OVERNIGHT MONEY: Lew on track for Treasury

Bernanke faced some grilling from GOP lawmakers in the Senate, but expect even more in the House, where conservative lawmakers tend to be even more critical of Bernanke and crew. 

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Financial Services Committee Chairman Jeb Hensarling (R-Texas) set off the Bernanke criticism Monday in interviews. He told CNBC Host Larry Kudlow that while he respects Bernanke, the Fed's policies are of "almost negligible benefit" while bringing on considerable risks. 

So, Bernanke will need to be on his toes, again.

Budget exam: House Republicans will hold a pivotal meeting Wednesday afternoon to devise a plan to avert a government shutdown after March 27, when the current stopgap measure expires. 

Leaders are seeking rank-and-file views on a new continuing resolution drafted by Appropriations Committee Chairman Hal Rogers (R-Ky.) while also gauging whether conservatives would back the plan. 

Some groups want the March 27 deadline to be used to force major changes, including possible defunding, of President Obama's healthcare reform law.

That bill would contain two of the 12 appropriations bills for 2013 that were never enacted — Defense and Military Construction-Veterans Affairs. 

The bill would remain at the current level of funding, but would do nothing to turn off the sequester cuts that are scheduled to take effect on Friday.  

Budget chat: The House Appropriations subcommittee on the Legislative Branch will hold a hearing on the budget for the nonpartisan Congressional Budget Office. Even though the hearing is supposed to focus on the agency's budget, it could give lawmakers a chance to ask CBO Director Douglas Elmendorf about the looming sequester and its potentially damaging effects on the economy. The CBO has estimated that the across-the-board spending cuts would put a dent in economic growth and lead to upward of 750,000 job losses. 

Moving right along: The Senate Agriculture, Nutrition and Forestry Committee will sit down with Commodity Futures Trading Commission Gary Gensler to talk about the agency's progress in implementing the Dodd-Frank financial law and what is planned for this year. 

Lawmakers also will question Gensler on the collapse of MF Global and look at the agency’s efforts to protect customers and the integrity of the markets.  


SEQUESTER CENTRAL

Feeling the heat: Congress is running out of time to find a way to replace $85 billion in automatic spending cuts set to take effect on Friday, and there wasn't exactly any feeling of consensus on Capitol Hill on Tuesday. 

Senate Majority Leader Harry Reid (D-Nev.) said the sequester should go forward unless Republicans agree to raise taxes, and said he would not agree to any package that replaces the spending cuts with, well, just different spending cuts.

"I think we need some revenue to take the pressure off everybody. The American people agree with me, and until there’s some agreement on revenue, I believe we should just go ahead with the sequester,” Reid said.

Reid wasn't exactly thrilled about a Senate Republican proposal that would give the administration more flexibility to manage the effects.

Republicans talked during lunch on Tuesday about that proposal — put forth by Sens. Pat Toomey (Pa.) and Bob Corker (Tenn.) — that is supported by leadership and would give Obama more leeway to deal with the sequestration.

Still, some GOP lawmakers don't like it much either, mostly because, they argue, it would give the White House too much power over spending decisions and fails to address the more damaging cuts to defense spending. 

"I've never seen so much passion about something that is not going to pass," Corker said.

Meanwhile, President Obama said the spending cuts would be a “self-inflicted wound” on the economy.

During a trip to the Virginia coast, Obama pointed the finger at Speaker John Boehner (R-Ohio) and congressional Republicans for stalling on the sequester, saying they “refuse to compromise even an inch” on closing tax loopholes.

“That’s what’s holding things up right now,” Obama said. “Keep in mind nobody is asking them to raise income tax rates. All we’re asking is to consider closing tax loopholes and deductions that the Speaker in the House John Boehner said he was willing to do just a few months ago.”

The remarks came only a short time after Boehner suggested that the Senate get “off its ass” and pass a bill to prevent the sequester.

So that's where Tuesday ended. 

The only issue lawmakers and the White House seem to agree on is that no one wants the cuts.

Sen. Barbara Boxer (D-Calif.) pushed back at suggestions that Democrats are ginning up fear about the cuts, as time runs out to reach some sort of agreement to avert the across-the-board cuts. 

With the sequester just days away, a prominent federal workers union released a survey that shows that agencies are already strapped, and that federal workers have already felt the effects of a current pay freeze.

The National Treasury Employees Union's survey found that roughly two in three of its members who responded to the survey said their agency had inadequate resources, and three in four said the pay freeze had forced them to cut back on necessities. 

Still, even despite the battle being waged on Capitol Hill, consumer confidence jumped up in February, exceeding projections.

Now, it's up to Congress and the White House to do the heavy lifting and figure out a solution to the sequester by Friday.


ECONOMIC INDICATORS 

MBA Mortgage Index: The Mortgage Bankers Association releases its weekly report on mortgage application volume. 

Durable orders: The Commerce Department releases its January report measuring the dollar volume of orders, shipments and unfilled orders of durable goods, which are goods intended to last three or more years. Orders are considered a leading indicator of manufacturing activity, and the market often moves on this report despite the volatility and large revisions that make it a less than perfect indicator.

Pending Home Sales: The National Association of Realtors will release its index for January that gauges contract signings, a forward-looking indicator of home sales.  


WHAT YOU MIGHT HAVE MISSED

— Boehner: Tax reform to be H.R. 1

— Banks post near-record earnings as sequester looms

— Home prices, new-home sales make big gains

— Economists press for corporate tax reform


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