Washington: Still An Accountability-Free Zone

Steny Hoyer has decided to take on the mantra of looking forwards and not backwards.

Sen. Chris Dodd (D-Conn.) and a handful of prominent Democrats said yesterday they would introduce legislation to strip telecom giants of immunity for possibly violating customer privacy by providing information to the government without a warrant.

But Hoyer seems uninterested in pushing the legislation through the House.

"I don't think revisiting that issue is going to get us anyplace," Hoyer told The Hill today.

Nope, sure won't! If you don't count a place of... justice and accountability.

Dan at Pruning Shears wonders if Hoyer is "the worst Democrat alive, or ever?" It's a very difficult question. Actually, he's just a front for corporate hegemony, in this case the telecoms.

I pretty much knew that Dodd's bill was going nowhere, but Hoyer's rationale is what got me.

Not Leaving It Alone

Chris Dodd and some colleagues have announced a bill to repeal retroactive immunity from the FISA law:

Senators Chris Dodd (D-CT), Patrick Leahy (D-VT), Russ Feingold (D-WI), and Jeff Merkley (D-OR) announced today that they will introduce the Retroactive Immunity Repeal Act, which eliminates retroactive immunity for telecommunications companies that allegedly participated in President Bush’s warrantless wiretapping program.

“I believe we best defend America when we also defend its founding principles,” said Dodd. “We make our nation safer when we eliminate the false choice between liberty and security. But by granting retroactive immunity to the telecommunications companies who may have participated in warrantless wiretapping of American citizens, the Congress violated the protection of our citizen’s privacy and due process right and we must not allow that to stand.”

Senator Leahy, Chairman of the Senate Judiciary Committee said, “Last year, I opposed legislation that stripped Americans of their right to seek accountability for the Bush administration’s decision to illegally wiretap American citizens without a warrant. Today, I am pleased to join Senator Dodd to introduce the Retroactive Immunity Repeal Act. We can strengthen national security while protecting Americans’ privacy and civil liberties. Restoring Americans’ access to the courts is the first step toward bringing some measure of accountability for the Bush-Cheney administration’s decision to conduct warrantless surveillance in violation of our laws.”

Let's make it clear up front: This isn't going to pass. Even if you could get 60 votes for it, which you can't, you have an occupant in the White House who voted for immunity, opening the possibility of a veto if it miraculously got through the Congress.

What this does signify is that some members of Congress will not be content to let the past remain in the past, especially if a great wrong was committed. Maybe they get 30 votes for immunity this year. Maybe 35 next year. And so on. But they keep offering it up, because they don't see the justice in allowing companies immunity for perpetrating a great error by aiding and abetting the government in illegal activities that violated the constitution. So they'll continue to push this at the legislative level. Meanwhile, at the judicial level, EFF and other groups continue to sue the government for real civil penalties to this lawbreaking.

It seems to me that, to succeed in politics, you have to be relentless. Introducing bills like this year after year is one example.

Michael Moore Smears Chris Dodd

I haven't seen Michael Moore's new movie, but Howie Klein has, and while he praises it he excoriates Moore for dredging up the discredited Chris Dodd Countrywide story, which has been picked over to death, with nobody finding any impropriety.

First, everyone who has seriously looked at the claims of a sweetheart deal has dismissed them: the Senate Ethics Committee; an independent compliance firm; the (not exactly Dodd-loving) Hartford Courant. And not once, but twice.

This is not the definition of the word "is." The man got a mortgage. He was told that he would get enhanced customer service, and assumed it was because of his good credit score. He got the exact same mortgage rate that anyone else buying a mortgage at the time would have gotten. He didn't know the CEO of Countrywide, nor anything about a Friends of the CEO program [...]

Why does this feel like, in the interest of being able to sit on Leno and say, "I went after Democrats too!," Moore passed up the real story here? It would have been really powerful if he made the connection between the bullshit allegations about Dodd and the banking industry desperately wanting to put the breaks on important housing and foreclosure legislation that Dodd was championing in the Senate at that very moment. Well, mission accomplished assholes, excuse me, the Sheriff is here to foreclose on my house (is it possible its the same one from Roger and Me? Oh, the irony) [...]

All in all, still love Moore, still want everyone to see the movie, but kind of wish he hadn't decided to jump ugly with one of the most progressive Senators in the Senate -- the guy responsible for the Family and Medical Leave Act, the Credit CARD Act, who voted for cramdown, worked to make that disaster of a bankruptcy bill better, then voted against it twice, voted for a 15% cap on interest rates, and is co-sponsoring another cap that is likely to come up again, is a leader on direct-student-loan reform, is in favor of a consumer financial protection agency and stripping the fed of some of its regulatory authority, and just last week introduced legislation to reign in the diabolical overdraft fee practice-- all stuff, if you are keeping score, which Moore clearly wasn't, that banks would rather paint a hammer and sickle on their walls than accept! I wish Moore hadn't got played like a three dollar harmonica. He should donate the 10 grand to Dodd's campaign.

It appears that the premise of Moore's film is that banking interests have taken over the government and prevented any meaningful regulation on the industry. Dodd's case can be an example of that, but not in the way Moore thinks. The banking lobby has consistently kneecapped him, with old charges that have a Whitewater quality to them, with all the same innuendo and the same lack of factual detail, right at the moments when Dodd was trying to get things passed to crack down on them. Dodd could have given away the Banking Committee Chair to completely-in-the-pocket Tim Johnson, but he didn't. And in the last few days, Dodd has introduced the aforementioned legislation to end the practice of banks charging overdraft fees on debit cards automatically, with 1000% interest, instead of giving customers the opportunity to have a transaction denied; introduced a plan for a single bank regulator that is at odds with the Obama Adminstration and his House counterpart Barney Frank, as well as being hated by the banking industry; and has taken the lead on weakening the power of the Fed, which is deeply desirable. In other words, despite the many slings and arrows, Dodd is basically doing the job Michael Moore would expect someone in his position to do, and doing it with gusto. He should be commended and not smeared.

