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Archive for January 6th, 2010

Geithner’s New York Fed Told AIG to Limit Swaps Disclosure

Jan. 7 (Bloomberg) — The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.” President Barack Obama selected Geithner as Treasury secretary, a post he took last year.

Bank Payments

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Senator Chuck Grassley of Iowa and Representative Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.

Securities Lawyers

AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” said Jack Gutt, a spokesman for the New York Fed, in an e- mailed statement. Gutt said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”

Mark Herr, a spokesman for New York-based AIG, declined to comment. Andrew Williams of the Treasury referred questions to the New York Fed.

Kathleen Shannon, an AIG deputy general counsel, wrote to the insurer’s executives in a March 12, 2009, e-mail about the conflicting demands from the New York Fed and SEC.

‘Reasonable Basis’

“In order to make only the disclosure that the Fed wants us to make,” Shannon wrote, “we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”

AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.

Earlier that month, Fed Vice Chairman Donald Kohn testified to Congress that disclosure of the counterparties would harm AIG’s ability to do business. The insurer agreed to turn over a stake of almost 80 percent in connection to its bailout.

‘No Mention of the Synthetics’

The e-mails span five months starting in November 2008 and include requests from the New York Fed to withhold documents and delay disclosures. The correspondence includes e-mails between AIG’s Shannon and attorneys at the New York Fed and its law firm, Davis Polk & Wardwell LLP. Tom Orewyler, a spokesman for Davis Polk in New York, declined to comment as did Shannon.

According to Shannon’s e-mails obtained by Issa, the New York Fed suggested that AIG refrain in a filing from mentioning so-called synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans.

The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”

AIG had about $9.8 billion of swaps protecting the synthetic holdings as of September 2008, the company said on Dec. 10, 2008. Goldman Sachs said in a press release last month that it was among banks that had losses on synthetic CDOs.

As part of a bailout that swelled to $182.3 billion, AIG and the Fed created Maiden Lane III, a taxpayer-funded facility designed to remove mortgage-linked swaps from the insurer’s books. Shannon told the New York Fed on Nov. 24, 2008, that AIG executives wanted to publicly disclose details about Maiden Lane the next day.

‘Guided by Your Counsel’

“Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week?” Brett Phillips, a New York Fed lawyer wrote in an e-mail that day. “The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.”

“Given the significance of the transaction, AIG would be best served by filing tomorrow,” Shannon wrote. “We will of course be guided by your counsel.” The document outlining the Maiden Lane agreement was posted on Dec. 2, 2008.

In at least one instance, AIG pushed for documents to be disclosed and then released the information.

‘Better Disclosure’

“We believe that the agreements listed in the index (i.e., the Master Investment and Credit Agreement and the Shortfall Agreement) do not need to be filed,” Peter Bazos, a Davis Polk lawyer wrote on Nov. 25, 2008. “Please let us know your thoughts in this regard.”

AIG’s Shannon replied that “the better practice and better disclosure in this complex area is to file the agreements currently rather than to delay.” The agreements were included in the Dec. 2 filing.

More details of the negotiations over swaps payments emerged in November 2009 when Neil Barofsky, the special inspector in charge of policing the Troubled Asset Relief Program, assessed the Fed’s role in the bailout.

“Federal Reserve officials provided AIG’s counterparties with tens of billions of dollars they likely would have not otherwise received,” Barofsky wrote in a Nov. 17 report. “The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds.”

AIG’s first rescue was an $85 billion credit line from the New York Fed in September 2008. The bailout was expanded three times and is valued at $182.3 billion. That includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury and up to $52.5 billion for Maiden Lane facilities to buy mortgage-linked assets owned or backed by the company.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

SEE THE ACTUAL E-MAILS HERE  (page 5 is particularly interesting)

A Clothing Clearance Where More Than Just the Prices Have Been Slashed

In the bitter cold on Monday night, a man and woman picked apart a pyramid of clear trash bags, the discards of the HM clothing store that reigns in blazing plate-glass glory on 34th Street, just east of Sixth Avenue in Manhattan.

Cynthia Magnus with mutilated clothing she found on West 35th Street last month. She said she was appalled by the waste.

At the back entrance on 35th Street, awaiting trash haulers, were bags of garments that appear to have never been worn. And to make sure that they never would be worn or sold, someone had slashed most of them with box cutters or razors, a familiar sight outside H & M’s back door. The man and woman were there to salvage what had not been destroyed.

