The horse is long out of the barn, but Congress may soon step in to correct this problem with credit default swaps.

S. 961, introduced just yesterday in the Senate, would authorize the regulation of credit default swaps and other swap agreements.

Really super – now that the market for credit default swaps has collapsed in an unruly heap.

But it’s not just that Congress has been behind the gun. Congress has done affirmative harm in this area. Let’s take a look at the tape:

In 2000, Congress passed a law barring states from regulating credit default swaps under their gambling and “bucket shop” laws. This set the stage for the market in derivatives, including credit default swaps, that have been a big part of the economic meltdown. That’s what credit default swaps are – side bets that allow people to wager on financial outcomes without having to buy assets.

We gave more background and listed the Members of Congress that allowed this to happen, were still serving, and were up for election last November here.

There are two choices to make in regulation of financial services: Either leave it unregulated – buyer beware (and buyer’s will be wary – it’s not a ridiculous idea) or regulate it uniformly. You can’t leave credit default swaps – essentially a form of gambling – unregulated but still looking like a financial service. That’s a sort of fraud on the public, perpetrated by policymakers. Thanks, Congress, for coming in after the fact to mop this up.

One of the bills featured in this morning’s WashingtonWatch.com Digest is S. 574, the Plain Writing Act of 2009.

It would be great to get government to write clearly about what they do and what they want us to do. But the fact is that plain English has been a project for several years now, and I don’t know that we’ve seen much improvement. More than a decade ago, President Clinton issued a memorandum telling agencies to use plain language, and there’s an entire government Web site on plain language already.

You can’t paper over complex government by calling for simple English. Making the government simpler and making the laws and regulations simpler and more straightforward is what’s going to get you better communications.

Best of luck to the author of the Plain Writing Act, but I don’t expect it to change much.

Here’s the current vote on S. 574, the Plain Writing Act of 2009. Click to vote, comment, learn more, or edit the wiki article about the bill.

Lead in children’s toys was a big story last year, and it might have caused Congress or regulators to go overboard in an anti-lead crusade. Because now Congress is considering a bill to relax the anti-lead standards for “secondary sales, repair services, and certain vehicles.”

Lead is bad for kids, but you don’t have to insulate kids from all contact with lead – just the forms that will hurt them. You could make the society worse off if you go too far and protect kids from lead in forms that don’t do them harm. That’s like putting a heavy coat on ‘em on a warm day. So . . . let’s get the lead back in!

(In truth, I know next to nothing about this issue, so welcome corrections and more information in the comments. Politely, please!)

Here’s the current vote on S. 608, which would amend the Consumer Product Safety Improvement Act of 2008 to exclude secondary sales, repair services, and certain vehicles from the ban on lead in children’s products.

The Internets are seeing much ado today about some remarks Democratic presidential candidate Barack Obama made early this year on coal and greenhouse gasses. A snippet is in the video at right. (Ignore the red captions and exclamation marks – if you can!!!!)

Senator Obama describes a carbon cap-and-trade system pretty accurately. He concludes with some provocative language, though: “So if somebody wants to build a coal-fired plant, they can. It’s just that it will bankrupt them because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

A cap-and-trade system is actually supposed to avoid bankrupting anybody by driving the market to discover the most cost-effective ways to reduce greenhouse gasses. This is something Senator Obama recognizes and wants to foster.

That being said, all the carbon cap-and-trade programs we’ve seen so far look to be huge undertakings that will cause significant economic dislocation. And, yes, “significant economic dislocation” means bankruptcies and job losses for some unfortunate businesses and people.

The two most expensive bills proposed in the current Congress are carbon cap-and-trade bills: S. 2191, the America’s Climate Security Act of 2007 (cost: about $17,000 per U.S. family) and S. 3036, the Lieberman-Warner Climate Security Act of 2008 (cost: over $12,000 per U.S. family). Those are big expenses for the nation to absorb.

Ultimately, the answer to the question, “Would a President Obama Bankrupt the Coal Industry?” is . . . : wrong question!

You should decide for yourself whether you want a carbon cap-and-trade program in this country, you should watch what Congress and the next president do, and you should give your opinion to your elected representatives early and often.

No, this is not about the latest energy drink.

The Environmental Protection Agency has decided not to rid drinking water of a toxic rocket fuel ingredient called perchlorate that can be found in public water supplies around the country. The scuttlebutt suggests that the Department of Defense would be seriously on the hook if EPA did go after this chemical.

