Excuse Me, Now?

President Obama's speech on financial reform laid out the basis for a new regulatory structure, but this part puzzled me to no end.

So restoring a willingness to take responsibility -- even when it's hard to do -- is at the heart of what we must do. Here on Wall Street, you have a responsibility. The reforms I've laid out will pass and these changes will become law. But one of the most important ways to rebuild the system stronger than it was before is to rebuild trust stronger than before -- and you don't have to wait for a new law to do that. You don't have to wait to use plain language in your dealings with consumers. You don't have to wait for legislation to put the 2009 bonuses of your senior executives up for a shareholder vote. You don't have to wait for a law to overhaul your pay system so that folks are rewarded for long-term performance instead of short-term gains.

The fact is, many of the firms that are now returning to prosperity owe a debt to the American people. They were not the cause of this crisis, and yet American taxpayers, through their government, had to take extraordinary action to stabilize the financial industry. They shouldered the burden of the bailout and they are still bearing the burden of the fallout -- in lost jobs and lost homes and lost opportunities. It is neither right nor responsible after you've recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system, and a more broadly shared prosperity.

So I want to urge you to demonstrate that you take this obligation to heart. To put greater effort into helping families who need their mortgages modified under my administration's homeownership plan. To help small business owners who desperately need loans and who are bearing the brunt of the decline in available credit. To help communities that would benefit from the financing you could provide, or the community development institutions you could support. To come up with creative approaches to improve financial education and to bring banking to those who live and work entirely outside of the banking system. And, of course, to embrace serious financial reform, not resist it.

Yeah, same with the health insurance industry. You don't see them rushing to accept anyone regardless of pre-existing condition or renouncing the dumping of sick patients. The way our system works, for-profit companies don't change their ways unless forced to by law. Is this some rhetorical trick that benefits nobody in the end, or is the President really asking Wall Street nicely to reform themsleves, trim their sails and stop taking risks with our money?

Financial titans are not going to play fair because somebody tells them to. That's what makes them FINANCIAL TITANS. The only way to hold Wall Street responsible is through holding them directly responsible and investigating every nook and cranny of their dirty dealings. The President is not powerless to simply beg and grovel for responsibility. He has significant tools at his disposal. Turning the Justice Department loose on the fraudsters isn't a bad start. Or empowering the Angelides Commission to really attack the root causes. Point being, if you want any kind of significant regulatory reform to pass, you'd better get tough on Wall Street instead of engaging them as some kind of buddy.

Still, the measure is proving more troublesome than expected in the House, where top Democrats had initially thought it would pass easily.

Unease among Democrats prompted House Financial Services Chairman Barney Frank (D-Mass.) to postpone a markup on the Consumer Financial Protection Agency proposal scheduled before the August recess. It’s now expected to occur in early October.

Industry efforts to kill the CFPA seem to be having an effect. And moderate Democrats still aren’t entirely on board. “Distinct parts [of the bill] are real problems for a lot of people,” including the enforcement powers granted to the agency and the lack of state pre-emption, said a Democratic aide.

Maybe the thinking in the White House is to turn over regulatory reform to Richard Shelby the way other progressive policy agenda items have been turned over to Republicans and moderates.

What happened in the financial market should have been a wake-up call. As Phil Angelides said, "If this shock doesn't do it, I don't know what would." But that requires leadership to see the changes through. And it's frankly lacking at the top.

...Arianna nails it.

And that's the way it is with our leaders. They stand on the bridge making theatrical gestures they claim will steer us in a new direction while, down in the control room, the autopilot, programmed by politicians in the pocket of special interests, continues to guide the ship of state along its predetermined course [...]

I don't dispute for a minute that his heart is in the right place, and that he means it when he says "the old ways that led to this crisis cannot stand" and touts "the need for change and change now."

But we've been hearing similarly great sentiments for months now -- and they've had the same impact as my friend's ten year-old yanking on the cruise ship wheel. None. President Obama won't be able to change the course our financial system is on unless he goes down into the boiler room and disengages the autopilot -- which means taking on the bankers and their hordes of lobbyists who continue to dictate policy in DC.

I'd give Obama a little more agency here - the Presidency carries tremendous power - but basically this is right.

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.

This Is Such A Set-Up

When I saw that bipartisan press conference claiming that the contours of a deal has been reached, I noticed that the Republican representative from the Senate side was Bob Bennett, not the ranking member of the Banking Committee Richard Shelby. Well, sure enough, Shelby just showed up on MSNBC, and sure enough, he's absolutely opposed to the bill. He was waving around a piece of paper from top economists opposing the bailout, calling it a giveaway to the same Wall Street corporations that created the problem. He also said it bails out foreign banks, which I thought was taken out of the bill.