He worked quickly, never uttering a word. A bag was opened and eyed, and if it held something of promise, was tossed at the feet of the woman. She said her name was Pepa.

Were the clothes usually cut up before they were thrown out?

“A veces,” she said in Spanish. Sometimes.

She packed up a few items that had escaped the blade — a bright green T-shirt that said “Summer of Surf,” and a dark-blue hoodie in size 12, with a Divided label. The rest was returned to the pyramid.

It is winter. A third of the city is poor. And unworn clothing is being destroyed nightly.

A few doors down on 35th Street, hundreds of garments tagged for sale in Wal-Mart — hoodies and T-shirts and pants — were discovered in trash bags the week before Christmas, apparently dumped by a contractor for Wal-Mart that has space on the block.

Each piece of clothing had holes punched through it by a machine.

They were found by Cynthia Magnus, who attends classes at the Graduate Center of the City University of New York on Fifth Avenue and noticed the piles of discarded clothing as she walked to the subway station in Herald Square. She was aghast at the waste, and dragged some of the bags home to Brooklyn, hoping that someone would be willing to take on the job of patching the clothes and making them wearable.

A Wal-Mart spokeswoman, Melissa Hill, said the company normally donates all its unworn goods to charities, and would have to investigate why the items found on 35th Street were discarded.

During her walks down 35th Street, Ms. Magnus said, it is more common to find destroyed clothing in the H & M trash. On Dec. 7, during an early cold snap, she said, she saw about 20 bags filled with H & M clothing that had been cut up.

“Gloves with the fingers cut off,” Ms. Magnus said, reciting the inventory of ruined items. “Warm socks. Cute patent leather Mary Jane school shoes, maybe for fourth graders, with the instep cut up with a scissor. Men’s jackets, slashed across the body and the arms. The puffy fiber fill was coming out in big white cotton balls.” The jackets were tagged $59, $79 and $129.

This week, a manager in the H & M store on 34th Street said inquiries about its disposal practices had to be made to its United States headquarters. However, various officials did not respond to 10 inquiries made Tuesday by phone and e-mail.

Directly around the corner from H & M is a big collection point for New York Cares, which conducts an annual coat drive.

“We’d be glad to take unworn coats, and companies often send them to us,” said Colleen Farrell, a spokeswoman for New York Cares.

More than coats were tossed out. “The H & M thing was just ridiculous, not only clothing, but bags and bags of sturdy plastic hangers,” Ms. Magnus said. “I took a dozen of them. A girl can never have enough hangers.”

H & M, which is based in Sweden, has an executive in charge of corporate responsibility who leads the company’s sustainability efforts. On its Web site, H&M reports that to save paper, it has shrunk its shipping labels.

“How about all the solid waste generated by throwing away usable garments and plastic hangers?” Ms. Magnus asked in a letter to the executive, Ingrid Schullstrom. She volunteered to help H & M connect with a charity or agency in New York that could put the unsold items to better use than simply tossing them in the trash. So far, she said, she has gotten no response.

On Monday night, Pepa’s shopping bag held a few items. She pointed to her gray sweatpants. “From here,” she said.

How about coats?

“Maybe tomorrow,” she said.

The C-SPAN Lie? See Eight Clips of Obama Promising Televised Healthcare Negotiations

So, Obama promises transparency, no less than 8 times and now, today we have:

Obama Reneges on Health Care Transparency

As a Candidate, President Obama Promised to Put Health Care Reform Negotiations on C-SPAN

(CBS) President Obama wants the final negotiations on health care reform – a reconciliation of the House and Senate versions of the bill – put on a fast track, even if that means breaking an explicit campaign promise.

“The House and Senate plan to put together the final health care reform bill behind closed doors according to an agreement by top Democrats,” House Speaker Nanci Pelosi said today at the White House.

The White House is on board with that, too, reports CBS News political correspondent Chip Reid. Press Secretary Robert Gibbs stressed today that “the president wants to get a bill to his desk as quickly as possible.”

During the campaign, though, candidate Obama regularly promised something different – to broadcast all such negotiations on C-SPAN, putting the entire process of pounding out health care reform out in the open. (That promise applied to the now-completed processing of forging House and Senate bills, too.)

Back when Republicans controlled Congress and George W. Bush was in the White House, it was Democrats who angrily complained about secret backroom deals.

Now the roles are reversed.

“The negotiations are obviously being done in secret and the American people really just want to know what they are trying to hide,” said Rep. Tom Price, R-Ga.

