Mojo - May 2010

Exploiting the Oil Spill: One Word—Lithium

| Wed May. 5, 2010 7:29 AM PDT

In recent days, Rush Limbaugh and other rightwingers have accused the Obama administration and environmentalists of trying to exploit the BP oil spill for political gain—even suggesting that they caused the disaster or let the leak continue in order to undermine plans for expanding offshore drilling. This is wacko stuff, showing that the soundbite scoundrels of the right will exploit anything to score political points. But there are those on the right who are also trying to exploit the BP oil spill the old-fashioned way: for financial profit.

This morning I received an email from Townhall.com, a prominent conservative site that features the writings of well-known conservative pundits. The subject head: "Obama may cancel ALL oil drilling, wants Lithium. LTUM stock could triple." Townhall had rented out its email list to a stockpicking newsletter that was pushing lithium stocks—and attempting to make a buck off the paranoid conservatives who soak up Limbaughian lies. Well, if  rightwingers really do believe that President Barack Obama will cancel all offshore drilling, then they ought to be easy marks for Townhall's partner. They might also be interested in purchasing some swamp land in Florida.

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Hank Paulson-Goldman Reunion

| Wed May. 5, 2010 7:15 AM PDT

Could Hank Paulson, the bald-headed, hard-charging former Treasury secretary who crafted the ad hoc bailouts of 2008, return to his former perch at under-fire Goldman Sachs? In a "what-if" story in today's Wall Street Journal, Paulson's name is floated as a potential successor to the chairmanship at Goldman, should current chair and CEO Lloyd Blankfein resign or be forced out of the chairman's role amidst one of the darkest periods in the Goldman's history.

To no one's surprise, rumors are swirling inside and outside of Goldman Sachs over the fate of the investment bank's leader, Blankfein—whether he'll survive the onslaught of lawsuits, the bad PR, a dip in the firm's stock, and so on. Right now, there aren't any indications that Blankfein or other top brass at Goldman are set to leave. There is, however, a resolution filed by a Goldman shareholder demanding a split of the CEO and chairman positions, both of which Blankfein currently occupies. If the resolution passed, Blankfein would have to relinquish the chairmanship. One bloc of speculators inside Goldman wants Paulson to return to the firm to fill the chairman role if Blankfein is pushed out.

Whether Paulson would jump at such a move is unlikely. After all, if his memoirs are any indication, Paulson sees himself as the man who helped rescue (most of) Wall Street's most storied firms and the financial markets, emerging relatively unscathed from the meltdown of 2008. A return to Goldman would likely tarnish that narrative. It would also provide more fodder for those who call Goldman "Government Sachs," and rail against the revolving door between Washington and Wall Street.

All of this, of course, hinges on the civil suit filed by the Securities and Exchange Commission against Goldman. The SEC alleges that the firm sold a complicated financial product to investors the design of which had been heavily influenced by a hedge fund trader, John Paulson, who was betting against that product; in other words, the product was designed to fail. What's more, the SEC says Goldman failed to fully disclose to investors Paulson's role in influencing the product's design. Right now, the case is still pending, and while there have been rumors of a settlement, Goldman has publicly said it will fight the suit. How the SEC-Goldman battle plays out will largely determine the fate of Blankfein and whether Paulson comes into the picture at all.

Bipartisan Deal on Too-Big-to-Fail?

| Wed May. 5, 2010 6:19 AM PDT

The two top lawmakers crafting the Senate's version of financial reform—Chris Dodd (D-Conn.) and Richard Shelby (R-Ala.)—appear to have finally reached a breakthrough on arguably the most contentious issue in reform: ending the threat of too-big-to-fail banks and future taxpayer bailouts. In a compromise, the New York Times reports, Dodd and Shelby have decided to scrap a $50 billion fund that would've been used to liquidate failed megabanks. The money for that fund would've come from fees charged to the country's biggest banks. Shelby and many Republicans opposed that fund, as did the Obama administration. Now, the Federal Deposit Insurance Corporation will handle the euthanization of big banks with support from the Treasury Department; the money spent to wind down those banks will later be recouped by selling the bank's assets. Shareholders and creditors, meanwhile, will be forced to take losses in the FDIC's wind-down process.

Dodd said on the Senate floor yesterday that the new FDIC proposal signaled that he and Shelby had "reached an agreement on the too-big-to-fail provisions." Further preventing future taxpayer bailouts is an amendment offered by Sen. Barbara Boxer (D-Calif.) that outright bans taxpayers from being on the hook for rescuing big banks. Her amendment is expected to win both Democratic and Republican support.

Dodd and Shelby's agreement, though, doesn't mean the issue of too-big-to-fail and bailouts is done, as some disagreement remains. As Mother Jones reported yesterday, Sens. Ted Kaufman (D-Del.) and Sherrod Brown (D-Ohio) will introduce an amendment calling for strict caps on the banks' size and amount of leverage—the amount of money they borrow to amplify the gains (or losses) of their bets. These kinds of capital and leverage limits are opposed by Republicans, haven't gotten much of a hearing from Dodd, but are backed by outside experts like Simon Johnson, former cheif economist of the International Monetary Fund and a widely read commentator on reform, because they proactively limit the size of banks. The way the Senate's bill looks now, there aren't any provisions preventing the growth of too-big-to-fail banks, only a new council to keep a close eye on them and new ways to liquidate them if and when they fail.