The Huge Looming Fight Over Financial Regulations

Today's the anniversary of 9-11, I guess. Why don't they just make it the following Monday and give us all a three-day weekend?

But another anniversary looms around this same time. On September 14, 2008, Lehman Brothers collapsed, and it sparked the biggest financial crisis since the Great Depression. America and other countries committed trillions in resources to keep the biggest banks afloat, and as a result we have rescued the system without fundamentally changing it or ensuring that the same bubble-and-crash couldn't happen again. Instead of taking advantage of the crash and responding to the bailout by immediately moving to financial regulatory reform, to prove that the banksters weren't getting free reign, the Administration waited, and is now trying to move forward without the urgency created by the crisis. Which is why you see high-fiving in the financial media that this regulatory reform effort will not succeed.

Large staffs of lobbyists with powerful financial interests behind them will use time-honored techniques to water down or kill anything that would drain profits and force the banksters to stop gambling with our money. The same interests killed a proposed Consumer Protection Agency in the 1970s with irrational fears about how it would harm ordinary Americans. And in the Senate, that same kind of coalition is forming to kill the Consumer Financial Protection Agency proposed by the Administration.

Nonetheless, I have a couple reasons to be optimistic, as this article in The Hill was the other day. First of all, the push to empower the Fed as a single regulator for a banking sector that it basically is enjoined to has faded rapidly.

The Obama administration's vision for revamping the nation's financial regulatory system could face significant revisions in the Senate, where proposed reform legislation departs from the White House proposal on several key points, according to staff members, lobbyists and a lawmaker briefed on the plans.

A bill taking shape in the Senate Banking Committee could give the Federal Reserve far less authority than the administration sought in the reform proposal it unveiled in June. Senators on both sides of the aisle have expressed a lack of confidence in the Fed in the wake of the financial crisis, challenging everything from the central bank's transparency to its ability to protect consumers.

Some lawmakers oppose giving the Fed responsibility for monitoring systemic risk in the economy, as proposed by the administration, favoring instead vesting that authority with a council of regulators.

"We really do take what the administration did as advisory. We have our own ideas," said one Democratic staff member familiar with the legislation who was not authorized to speak on the record. "We've been thinking about this a long time."

The second reason why I'm sanguine is that the Justice Department is finally stepping up with enforcement - and I think AIG represents the beginning, not the end.

U.S. investigators are probing the former head of American International Group Inc's (AIG.N) Financial Products unit, Joseph Cassano, and other executives for securities fraud, a law enforcement source familiar with the case said on Friday.

The source said that a grand jury may be impaneled this month in New York to consider potential charges that executives failed to disclose the value of toxic assets to the bailed-out insurance company's outside accountants and shareholders.

"The investigation is really who knew what and when about these assets," said the source, who asked not to be identified because the probe was ongoing. "They were holding toxic credit default swaps and may not have disclosed their real worth."

I don't think there's a single part of this sector that couldn't be probed in the same way. Look at this horrow show of overdraft fees on debit cards, for example. You cannot literally promise lighter enforcement in exchange for tighter regulation, but I think the firms get the message.

This actually will be a more expensive fight than health care reform in terms of lobbying, once everyone gets down to it. Chris Dodd's centrality to it while he fights for his political life is a bit worrying, but he's not the real problem here. It's the Mark Warner types who can deep-six anything meaningful.

...Yves Smith is not so hopeful.

Dodd Stays At Banking

I knew that Tim Johnson would not be permitted to chair the Senate Banking Committee:

Sen. Christopher Dodd (D-Conn.) has decided against succeeding his close friend and mentor, the late Edward M. Kennedy (D-Mass.) as chairman of the Senate's health committee, a senior Senate aide said Tuesday night.

The decision sets in motion a final game of musical chairs involving committee chairmanships after Kennedy's death.

Dodd's decision leaves the chairmanship of the Health, Education, Labor and Pensions Committee to Sen. Tom Harkin (D-Iowa), who follows Dodd in seniority. Multiple sources in the Harkin orbit, requesting anonymity to discuss internal deliberations, said that he is certain to take over the HELP committee.

Harkin is currently chairman of the Agriculture Committee and would have to give up that position. He would likely be replaced at Agriculture by Sen. Blanche Lincoln (D-Ark.), who faces a difficult reelection bid in 2010. Other Democrats are more senior than her on the Agriculture Committee, but they hold more prestigious chairmanships already.

Dodd isn't great chairing Banking, but he's ten times better than Johnson, and I'd rather have financial regulation in his hands. Meanwhile, Tom Harkin, who's a great liberal except when it comes to agriculture, now goes to a committee to show off his talents. And I think the Senate just gained some leverage over Blanche Lincoln, who will need to be reasonably loyal to keep that slot on the Agriculture Committee. When Max Baucus was foundering there was talk of switching committee chairs, and that should still be on the table for squishes like Lincoln and Joe Lieberman if they participate in a filibuster of policies Democrats have sought for 60 years.

Johnson To Banking?

I don't want to sound insensitive to the disabled, and Tim Johnson appears to have all of his mental faculties with him. But Johnson is two years out from a debilitating stroke, and chairing a committee in the Senate is demanding work. Robert Byrd lost his gavel because he was physically incapable of performing the chairmanship on Appropriations. I would just be very surprised to see Johnson get the chair of the Senate Banking Committee if Chris Dodd moved over to run the HELP Committee to replace the late Ted Kennedy.

There's the other matter that Johnson clearly is a total shill for corporate banking interests, many of which are hid away in his low-regulation state of South Dakota. With consumer protection legislation coming up, absolutely nothing of worth would get through a Banking Committee under Johnson. But it would be simply terrible optics to have someone who may not be able to handle the job up there trying to put together this high-profile legislation. I just can't see it.

Next in line on Banking after Johnson would be Jack Reed, which would be a major improvement over Johnson and Dodd. If Reed gets it, we're seeing some serious change. If Dodd stays put and Barbara Mikulski takes over HELP, it's the status quo. If Johnson really gets that seat, the country is seriously ruled by corporate whores and sellouts.

