At a packed hearing today on the 2,200-page autopsy of Lehman Brothers, a painstakingly detailed report by bankruptcy examiner Anton Valukas, Treasury Secretary Tim Geithner was asked about a obscure yet destructive financial product called a collateralized debt obligation (CDO). In particular, the questioner, Rep. Joe Donnelly (D-Ind.), wanted to know Geithner's take on "synthetic" CDOs, which are complex derivatives whose value rose and fall depending on the swings in the housing market. (That allegedly rigged Goldman Sachs deal at the heart of the SEC's suit? Yep, a synthetic CDO.) Unlike regular CDOs, which are backed by pools of actual mortgage loans, synthetic CDOs take the gambling to a new level: They're not backed by actual loans at all. Instead they were created by Wall Street's rocket scientists when the stream of real loans ran out to fulfill the demand from investors clamoring to bet more on the housing market.

You're probably asking, What do synthetic CDOs mean to me? Well, other than helping to explode the economy, not much. In fact, there's been considerable doubts and hand-wrining on whether these products serve any purpose whatsoever. "With a synthetic CDO, it's a pure bet," Erik F. Gering, a former securities lawyer and now a law professor at the University of New Mexico, told the New York Times. "It is hard to see what the social value is—it's hard to see why you'd want to encourage these bets." 

Back to Geithner. What Rep. Donnelly asked the treasury secretary was this: If they're essentially explosive poker chips that helped topple the economy, do we need synthetic CDOs? Should we get rid of them? To no one's surprise, Geithner wavered. He vacillated. While he admitted that the logic fueling the rise of synthetic CDOs before the housing crisis—that the market would grow and grow and never stop—was horribly wrong, he chose not to disavow these products that have little, if any, purpose apart from speculative investing. "They do provide a useful economic function," Geithner said. Whether that function benefits anyone other than the people in the casino remains to be seen.

Jon Voight may be more outspoken, but for years Kelsey Grammer has been one of Hollywood's most prominent conservatives. The Frasier star endorsed John McCain in 2008, and has told reporters he may someday run for office himself (he did, after all, play a Republican presidential candidate in the 2008 movie Swing Vote). Now, Grammer has taken his activism to its logical conclusion: This summer, he's backing the launch of The RightNetwork, an on-demand television channel catering to, in his words, "Americans who are looking for content that reflects and reinforces their perspective and world-view." Think of it as Fox News without the news.

The RightNetwork's rollout hasn't been without controversy. A press release from RightNetwork, which suggested that Comcast was a partner in the project, has since been taken down, and the broadcast giant has sternly denied any involvement (although it may still decide to carry the channel).

I am pretty psyched for Casino Jack and the United States of Money, the latest movie from Alex Gibney. Gibney's documentaries—especially the wonderful, Oscar-winning, and deeply disturbing Taxi to the Dark Side—are informed by a deep understanding for how the world really works. That's why I'm so eager to see Casino Jack. This time, Gibney's taking on the dark side of DC and the story of disgraced lobbyist Jack Abramoff. The trailer and the title hint that the story is bigger than Abramoff himself. And as much as DC wants to ignore it, that's the truth. Watch the trailer:

The movie opens in New York and Los Angeles May 7 and goes into wide release later that month.

Sen. Judd Gregg (R-RI), a top senator with a hand in financial regulatory reform, held out hope today that the Senate's bill to rewrite the rules of our financial markets could still garner bipartisan support. "I hope we’ll do a negotiated compromise because there's not really a big partisan divide here," Gregg told a Bloomberg radio program. "It's just a question of getting it right."

The bill, which is set to hit the Senate floor tomorrow or Thursday, has become the latest lightning rod issue to divide the Senate. Senate Minority Leader Mitch McConnell (R-Ky.) sparked the partisan bickering by disingenuously saying the bill would lead to "endless taxpayer-funded bailouts"; soon after, all 41 Republicans in the Senate signed a letter opposing the current version of reform legislation. That divide between Democrats and Republicans has been exacerbated by an armada of Wall Street and other financial lobbyists seeking to water down the Senate's financial reform bill and play members of both parties off of each other. The challenge facing Democrats is rounding up one or two or three GOP votes to overcome Republicans' potential filibuster and pass the bill, which could be voted on as early as Monday of next week.

