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The Fed in the News (all times Eastern)

November 7 - 8:40 am. Boston Fed President Eric Rosengren to speak at the conference “New England Works: A New England Leadership Summit on Bridging Higher Education and the Workforce. November 8 - 1:00 pm. Minneapolis Fed President Narayana Kocherlakota to address the Economic Outlook Seminar in Sioux Falls, SD on “Looking Back at Three Years of Federal Reserve Action.” 1:30 pm. Philadelphia Fed President Charles Plosser will speak on monetary policy at an awards ceremony at which he will receive the 2011 Global Citizen Award from the Global Interdependence Center. November 9 - 9:30 am. Chairman Ben Bernanke to deliver opening remarks at the Small Business and Entrepreneurship During an Economic Recovery conference. 12:15 pm. Governor Daniel Tarullo to speak on “Current Issues in Financial Regulation” at the Clearing House Business Meeting and Conference in New York, NY. November 10 - 11:45 am. Ben Bernanke to hold Town Hall Meeting with soldiers and their families in El Paso, TX. 1:00 pm. Chicago Fed President Charles Evans gives the keynote address at the Chicago Fed's 14th Annual International Banking Conference. November 11 - 1:15. Vice Chair Janet Yellen to give the keynote luncheon speech on “Financial Stability” at the Chicago Fed’s 14th Annual International Banking Conference. 2:45 pm. San Francisco Fed President John Williams to appear on a panel on “Monetary and Macroprudential Policies: Challenges and Solutions” at the IMF annual research conference in Washington, DC.

Washington This Week November 7 - November 11

With the House in recess this week, the Senate will be left to take up a number of measures tied to President Obama’s jobs proposals, as well as issues more closely related to budget concerns. Further, while there are no official meetings of the deficit reduction “Super Committee” scheduled this week, members will be meeting behind closed doors as the time ticks down to the November 23 deadline for an agreement: 16 days and counting. As early as today, the Senate is expected to hold a test vote on a House-passed bill that would repeal a requirement that federal, state and local governments spending at least $100 million annually withhold three percent of payments to contractors. A similar measure was included in the President’s jobs plan. As designed, the directive that payments be withheld from contractors is estimated to save $11.2 billion over 10 years. Its repeal is favored by both Republicans and Democrats alike, but the foregone savings will require an offset. As such, the House included a “tweak” to the 2010 health reform law that would save more than $14 billion by reversing a provision allowing more than one million additional middle-income seniors to qualify for Medicaid, the federal/state health program for the poor. While Democrats favor the tweak, many prefer that the savings be used in a Super Committee agreement or even a one-year Medicare “doc fix.” Senate Majority Leader Harry Reid (D-NV), however, has already indicated that he will allow its inclusion in the withholding bill in exchange for Republican support for expanded tax credits to businesses that hire veterans. Next, expect the Senate to move on to another “minibus,” which combines the appropriations bills for Energy / Water, Financial Services, General Government, and State and Foreign Operations. Note, however, that not one of the 12 appropriations bills that should have funded the government beginning on October 1 has yet been enacted. As such, another short-term continuing resolution (CR) will be needed to avoid a government shutdown on November 18. We are hearing that such a measure could be attached to this minibus appropriations bill, and we are confident that a shutdown will