Maybe I shouldn't be so unequivocal in my prediction.

Just Some Admirable Grassroots Passion

A protester on Chris Dodd, just diagnosed with prostate cancer:

"Barack Obama clearly said, all you should do is take a painkiller. How come we just don't give Chris Dodd painkillers?" shouted one man. "Like a handful of them at a time! He can wash it down with Ted Kennedy's whiskey -- oh excuse me, scotch!"

Miserable little people.

Best To Chris Dodd

Sen. Dodd has been diagnosed with early-stage prostate cancer. My dad had this, and my grandfather too. It's very common and eminently treatable in this day and age, and hopefully Dodd will be able to beat it as quickly and painlessly as possible. He still plans to run for re-election and be back at work after the August recess. Here's part of his letter to supporters:

I want to assure you that I'm feeling fine. As you know, we've been working hard to pass health care legislation and reform our nation's financial system to protect consumers, and that hard work will continue.

After the Senate adjourns at the end of next week, I'll have surgery to remove the cancer. After a week or two of recuperation, I expect to be right back to work.

After all, as a Member of Congress, I have great health insurance. I was able to get screened, seek the opinions of highly skilled doctors, consider all the available options, and choose the treatment that was right for me.

And I know you'll agree that every American deserves the same ability.

We have health care legislation to pass - and an election to win. And I can't thank you enough for your support.

I had the opportunity to meet and talk with Sen. Dodd when he ran for President last year. I found him smart, engaging and focused on the right issues. He's been hammered back home for being the fall guy in the AIG bonus scandal - falsely, I might add - and for this alleged sweetheart deal on his mortgage from Countrywide, which his hometown paper states in two editorials today were not at all sweetheart deals but widely available mortgage terms.

I hope he's back on his feet soon.

The Battle Over The F-22

One area where President Obama deserves some praise is his stand on the F-22, at odds with parochial interests in Congress and even splitting some senior Democrats:

Democratic leaders support an amendment that would strip the $1.75 billion for seven additional jets from the 2010 defense authorization bill, which is being debated on the Senate floor this week.

But several senior Democrats are from states that will see gains from building more F-22s.

Sen. Chris Dodd (D-Conn.), who represents the state where Pratt & Whitney builds the F-22 engine, told The Hill he was working with his Democratic colleagues to convince them to support the purchase of more jets despite the president’s opposition. Dodd also faces a tough reelection campaign next year.

Sen. Charles Schumer (N.Y.), the vice chairman of the Senate Democratic Conference, will be a key vote to watch. The watchdog group Project on Government Oversight, which supports removing the F-22 funds, lists Schumer as poised to vote against stripping the money.

Schumer declined to say how he was voting, telling The Hill he is still studying the issue, and advised: “Watch the vote.”

Sen. Levin withdrew the amendment temporarily today so the Senate could take up the hate crimes bill. Sounds to me like Levin feared he didn't have the votes.

Matt Duss lays out what this is really about.

So just to be clear, this argument over the F-22, at least as it’s occurring in Congress, not really a debate over defending the country — it’s a test of whether the requirements of electoral politics can outweigh the requirements of American national security as defined by the Department of Defense. This isn’t to suggest that Congress has no role in determining American defense requirements — of course it does, but let’s not pretend that seven extra planes is the difference between air dominance and ceding the skies.

Meanwhile, Mike Goldfarb observes that “one thing that’s been consistent throughout this process has been quiet support for F-22, in contrast to the vocal opposition from Obama, Gates, and McCain. Most people thought that F-22 was DOA as soon as Gates released the administration’s defense budget. But it turns out that support for the program in Congress is pretty broad.”

I don’t know if I’d call Lockheed and Boeing spending $6.5 million and $2.4 million, respectively, on lobbying in the first three months of 2009 “quiet support.” But yes, it is rather impressive what kind of support can be gotten for an item that the military doesn’t want by spreading its production out into 48 different states, donating vast sums of money to various political action committees, and sending armies of lobbyists onto the Hill. It’s almost as if politicians were interested in getting re-elected or something.

We're moving into a phase of whether we can take even this minor step in defying the military-industrial complex - remember, the overall military budget will increase this year - or whether we're resigned to defense contractors eating up massive government contracts forever, permanently hamstringing our budget. That's what's at stake in this amendment.

Chris Dodd Comes Around To Supporting Gay Marriage

Chris Dodd's running for Senate re-election in a state that has already legalized gay marriage, in legislation eventually signed by a popular Republican Governor. So him coming out in support of gay marriage probably has a political significance. But he frames it on the level of wanting to properly meet the call of history.

While I’ve long been for extending every benefit of marriage to same-sex couples, I have in the past drawn a distinction between a marriage-like status (“civil unions”) and full marriage rights.

The reason was simple: I was raised to believe that marriage is between a man and a woman. And as many other Americans have realized as they’ve struggled to reconcile the principle of fairness with the lessons they learned early in life, that’s not an easy thing to overcome.

But the fact that I was raised a certain way just isn’t a good enough reason to stand in the way of fairness anymore.

The Connecticut Supreme Court, of course, has ruled that such a distinction holds no merit under the law. And the Court is right [...]

My young daughters are growing up in a different reality than I did. Our family knows many same-sex couples – our neighbors in Connecticut, members of my staff, parents of their schoolmates. Some are now married because the Connecticut Supreme Court and our state legislature have made same-sex marriage legal in our state.

But to my daughters, these couples are married simply because they love each other and want to build a life together. That’s what we’ve taught them. The things that make those families different from their own pale in comparison to the commitments that bind those couples together.

And, really, that’s what marriage should be. It’s about rights and responsibilities and, most of all, love.

Even with gay marriage a reality in Connecticut, among those in the middle who would decide his re-election, this stand probably doesn't help all that much, although I'm not sure it hurts either. Dodd's simply trying to get this right. So good for him; others in the Democratic Party who probably share his views are afraid to speak out this way. And the rest of those lagging behind Dodd ought to catch up.