It may not look like good news, but if you're an American taxpayer, pay attention. AIG, the massive global insurer and beneficiary of billions of dollars in taxpayer cash, is eyeing a lawsuit against Goldman Sachs, a move clearly piggybacking on the Securities and Exchange Commission's announcement that it was suing Goldman for allegedly misleading its clients. The SEC's suit, filed on Friday, says Goldman created and sold a complex financial product called a collateralized debt obligation (CDO), whose value depended on the health of the subprime mortgage market, and that Goldman let a hedge fund trader wanting to bet against the housing bubble, John Paulson, pick basement-quality bonds to make up that CDO. More importantly, Goldman, the SEC alleges, failed to tell the buyers of that CDO that Paulson picked those bonds and that he was betting against those bonds and the housing market.

AIG's potential suit, the Financial Times reports, would center on "losses incurred on USD 6 billion of insurance deals on mortgage-backed securities similar to one that led to fraud charges against the US bank." In other words, AIG sold insurance against the failure of the Goldman bonds in question, from a family of bonds called Abacus. When those bonds inevitably failed, AIG had to pay out, recording losses of $2 billion. But now knowing that crucial information about the strength of those bonds was allegedly left out, AIG could have a case to make. 

The insurer, you'll remember, is a company largely buoyed by the American taxpayer—something to the tune of $134 billion, including the Federal Reserve and Treasury's support. Someday, a portion of those funds could make their way back into the government's coffers if and when AIG returns to full health. This suit against Goldman, however, could help AIG recoup some of its losses, which ultimately is a good thing for the American taxpayer that so generously kept a too-big-to-fail AIG from crumbling to the ground.

Continuing his lurch rightward in the face of a tough Republican primary challenge, Sen. John McCain has endorsed a draconian immigration bill that's close to passage in Arizona. The state-level bill, which the Arizona Senate passed on Monday, would arguably create one of the harshest immigration laws in the country, requiring police to question and arrest anyone on the "reasonable suspicion" that he or she was in the country illegally. A person could be arrested simply for not carrying proof of citizenship or for knowingly transporting undocumented immigrants for any reason. If the bill clears the Arizona House and is signed into law, it could embolden anti-immigrant activists and officials elsewhere in the country.

McCain gave a big thumbs up to the legislation on Monday, describing it "a very important step forward… I can fully understand why the legislature would want to act." But civil liberties advocates have questioned its constitutionality, arguing that it would allow racial profiling and would turn Arizona into a police state. (Currently, undocumented presence is a civil federal offense, and state and local officials can only ask about immigration status if a person is suspected of a crime.) Even some state and local police officials oppose the legislation out of concerns that it would deter immigrants from coming forward as witnesses to crimes.

The motivation for McCain’s rightward shift is obvious. As I explained last week, the Arizona senator authored the Senate's last comprehensive reform bill, which included a path to citizenship for undocumented immigrants. His Tea Party-backed primary opponent, J.D. Hayworth, has attacked him relentlessly for doing so. Hayworth has been endorsed by Americans for Legal Immigration (ALIPAC), a right wing anti-immigrant group that's trying to stir up Tea Partiers to revive the conservative crusade against "amnesty."

As the Senate's financial reform effort nears the final stretch, there's no mistaking the Obama administration's stance on regulating derivatives, the complex products that derive their value from underlying prices (the cost of wheat, say, or certain stock's value) and are used to both hedge risk and recklessly bet on the economy. Gary Gensler, chairman of the Commodity Futures Trading Commission which oversees derivatives, wants the opaque, $450 trillion over-the-counter derivatives market dragged fully into the open, so price, volume, and the structure of deals is transparent. Ditto Treasury Secretary Neil Wolin, who has said, "We cannot afford to wait to...bring transparency and oversight to derivatives." And Obama himself said last week he'll veto any bill if it lacks tough derivatives regulation. But is Obama and Co. truly doing all it can to back up all that tough talk on derivatives?

That's what one group, the Interfaith Center on Corporate Responsibility, is essentially asking, on the eve of a vote on a major shareholder resolution set to be voted on today by shareholders of Citigroup. ICCR is calling on the US government to flex its shareholder muscle (at 2010's outset, the US government owned 27 percent of Citi) by voting its shares in support of a resolution, filed by ICCR, calling on Citi's board of directors to report on how the bank uses collateral for its derivatives trading and, more importantly, the bank's position on using their customers' money for derivatives trading. 

