Cato Institute and former president of the Federal Reserve Bank of St. Louis. So what does the Fed really do anyhow? The central bank has essentially two jobs: Use monetary policy to keep inflation under control and unemployment rates low. What does Rick Perry really want from the Fed? Politics is not part of the mission. Some of the recent criticism of the Fed stems from the 2008 financial crisis and its aftermath, when the bank was forced to take extraordinary measures to help stabilize financial markets. The bank made special loans, cut key interest rates and worked closely with the Treasury Department to backstop large financial institutions. That role has opened Bernanke and company to complaints from candidates who view the Fed's actions as suspect. But not everybody is buying what the candidates are selling. "It's inaccurate to suggest the Federal Reserve acted in a political manner during the economic crisis" said Steve Bartlett, CEO of the Financial Services Roundtable and a former Republican congressman from Texas. "They've acted in a transparent way and fulfilled their statutory responsibilities." Perry, the current governor of Texas, apparently does not agree, and has stepped up his criticisms of the Fed to a level rarely seen. 0:00 / 6:04 PIMCO CEO: Bernanke's cry for help "If this guy [Bernanke] prints more money between now and the election, I don't know what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas," Perry said last month in Iowa. On Monday night, Perry stuck by his comments, saying it would be be almost treasonous for the Fed to print more money -- a reference to quantitative easing, a bond-buying program designed to boost the economy. Bartlett said Perry's comments about Bernanke are not particularly helpful. "The name calling -- I don't know if that's happened in the past. And it's bad," he said. Another reason to attack the Fed? It's a soft target. The central bank doesn't often fight back -- and when it does, the language used is measured. And the 2012 GOP primary is still a tight race. Political points are on the line. "Most ... informed observers understand this kind of language does seep out of politicians' mouths from time to time when they are trying to gather votes and win office," Poole said. "I think it's very unfortunate that it happens, and I think it's very unfortunate that voters seem to respond positively to it," he added. But the Fed anger might die down as the race moves toward the general election and independent voters become the focus. "I don't think it has legs as a campaign issue," Bartlett said. "It's only an issue if it has legs with the voters, not with the candidates."  

'Too big to fail' foe picked for top FDIC post

Former KC Fed President Thomas Hoenig is President Obama's pick for the No. 2 position at the FDIC. NEW YORK (CNNMoney) -- A conservative critic of "too big to fail" banks has been tapped for a key position to do something about them. Thomas Hoenig, a former Federal Reserve bank president, will be nominated by President Obama to become vice chairman at the Federal Deposit Insurance Corp., the federal agency that insures banks and closes them when they fail. Print Comment Hoenig is a vocal critic of large banks, technically known as "systemically important financial institutions," or SIFI, under the recent Dodd-Frank regulatory reform of the financial system.

Of course, they're more popularly known as the "too big to fail" banks that are a focus of the Occupy Wall Street protests. Under Dodd-Frank, the FDIC will be responsible for unwinding failing big banks. In a June speech, Hoenig -- who headed the Federal Reserve Bank of Kansas City -- called those institutions "fundamentally inconsistent with capitalism." "They are inherently destabilizing to global markets and detrimental to world growth," he said. "So long as the concept of a SIFI exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril." There is a debate going on right now as to what trading of financial assets banks will be allowed to do under Dodd-Frank. Advocates of the so-called Volcker rule, named after former Fed Chairman Paul Volcker, want to allow banks to conduct trading for customers but prohibit them from trading on their own behalf, a practice known as proprietary trading. The FDIC board voted for a draft of the Volcker rule earlier this month, starting a process of public comment on the regulation. In his June speech, Hoenig advocated even tighter prohibitions on bank trading. In fact, he thinks they should not be allowed to conduct any trades at all. "Allowing customer but not proprietary trading would make it easy to game the system by 'concealing' proprietary trading as part of the inventory necessary to conduct customer trading," he argued. If Hoenig is confirmed by the Senate to the new post, it could be bad news for big banks, but good news for smaller banks, said Jaret Seiberg, research analyst with MF Global's Washington Research Group. "It is hard to find a government official who spoke out more forcefully for breaking up the biggest banks than Hoenig during his tenure as Kansas City Federal Reserve president," said Seiberg. "As FDIC vice chairman, he will have an even bigger platform for this message." Besides his views on banks, Hoenig was probably best known as the sole dissenting vote against the Fed decision last November to buy an additional $600 billion in Treasuries in an effort to boost the sluggish U.S. economy, a policy known as quantitative easing, or QE2 for short. He also opposed language in which the Fed promised to keep its key interest rate exceptionally low for an extended period. He said in a speech a year ago that QE2 would be a "bargain with the devil," fearing new asset bubbles that could distort markets, and arguing that it could feed inflation down the road. Hoenig's criticism of Fed policy made him a favorite among Congressional Republicans. Last fall, as Republicans prepared to assume control of the House after their midterm win, Hoenig was invited to speak to Republican members of Congress behind closed doors. He also testified earlier this year before the House subcommittee on monetary policy chaired by Ron Paul, a noted Fed critic and presidential candidate, who would like to abolish the central bank altogether. Republicans' previous praise for Hoenig may make it difficult for them to block his confirmation, even if they oppose his views on the Volcker rule and bank regulation, said Boston University law professor Cornelius Hurley, a former counsel to the Fed Board of Governors. "A brilliant political step, Hoenig's nomination puts Senate Republicans in a very difficult spot in voting on his vice-chairmanship," said Hurley. "His experience and point of view on systemic risk may foretell a pivot away from the failing policies of (Treasury Secretary)Timothy Geithner and (and former Obama adviser) Larry Summers toward more meaningful structural reform of our financial system." The FDIC is the government agency that insures bank deposits for customers, and oversees the takeover of banks deemed to be insolvent. After taking over relatively few banks in the years leading up to the 2008 financial crisis, it has become very active since the financial meltdown, taking over 402 banks since 2008. Martin Gruenberg is technically still the vice chairman of the agency but he has been acting chairman since the resignation of the previous chairman, Sheila Bair, in July. President Obama nominated Gruenberg in June to become the new chairman.