Letting The Banksters Off The Hook

If you want to get seriously depressed about the state of the economy, take a look at Martin Wolf's article about how the state of the global economy pretty much mirrors the Depression right now, green shoots notwithstanding.

Robust private sector demand will return only once the balance sheets of over-indebted households, overborrowed businesses and undercapitalised financial sectors are repaired or when countries with high savings rates consume or invest more. None of this is likely to be quick. Indeed, it is far more likely to take years, given the extraordinary debt accumulations of the past decade. Over the past two quarters, for example, US households repaid just 3.1 per cent of their debt. Deleveraging is a lengthy process. Meanwhile, the federal government has become the only significant borrower. Similarly, the Chinese government can swiftly expand investment. But it is harder for policy to raise levels of consumption.

The great likelihood is that the world economy will need aggressive monetary and fiscal policies far longer than many believe. That is going to be make policymakers — and investors — nervous.

We have this great unraveling to undertake, in the midst of record unemployment and still-sick banks. The way to get out of this was to really stand up to the banks, to create a system that rewarded risk but also managed it so that nobody got too big to fail and drained the money out of the system. Instead, we seem to be sustaining all-new bubbles:

Witness the "fierce rally" in the collateralized loan obligation market. CLOs are made up of sliced and diced assets (including high-risk and junk loans) -- and are kissing cousins to the collateralized-debt obligations (i.e. crap) at the heart of the financial meltdown. But according to analysts at Morgan Stanley there has recently been a "remarkable change" in investor sentiment towards these securities, including an "exuberance" for the lowest grade junk being sold.

In other words, we are right back to risky business as usual. No harm, no foul. Let's get back to the fun we were having before this whole worldwide economic collapse thing started happening.

It puts a whole other spin on the audacity of hope.

The new financial regulations proposed by the President seem good in some places, weaker in others, and certainly an advance, but not what is necessary to truly break the strangehold that the banks have over the government, the central cause of this mess.

Three quarters of a century ago, President Franklin Roosevelt earned the undying enmity of Wall Street when he used his enormous popularity to push through a series of radical regulatory reforms that completely changed the norms of the financial industry.

Wall Street hated the reforms, of course, but Roosevelt didn’t care. Wall Street and the financial industry had engaged in practices they shouldn’t have, and had helped lead the country into the Great Depression. Those practices had to be stopped. To the president, that’s all that mattered.

On Wednesday, President Obama unveiled what he described as “a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.”

In terms of the sheer number of proposals, outlined in an 88-page document the administration released on Tuesday, that is undoubtedly true. But in terms of the scope and breadth of the Obama plan — and more important, in terms of its overall effect on Wall Street’s modus operandi — it’s not even close to what Roosevelt accomplished during the Great Depression.

Rather, the Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself. Without question, the latter would be more difficult, more contentious and probably more expensive. But it would also have more lasting value.

We'll still have companies allowed to grow too big to fail under this proposal. Banking will not be made more boring, and thus more safe. In effect, there is very little here to "make bankers mad," as Joe Nocera put it. Simon Johnson concurs, although he thinks the model should be Teddy Roosevelt - more trust-busting to break up these huge integrated companies.

And yet, the banksters have grown so audacious that they are, in fact, mad, over the idea to create a Financial Services Products Agency to protect consumers. They found something to shake their stick at, and they're shaking for all its worth. They keep winning because even when they win, they fight. Chris Dodd absolutely blew his stack at this today.

Dodd, who is chairman of the Senate Banking Committee and who will be the chamber's leader on regulatory reform efforts, said he was "upset" by media reports that financial industry groups are gearing up to oppose the Obama administration's proposal to create an agency to protect consumers from abusive financial products.

"The very people who created the damn mess are the ones" now saying they will oppose sensible changes, Dodd, D-Conn., said. "That's not the place to start."

But of course, even a Consumer Financial Products Agency will remain one small island in an alphabet soup that is still wired for the industry to circumvent. We're propping up big banks and not eliminating the huge leverage that allowed the explosion in the derivative market. In short, we're headed for a lost decade, a time of little to no growth and the inability to get out of the crisis.

And if that next bubble bursts... well, start running for cover.

Credit Card Reform Deal In Senate

Senate Banking Committee leaders have reached a compromise deal on credit card reform.

The House has passed a credit card reform measure that mirrors new rules passed by the Federal Reserve in December. The (Chris) Dodd bill offers stronger consumer protections than the House bill and the Federal Reserve rules. The Fed's regulations won't go into effect until July 2010. The Senate bill's protections would be enacted nine months after being signed into law.

Dodd had sought to ban all interest rate increases on existing balances. Under the compromise bill, card issuers would be allowed to retroactively bump up rates for any borrower whose payments are 60 days past due. However, if the borrower pays on time for six months, the card issuer would have to restore the original rate. The bill also prohibits card issuers from increasing rates during the first year a credit card account is opened and requires them to get customers' permission to set up accounts so that transactions over the limit can be processed. Another provision would require card issuers to post credit card agreements online.

"It's a meaningful compromise that will significantly improve the credit card marketplace and stop abusive practices," said Travis B. Plunkett, legislative director of the Consumer Federation of America.

Getting Richard Shelby's signoff early strongly improves the possibilities for the bill, even while the banksters lobby against it. Just by virtue of being more real for most Americans, it will be harder for the Congress to walk away from this. It's rare to see a stronger bill coming out of the Senate than the House, but that's the case here.

And let's not diminish the significance of the Chris Dodd credit card reform bill getting signed into law. He'll need help like this to win re-election.

Let's See If The Referrals Disappear

Here's a little nugget buried in an article about developments in the torture cases, most of which I covered yesterday:

At the same time, Bush administration lawyers are facing a deadline to respond to a Justice Department ethics investigation into their support for the rough interrogation tactics.

Investigators are evaluating whether former Office of Legal Counsel lawyers John C. Yoo, Jay S. Bybee and Steven G. Bradbury followed professional standards when they drafted memos in 2002 and 2005 that gave a green light to simulated drowning and wall slamming of prisoners.

