Mojo - March 2010

Rove Loses WMD Message War

| Thu Mar. 4, 2010 1:18 PM EST

It's interesting how quickly the media narrative about Karl Rove's new book has formed. Though the memoir, which is called Courage and Consequence and will be released on Tuesday, covers Rove's long and controversial career as a political operative, all the initial news stories on the book zero in on his claim that George W. Bush did not "lie us" into the Iraq war. This is bad news for Bush. It indicates that this particular case against Bush and his crew has become the conventional view and accepted history—and that remains an open wound for the Bush presidency.

In a piece posted earlier, I explain why Rove's defense is flat-out wrong and list key assertions made by Bush in the run-up to the war demonstrating that he and his aides showed utter disregard for the truth. Bush and his crew recklessly overstated the uncertain intelligence about Iraq's WMD capabilities and literally made stuff up that was not true (and not supported at all by the iffy intelligence). It was a campaign of willful misrepresentation.

Later today, I'm scheduled to appear on Hardball to discuss all this. Moreover, I'd like to see Rove to debate this matter—and be forced to respond to the list of Bush's false assertions. You think he has the "courage" to do so? In the meantime, anyone who's troubled by how Bush and Rove spun this nation into war can be somewhat comforted by the knowledge that Rove believes he lost the most important message war of the George W. Bush presidency—and years later is still scrambling to make up that lost ground.

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Levin Demands Blackwater/Raytheon Probe

| Thu Mar. 4, 2010 12:18 PM EST

Last week, Fred Roitz, a top executive at Xe Services (formerly Blackwater), made a stunning admission. Testifying before the Senate Armed Services Committee, he said Raytheon had requested that Blackwater create a shell company in order to win a $25 million subcontract to train Afghan troops. In Roitz's telling, Raytheon apparently wanted to do business with Blackwater, yet didn't want to be associated with its controversial brand. Blackwater obliged, creating a subsidiary called Paravant that was separate from its parent company in name alone. Armed services committee member Sen. Claire McCaskill (D-Mo.) called the subsidiary a "classic example of a cover corporation." Committee chairman Sen. Carl Levin (D-Mich.) described the creation of Paravant as "deception" and said "there's clearly an effort to coverup that Blackwater was the real contractor here."

Now Levin wants a Justice Department investigation into Blackwater and Raytheon. Specifically he wants to know whether representatives of the companies "made false or misleading statements in their submission of a contract proposal to the U.S. Army."

How to Grill Citigroup

| Thu Mar. 4, 2010 11:55 AM EST

The Congressional Oversight Panel (COP), the watchdog investigating the government's bailout and other financial rescues, is set to question Vikram Pandit, the CEO of Citigroup today. Simon Johnson, former chief economist of the International Monetary Fund, says the grilling offers the COP an easy chance to ask some tough questions of the leader of one of the nation's biggest supermarket banks. "This is an important opportunity," Johnson writes, "because, if you want to expose the hubris, mismanagement, and executive incompetence—let's face it—Citi is the low hanging fruit."

To that end, Johnson offers five questions of his own, each well worth reading, that the COP should ask Pandit today:

  1. As far as anyone can judge, Mr. Pandit, you are completely unqualified to restructure and run a disaster prone global bank. Can you please explain in detail how you got the job? 2.
  2. Your hedge fund. Old Lane Partners, was closed by Citi in June 2008. Please elaborate on why it was closed, including how much money you lost on what kinds of securities. (Hint: follow the NYT through the sad story.)
  3. Please review for us the details of your promised compensation package and how much you have actually received – including cash, deferred compensation, stocks, and perks (including executive jet travel, valued at market rates); do not forget your chunk of the Old Lane deal. How much taxpayer money has been injected into Citi and on what basis?
  4. Of course, as you understand full well, the true cost to society of Citi’s misdeeds is vastly more than the direct taxpayer injections of capital. Please tell us – as specifically as you can – what other burdens Citi has generated for the rest of us. (Hint: there is a right answer here, which includes more than 8 million jobs lost since December 2007, a 30-40 percent increase in net government debt held by the private sector, and much higher taxes for everyone in the future.)
  5. Mr. Pandit, your proposed restructuring plans simply make no sense; there is nothing you have put on the table that would reduce the risks posed by Citi to the national interests of the United States. Even John Reed, the man who built Citi as a global brand, now says that it should be disbanded. There is no evidence – and I mean absolutely none – for economies of scale in banks over $100bn in total assets. Richard Fisher, head of the Dallas Fed, calls for immediate action in terms of breaking up large dysfunctional banks such as yours; please explain to us why the Fed should not move immediately to apply his recommendations to Citi – surely, the safety and soundness of our financial system is on the line.

