Mojo - May 2010

Dear GOP: Fannie, Freddie Did Not Cause the Financial Crisis

| Wed May 19, 2010 2:12 PM EDT

It's time to put to rest a lingering myth that, all evidence to the contrary, just won't die. On the Senate floor this morning, Senate Minority Leader Mitch McConnell (R-Ky.) repeated, for the umpteenth time among Republicans and conservatives, a pernicious misconception that places most, if not all, of the blame for the financial crisis on the government-sponsored housing corporations, Fannie Mae and Freddie Mac:

"[The financial reform bill] does nothing—nothing—as I indicated, to rein in Fannie Mae and Freddie Mac, the main protagonists in the financial meltdown. This is absolutely worse than irresponsible; it's the legislative equivalent of wrongful conviction."

Not only is McConnell's basic grasp of storytelling wrong—if Fannie and Freddie are to blame, shouldn't they be the antagonists?—but his understanding of what caused the financial crisis is deeply flawed. Sadly, this misconception is a longstanding meme among Republicans and conservatives. In 2008, then-Republican presidential candidate John McCain said Fannie and Freddie were "the catalyst for this housing crisis" and thus the spark that ignited the broader economic meltdown. House Majority Leader John Boehner has said, "How you can attempt to fix [the financial system] without going to the root of the problem, Fannie Mae and Freddie Mac, is really beyond me." And a roster of conservative pundits has played the Fannie-Freddie blame game so many times it's hard to keep track.

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Doubt Surrounds Finance Bill Passage

| Wed May 19, 2010 1:50 PM EDT

After nearly two weeks of cruising through financial reform and passing amendments that have noticeably improved the bill, Senate Democrats now face an 11th-hour scare on their Wall Street overhaul. A clutch of Democrats, including Sheldon Whitehouse (D-RI) and Byron Dorgan (D-ND), have signaled that they may not vote for the Senate's reform bill. And with complete GOP opposition practically guaranteed, that means the fate of financial reform is a lot less assured than it was earlier this week.

Majority Leader Harry Reid (D-Nev.) said yesterday and today that he wanted a final vote on financial reform as early as this afternoon or tomorrow, in effect cutting off debate on additional amendments. Reid's charge, however, has left some Democrats feeling burned.

Dorgan, for instance, wants a vote on his amendment to ban a particularly risky type of financial trading called naked short selling. That's when a trader bets that a stock or bond will fall in price without having any skin in the game—no cash or securities in hand to pay out in case the bet goes bad. Experts say naked short selling is particularly pernicious because it artificially drives down stock or bond prices, and distorts markets. (Matt Taibbi wrote a good—and highly entertaining—piece on this.) Dorgan has an amendment pending that would ban naked short selling, something Germany has temporarily done. But earlier today it didn't look like Dorgan would get a vote on his amendment, and in response, he's saying he might not vote for the full bill when the time comes. Whitehouse is pulling the same move over an amendment of his that would cap credit card interest rates and that has yet to be voted on.

Sens. Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) are also pushing hard to get a vote on their amendment, which would ban big banks from "proprietary trading," that is, trading for their own benefit instead of for clients'. Cutting out prop trading, as it's called, would eliminate the kinds of conflicts of interest seen in big investment banks like Goldman Sachs and Morgan Stanley. Goldman in particular has taken criticism for selling mortgage-linked products to clients the firm itself was betting against. The Merkley-Levin amendment would further block banks from sponsoring hedge or private equity funds, and set caps on banks' growth.

It's unclear whether Levin or Merkley would vote against the full bill if their amendment isn't voted on. Reuters reported today that a back-door compromise had been reached on the amendment, which means it could ultimately see the light of day—and give Democrats the boost they need to reach 60 votes (or more) when they vote on the full financial bill.

Anti-Immigration Group Claims Neo-Nazis Involved in Tancredo Rally

| Wed May 19, 2010 1:30 PM EDT

Americans for Legal Immigration PAC is rarely afraid to offend. The right-wing group, known as ALIPAC, has accused illegal immigrants of putting the US "on a path to anarchy" by "lying, cheating, and stealing," and recently claimed that Sen. Lindsey Graham (R-SC) had been blackmailed into working on immigration reform because of his alleged homosexuality. But even ALIPAC draws the line somewhere. The group says it is withdrawing its support from any rallies supporting the Arizona law next month "due to the discovery of racist group involvement and the actions of former Congressman Tom Tancredo," who is keynoting a June 5 anti-immigration rally in Phoenix. ALIPAC singles out the lead organizer of the rally, Dan Smeriglio of Voice of the People USA, for associating with members of neo-Nazi groups online, and goes after Tancredo for defending Smerglio:

The video and screen shots of Dan Smeriglio's Facebook account indicates that he has willingly been working with members or racist skin head groups long after he knew their identities and politics. In fact, Dan's Facebook profile, which remains his main way of broadcasting a rally for June 5, promoted one of Europe's most popular neo-Nazi rock groups until a few days ago…

Unfortunately, our plans to get the skinheads out and away from the Phoenix effort was thwarted, when retired Congressman Tom Tancredo, who had self titled himself as the 'key note speaker' at the June 5 event started telling leaders and candidates to come back to the June 5 rally. Tancredo even claimed that ALIPAC's concerns about Dan Smeriglio were false, when he had not reviewed the video and screen shots which we find to be fairly conclusive.