Shelby isn't wrong, not to my knowledge. As James K. Galbraith says today, the need for this bailout is extremely suspect. Certainly there are better ideas out there than the crappy Paulson plan. And in many ways, lawmakers and the Bush Administration are trying to fix a problem that doesn't have a fix - the housing market hasn't hit bottom, and it'll drag down the economy regardless (though a new Home Owners Loan Corp. would help).

But the politics of this are clear. Right after Dodd and co. announced a bipartisan deal, John Boehner said no dice. They are going to try to stick the Democrats alongside with Bush on this bailout.

I don't know if that will totally work. Pete Stark is calling B.S. on President Paulson's irresponsible talk about bank runs and depressions. Brad Sherman says his office calls are running 300 to 2 against. The results are the same across the country. I think a good portion of Democrats won't go along with this. But the Blue Dogs, those supposed stewards of fiscal responsibility, will, and they'll put Democrats in the situation of being on the side of the largest bank bailout in American history. At that point, the details will be irrelevant. This is Lucy with the football, and if the Democrats manage to blow this one they actually don't deserve to be a political party.

...the other option here is that House Republicans are holding off until McCain "convinces" them, showing how much of a post-partisan leader he is. That's a possibility, but anyone who votes for this piece of crap bill, absent some really enticing language, is in trouble in 2010.

Wiretapping Updates: Bush Sought Powers BEFORE 9/11

Right before the Congress makes updates to the FISA law and determines whether or not to give retroactive immunity to telecom companies who assisted in the efforts to wiretap Americans without a warrant, there's a lot of information coming out about just how pervasive Bush Administration surveillance has become, and how long they have sought these expansive surveillance powers.

We learned about Qwest CEO Joe Nacchio's contentions that his company was targeted by the NSA for refusing to participate in the wiretapping program back on Thursday. Today we learn more from the Washington Post:

A former Qwest Communications International executive, appealing a conviction for insider trading, has alleged that the government withdrew opportunities for contracts worth hundreds of millions of dollars after Qwest refused to participate in an unidentified National Security Agency program that the company thought might be illegal.

Former chief executive Joseph P. Nacchio, convicted in April of 19 counts of insider trading, said the NSA approached Qwest more than six months before the Sept. 11, 2001, attacks, according to court documents unsealed in Denver this week.

Details about the alleged NSA program have been redacted from the documents, but Nacchio's lawyer said last year that the NSA had approached the company about participating in a warrantless surveillance program to gather information about Americans' phone records.

That's really the key statement. All along we have heard that the warrantless wiretapping program was necessary to protect America from the kind of terrorist attacks that we saw on September 11. But months prior, in February 2001, the NSA was approaching telecoms to get them to cooperate on spying. This is only a month or so after Bush's inauguration. And we know that terrorism was nowhere close to being on their minds at that time. So the question must be asked, why would the NSA need these phone records back in February if the goal was not protection from terrorism.

There are a couple possible answers, based on recent news. First, we recently learned that Senator Richard Shelby of Alabama sought information from NSA intercepts on a Clinton-era CIA nominee back in the late 90s. This was in George Tenet's book and was virtually ignored until this week:

[Former CIA Director George] Tenet also wrote that, “National Security Agency officials told us that [Republican Senator Richard] Shelby staffers had been asking whether there was derogatory information in their communications intercepts on [Clinton CIA-nominee Anthony] Lake.”

But the NSA refused Shelby’s entreaties, two sources said, and there was no derogatory information in the FBI’s files.

Shelby also demanded, and got, the FBI’s raw files on Lake.

And Washington Democrats wonder why we’re suspicious of unregulated NSA/FBI wiretaps and other surveillance?

There's credible evidence that Republicans were interested in obtaining evidence on political enemies through wiretaps, but they were stymied in the Clinton years. The transfer of power offered an opportunity. And that opportunity has been realized. Today, news comes that a law firm in Vermont which has been representing detainees at Guantanamo has had their phones bugged.

A law firm that represents clients at Guantanamo Bay, Cuba, and in Afghanistan is warning its Vermont clients that it believes the federal government has been monitoring its phones and computer system.

In a letter sent to clients of the St. Johnsbury firm of Gensburg, Atwell & Broderick, the three attorneys said they can’t guarantee their communications were confidential.

“Although our investigation is not complete, we are quite confident that it is the United States government that has been doing the phone tapping and computer hacking,” said the letter, dated Oct. 2.

The firm claims "hard evidence" that the government is tapping the calls. Verizon is the service provider, and a service technician did find "crossed lines" and disabled security software on all of their computers. Here's the key quote:

Sleigh said that under current federal law, he felt the U.S. Government could argue it was entitled to tap Gensburg’s phone and computer without a warrant.

This is precisely why the upcoming vote on surveillance is so important. Contrary to the stupidity of traditional media pundits, there are real concerns about spying on Americans without warrants, happening right now, with the legal protections conferred in the awful FISA bill passed back in August. What the Bush Administration seeks is the ability to eavesdrop on any phone call it wants, at any time, even if American citizens are caught up in that net, and they have wanted to do this since before 9/11.