Senate "Very Close" on Financial Deal

| Thu Mar. 4, 2010 10:16 AM EST

The Senate banking committee is reportedly "very, very, very close" to reaching a deal on a consumer-protection agency, which in turn could lead to a breakthrough on a broader agreement on financial-reform legislation. The latest news from the Senate's grueling, ongoing talks is that several more Senate Republicans—Sen. Mitch McConnell (R-Ky.), Sen. Mike Crapo (R-Idaho), and Sen. Judd Gregg (R-NH)—have joined the negotiations already being lead by Sen. Chris Dodd (D-Conn.), chair of the banking committee, and Sen. Bob Corker (R-Tenn.), Dodd's main GOP negotiator, the Wall Street Journal reports. It's unclear why the additional Senate GOPers jumped on board, perhaps to help finish off the closed-door talks.

The WSJ also reported that a deal to house a consumer-protection agency within the Federal Reserve, an idea of Corker's, remained on the table. The Fed option has been roundly panned by consumer advocates—John Taylor, president and CEO of the National Community Reinvestment Coalition, said he'd rather put the agency at the National Zoo than the Fed—and if passed, would be viewed as a win for the Big Finance. The Senate's financial-reform negotiations continue today, and a agreement within the banking committee could come as early as this week.

We're Still at War: Photo of the Day for March 4, 2010

Thu Mar. 4, 2010 7:30 AM EST

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US Army Capt. Carl Subler, right, a chaplain, celebrates Catholic Mass for soldiers at an abandoned compound during Operation Moshtarak in Badula Qulp in Helmand province, Afghanistan, on Feb. 21, 2010. Photo via the US Air Force by Tech. Sgt. Efren Lopez

Will Progressive Candidates Run on the Public Option?

| Thu Mar. 4, 2010 7:01 AM EST

Since launching his Senate primary campaign in Arkansas this week, Bill Halter has zeroed in on Senator Blanche Lincoln’s failure to support the public option. This has prompted some to wonder if other progressive candidates might follow suit as liberal legislators continue to push to keep the proposal alive. Over at the Daily Dish, Jonathan Bernstein was bullish about the public option’s campaign comeback:

In fact, I expect virtually every Democrat in contested primaries during this and (if still not enacted) the next campaign cycle to support the public option, at least in any district in which Democrats have a chance to win.

Rallying behind the public option—which would set up a government-run health plan in the planned insurance exchange—could certainly give liberal candidates the opportunity to tap into the extensive grassroots network that mobilized behind the proposal last year. It was the last time that the liberal base seemed visibly excited and unified behind a single proposal coming out of Washington. Most Democratic candidates—whether they are incumbents or challengers—will sorely need to close the enthusiasm gap, and having a built-in constituency (and donor base) could give them a significant boost. In Halter’s case, the progressive netroots has already used his support of the public option to headline their fundraising efforts.

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Don't Mess With Textbooks

| Wed Mar. 3, 2010 7:08 PM EST

Last night's Texas Republican gubernatorial primary might get most of the attention (don't ever give up, Debra Medina!), but it was another primary result in the Lone Star State that may, in the long run, have a far greater impact: The end of Don McLeroy's tenure on the State Board of Education. McLeroy, you might recall, is the dentist who, as leader of the Board's conservative bloc, tried to rewrite public school textbooks to de-emphasize the civil rights movement and encourage the teaching of intelligent design, as well as global warming denialism. (He was the subject of that huge New York Times Magazine piece a few weeks back).

McLeroy didn't lose by muchand the other social conservative who faced a strong primary challenge, Ken Mercer, ended up winning big (the "weak on terror" whisper campaign paid off, apparently). Still, the result is significant. In the most likely scenario going forward, archconservatives go from seven seats on the board to just six. Beyond that, as the Texas Tribune points out, their traditional swing vote, a Democrat, is not running for re-election and will likely be replaced by someone with much more moderate views.

So, why should we care? Simple. Texas, as the nation's largest purchaser of textbooks, essentially sets the standards for the textbook market; other states are often stuck with whatever standards the Texas State Board of Education asks for. In that sense, McLeroy's loss was a local election with potentially significant ramifications for public schools nationwide. While far from ideal, Tuesday's result, is, if nothing else, at least a step in the right direction.

Diplomatic Impunity?

| Wed Mar. 3, 2010 5:38 PM EST

For years a group representing current and former State Department officials has warned of an "above-the-law" culture that has taken root within the agency's law enforcement division, the Bureau of Diplomatic Security. No one paid much attention—and now the State Department could have a major scandal on its hands.

Court records unsealed Tuesday suggest that diplomatic security officers may have worked to impede the investigation into 2007's mass shooting in Baghdad's Nisour Square by Blackwater personnel. The New York Times' James Risen unearthed a key exchange, buried in thousands of pages of court transcripts, in which Kenneth Kohl, the lead prosecutor in the case against five former Blackwater guards, recalls an interview with a diplomatic security officer stationed at the US Embassy in Baghdad when the episode occurred:

"I talked to David Farrington, who was concerned, who expressed concern about the integrity of the work being done by his fellow officers," Mr. Kohl recalled. He said that Mr. Farrington had said he was in meetings where diplomatic security agents said that after they had gone to the scene and picked up casings and other evidence, "They said we’ve got enough to get these guys off now."