Smeriglio has denied the accusations that he sympathized or worked with neo-Nazi groups. On the webpage for his organization, he writes that he was "outraged, disgusted, and angry" when he learned these individualas were among his 2,000-plus friends on Facebook—one of whom, Steve Smith, heads up a Pennsylvania-based skinhead group called Keystone United. Tancredo similarly dismisses the charges: "I have 5,000 quote-unquote friends, and I have no idea who 98 percent of them are....So I don't think any of this rises to the level of concern." ALIPAC alleges, however, that Smeriglio had long known about Smith’s neo-Nazi affiliations, citing a video clip from a 2009 anti-immigration rally in Pennsylvania, where they both appeared together.

Gold: Not Just for Right-Wingers!

| Wed May 19, 2010 12:31 PM EDT

When Glenn Beck talks, people listen. Too bad he's the last person you should be getting investment advice from—especially when he plugs gold and his favorite gold dealer, Goldline. Of course, Beck is hardly the only right-wing gold pitchman—virtually every major conservative talker, from Rush Limbaugh to G. Gordon Liddy, has endorsed a gold seller. But, as several readers have rightly pointed out in response to MoJo's story about Beck and Goldline, prominent left-wing radio hosts have jumped on the gold bandwagon as well. Ed Schultz and Thom Hartmann have both endorsed ITM Trading, an Arizona company that, like Goldline, pushes gold coins as "the best way to own gold" and likes to cite the 1933 executive order banning gold hoarding. As I write this, I'm listening to Schultz, whose website announces that he's just about to chat with ITM's Craig Griffin about "why we are seeing record gold prices." 

That type of guest appearance is par for the course on talk radio, no matter the political stripe, where the lines between commercials and content can get pretty blurry. So does Big Eddie think that promoting gold squares with being a "straight talking, no-nonsense voice of reason in unreasonable times"? Or does even a good progressive have to pay the bills? Or both? I've contacted Schultz, Hartmann, and ITM for comment. Stay tuned.

UPDATE: Schultz just spent seven minutes chatting with Griffin, whom he ID'd as an advertiser as well as a longtime "contributor" to his program. The conversation hit many of the standard gold selling points—its price is skyrocketing, the value of the dollar is being undermined by the federal debt—though it noticeably lacked the apocalyptic feel of Beck's gold pitch. Nonetheless, Schultz didn't mince words. "I own it and I think you should too," he concluded. Gold, he added, is "a very safe, solid, and growing investment."

Glenn Beck's Favorite Gold Company: Trial Lawyer Fodder?

| Wed May 19, 2010 9:54 AM EDT

Yesterday, Rep. Anthony Weiner (D-NY) got into a pissing match with the talk show host liberals love to hate: Glenn Beck. The reason? Weiner released a report suggesting that Beck's favorite gold company (and show sponsor), Goldline International, is ripping people off with overpriced coins, misleading investment advice and other misdeeds. He told Politico:

“Goldline rips off consumers, uses misleading and possibly illegal sales tactics, and deliberately manipulates public fears of an impending government takeover – this is a trifecta of terrible business practices.”

Beck shot back on his show, accusing Weiner of McCarthyism. "This is again another arm of this administration coming out to try to shut me down," he railed on his radio show.

As it turns out, Mother Jones has also been investigating Goldline's practices and found much of what Weiner turned up and more. (Read the full investigation here.) We discovered that Beck has been "recommending a company that promotes financial security but operates in a largely unregulated no-man's land, generating a pile of consumer complaints about misleading advertising, aggressive telemarketing, and overpriced products." Many of those sucked in by Beck's pitch to call Goldline, and who ended up losing money as a result, were elderly, disabled, and sometimes both. One disabled truck driver who found Goldline after listening to Beck invested nearly 20 percent of his life savings in the company's gold coins, only to discover that he had paid almost double the price of gold for the coins. It would have been years before he had any reasonable chance of recouping his money, and there was a good chance he'd never make it back. What's not clear, however, is whether anything Weiner is proposing would do much to help these folks.