Sources told The Washington Post earlier this year that an earlier draft of the investigators' report recommended disciplinary referrals to local bar associations for two of the men: Yoo, now a law professor in California, and Bybee, now a federal appeals court judge based in Nevada. The report requires the approval of new Attorney General Eric H. Holder Jr., and findings could be released as early as this summer, according to two sources familiar with the process.

The Associated Press reports that this DoJ probe is nearing conclusion. If the recommendations fall short of the disciplinary referrals reportedly cited in the earlier draft, can we conclude that Eric Holder softened the report?

...in a somewhat related story, I appreciate Chris Dodd's thoughts on torture. Dodd's father prosecuted at Nuremberg, incidentally, so he can fairly accurately assess accountability for war crimes.



...I should also mention that DiFi's attempted whitewash of any investigation is disconcerting. Intelligence Committee hearings would not be public, and who knows what would be released at the end. We need a public airing, at the very least.

...Aha, now we hear that BushCo is working overtime to make those disciplinary referrals disappear.

Former Bush administration officials are lobbying behind the scenes to push Justice Department leaders to water down an ethics report criticizing lawyers who blessed harsh detainee interrogation tactics, according to two sources familiar with the efforts.

In recent days, attorneys for the subjects of the ethics probe have encouraged senior Bush administration appointees to write and phone Justice Department officials, said the sources, who spoke on condition of anonymity because the process is not complete.

These are the burrowed Bush officials at Justice, designated to protect the interests of the previous Administration. Let's see what kind of power they wield.

...And here's the latest, as Devlin Barrett of the AP gets a sneak peek at the report, showing that the professional sanctions may remain intact, but that's as far as it goes:

Bush administration lawyers who approved harsh interrogation techniques of terror suspects should not face criminal charges, Justice Department investigators say in a draft report that recommends two of the three attorneys face possible professional sanctions [...]

Officials conducting the internal Justice Department inquiry into the lawyers who wrote those memos have recommended referring two of the three lawyers — John Yoo and Jay Bybee — to state bar associations for possible disciplinary action, according to a person familiar with the inquiry. The person, who spoke on condition of anonymity, was not authorized to discuss the inquiry.

The person noted that the investigative report was still in draft form and subject to revisions. Attorney General Eric Holder also may make his own determination about what steps to take once the report has been finalized.

This is clearly a trial balloon, designed to gauge reaction throughout the civil liberties community and the broader Democratic constituency. We've seen this movie enough with the Obama Administration to recignize it. They leak out some possible outcome to see how it plays. This would be the desirable response.

Vincent Warren, executive director of the Center for Constitutional Rights, called the decision not to seek criminal charges "inconceivable, given all that we know about the twisted logic of these memos."

Warren argued the only reason for such a decision "is to provide political cover for people inside the Obama White House so they don't have to pursue what needs to be done."

Offering disciplinary sanctions at state bar associations isn't nothing, but hardly approaches full accountability. There needs to be a very loud reaction to this. First and foremost, Congress needs to open their own hearings into the conduct of officials like Jay Bybee, who remain in a lifetime appointment on the federal bench.

Finally Taking A Look At Usury In The Credit Card Industry

In Al Franken's "Why Not Me," which chronicles his fake run for the White House (as opposed to his fake run for Senate, and I say "fake" because it can't be real that it's April and he still hasn't been seated), his single issue that he rides to victory is ATM fees at banks. I've been wondering why more politicians haven't jumped on consumer banking issues, that interface with the public every single day. Looks like the President has thought this over as well.

President Barack Obama plans to crack down on deceptive credit-card industry practices that have saddled U.S. consumers with huge debts and soaring interest rates, U.S. officials said on Sunday.

Top White House economic adviser Lawrence Summers said Obama would be "very focused in the very near term on a whole set of issues having to do with credit card abuses."

"We need to do things to stop the marketing of credit in ways that addict people to it," Summers said in an interview on the NBC television talk show "Meet the Press."

Summers, director of the White House National Economic Council, said the administration is concerned about practices that result in consumers being "deceived into paying extraordinarily high rates that they wouldn't have paid if they knew they were getting themselves into."

The movie Maxed Out covers this topic fully, and guess who emerges as the lone voice in Congress wanting to tackle this issue? Chris Dodd. His bills regulating the credit card industry have been so watered down over the years they actually arrive on the President's desk in liquid form. It's high time we did something about these usurious rates.

That said, I am not all that encouraged by the fact that the industry gets a White House meeting to plead their case:

Executives of the nation's largest credit-card companies will meet with President Barack Obama at the White House on Thursday to discuss growing concerns about questionable practices in the industry.

White House Press Secretary Robert Gibbs said Monday that the meeting would be a chance to stress the need for greater clarity in the way that credit cards are marketed and administered. During his campaign last year, Obama strongly supported legislation to improve the rights of cardholders.

"What we want to do is ensure that people can have access to the credit that they need, but that we can also do this in a way that's transparent and fair and honest. And I think that's one of the things that the president will talk to them about," Gibbs said.

A recent survey of credit card practices by the Pew Charitable Trusts found that of more than 400 cards offered online by the 12 largest issuers, all allowed payments to be applied in ways that disadvantaged cardholders, such as paying off lower-interest balances before those that accrue higher interest.

Keep in mind that most of these credit card issuers are the same banks that received huge bailouts from the government. Yet they continue to gouge the consumer. Why exactly do they deserve a meeting at the White House? Are consumers getting a meeting?

The Curious Case Of Christopher Dodd

Chris Dodd has clearly become collateral damage to the economic crisis and in particular the AIG bonus scandal, and it's sad to see. The Administration basically hung him out to dry and he's paying the price.

Slipping below a 50 percent approval rating is often considered a red flag for incumbents. Quinnipiac Poll Director Douglas Schwartz said Dodd's 33 percent approval rating, a dip from 44 percent in a March 10 poll, is "especially devastating."