Obama Defends Risky Trading Ban

| Wed Mar. 3, 2010 5:26 PM EST

President Obama looks ready to fight to ensure the survival of his plan to ban risky trading within the same walls as taxpayer-backed US banks, according to draft language from the administration obtained by Reuters today. Obama's proposal would also place limits on the same kinds of trading at other big non-bank institutions, like Goldman Sachs. This new proposal, which will reportedly be sent to lawmakers today, reinforces a tough stance the president took back in January when, standing alongside former Federal Reserve chair Paul Volcker, for whom the idea is named, he called for new safeguards preventing federally-insured banks that take deposits from essentially gambling in venutres like hedge funds and private equity funds.

The proposal for non-banks would involve a cap on their risky trading levels and subjecting them to more enhanced regulation—the latter a proposal sure to irk the financial-services community. According to Reuters, the draft says, "These proposals are part of a comprehensive package of reforms to create a safer, more resilient financial system."

It's unclear right now how much of the Volcker proposals will make it into draft legislation now being hammered out in the Senate banking committee, led by Sen. Chris Dodd (D-Conn.), the committee's chairman. Earlier this year, Dodd had lightly criticized the Obama administration for rolling out the proprietary-trading ban, saying the president's proposal "seemed to many to be transparently political." The banking committee is expected to release its financial-reform framework as early as this week. The Volcker Rule has also been downplayed by experts, like former IMF chief economist Simon Johnson, who say a firewall between proprietary trading and more boring banking activities wouldn't get at the root of the problem:

For one thing, proprietary trading is but a small part of what these banks do. For most of the major banks, such activity accounts for less than 5 percent of total revenue—even at Goldman Sachs, which is, in some senses, the largest hedge fund in the world (backed by the US government through its access to the Fed’s discount window), proprietary trading accounts for only around 10 percent of total revenue on average. Even if we could strip this activity from the banks, it would reduce their size only slightly—and the too-big-to-fail banks would find ways to take similar-sized risks because their upside during a boom would still be big, and their downside in a bust would dramatically damage the economy, thereby forcing the government into some sort of rescue.

I'd recommend reading more of Johnson's take on the Volcker plans here. And hearing what Johnson has to say, Obama's continued backing for Volcker's idea looks even more political. We'll have to wait and see whether the Senate banking committee takes a cue from Obama or makes up its own mind on the issue.

Massa Sex Scandal: Good for Health Care?

| Wed Mar. 3, 2010 4:45 PM EST

President Barack Obama kicked off the final push on health care with a speech at the White House Wednesday. Basically, the plan now is for the House to pass the Senate health care bill, and then for the Senate to pass a package of changes to the bill through the filibuster-proof process known as "reconciliation."

As you know if you've been following this, the big question is whether the Senate bill has the votes to pass the House.

The House passed its health care bill by the narrow margin of 220-215 in November. Since then, three members—two Dems and one Republican—have left the House, and one Democrat, Jack Murtha of Pennsylvania, passed away. Theoretically, that brings the vote to 217-214. But Rep. Anh Cao (R-La.), the only Republican to vote for the original bill, has said he won't vote with the Dems again. That makes it 216-215.  As I have previously reported, it seems clear that Rep. Bart Stupak (D-Mich.), the author of the House health care bill's tough anti-abortion language, will oppose the Senate bill because he believes its abortion restrictions are not stringent enough. Stupak claims to have other Dems that previously voted yes on health care reform ready to switch, but House Dem staffers and Speaker Nancy Pelosi have expressed doubts about how many of those people might actually break ranks.

So, until this afternoon, absent any vote switchers other than Stupak, the vote in the House stood 216-215 against the bill.

Then came the news that Rep. Eric Massa (D-N.Y.) plans to resign in the wake of allegations that he sexually harrassed a staffer. Despite his avowed liberalism, however, Massa voted against the health care bill the first time around. That makes the vote count 215-215. So while the Massa sex scandal is terrible news for the Democrats narrative-wise, it's actually good news for the health care vote count. It takes away a no vote.

But even Massa's resignation won't be enough to pass the bill. Pelosi will still have to find at least one Democrat who voted against the bill the first time around to switch his or her vote. She'll also have to prevent any Democrats from switching their "yes" votes to "nos"—or find no-to-yeses to offset them. (Rep. Michael Arcuri, a Democrat from New York, told the Utica Observer-Dispatch on Wednesday that, absent "dramatic changes" to the bill, he will switch his "yes" to a "no.")

So where can Pelosi find more potential "yes" votes? On Monday, the Associated Press ran a story listing 10 Democrats who said they were undecided about possibly switching to "yes" votes. And as Jonathan Chait noted at the time, not all Dem "no" votes responded to the AP's query, meaning "the universe of potential N to Ys is larger than 10—the 10 who said they could potentially switch, plus another several who won't say."

The AP story is a useful piece of reporting, but for my money, the best full rundown of all the potential vote switchers is at Daniel Nichanian's Campaign Diaries blog. Check it out.