Dodd's Death Blow to Swaps Spin-off

| Wed May 19, 2010 9:44 AM EDT

[UPDATE]: Talking Points Memo is reporting that Dodd intends to drop his death-by-study amendment on spinning off big banks' swaps desk. TPM quotes a couple of anonymous Senate Democratic aides who say the Connecticut senator plans to ditch the amendment after taking a lot of heat from the financial sector, liberal lawmakers, and especially the proposal's author, Sen. Blanche Lincoln (D-Ark.).

Sen. Chris Dodd (D-Conn.) quietly sought to end yesterday one of the most contentious battles in the Senate's Wall Street overhaul: how to reform derivatives, the complex financial products that can be used safely—to hedge risk and protect against swings in the market—or to make risky gambles on swings in financial markets. A proposal from Sen. Blanche Lincoln (D-Ark.), who's emerged as a derivatives reform crusader, would've forced big banks like JPMorgan Chase and Citigroup to cut out their lucrative, highly profitable "swaps" trading desks and make them separate subsidiaries. The logic behind Lincoln's proposal is that banks engaging in risky swaps trading shouldn't have access to federal (i.e., taxpayer) support when needed, and that if they want to retain access to those funds, they need to cut loose their swaps desks. Lincoln's proposals have been vehemently contested by Wall Street, and opposed even by the White House and respected outsiders like Paul Volcker, the former Federal Reserve chairman.

Just before Tuesday's deadline for submitting amendments, Dodd, a top Democratic senator on financial reform, filed one that he presumably thought would appease everyone. To his credit, the Lincoln swaps desk language will remain. But here's the catch: The rule will be "studied" for two years before any action. As I've written before, calling for a study is essentially committing a rule to a slow, prolonged death. It's a tactic straight out of the GOP playbook in this year's financial reform battle when they wanted to kill a part of the bill without blatantly doing so.

From the looks of it, few people—except Dodd himself—are happy with the swaps-desk study. Lobbyists for the financial industry said the uncertainty created by the study amendment would "introduce a comic amount of uncertainty." In a statement to the Washington Post, Lincoln said, "I remain fully committed to my provision and will fight efforts to weaken it." But with time for debate in the Senate just about over—Majority Leader Harry Reid wants to vote on the bill in the next day or two—it looks like Dodd's study amendment, despite Lincoln's avowed opposition, will most likely end up in the Senate's reform bill.

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We're Still at War: Photo of the Day for May 19, 2010

Wed May 19, 2010 4:00 AM EDT

 

Croatian, Afghan and Minnesota National Guard Soldiers talk about room clearing procedures during an Operational Mentoring and Liaison Team training exercise at the Joint Multinational Readiness Center. Photo via the US Army.

A Good Night for Liberals

| Wed May 19, 2010 12:51 AM EDT

Tuesday was a big day for American politics. You'll be hearing a lot about the victories for the tea party, but liberal Democrats also did as well as—and perhaps better than—the right-wing insurgents. In some cases—like that of Rand Paul's win in Kentucky's Republican Senate primary—tea partiers and liberals were even celebrating the same event. Tea partiers preferred Paul, the son of Texas congressman Ron Paul, to Trey Grayson, the establishment GOP candidate. But liberals were also rooting for Paul, because polling shows that he could be easier to beat in the general election than Grayson would have been.

Liberals had to be happy with some of Tuesday's other results, too. In Pennsylvania, GOPer-turned-Dem Arlen Specter lost the Democratic primary to Rep. Joe Sestak. In Arkansas, Sen. Blanche Lincoln was not able to avoid a June 8 runoff with union and liberal-backed Lt. Gov. Bill Halter. And in Kentucky, Attorney General Jack Conway—generally considered to be not only more progressive but also a stronger general election candidate than Lt. Gov. Dan Mongiardo—won his primary. Conway will face Rand Paul in November, and stands a decent chance of winning.

Another important win for progressives was in Pennsylvania's 6th congressional district, where physician Manan Trivedi edged newspaper publisher Doug Pike. Trivedi was a big favorite of the netroots and a member of Daily Kos' "Orange to Blue" program. He'll take on incumbent GOPer Jim Gerlach in November.

Tuesday's big victory for the national Democratic party, however, isn't as pleasant for liberals. Mark Critz held Pennsylvania's 12th congressional district for the Dems, filling the seat once held by the late Rep. John Murtha. But Critz is not a progressive—he ran against health care reform and tried to distance himself from President Obama, who has a 33 percent approval rating in the district. Still, Critz is more liberal than the alternative, GOPer Tim Burns. Progressives will take a Democrat who will vote with them some of the time over a Republican who would vote against them on almost everything.