"A 33 percent job approval is unheard of for a 30-year incumbent, especially a Democrat in a blue state," Schwartz said.

The poll also found Dodd trails his two announced Republican challengers, former GOP Congressman Rob Simmons and Connecticut state Sen. Sam Caligiuri. Former ambassador Tom Foley, who has not announced whether he will run against Dodd, also would hold an edge over the veteran Democrat, according to the poll.

It shows Simmons defeating Dodd by a margin of 50 percent to 34 percent. Dodd also trails Caligiuri 41 percent to 37 percent, and Foley 43 percent to 35 percent.

Even more distressing is that Dodd has been one of the only ones in Congress trying to make the banksters really pay for their greed by setting limits on the credit card industry. A loanshark offers lower rates than the banks on some credit cards. You can't come up with a more real-world distress to regular working people. And as Tom Geoghegan notes, you can draw a straight line from the collapse of anti-usury laws in the 1970s and the bubble of capital that ended up going into the exotic financial products that helped cause this crisis. Dodd's bill isn't a full step away from that wild open marketplace, but it goes pretty far.

Today, the Senate Banking Committee passed the Credit Card Accountability Responsibility and Disclosure Act - legislation I wrote to stop abusive and deceptive credit card practices once and for all. Indeed, 2009 may well prove a watershed moment for credit card reform [...]

Universal default is one of countless abusive practices credit card companies regularly engage in today that my legislation would put to an end.

Here are a few other practices the Credit C.A.R.D Act ends:

"Any Time, Any Reason" interest rate hikes. Issuers often unilaterally change the terms of a credit card contract before the term is up. One issuer "voluntarily" eliminated these hikes after Congress exposed them. They even ran ads stating that "a deal is a deal." But there is nothing binding them to that commitment, and most issuers have already gone back to the practice - one a Pew Charitable Trusts survey found in 93% of 400 cards issued by the country's largest banks and issuers. This bill makes that practice illegal.

Penalty Rates With No End. Let's say you've been a customer in good standing, and you have a reasonable interest rate of 12%. You pay your bill three days late, and you get raised to a penalty interest rate of 29.9%. Once that penalty rate increase is triggered, there is no limit on how long it will last. From that point on, you continue to pay your bill on time, but despite that, you continue to pay the penalty rate for the life of that card. The amount and duration of the penalty rate is entirely determined by the card issuer. My bill says that after 6 months of on time payment, your rate has to go back down.

Double-Cycle Billing. Say a few months ago, you had a credit card debt of a thousand dollars - and that since then, you've paid off $900 of that debt. It's not uncommon for credit card companies to keep charging interest not on a hundred dollars but on the full $1,000 for another cycle or two. The Credit C.A.R.D Act prevents that practice.

Aggressive Marketing to Young People. Recently, my seven year-old daughter received a credit card solicitation in the mail. Jackie and I laughed it off, but it brings up a serious point: young people are faced with an onslaught of credit card offers. And just as we saw in the mortgage crisis with lenders and borrowers, too often, issuers offer cards to young people without verifying any ability to repay whatsoever. This is particularly true for students, who are flooded with offers the second they set foot onto a college campus - in fact, industry officials have testified to Congress that simply being a college student is considered a "positive factor" toward the ability to pay. This bill simply says that credit card companies must take into account a young person's ability to repay before allowing them to take on what is all too often a lifetime's worth of debt.

It should be stronger, but even this mild stuff barely cleared the Senate Banking Committee, which credit card-state Senator Tim Johnson voting against it. The point is that Dodd has been working to rein in credit card abuse for decades. Now some demagoguery has driven down his poll numbers and threatened his career. It's quite unfair.

Unfortunately, once the public mind is set, they resist changing it. At some point, Dodd may have to be asked to step aside. And the Obama Administration, which threw him over the side of the boat, had better make good for him.

Dodd Held Hostage

I really feel bad for Chris Dodd getting caught up in the populist fury over AIG, in a way that is truly unfair to him. He wrote an executive compensation amendment for the stimulus. He was hounded by Treasury officials and Administration leaders to water it down, and wanting to keep at least some of the provisions in the bill he did so. There was no indication that AIG executives stood to benefit when he made changes to the bill. In fact, language that is LAW TODAY would still allow the Treasury Department to claw back bonuses if they found compelling public interest (which, according to Dodd, is happening as we speak). Despite the media and conservative jabber he's been completely consistent on this issue, the facts of which have been well-known for over a month. The flip-flop from the conservative business press, which a month ago were calling Dodd's amendment too restrictive and are now calling it a giveaway, is astonishing.

Here he is at a press conference today. Sadly, I'm not sure it'll be enough. The right was already smearing Dodd for a sweetheart mortgage he apparently received through Countrywide, and this offered another opportunity to pile on. Instead of the greater lesson that executive compensation is a festering problem that we must deal with (good again on Ben Bernanke for addressing that today), commentators are pointing fingers and deciding on Dodd as the scapegoat. "He gets all that campaign money from AIG!" No shit, so the chairman of the Senate Banking Committee gets campaign contributions from financial services interests? They apparently swayed him so much that he only offered an amendment to take all their bonuses away!

The end of Dodd's statement is particularly good:

"Standing in a community of my state, this isn't about my job, it's about their jobs. It's about their future and their children. And I'm not in the business of getting re-elected to office, I'm in the business of doing my job that I got elected to do. And I'm going to do my job."

I think he understands the reality, and that this all may cost him re-election. Scapegoating is a very easy and familiar action, but it doesn't make it right. And anyway, plenty in government knew about these bonuses. Talk to them for a minute.

Dodd Was Pushed - Who Pushed Him?

Chris Dodd's "admission" that he was asked by unidentified Administration officials to take out the limits on executive compensation and bonuses from the stimulus package is being treated like a bombshell, for reasons which escape me. Let's start with his statement (via email):

“I’m the one who has led the fight against excessive executive compensation, often over the objections of many. I did not want to make any changes to my original Senate-passed amendment but I did so at the request of Administration officials, who gave us no indication that this was in any way related to AIG. Let me be clear – I was completely unaware of these AIG bonuses until I learned of them last week.