Republicans had been blocking votes on financial reform amendments until Dodd and Shelby reached an agreement on too-big-to-fail. With that impasse now resolved, the Senate is expected to begin voting on amendments as early as today.

We're Still at War: Photo of the Day for May 5, 2010

Wed May. 5, 2010 4:11 AM PDT

 

Special operations Soldiers stand clear as they blow a door open to demonstrate how they clear buildings during the USASOC capabilities exercise. Photo via the US Army.

How Did the Times Square Suspect Become a US Citizen?

| Tue May. 4, 2010 6:39 PM PDT

Right after the news about the Times Square bomber broke, some Republicans were outraged that the suspect--a naturalized US citizen—had been read his Miranda rights after his arrest. The next installment in the debate is sure to be exactly how Pakistan-born Faisal Shahzad gained his citzenship--and whether it should have been granted in the first place.

Shahzad became a naturalized US citizen just a year ago, after marrying an American citizen in October 2008, according to one Bloomberg report. After being approved for US student visas in 1998 and 2002, Shahzad had passed all the necessary national security background checks and was naturalized in April 2009. The suspect also "apparently went back and forth to Pakistan often, making his last trip in February," reports the New York Times, adding that he had traveled with three passports—two from Pakistan and one from the US.

There's no way of knowing at this point whether Shahzad’s citizenship had facilitated any aspect of the attempted bombing or its genesis. Nor is it known whether Shahzad had designs to carry out the plot while he was seeking American citizenship. But federal officials are already looking to see if Shahzad had lied on any part of his citizenship application. And the questions surrounding his path in the US are likely to prompt renewed calls from conservatives for tightened immigration controls as a national security measure—particularly as the immigration debate heats up.

Though the debate has focused predominantly on Latino immigrants so far, it wasn’t long ago that concerns about terrorism were a big driver of both the national politics and policy of immigration. In 2007, in the midst of the last Congressional immigration debate, then-Colorado Rep. and GOP presidential hopeful Tom Tancredo released a TV ad claiming that "jihadists frothing with hate" would use the southern border to cross into the U.S. And it seems like such concerns could end up entering the political bloodstream once again. Already, security hawk Joe Lieberman (I-CT) has floated one especially draconian proposal: revoke the citizenship of Americans with ties to known terrorist networks, so they will be denied Miranda rights and can be tried in military tribunals instead of civilian courts. Now that's a handy work-around: afford Americans the protections of citizenship only when it's convenient.

Oklahoma's Abortion Two-Step

| Tue May. 4, 2010 2:22 PM PDT

Last week, Mother Jones reported how Oklahoma legislators ratified two of the country's toughest constraints on safe legal abortion. Now, the state's attorney general is reluctantly blocking enforcement of one of those laws; he says the delay will give Oklahoma's favored anti-choice attorney time to mount her defense of the regulation. But thanks to that attorney's public comments, the state's case just got a lot messier, and it may have to jettison one of its draconian laws to save the other one.

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The New York Times and the "T-Word"

| Tue May. 4, 2010 2:01 PM PDT

I know there are a lot of other subjects in the news this week, but I don't want to let this excellent post by John Cole go unacknowleged. As Cole notes, major American news organizations that avoid the word "torture" when describing conduct by the American government are perfectly willing to use the word when they're talking about foreign governments:

The New York Times:

 

The torture of Iraqi detainees at a secret prison in Baghdad was far more systematic and brutal than initially reported, Human Rights Watch reported on Tuesday.

The Washington Post:

Adding to the political tension, Human Rights Watch released a report late Tuesday saying that members of a military unit under the command of Prime Minister Nouri al-Maliki, a Shiite, systemically tortured and sexually abused hundreds of Sunni Arab prisoners.

NPR:

Iraqi men held for months at a secret prison outside Baghdad were systematically tortured and forced to sign confession statements that in at least some cases they were forbidden to read, according to a new report by a human rights group released Wednesday.

When OTHER people do it, HRW is a legitimate, credible source, and it is not "allegations of torture" or "enhanced interrogation techniques."

 

More, including an interesting discussion in the comments section, here.

The Forever Too-Big-to-Fail War

| Tue May. 4, 2010 1:00 PM PDT

More than any other issue, the question of what to do with too-big-to-fail banks has perplexed and divided lawmakers since the glaring need for new financial rules was laid bare in the fall of 2008. Ever since global insurer AIG teetered on the brink of collapse in 2008, and then took a $134 billion lifeline from the Treasury Department and Federal Reserve, experts, financiers, and politicians from both parties agreed something had to be done to prevent the next AIG from imperiling the global economy. Almost two years after the financial collapse, though, lawmakers still can't agree on how to fix our too-big-to-fail conundrum.