Even with no cameras and no Republicans in the room it will be a tall order for the House and Senate to resolve their differences – especially on abortion coverage and how to pay for health reform

Even so, top Democrats in both houses say they hope to have the final bill ready for the president’s signature in time for his State of the Union address – less than four weeks from now.

Buying a Home in America today is Expensive Thanks to the Banking Sector: Examining Income and Home Prices from 1950 to the Present. Can Home Prices Fall Another 38 Percent?

A question rarely asked regarding the housing market today is whether prices are affordable.  There seems to be this implicit belief that because prices have fallen so drastically that they somehow must reflect a bargain.  This is not necessarily true.  I think in our consumerist society people are conditioned to automatically assume that a lower price somehow means a good deal.  Go to any mall after the Christmas shopping season and you’ll see “amazing” bargains for 50, 60, or even 70 percent off.  But is it really a bargain?  This question is not often asked yet this is the central tenet to the housing bubble that got many Americans into trouble.

In order to understand the housing market, we need to look at the income of the average American.  Yet this is something that is usually removed from the equation when discussing housing policy.  How do Americans pay for their mortgage?  From an ever scarcer W-2 job yet Wall Street and policy makers have somehow consciously avoided focusing on this connection because headline unemployment is at 10 percent.  But let us look at the relation of income to home prices over the decades:

Source:  Visual Economics

Now this is a critically important chart.  At the height of the bubble it took 473 percent of the median household income to purchase a median priced home.  Compare this to 297 percent in 1975.  The current number is 331 percent.  But let us run our own numbers based on Census data.  The median U.S. household income is $52,029 according to the 2008 Census (this number is lower for 2009 but data won’t be released until September of 2010).  The current median home price is $172,600.

Median Household income:       $52,029

Median U.S. home price:             $172,600

But is this affordable?  Not necessarily.  First, let us look at the home ownership rate in the U.S.

67.6 percent of U.S. households own their home.  The housing situation is very much a majority issue for average Americans.  This is where most Americans store their wealth.  51 million households have a mortgage while 23 million live in homes with no mortgage at all (approximately 30 percent).  Let us run the numbers for someone looking to buy a home today with a FHA backed loan since this only requires a 3.5 percent down payment.  Here are the numbers:

We’ll go ahead and use Texas since there is no state income tax there and it will give a better overall net income to the median income household.  After taxes, the family is taking home roughly $3,570 per month.  How much money down is need for a FHA backed loan?  3.5 percent and let us use the $172,600 median home price:

Down payment:                               $6,041

Now if we run the numbers, things look okay here:

$982.60 / $3,570= 27.5% Debt to Income (DTI)

Many bankers will even go with gross income so you will have a better ratio.  However, taxes and insurance are other costs associated with owning a home.  In Texas, these run anywhere from 2.5 to 3 percent.  Let us add that in as well:

PI ($982.6) + TI ($431.5) = $1,414

Now, your housing payment is eating up nearly 40 percent of your income:

$1,414 / $3,570 = 39.6%

What about repairs?  Landscaping?  Garbage pickup?  These are all other items associated with owning a home.  Keep in mind we are using the median priced home in our example and not some extravagant home.  This is what the average American is facing.

Even going back to 1975, prices would still need to fall to meet that price to income percentage:

$50,029 x 2.97 = $148,586

The median home price would need to fall an additional 13.9 percent to go back to 1975 affordability levels.  I’ve seen a few articles mention home prices falling an additional 10 to 15 percent and this seems to fall in line with the above.  Keep in mind this is important because buying a home is now based on income and monthly fixed outlays.  The maximum leverage products like option ARMs are now a thing of the past.  You now have to demonstrate via reportable income that you can afford a home.  With unemployment so high this becomes a challenge.

I always find it fascinating that most charts looking at home prices seem only to go back to the 1970s.  This is when the U.S. Treasury and Federal Reserve disconnected the dollar from any connection to the gold standard.  But let us look at two other periods of relative good economic times, 1950 and 1960:

1950

Median household income:        $3,319

Median home price:                       $7,354

Home price / income = Percent of 221

1960

Median household income:        $5,620

Median home price:                       $11,900

Home price / income = 211 percent

Now this is interesting data.  If we use the 1960 ratio home prices today would need to be:

$50,029 x 2.11 = $105,561

A 38.8 percent drop from current levels.  The above chart from 1975 to the current housing peak in the late 2000s shows housing prices going up for nearly 30 years.  Many average Americans simply assumed this was the normal trajectory of home prices.

