OVERNIGHT MONEY: Gas prices take center stage

The vote comes after the Senate voted Tuesday evening on a Democratic plan to repeal an estimated $21 billion over a decade in tax incentives for the largest oil companies. A procedural motion necessary for the bill to move forward failed in a 52-48 vote. The motion required 60 votes for passage, but moderate Republicans Sen. Olympia Snowe (Maine) and Susan Collins (Maine) voted in favor.

The vote is playing a key role in efforts to come up with a bipartisan deficit reduction plan and Democrats are using it to highlight GOP cuts to entitlements and their blanket refusal to raise any taxes or cut any tax breaks. Senate Majority Leader Harry Reid (D-Nev.) said he is confident that a deficit reduction deal in exchange for getting the GOP to raise the nation’s debt ceiling will include the end of the tax breaks.

Sen. Robert Menendez (D-N.J.), a lead sponsor of the bill, told The Hill the vote was meant in part to provide a sobering moment for Republicans that will bring them to their senses on the need for revenue to be on the table in the debt talks. “Certainly this is part of saying tax expenditures have to be part of the deficit conversation. This the most obvious one, the one that 74 percent of Americans agree with,” he said. He said breaking the back of the GOP no-taxes pledge is part of the reason for holding the vote. “At some point there has to be a sobering reality that even Jim Baker and other mainstream Republicans have said that you are not going to solve the deficit problem just with spending cuts,” he said. “It’s a pretty realistic approach, except for those that want to privatize Medicare … rather than take oil company subsidies away.”

WHAT ELSE TO WATCH FOR:

DEBT LIMIT DEBATE: Sen. Pat Toomey (R-Pa.), who has emerged as one of the leading skeptics in the debt limit debate, will discuss the spending ceiling at the American Enterprise Institute. As Treasury Secretary Timothy Geithner repeatedly told lawmakers that a boost to the debt limit is the only way to avert an economic catastrophe, Toomey has fired back, accusing the White House of using “scare tactics” in the debate. He is the primary sponsor of legislation that he maintain would allow the government to reach the debt limit and avoid a default, by prioritizing debt service payments on government obligations over other spending (Treasury officials maintain this arrangement would be unworkable).

FED MINUTES RELEASED: The Federal Reserve will release its Federal Open Market Committee minutes on Wednesday afternoon that could provide some insight into the central bank’s exit strategy from its quantitative easing policy that ends in June. Atlanta Federal Reserve Bank President Dennis Lockhart suggested recently that the FOMC is ready to move ahead and that could mean a signal that interest rates may be allowed to rise. The minutes could provide more of a look into how the Fed will move forward on selling off assets on its balance sheet. Fed Chairman Ben Bernanke has continued to say that interest rates will be held near zero for an “extended” period, probably the remainder of the year. But several committee members have suggested that the central bank gradually begin raising interest rates before the end of the year.

CFPB COMING OUT: The Consumer Financial Protection Bureau (CFPB) will make a debut of sorts tomorrow, when it unveils a prototype mortgage disclosure form. The document, which aims to combine two existing pieces of mortgage paperwork and replace the jargon with easier, consumer-friendly language, marks the most official action of the new bureau to date. However, CFPB officials are quick to point out that this draft does not represent official rule-making for the bureau, which does not actually go live until July. Rather, this test document is going to be field-tested in cities nationwide before CFPB regulators sit down to do actual rule-making later in the year.

SECURITIZATION SCRUTINY: A subcommittee of the Senate Banking Committee will explore the state of the nation’s securitization markets tomorrow. Sen. Jack Reed’s (D-R.I.) subcommittee on securities, insurance and investment will discuss that market, which needs to play a vital role in the nation’s housing market going forward. As lawmakers and the White House search for ways to pry the grip of Fannie Mae and Freddie Mac from over 90 percent of the nation’s mortgages, figuring out how to build a robust securitization market for mortgages will be a major issue. Housing and investment experts are slated to testify.

DEFENSE DOLLARS: The defense subcommittee of the Senate Appropriations Committee will discuss three areas of military spending Wednesday. Appropriations for the Army, Missile Defense Agency, and the Joint Chiefs and Secretary of Defense will be the topics du jour.

CANTOR FOCUSES ON JOBS: On Wednesday, May 18th from 10 to 11 a.m., House Majority Leader Eric Cantor (R-Va.) will host a job creators forum with local business leaders at Virginia Commonwealth University.

CHINA’S IPR REGIME SCRUTIZED: The U.S.-China Economic and Security Review Commission will examine China controversial “Indigenous Innovation” policy that the U.S. has been unable to curb. The policy forces government contractors to hand over valuable intellectual property rights to face denial of a contract.

ENERGY DOLLARS: Energy Secretary Steven Chu will appear before the Senate Appropriations Committee seeking to justify the Obama administration’s 2012 budget request for the department.

Economic indicators:

– The Mortgage Bankers Association releases its weekly numbers on mortgage applications tomorrow.

BREAKING TUESDAY:

GANG OF SIX COLLAPSES: Deficit hawks for six months had pinned their hopes on six senators working on a grand deficit bargain. Those hopes were dimmed Tuesday when Sen. Tom Coburn (R-Okla.) announced that he would pull out of the talks with two other Republican and three Democratic colleagues. Coburn said the talks have collapsed over the tough issue of entitlement reform. “We can’t bridge the gulf of where we need to go on mandatory spending,” Coburn said Tuesday afternoon. “I don’t see that there’s going to be any fruition in continuing them at this time.” Fellow gang member Sen. Saxby Chambliss (R-Ga.) said that the talks cannot produce a result without Coburn. 

FTA ACTION PROCEEDS: Senate Finance Chairman Max Baucus (D-Mont.) announced plans to hold a hearing next Wednesday on the pending free trade agreement between the U.S. and Panama. The announcement shows the committee is moving forward on the FTAs even though the White House placed an ultimatum on them yesterday that has thrown a wrench in the possibility of passage. The White House wants a renewal of Trade Adjustment Assistance for service workers as the price for submitting the free trade agreements. Panama recently ratified the U.S.-Panama Tax Information Exchange Agreement (TIEA), one of the final outstanding issues that had delayed the process of moving the FTA forward toward implementation.  In addition to the TIEA, which brings Panama into compliance with Organization for Economic Cooperation and Development standards designed to deter the formation of tax shelters, Panama also enacted several new labor rights laws in recent months. Baucus has pledged support for the Panama, Colombia and South Korea FTAs, as well as a renewal of Trade Adjustment Assistance and key trade preference programs.

WHAT YOU MIGHT HAVE MISSED:

– Audit reveals housing authority misused stimulus funds

– Geithner slams Ryan budget: ‘America can do better’

– Cummings calls for closer look at misuse of federal housing funds

– Reid ‘confident’ debt agreement will include repeal of oil tax break

– Warren named to Oklahoma Hall of Fame

– NY lawmakers express concern about derivatives rules

– New residential construction falls