Such a report would shed plenty of light on the bank's derivatives policies, ICCR says, and would align with the calls for greater transparency from the White House, Treasury, and many lawmakers in Congress. "To adopt an inconsistent posture at this critical juncture on derivatives disclosure would be disastrous," says ICCR executive director Laura Berry, "both in terms of how Wall Street reads the signals from Washington and how seriously Congress sees the Obama administration as being in its support of vital financial services reform."

Unlike most bailed-out banks which have bought back their shares, the US government—and by extension the American taxpayer—still owns a significant chunk of Citi. Granted, the US' ownership in Citi has begun to dwindle, as the Treasury announced plans in March to sell off its stake throughout 2010. Still, nowhere near all of those stocks are sold. If the US government voted in favor of the resolution, it could provide some major heft to the broader calls for greater disclosure and regulation of derivatives.

At the moment, the signs suggest that "yes" vote is unlikely. The Treasury, which orchestrated the bailout, has consistently taken a hands-off stance regarding its stock holdings, and a Treasury spokeswoman, Meg Reilly, told Mother Jones yesterday that the department had no comment. Even in the resolution passes without the US government's help, it'd be a major victory for those trying to bring some sunshine to an insanely lucrative and wholly unregulated corner of our financial markets.


Flames leap into the air in front of the 49 soldiers who re-enlisted on Joint Security Station Nasir Wa Salam, Iraq, on April 9, 2010. Photo via the US Army by Spc. Luisito Brooks.

At a press conference for this weekend's big gun-rights rally in Washington, D.C., Oath Keepers founder Stewart Rhodes announced that he's thinking about suing us over Justine Sharrock's profile of his organization, a fast-rising right-wing group that is recruiting men and women in uniform to resist the Obama administration. Rhodes is upset that we featured Oath Keepers supporters who talk openly about taking up arms against the government, and says that instead we should have focused on the Navy officer who sits on his board (and who seems in unshakeably good cheer when answering questions like, "That's the ultimate cost of freedom, isn't it—blood?").

The thing is, talk of armed resistance is what our reporter, Justine Sharrock, heard over and over during the months she spent reporting on Rhodes' organization—going to Oath Keepers conferences, spending time in Oath Keepers chat rooms, and meeting as many of the group's supporters as she could. She wrote the story she found, not the story she was directed to. That's what good reporters do, even when it earns them angry comments, threats of litigation, or worse. (Last year, another one of our writers, Anna Lenzer, was detained and not-so-subtly threatened with rape while investigating Fiji Water).

Some MoJo reporters are working on in-depth exposes—on the industry that stands in the way of housing relief, for example, and on a mysterious birth-defect cluster near a toxic-waste landfill—right now. Others are in Washington, keeping tabs on folks like the Congressman who calls other lawmakers "domestic enemies." The reason they can stay on the beat is... well, you. MoJo relies on our readers' help; hundreds of you have pitched in to get us to the goal of $25,000 for our current drive, but we're not there yet. You can give 50 cents, $5, or $50, via credit card, PayPal, or check in the mail. Try it! It'll feel good to be part of one of a very few reader-supported news organizations in America.

Al-Jazeera English released chilling footage Sunday of Taliban fighters overrunning a former US outpost in Afghanistan's Korengal Valley, capturing the drama, the melodrama, and the dilemmas that attend counterinsurgency against an ideological foe.

The base—which was always small in comparison to most of the military's forward operating bases (FOBs) in Iraq and Afghanistan—was abandoned last week by its Army residents as part of a larger strategy by the US commander there, Gen. Stanley McChrystal. It wasn't the first such outpost that the Army has ditched, and it's unlikely to be the last, as US forces change tack and focus on larger, less-remote urban areas of the country. "The area was once very operationally important, but appropriate to the new strategy, we are focusing our efforts on population centres," the Army said in a press statement. In that sense, the loss of Korengal Outpost isn't a defeat, but part of a larger advance.

Still. Forty-two US servicemembers lost their lives within those walls in five years of fighting over what's been dubbed "the Valley of Death." And Al-Jazeera's video shows that the Taliban isn't afraid to use some empty ammo cans and sandbags as part of a massive PR coup. "There's a lot of ammunition left behind," claims Anwar, one of the local Talibs. "Mortars, rockets, missiles. This, God willing, we will use against them." His claims to possess US munitions and petrol are probably lying bravado. But perceived defeats in this kind of war have a wicked way of becoming more concrete.

Video and full analysis follow the jump.