But the 1950 to 1960 example shows that after one decade, relative to income, home prices in 1960 were actually cheaper than they were in 1950.  In 1960 the median home price cost about twice the median annual household income.  Some can’t even imagine this number and think this would be ruinous for the economy.  Nonsense from the banking industry.  In fact, the 1950s saw some of the best GDP growth:

Now many would argue that the rise of the two income household has pushed home prices up.  But you can easily argue that it now takes two incomes merely to have what those in the 1950s and 1960s had.  Of course this comes from the insidious ability of the U.S. Treasury and Federal Reserve to siphon off the earning power of average Americans and give massive handouts to the banking industry.  And that is exactly what occurs.  Look back up at the mortgage calculation chart.  Aside from the monthly payment, notice something else?  The “cost” of that cheap 5.85 percent mortgage is going to run you $187,176 after 30 years.  In other words, the interest you pay is more than the actual home price.  Now if banks are borrowing near zero from the Fed why not allow average Americans to borrow directly from the Fed since virtually every mortgage is now guaranteed by the taxpayers?  Because interest and fees, unproductive aspects of our economy are being taken from the banking industry and suffocating the balance sheet of average Americans.

Home prices have gotten more expensive because the crony banking system is hungry for more and more profits.  If banks had to lend their own money, home prices would automatically adjust lower.  Is that necessarily bad?  This would provide more mobility and less of a focus on homes as commodities and more as a place of shelter.  Take for example the current bust.  Say someone in struggling Detroit finds a job in New York but can’t sell his home.  Say that new job utilizes their skills more effectively.  How is their inability to move helping the overall prosperity of our economy?  It isn’t.  Yet this is the position millions now find themselves in.

I would argue that homes are still very expensive yet the propaganda is flying from the banking industry because they want people to buy homes even though they can’t afford them.  Ironically cheaper home prices would help our economy in the long term but this would cut into additional banking profits since they currently hold over priced real estate, both residential and commercial, and want to off load the waste at peak prices to the taxpayer.  The corporatocracy has caused more and more damage to our economy and inflating home prices has been one of the outcomes of giving too much power to the financial sector.

In the 1950s and 1960s when our economy was relatively healthy and booming home prices cost about twice the annual median income.  That number sounds about right even for today.  Yet the propaganda is strong and many simply want to believe that a big drop in prices means homes are now cheap.  Don’t believe it.

There Are Now More Government Employees than Goods-Producing Workers in the US

For the first time there are decidedly more government employees than goods-producing (manufacturing) employees in the US according to the Department of Labor.

This chart is from The Mess That Greenspan Made here.

It is interesting to think about this in terms of health care, pension plans, job security, employee loyalty, and so forth.

The reason for this is not the growth of government jobs but rather the drastic shrinkage in US based manufacturing employment while government employment remains resilient. As a percent of the population, the number of government employees is now about 9% which is slightly lower than it was in the 1970′s.

The Service sector dominates. There is a nice chart showing goods-producing, government, service, and non-employed percentages from EconomPicData here.

US corporations have been offshoring jobs for many years, in part due to the structural problems of benefits and environmental costs in a developed nation and Asian mercantilism. Some of this transfer of employee is due to natural market forces, but a great deal of it is a result of purposeful national policy and trade practices such as currency pegs, for example.

As Adam Smith observed in Wealth of Nations (1776):

“To found a great empire for the sole purpose of raising … customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers.”

In this case if one substitutes “kleptocrats” for “shopkeepers” and “dollar debt slaves” for “customers” then the quotation may fit the current situation in the US and its reserve currency empire quite well. It also helps to explain the steady role of the government bureaucracy in administering this paper empire, as well as the outsized financial sector.

But one underestimates the resilience of a free people at their peril, as did Napoleon dismissing the English, echoing Smith, “L’Angleterre est une nation de boutiquiers,” prior, of course, to his Waterloo in June, 1815.

AP sources: Obama OKs taxing high-end health plans

By ERICA WERNER, Associated Press Writer Erica Werner, Associated Press Writer

WASHINGTON – President Barack Obama signaled to House Democratic leaders Wednesday that they’ll have to drop their opposition to taxing high-end health insurance plans to pay for health coverage for millions of uninsured Americans.

In a meeting at the White House, Obama expressed his preference for the insurance tax contained in the Senate’s health overhaul bill, but largely opposed by House Democrats and organized labor, Democratic aides said. The aides spoke on condition of anonymity because the meeting was private.