Reports that I changed my position on this issue are simply untrue. I answered a question by CNN last night regarding whether or not a specific date was aimed at protecting AIG. When I saw that my comments had been misconstrued, I felt it was important to set the record straight – that this had nothing to do with AIG.

Fortunately, we wrote this amendment in a way that allows the Treasury Department to go back and review these bonus contracts and seek to recover the money for taxpayers. Again, I have led the fight to curb excessive executive compensation, and will continue to do so.”

Dodd is classier than whatever Administration official tried to rat him out on this. But the fact remains that Dodd devised the amendment capping bankster salaries, authored it, got it passed through the Senate, and then someone in the White House asked him to nix part of it, which he did, reluctantly, while keeping in the forward-looking language. And by the way, this was all public knowledge in the run-up to the conference committee on the stimulus. I fail to understand how there could be a grand conspiracy on such a well-covered subject.

The only question that remains is: Who?Who asked Dodd to take out the amendment?

The anti-bonus provision has been the subject of several posts in the liberal blogosphere today, after an anonymous administration official was quoted in the New York Times Sunday appearing to place the blame on Dodd for the weakening of the language.

Jane Hamsher cites two contemporaneous articles on the stimulus that identify top administration opposing to Dodd's original, tougher language. This one from the Wall Street Journal reports that Timothy Geithner and Lawrence Summers "had called Sen. Dodd and asked him to reconsider."

And this one, from The Hill, says President Obama himself wanted changes in the provision.

If those reports -- both anonymously sourced -- are accurate, contacts with Dodd occurred well above the "staff level." Something tells us we'll be hearing more about this.

The reporters from the WSJ and The Hill who anonymously sourced their stories could actually shed the most light on this by simply giving up their sources, but of course that's not going to happen. So we wait. Tim Geithner or Larry Summers have an opportunity to clear their names as well.

Finding A Scapegoat

Good to see that the Treasury Department is so concerned about the AIG bonus babies that they are throwing Chris Dodd to the wolves to deflect criticism.

The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.

That's just not true, as both Jane and Glenn Greenwald explain pretty definitively. Under a Dodd-written amendment, the Senate version of the stimulus bill included executive compensation limits for all recipients of TARP money, only to have the amendment stripped of retroactivity and applied strictly toward future payouts, after negotiations with none other than Tim Geithner and Larry Summers:

The administration is concerned the rules will prompt a wave of banks to return the government's money and forgo future assistance, undermining the aid program's effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.

This wasn't a small behind-the-scenes fight, it was a major contention in the stimulus debate, subject of several articles. Obama's economic team didn't want limits on executive compensation, and Dodd did. The Administration won, and now in the midst of this furor they're trying to rewrite history by putting Dodd and themselves in opposite roles.

Dodd is a threatened incumbent who the right wing has been slandering for months, and now some anonymous official in the Obama Administration has taken the heat off themselves by allowing a firestorm based on a myth. Chris Bowers writes:

Now, some elements inside the administration have reached the point where they are placing blame for something Geithner and Summers did--block legislation that would have stripped the bonuses--on the person who wrote the legislation that would have stripped the bonuses. And that person just happens to be the most vulnerable Democratic Senators in 2010.

Glad to see that some senior administration officials value Geithner and Summers more than either Democratic Senate seats, or even more than honesty. There is a serious problem inside the Obama administration on this matter, and dismissals are needed to solve it.

In a related development, Republicans tied Democrats in the congressional generic ballot in one poll today, and took the lead in the other. I guess the new "Geithner uber alles" strategy isn't working out to well for Democrats.

I think it's premature to hype those poll numbers, especially when other ones taken at the same time show an opposite dynamic, but unquestionably, there is a rot at the heart of the economic team. This is the first incident that Obama has truly owned, regardless of the deflections. Republicans don't completely have their act together on this - they're too conflicted, having argued for free market fundamentalism for so long that the knee-jerk response is to argue for more. Even their ideas for clawing back the bonuses are crude copies of what the President has already decided. But anyone can plainly sniff out the villains here, and in addition to hyping the bogus Dodd assertion, the GOP is going after Geithner.

Reps. Steven LaTourette (R-OH) and Thaddeus McCotter (R-MI) introduced a resolution of inquiry today that would force Geithner to reveal the full extent of his department's communications with AIG.

The resolution would affect not just talks over bonuses but about the very structure of the Federal Reserve's investment in the company -- which appears to have included built-in limitations on the government's influence over management.

This is the real deal, folks: resolutions of inquiry (ROIs) are a crucial procedural tool for the minority party to seek information from the executive branch. Democrats did this during the Valerie Plame/Spygate scandal and the debate over the Bush administration's extraordinary rendition. The Congressional Research Service found in a November study that ROIs oftentimes succeed in prying out information even if they fail on the House floor.

No rational Democrat can disagree that we need to know about those communications. Geithner's connections with AIG go all the way back to the initial bailout decision, and are tied to the tens of billions in payments to counterparties, which is the far more damaging element of this - essentially a double-dip for banks who already received government money. While the bonus scandal raises the right-wing phony populist ire, the drumbeat for more investigations into Geithner's contacts with AIG and what he knows about the counterparties and maybe about why the Federal Reserve is injecting billions into foreign central banks and why more than half of the AIG bailout money is leaking over the border and a whole host of other issues which involve Geithner but also the previous Administration. And the very clear potential exists to drown the entire Administration agenda into a day-by-day recitation of whether the President still has faith in his economic advisers, etc.

The President brought this upon himself through his hirings. But if he wants to find a way out, he could stop the practice of his team blaming others and start living up to his own rhetoric.

Nationalization Rumblings - Senators Step Up

Big news today on the bank nationalization front. First, Sen. Dodd states the obvious:

Senate Banking Committee Chairman Christopher Dodd said banks may have to be nationalized for “a short time” to help lenders such as Citigroup Inc. and Bank of America Corp. survive the worst economic slump in 75 years.