Read what they write about government surveillance and the only argument one finds, literally, is that our Leaders need more power because they want to protect us. The very notion that such power should not be vested without oversight and safeguards is, to them, considered unserious, because we are talking here about officials who are good and responsible and would never abuse their power. That is why Congress in August all but gutted the Fourth Amendment and vested the Bush administration with the power of warrantless eavesdropping with barely a peep of protest from our Beltway elite. To the contrary, when they speak about it at all, they do so by warning Democrats not to impede these "important" protections.

The very real reason to be skeptical of these efforts is the lessons of history, when we saw warrantless surveillance without oversight abused and used to spy on political enemies. Which is why the Congress must hold the line in rejecting so-called "basket warrants," which allow the government to spy without a direct target, and rejecting retroactive immunity for those companies which illegally provided the means for the Bush Administration to spy on Americans. Dick Durbin today said he would not allow blanket immunity without knowing the scope of the program. What we're starting to learn is enough. There should be no immunity for breaking the law.

The Protective Non-Defense

I gave my impressions of the Scooter Libby trial yesterday, where I reached the conclusion that that Libby's shockingly brief defense comes out of some wingnut mythology that you show confidence at all times. It's as if they're trying to intimidate or bamboozle the jury by showing that they don't even have to mount a defense against such self-evidently ridiculous charges or something.

I asked emptywheel, pretty much America's greatest Plame expert, about this, and here's her reply:

Wingnut overconfidence (2+ / 0-)

Perhaps that, or the realization that the Hannah ploy backfired, so there weren't more people they could call without risk of magnifying the risk.

I didn't address this yesterday. John Hannah is an official with the Office of the Vice President who the Libby defense team used to get out their claim that Scooter Libby was so very busy during this time in 2003 that he couldn't possibly have remembered what he told everyone about Valerie Plame. But prosecutor Patrick Fitzgerald crossed up Hannah in a major way.

What we did get was Cheney proxy John Hannah, who spent the morning telling us what a Very Important Man Scooter Libby is, and how very busy he was fighting Al Quaeda single handedly the week of July 8 and how he had a charming habit of forgetting things that Hannah would tell him. In the courtroom Scooter smiled affably at this good-natured portrait of his memory-challenged self.

On cross examination, Fitzgerald then inquired of Hannah if part of Libby's job was to push back if the integrity of the OVP was attacked, and Hannah said yes. Fitz then wanted to know if, during that very critical week, Hannah wanted to go out for coffee with Scooter for a couple of hours and shoot the breeze would Scooter even have time to say yes? Hannah started to squirm, knowing that this is exactly what happened between Judy Miller and Scooter at the St. Regis. So a very uncomfortable Hannah replied, well, if it were really important, he's sure Scooter would do it. Fitzgerald then wants to know if it's fair to conclude that if Scooter DID agree to go, it would be over something that was very important to him.

It was a Perry Mason moment.

If Scooter Libby and Dick Cheney had to walk onto that witness stand with this information already out, it could have been a bloodbath. Fitzgerald basically got Hannah to admit how important the Libby-Miller meeting was. And even Libby's defense team is having to admit that he leaked classified information.

Lawrence O'Donnell thinks Libby's guilty as sin:

The multi-million dollar defense, which provided no defense at all, did not call Libby to the witness stand for one very simple reason: Libby is very very guilty. Publicly, defense lawyers cling to the text book theory that the defendant has no burden of proof and that no negative inference should ever be taken when a defendant doesn't defend himself on the witness stand. Practically, every defense lawyer knows that the jury desperately wants to hear from the defendant and that the only reason not to put him on the stand is that he is soooo guilty that every answer he gives after his name will eradicate any shred of reasonable doubt. Think about it. Your whole life is at stake in the outcome of a criminal trial. You're innocent. And you don't testify in your own defense? Around the courthouse when defense lawyers are chatting about their cases, the only question they ask each other is can you put your guy on the stand? Those conversations always assume the defendant is guilty. The question is just about the degree of difficulty in presenting a defense.

Libby's defense gave up before the opening statements in the trial. They always knew Libby was too guilty to put on the witness stand. And they were never going to call the Vice President. Telling the judge that they were going to call Libby and Cheney was just a mirage they were trying to create to misdirect Patrick Fitzgerald's focus. I'd be shocked if Fitzgerald was fooled for even a second.

O'Donnell thinks the whole defense is a set-up for a campaign to get him pardoned. Possibly. He's certainly holding things back for the inevitable appeal, hoping to run out the clock until December 2008 when a pardon would have no political ramifications.

For those interested, please also read Murray Waas' column, which explains the reason we're having this trial in the first place, because the executive branch was pissed off about an earlier leak by Republican Senator Richard Shelby, which they wanted to investigate with outside counsel, and when the CIA leak came up they were forced into showing equaniminty. Which is kind of hilarious.