House Democrats want to raise income taxes on high-income individuals instead and are reluctant to abandon that approach, while recognizing that they will have to bend on that and other issues so that Senate Majority Leader Harry Reid, D-Nev., can maintain his fragile 60-vote majority support for the bill.

Pelosi and four committee chairmen met with the president Wednesday as they scrambled to resolve differences between sweeping bills passed by the House and Senate. The aim is to finalize legislation revamping the nation’s health care system in time for Obama’s State of the Union address early last month.

Despite the dispute over the payment approach, Pelosi, D-Calif., emerged from the meeting expressing optimism.

“We’ve had a very intense couple of days,” Pelosi said. “After our leadership meeting this morning, our staff engaged with the Senate and the administration staff to review the legislation, suggest legislative language. I think we’re very close to reconciliation.”

Congressional staff members stayed at the White House into the evening to continue work and a conference call of the full House Democratic caucus was scheduled for Thursday.

Married Couples Pay More Than Unmarried Under Health Bill

By MARTIN VAUGHAN

WASHINGTON — Some married couples would pay thousands of dollars more for the same health insurance coverage as unmarried people living together, under the health insurance overhaul plan pending in Congress.

The built-in “marriage penalty” in both House and Senate healthcare bills has received scant attention. But for scores of low-income and middle-income couples, it could mean a hike of $2,000 or more in annual insurance premiums the moment they say “I do.”

The disparity comes about in part because subsidies for purchasing health insurance under the plan from congressional Democrats are pegged to federal poverty guidelines. That has the effect of limiting subsidies for married couples with a combined income, compared to if the individuals are single.

People who get their health insurance through an employer wouldn’t be affected. Only people that buy subsidized insurance through new exchanges set up by the legislation stand to be impacted. About 17 million people would receive such subsidies in 2016 under the House plan, the Congressional Budget Office estimates.

The bills cap the annual amount people making less than 400% of the federal poverty level must pay for health insurance premiums, ranging from 1.5% of income for the poorest to 11% at the top end, under the House plan.

For an unmarried couple with income of $25,000 each, combined premiums would be capped at $3,076 per year, under the House bill. If the couple gets married, with a combined income of $50,000, their annual premium cap jumps to $5,160 — a “penalty” of $2,084. Those figures were included in a memo prepared by House Republican staff.

The disparity is slightly smaller in the Senate version of health-care legislation, chiefly because premium subsidies in the House bill are more targeted towards low-wage earners.

Under the Senate bill, a couple with $50,000 combined income would pay $3,450 in annual premiums if unmarried, and $5,100 if married — a difference of $1,650.

Republicans say the effect on married couples whose combined income makes them ineligible for subsidies is even greater — up to $5,000 or more — but that is more difficult to measure because it includes assumptions about the price of insurance policies.

Democratic staff who helped to write the bill confirmed the existence of the penalty, but said it cannot be remedied without creating other inequities.

For instance, they said making the subsidies neutral towards marriage would lead to a married couple with only one bread-winner getting a more generous subsidy than a single parent at the same income-level.

“The Finance Committee, along with other committees in the Senate, took pains to craft the most equitable overall structure possible, and that’s what we have here,” said a Democratic Senate Finance Committee aide.

If the bill passes in its current form, it would be far from the first example of federal and social benefits creating incentives to remain single. Under current law, marriage can have a negative impact on a person’s ability to claim the earned income tax credit and welfare benefits including food stamps.

In any progressive system of taxes or benefits, there are trade-offs between how well-targeted a subsidy is and how equitable it is, said Stacy Dickert-Conlin, an economics professor at Michigan State University.

“You might like to have it be progressive, equitable and marriage-neutral. But you have to decide what your goals are, because you can’t accomplish all three,” she said.

The marriage penalty in the health bill has not been a major focus of attack by Republican opponents of the bill, who are focusing on larger themes such as new taxes in the bill and growth in government spending.

But it has caught the attention of some conservative groups, who claim that the prospect of reduced subsidies will dissuade people from tying the knot.

“This seems to not only penalize the married, but also those who would have the most to gain from marriage — the poor,” said Jenny Tyree, an analyst at the Colorado-based Focus on the Family.

Ms. Dickert-Conlin said that isn’t borne out by research in the area.

“Most of the literature says that people do not make decisions about whether or not to get married based on” government benefits, she said.

“You might see bigger effects on the timing — someone choosing to get married in January, instead of December,” she said.

Write to Martin Vaughan at martin.vaughan@dowjones.com