Wednesday, July 20, 2005; Page D01

Lawmakers Keeping Treasury Depleted
Nominees' Confirmation Held Up Over Rule on Agricultural Trade With Cuba
By Jonathan Weisman
Washington Post Staff Writer

Shipments of Montana peas to Cuba have not risen to headline status in Washington, but for a Treasury Department trying to rebuild its depleted ranks, they have become a serious matter.

Sen. Max Baucus (Mont.), the ranking Democrat on the Senate Finance Committee, is single-handedly blocking every senior Treasury nominee -- a dozen or more -- until the Bush administration changes obscure regulations governing agriculture trade with Cuba.

The Finance Committee will hold a confirmation hearing today for the Treasury Department's would-be deputy secretary, its undersecretary for domestic finance, its management chief and its head lobbyist.

But nobody is expecting their confirmations any time soon.

"If I were the president, I would be very concerned," Baucus said yesterday, "and I would do what was reasonably necessary to find a way to get my people confirmed."

The confrontation comes at a sensitive time. This fall, the Treasury Department is to lead a high-stakes push to overhaul the tax code. Economic frictions with China are coming to a head. And the frothy housing market has raised pressing questions about the federally regulated mortgage market.

But beneath Treasury Secretary John W. Snow, the upper echelons of Treasury are studded with vacancies. Treasury officials had hoped a new team at the top would quash talk that the once-powerful agency is losing its stature. Bush has nominated a veteran Washington hand, Robert M. Kimmitt, to be Snow's deputy. He has tapped the policy chief of his reelection campaign, Timothy D. Adams, as undersecretary for international affairs and has named a respected international finance lawyer, Randal K. Quarles, to be undersecretary for domestic finance.

Baucus is blocking them all, along with the nominees for assistant secretaries for tax policy, terrorist finance, intelligence and analysis, legislative affairs, and management. He is also holding up confirmation of the U.S. executive director of the World Bank, the comptroller of the currency, and the director of the Office of Thrift Supervision.

"We need our nominees in place here," said Treasury spokesman Tony Fratto. "Some of the most important issues facing the government today are coming through the Treasury Department."

Baucus and his farm-state allies -- from both parties and both houses of Congress -- say the administration has only itself to blame.

"If the president would like to have his people in place, I would think he would burn the midnight oil to find a solution," Baucus said.

The root of the dispute lies in a law, passed in 2000, that loosened restrictions on agricultural sales to Cuba. Under the Trade Sanctions Reform and Export Enhancement Act, such sales can be made if Cuban customers pay cash in advance or finance the deal through an acceptable, third-country bank. The law specifically prohibits a president from using agricultural trade as a foreign policy tool without congressional consent.

The law did not define "cash in advance," so for four years, payments for agriculture sales have been made after the goods have reached Cuban ports for inspection. The goods could not be transferred to the Cuban customers until their cash deposits were registered.

But this year, the Treasury made a subtle but significant change: The cash for such sales must be deposited in a U.S. bank before the goods leave the United States.
Treasury officials say they were merely clarifying the definition of "cash in advance" at the request of banks concerned that they not violate the Cuba trade sanctions. The regulation, drafted on the advice of trade counsel, follows the standard definition, Treasury spokeswoman Molly Millerwise said, and has nothing to do with shutting off agriculture trade with Cuba, since sales can still be financed by foreign banks.

But farm-state lawmakers say the regulation flies in the face of Congress's intent and will all but kill the fledgling Cuban agriculture market. Cuban customers will fear that cash payments that arrive in the United States before their goods arrive in Cuba could be seized with impunity by Cuban Americans with grievances against the Cuban government.

Indeed, trade data suggests the regulations may be chilling trade with Cuba. U.S. agriculture sales to the island tripled in the first four months of 2004 over a comparable period in 2003. Sales in 2005 were expected to reach $800 million, double last year's level, according to Finance Committee aides. Instead, Census Bureau data show that for the first four months of this year, sales have fallen 26 percent -- and the new regulation took effect in late March.

To farm-state lawmakers, the decline has provoked a rift with the White House. Rep. Jo Ann Emerson (R-Mo.) inserted a provision in the annual bill that finances Treasury to cut off any money that would be used to implement the new rules.

"This policy is less than neighborly; it is nonsense," she said in a statement last month.
The White House budget office responded with a promise that Bush would veto the appropriations bill for the departments of Transportation, Treasury, Housing and Urban Development, and Judiciary and for the District if the Emerson provision is not removed. It would be the first veto of an appropriations bill since Bush took office.

"The Bush administration strongly, strongly supports hastening the day the Cuban people can live free lives not under the thumb of Castro," Millerwise said.

Baucus said the veto threat is proof that the Bush administration is trying to choke off agricultural sales to Cuba in violation of the law.

"The threat lets the cat out of the bag," he said. "This is not economics. It is White House ideology."