“I don’t welcome that at all, but I could see how it’s possible it may happen,” Dodd said today on Bloomberg Television’s “Political Capital with Al Hunt” to be broadcast this weekend. “I’m concerned that we may end up having to do that, at least for a short time.”

Bank of America and Citigroup, which received $90 billion in U.S. aid in four months, tumbled as much as 36 percent today on concern they may be nationalized. The Obama administration today said a “privately held” banking system is the “correct way to go” and House Financial Services Committee Chairman Barney Frank said nationalization ought “to be avoided.”

And then Chuck Schumer followed suit:

Sen. Charles Schumer (D-N.Y.) believes that failed "zombie" banks, no matter what their size, should be taken over by the government, which should then wipe out shareholders, fire management, clean up the banks and quickly resell them into the marketplace. Such a move, he cautioned, should come only if the "stress tests" being conducted by Treasury Secretary Timothy Geithner determine a bank to be insolvent.

Schumer argued that there are good and bad ways to nationalize banks, and that the loaded nature of the term often leads to confusion. "'Nationalization' means many different things to many different people, and somebody needs to clear it up," said Schumer. "We have to distinguish. I like the good and don't like the bad."

Schumer also pressed that nationalization should be a last resort. "It should be the last arrow in the quiver. The danger here is when a government takes [a bank] over, it drives down shares of other banks that might not be in as bad shape," he said. "Let me be clear about this because I want to be very careful: I am not speaking of any specific institution, just a general comment about a general situation. And I don't have -- and please write this -- I don't have any specific institution in mind."

These aren't backbenchers. They're the Chair of the Senate Banking Committee and Wall Street's man in Washington. And they're merely saying out loud what already has the markets in a panic. The right will try to pin any erosion of the banks on Dodd and Schumer, surely, but the problem is not loose lips, but that many banks are insolvent:

We are not talking about fears that leftist radicals will expropriate perfectly good private companies. At least since last fall the major banks — certainly Citi and B of A — have only been able to stay in business because their counterparties believe that there’s an implicit federal guarantee on their obligations. The banks are already, in a fundamental sense, wards of the state.

And the market caps of these banks did not reflect investors’ assessment of the difference in value between their assets and their liabilities. Instead, it largely — and probably totally — reflected the “Geithner put”, the hope that the feds would bail them out in a way that handed a significant windfall gain to stockholders.

What’s happening now is a growing sense that the federal government, in return for rescuing these institutions, will demand the same thing a private-sector white knight would have demanded — namely, ownership.

And they'd better get to it soon before the whole financial sector goes over the cliff.

Schmucks At The Helm

At the rate we're going, we'll be lucky if the White House isn't in the middle of foreclosure by January 20th. Emperor Paulson and his merry band of geniuses are making the same bad bets with taxpayer money as the investment banks did to get us here in the first place.

Stock intended to eventually earn taxpayers a profit as part of the Bush administration's massive bank bailout has lost a third of its value — about $9 billion — in barely one month, according to an Associated Press analysis. Shares in virtually every bank that received federal money have remained below the prices the government negotiated.

Stocks dropped again Friday after the government reported a larger-than-expected number of job losses in November, but a top Treasury Department official told the Mortgage Bankers Association that the tax dollars are being invested in "very high-quality institutions of all sizes."

"We're not day traders, and we're not looking for a return tomorrow" said Neel Kashkari, the director of Treasury's Office of Financial Stability, which oversees the $700 billion financial rescue fund. "Over time, we believe the taxpayers will be protected and have a return on their investment."

That would be more reassuring if I believed you had the first clue what you were doing, Neel (also if your name wasn't "Neel"). I mean, this latest plan to reinflate the housing bubble in a desperate attempt to get out of the Treasury Department alive is completely absurd.

Treasury Secretary Henry Paulson is considering a new plan to reduce mortgage rates in another bid to revive the U.S. housing market, a government official said.

The Treasury, which already has a program to buy mortgage- backed securities issued by Fannie Mae and Freddie Mac, could step up those purchases to drive down interest rates on some loans to 4.5 percent, the official said on condition of anonymity. The plan is preliminary and could change.

Note the words "some loans". Anyone that would qualify for these rates would not need the rate reduction, and there's no indication that those rates would be fixed. What's more, this would not apply to those who are upside down in their homes and looking to restructure their payments. While some homeowners have been able to refinance, in the main that is largely not those homeowners at risk, which is why you're seeing defaults at stratospheric levels, something like 10% of the market. And anyway, this just prolongs the inevitable. Running the US economy on home-buying is unsustainable. Houses are in most cases still overvalued.

(By the way, I'm also very concerned that Treasury Secretary nominee Tim Geithner, who's been in on a lot of the decisions made by Paulson and others, may be trying to force out Sheila Bair, practically the only person in the government who's focusing on the foreclosure side of the equation. The article contains a bit of hearsay, but I hope it's wrong and Bair is retained at the FDIC.)

Thankfully, some members of Congress are figuring out that Paulson and his cadres don't know what the hell they're doing and need to be swiftly separated from any future taxpayer funds:

Dec. 4 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said he opposes giving the Bush administration the second half of the $700 billion financial rescue plan, joining Republicans upset with how it is being managed.

“I would be a very hard person to convince that this crowd deserves to have their hands on the next $350 billion,” Dodd, a Connecticut Democrat, told reporters today in Washington after a hearing on whether automakers should get government aid. “I am through with giving this crowd money to play with.”

Good. There are about 299,999,999 million other people I could think of that would manage this bailout money better. Instead of rebuilding the same failed institutions and putting no new restrictions on them, we need to restore competition to the marketplace, break up the concentrations of financial sector wealth, significantly reduce the leverage that these behemoths take on, and never again get ourselves in a situation where companies are too big to fail. We're in this mess because the financial industry was allowed to play all kinds of games with our collective future. Now the Treasury Department is doing virtually the same thing in restoring them.

We have to break this cycle.