At least three bills already introduced in Congress go after the perchlorate problem.

S. 24, the Perchlorate Monitoring and Right-to-Know Act would amend the Safe Drinking Water Act to require a health advisory and monitoring of drinking water for perchlorate. Cost: about $0.20 per U.S. family.

S. 150, the Protecting Pregnant Women and Children From Perchlorate Act would simply require a health advisory and drinking water standard for perchlorate. Cost: about $0.04 per U.S. family.

In the House, H.R. 1747, the Safe Drinking Water for Healthy Communities Act, would require a national primary drinking water regulation for perchlorate, the thing the EPA just declined to do. No cost estimate on that yet.

So if you don’t want perchlorate in your drinking water or your pregnant friends, one of these may be bill for you. Here’s the current vote on each. Click to vote, comment, learn more, or edit the wiki articles about the bills.

As I finished assembling the WashingtonWatch.com Digest for the week (see it here), I realized that the featured laws represent an interesting cross-section of things the federal government does – though not nearly all of it, of course.

Take Public Law 110-315, the College Opportunity and Affordability Act of 2007. This is mostly about redistributing wealth. The $1,200 in spending per U.S. family is mostly intended to go toward getting young people through college.

Does it actually get there? Not so sure. And does it go from, say, people who have plenty of money to people in need? Doubtful. This looks like classic middle-class entitlement legislation. Feel free to blast me in the comments if you think it’s not.

Then there’s Public Law 110-314, the Consumer Product Safety Modernization Act. It’s a classic example of public health and safety regulation.

Does it do the job and cost-effectively make us safer? There’s often more to the story, as regulatory agencies can be captured by the companies they regulate. But at thirty cents or so per U.S. family (and whatever costs might be imposed by the regulations – which are very hard to determine), it’s hard to complain about this one compared to one costing $1,200.

Finally, Public Law 110-316, the Animal Drug User Fee Amendments of 2008. This is also health and safety regulation. But . . . it’s about the health and safety of animals.

A buck-fifty per family isn’t a lot, but how many buck-fifty programs at the outer edge or beyond the federal government’s real responsibility are you willing to support? It’s stuff like animal drug regulation that we created the Jack of All Trades – Master of None category for.

WashingtonWatch.com isn’t going to make you an expert on every bill in Congress, but perhaps you’ll be in a better position to make a few judgments about what you like and don’t like. Keep watching.

As you know, I’m constantly on the look-out for undiscovered corners from the business of governing. And this morning I came across a timely item for you.

As luck would have it – just in time for those summer vacations – the Food and Drug Administration put a note in the Federal Register this morning announcing the availability of a draft guidance entitled “Labeling OTC Skin Protectant Drug Products.”

A “guidance” is a document that agencies put out to clear up the ambiguities in their regulations. Now, regulations are supposed to clear up the ambiguities in the statutes that Congress has passed, but, hey, sometimes that’s hard. So you’ve got to have a guidance to clear up what’s in the regulation that cleared up what’s in the statute. There’s one last step to know about: if the guidances don’t actually clear things up – or if the guidances conflict with one another – another important part of the regulatory process kicks in: you’re screwed.

Anyway, the FDA this guidance is on “Labeling OTC Skin Protectant Drug Products.” That’s your sunscreens and burn creams and whatnot. “OTC” means “over-the-counter,” so we’re talking about the junk you go buy at the drug store when you’re heading out to get some sun, or when you’ve already gotten too much sun, or when your outdoor adventures brought some poison ivy in contact with your thighs, or whatever.

So, each of the active ingredients in these topical ointments has specific labeling requirements. But what do you do when there is more than one active ingredient? You’re looking at some serious label clutter! And is it even allowed? That’s where this FDA publication comes in: “This guidance is designed to clarify the permitted combinations of active ingredients along with the corresponding required labeling.” The summer’s looking bright indeed . . .

Now the FDA only told us in the Federal Register about the availability of the guidance. It didn’t actually put it in there. But luckily I was able to go dig it up on Regulations.gov using a search of the docket number. (Who wants to go out in the sun anyway when you can be searching Regulations.gov?)

So without further ado, we present the FDA’s “Guidance for Industry: Labeling OTC Skin Protectant Drug Products.” Download it and take it to the beach or the lake with you this summer. Give it a read over and see if you understand it. ‘Cause it looks like a whole bunch of gobbledegook to me. But that gobbledegook is there to make your summer ointment a smooth and creamy one. Thank you, FDA!