Will liberal wins in May primaries lead to defeats in November? Maybe in some cases, but these aren't them. Conway and Sestak poll better against their GOP opponents than their less progressive primary opponents did. Trivedi-Pike is a wash. And either Halter or Lincoln is probably cooked in the Arkansas general election against popular GOP Rep. John Boozman. The national Democratic establishment might not be happy about seeing some of their preferred candidates go down, but if anything, Tuesday's results will help the Dems in November.

Here's a roundup of some of the other important primary results, including updates on the rest of my 14 House races to watch:

A Runoff for Lincoln: Good News for Wall Street Reform?

| Tue May 18, 2010 11:32 PM EDT

We don't yet know the final results of the Arkansas Senate Democratic primary, but one thing is certain: this race headed for a runoff. Neither incumbent Sen. Blanche Lincoln nor her union-backed challenger, Lt. Gov. Bill Halter, will get the 50 percent needed to avoid a rematch on June 8.

The extension of this primary contest is good news for supporters of strong financial regulatory reform. When Lincoln released her proposal to regulate financial derivatives on April 13, many observers were shocked by its toughness. Lincoln's bill would force almost all derivatives onto exchanges, where it would be more transparent for traders and regulators. It would also force big Wall Street banks to spin off their derivatives desks—separating a practice that critics deride as gambling from other banking activities.

So why would a normally conservative, red-state Democrat go so hard on the banks? One theory is that Halter's primary challenge pushed Lincoln to the left. Under this scenario, Lincoln worried that her opponent could accuse her of being too close to Wall Street, so she made her reform bill as tough as possible in order to preempt any attacks.

As primary day drew near, Lincoln hinted that she might be open to giving up her derivatives stand. But now that the contest is going into overtime, it will be very hard for her to change course without paying a price at the polls. With her left flank still vulnerable, Lincoln will feel pressure to stand tall on derivatives. Financial reform is at a crucial juncture—a key Democratic senator has expressed worries that the process "fell off a cliff" on Tuesday, as Republicans suddenly stopped cooperating. The weeks between now and Lincoln's runoff are critical. But since Lincoln still has to worry about Halter, supporters of strict derivatives regulation probably won't have to worry about her.

Also happening Tuesday night: Rand Paul wins the Republican Senate primary in Kentucky and Dems rejoice, while Republican-turned-Democrat Arlen Specter goes down to defeat in Pennsylvania.

Specter Loss: Obama's Word Not So Good?

| Tue May 18, 2010 9:45 PM EDT

He came to us, we didn't go to him. That's how Obama White House aides started talking about the soon-to-be former Sen. Arlen Specter (R-to-D-Penn.) hours before he lost the Democratic Senate primary to Rep. Joe Sestak. In politics, this is called running away.

When Specter last year bolted the Republican Party and became a Democrat—when it looked as if he might not be able to win the GOP primary—the White House said that he would have its full support. And the Obama crew did signal it did not want any Democrat, including Sestak, to challenge Specter in the Democratic primary. But Sestak, a retired admiral, wouldn't retreat.

For months, Specter—a politician with much name recognition in the Keystone State—looked like a good bet for the White House. He maintained a double-digit lead over Sestak. But in the final weeks of the campaign, Sestak drew to a tie in the polls. And though Specter's prospects looked bad, experienced political handicappers in Washington still were saying that the party-switcher could pull it out, especially if Democratic Gov. Ed Rendell, a Specter supporter, could deploy his political machine on Specter's behalf.

But with the race close, the White House did nothing special for Specter. President Barack Obama recorded one robo-call. Neither he nor Vice President Joe Biden campaigned with Specter. It appeared that they had cut him loose. It wasn't pretty. But with 2010 looking ugly for incumbents, especially Democrats, the White House now seems to be hunkering down. Obama and his aides didn't want to take an early hit on this race and come across as politically impotent. (One bit of good news for the Ds: in a special election to fill the Pennsylvania seat of the late Rep. Jack Murtha, Democratic Mark Critz bested Republican Tim Burns. Of note: former President BIll Clinton campaigned for Critz. Not surprisingly, the Democratic Party called this the "most significant election contest" of the day.)

Obama's pirouette in Pennsylvania made political sense. But did Obama send a signal: don't trust me? He had said he would put his muscle behind Specter, but in the end he didn't. This might have been best for the party, for Sestak could well be the better Democratic candidate in the general election. And if Sestak wins in November, what Obama did with (or to) Specter won't matter much. For now, though, this one race shows that Obama's endorsement doesn't have much juice (ask Martha Coakley and Jon Corzine about that) and that any promise of support from Obama is vulnerable to political calculation.

Also happening Tuesday night: Rand Paul wins the Republican Senate primary in Kentucky and Dems rejoice, while Blanche Lincoln is headed to a runoff in Arkansas, which could be good news for tough Wall Street reform.