W A ASHINGTON NALYSIS

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be avoided with a minimum of drama, despite the proximity to the deadline. Meanwhile, looming is the November 23 Super Committee deadline. The Congressional Budget Office has imposed an additional unofficial deadline of Wednesday for when it would like to have a scoreable bill, even if it is only in draft form. With persistent reports of continued discord between the parties over the role of taxes and entitlements in a final agreement, such an artificially truncated timetable appears virtually impossible. Despite the apparent lack of tangible progress, however, we continue to think the Committee capable of crafting a piece of legislation saving $600 billion+, and perhaps even one saving $1.2 trillion without resorting to sequestration, though the larger bill is not as likely. The Senate Environment and Public Works Committee (EPW) is slated to markup a two-year surface transportation bill on Wednesday that would be the longest highway measure since 2009. The legislation keeps funding for highways essentially flat at $42 billion per annum. The only real positive we can see, and it appears to be rather small, is that the two-year bill is likely to bring some stability, along with inflationary increases in funding. Although highway bills are historically five or six years in duration, a two-year extension at least means that states and localities reliant on such funds will not have to worry every few months over whether or not they will be available, something that has been the trend for the last two years. In the telecom sector, the Senate is expected to approve House-passed legislation tomorrow that would strike down the Federal Communications Commission’s network neutrality rules. However, we expect the President to veto the bill, and there are insufficient numbers in Congress for this to be overridden. The rules are scheduled to go into effect on November 20, but we anticipate that the courts will find that the Commission exceeded its authority to regulate the Internet and will ultimately throw the rules out in 2012. Finally, Sen. Rand Paul (R-KY) is expected to force a vote this week to block implementation of the Cross State Air Pollution Rule (CSAPR). Regardless of the vote’s actual outcome, President Obama would veto the measure should it reach his desk. In fact, we are dubious of Sen. Paul’s prospects of securing even a simple majority for the legislation. A failure by Paul in this regard could provide tremendous political cover to the Administration and would put to rest the expectation of many investors that Congress will somehow intervene to delay or otherwise block significant Environmental Protection Agency (EPA) regulations impacting the power generation sector. Similarly, we continue to seriously doubt that Congress will use the appropriations process to rein in EPA.

Thurs., Nov. 10, 10:00 am. Senate Finance Committee. “Unemployment Insurance and the Path Back to Work.”

Tues., Nov. 8, 10:00 am. Senate Energy and Natural Resources Committee. “Market Developments for U.S.

Natural Gas, Including the Approval Process and Potential for Liquefied Natural Gas Exports.”

Financial Institutions

Energy and the Environment

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FDA User Fee Dates [our prediction in bold]

Alimera Sciences / pSivida Iluvien® Diabetic macular edema We Expect Approval Merck / Santen Saflutan® Elevated intraocular pressure in patients with primary open- angle glaucoma or ocular hypertension We Expect Approval

Wed., Nov. 9, 2:30 pm. Senate Judiciary Committee, Subcommittee on Privacy, Technology and the Law. “Health and Privacy: Protecting Health Information in a Digital World.”

Thurs., Nov. 10, 2:30 pm. Senate Health,

Education, Labor, and Pensions Committee. “Health Care Delivery System Reform: Improving Quality and Lowering Costs.”

Tues., Nov. 8, 7:30 am. NFIB Small Business Optimism - October. Survey: 90.0. [September: 88.9] Tues., Nov. 8, 10:00 am. IBD/TIPP Index of Economic Optimism - November. Survey: 41.0. [October: 40.3] Thurs., Nov. 10, 8:30 am. Import Price Index MoM - October. Survey: 0.1%. [September: 0.3%] Thurs., Nov. 10, 8:30 am. Initial Jobless Claims - November 5. Survey: 400K. Fri., Nov. 11, 9:55 am. U. of Michigan Consumer Sentiment Index - November. Survey: 61.5 [Prior: 60.9] ________________________________________________________________________________________________________________________ Washington Analysis, 1120 Connecticut Avenue, NW, Suite 400, Washington, DC 20036 Tel: 202/659-8030 Fax: 202/463-5137 Additional information is available upon request. Washington Analysis conducts economic and political legislative and regulatory analysis. This report is for private circulation and distribution in its entirety and is based upon information believed to be reliable. However, we cannot guarantee accuracy and are neither responsible for errors of transmission of information, nor liable for damages resulting from reliance on this information. Opinions in this report constitute the personal judgment of the analysts and are subject to change without notice. The information in the report is not an offer to purchase or sell any security, nor do the analysts receive any compensation in exchange for any specific recommendation or view expressed in this report. Directors and/or employees of Washington Analysis own securities, options or other financial instruments of companies impacted by the issues discussed herein.

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