Wall Street bullish on healthcare reform

Wall Street expects Washington to complete healthcare reform. But it doesn’t expect a public option. That fact is evident from the stock prices of health insurance companies.

Shares of UnitedHealth Group, Aetna and HealthNet Inc. rose when legislation sponsored by Senate Finance Committee Chairman Max BaucusMax Sieben Baucus2020 Dems pose a big dilemma for Schumer Steady American leadership is key to success with China and Korea Orrin Hatch, ‘a tough old bird,’ got a lot done in the Senate MORE (D-Mont.) was introduced and then attacked from the left.

Those stocks have dropped a bit since then, but remain up from earlier this year.

The recent movement reflects the fact that stock prices for some healthcare industries, particularly insurance, have been moving to the daily rhythms of Washington.

“Stocks fluctuate enormously depending on where the public option is,” said Daniel Alpert, managing director of Westwood Capital. “I don’t believe that any stock that’s at all connected to healthcare isn’t rising or falling with this issue,” he said.

Stock in health insurers has climbed for the year, with investors increasingly confident the legislation that hits President Barack ObamaBarack Hussein ObamaOvernight Energy: Dems ask Pruitt to justify first-class travel | Obama EPA chief says reg rollback won't stand | Ex-adviser expects Trump to eventually rejoin Paris accord Overnight Regulation: Trump to take steps to ban bump stocks | Trump eases rules on insurance sold outside of ObamaCare | FCC to officially rescind net neutrality Thursday | Obama EPA chief: Reg rollback won't stand Ex-US ambassador: Mueller is the one who is tough on Russia MORE’s desk is unlikely to include a public health insurance option.

Health insurance reform without the public option is seen by some as a check for insurers to make more money. Though the legislation would prevent them from turning away people who have pre-existing ailments, it would deliver millions of new premium-paying customers, many of them young and healthy, who would be required to buy insurance.

Some Washington firms have been predicting for some time that Congress will approve a healthcare reform bill with no public option.

“We believe that there will be a deal … and it’s unlikely they’ll use reconciliation,” said Andrew Parmentier, founder of Height Analytics, which provides equity research on regulated industries to institutional investors.

The use of budget reconciliation rules to move healthcare in the Senate would allow legislation to move forward without 60 votes. Democrats are likely to pull out those rules to move a bill with a public option, since so far no Republicans support it.

Height, based on its talks with people on Capitol Hill and K Street, is confident that because so many Democrats oppose the use of the rules for moving healthcare, it won’t happen.

Alpert saw Obama as putting the public option in the grave with his speech to a joint session of Congress on Sept. 9. The address “pretty much buried the public option,” he said.

Both Democrats and Republicans in Washington can take some solace from investor confidence. Wall Street appears to believe Obama will get his reform bill, which will be hailed as a tremendous political victory for the president.

At the same time, investors believe Republicans will be able to crow that they stopped a government takeover of healthcare by blocking a public option.

Unions say no to trade

Several unions have drawn a bright line on trade for the Obama administration.

The Teamsters, United Steelworkers and Communications Workers of America are among the groups saying they will fight to defeat free trade deals with Panama, Colombia and South Korea if they are brought to Congress. All three free trade agreements (FTAs) were negotiated by the Bush administration.

“We want to make clear that we strenuously oppose the three leftover Bush FTAs and will fight for their defeat if they are brought to Congress,” members of the Citizens Trade Campaign wrote in a Tuesday letter to Obama.

The letter was also signed by the National Farmers Union and Public Citizen’s Global Trade Watch.

Several large unions, including the AFL-CIO and Service Employees International Union (SEIU), also oppose the three deals but are not signatories to the letter. But Workers United, an SEIU-affiliated union, did sign it.

The Steelworkers won a victory on trade this month when Obama decided to slap tariffs on Chinese tires. The president has shown a willingness to bend to labor on trade.

The trade agreements appear to be on ice while the administration tries to win healthcare reform. It is widely expected, however, that Obama will move forward with the deals after the healthcare debate.

Community banks flex

The biggest problem for Sen. Chris Dodd’s (D-Conn.) proposal for a single banking regulator could be opposition from the country’s 8,000 community banks.

“I think we’re well-positioned,” said Steve Verdier, director of congressional relations for the Independent Community Bankers of America.

Community banks are happy with the present system, in which four different regulators oversee the banking system. Verdier notes that the fact that there were four regulators regulating community banks had nothing to do with last year’s crisis.

“People recognize we’re the good guys in all this,” said Verdier, who added that his 5,000 members aren’t seen by lawmakers as the people who brought you the financial crisis.

It was community banks, not the larger institutions, that were responsible for slowing regulatory restructuring and killing “cramdown” legislation that would allow bankruptcy judges to adjust the principal and interest rates of mortgages, Keefe, Bruyette and Woods analyst Brian Gardner argued in a research note on Tuesday.

“Smaller banks were not seen as being the cause of the financial crisis and so were not the bad buys,” Gardner wrote.