A recent exchange on the Senate floor illustrated this chasm. In one camp are senators like Ted Kaufman (D-Del.). Kaufman took to the floor on Monday for an impassioned speech calling for strict caps and restrictions on the size of banks. Citing financial experts and even former Treasury Secretary Robert Rubin, Kaufman said too-big-to-fail banks were too-big-to-regulate and a danger to the economy. Kaufman's amendment, authored with Sen. Sherrod Brown (D-Ohio), would not only cap the size of banks' balance sheets but also the amount of leverage—the money they borrow to amplify the gains or losses of their investments—they can use. "The truth is that these financial institutions have become so large and complex that regulators rely upon the banks and the markets to self-regulate," he said, adding that self-regulation is effectively no regulation. Capital and leverage limits essentially dummy-proof financial regulation, taking decisions out of regulators' hands and simply saying banks can't grow to AIG-like size.

Kaufman's proposal was cheered by outside experts like Simon Johnson, former chief economist of the International Monetary Fund, who wrote on Tuesday that ending the specter of megabanks is the "most pressing issue of financial reform." Yet Johnson rued the fact that Kaufman's proposal isn't getting a fair hearing in the Senate, which is content to "keep the 'debate,' in terms of votes, on issues less likely to infuriate powerful banks."

Presumably, Johnson is alluding to senators like Bob Corker (R-Tenn.), who today brushed off the need for capital and leverage restrictions. Corker, in essence, said we didn't these caps; the best way to deal with too-big-to-fail banks, he said, is to remove the implicit guarantee that megabanks will always be bailed out. The prospect of failure, Corker's thinking goes, will dissuade banks from growing to too-big-to-fail size, and if the bill ends up as he wants it, there will be no bailouts. "The best way to level the playing field is ensure that if a big company fails it fails," Corker said. The Tennessee senator said he also supported a resolution authority, which would be a special process created by the bill to handle the failure of these big banks in a timely way, outside the traditional bankruptcy process.

Think of Kaufman's proposal as the proactive one, and Corker's the reactive. While some see Kaufman's idea as the unwarranted reach of big government, Corker's stance overlooks the turmoil and pain involved with the failure of a big bank, an event sure to shake the foundations of the financial markets like AIG's near-collapse did. Letting big banks fail, instead of offering ad hoc bailouts, is indeed important, but Corker's position doesn't prevent the growth of new megabanks at all, failiure or not—a situation with ominous consequences for the markets and our country, says Johnson. At the end of the day, he sees the war over too-big-to-fail as more than just a debate over bank size:

This is, of course, partly about the political power of corporations. But corporations are, in this sense, merely a veil—this is really all about which people have what kind of power in our society. To what extent are we really still a democracy—and how far have we already slipped down the road to oligarchy?

Why Was Cheney in Saudi Arabia?

| Tue May. 4, 2010 11:59 AM PDT

[UPDATED] Foreign Policy's David Kenner pointed out Monday that former vice president and ex-Halliburton CEO Dick Cheney just went on a junket to meet with Saudi Arabian leaders, a quiet pow-wow that's been discussed in the Saudi media but not so much over here. Cheney—who's been busy defending torture and complaining that Barack Obama lets world leaders "think they're dealing with a weak president"—weakened the president by visiting a leading torture regime and its caliph, King Abdullah.

So, what was the ex-veep doing in Riyadh?

The obvious answer would be: something financially advantageous. Cheney, who oversaw the Saudi staging of Gulf War I, has always maintained good relations with the kingdom and its elites—relations that certainly came in handy after the war, when his oil-services and all-around shady operation, Halliburton, won lots of US and Saudi contracts to help extract the kingdom's petroleum wealth—and buttress its national defenses.

But those sorts of financial entanglements—and high-level contacts—can quickly deteriorate into policy interference. Which wouldn't be new territory for Cheney, who as CEO helped Halliburton skirt international and US terror sanctions on trade with Iran in order to make a quick buck.

If his Saudi expedition is intended in any way to undermine the US administration's foreign policy—and his track record here isn't great—then some politicians might argue he's skirting the law...the longstanding Logan Act, to be exact. Mind you, nobody's ever been prosecuted under that act, which prohibits private citizens from setting US foreign policy. But just a few years ago, Cheney's GOP colleagues in Congress constantly used the Logan Act to threaten Democrats like Nancy Pelosi, and even promulgated ethical guidelines on foreign post-employment activities for Republican politicians. (Cheney and fellow GOPers may not have read those guidelines, though, since the link to them seems to be dead.)

Look, it could be nothing. Richard Cheney, whether he's a nice guy or not, whether he's right or not, is entitled to his travels and meetings. And he's probably got a lot more friends in that desert-straddling medieval-style theocracy than he does in these United States. The least he could do is keep his countrymen in the loop. But hey, why start now?

Tuesday's Primary Elections

| Tue May. 4, 2010 9:00 AM PDT

It's been a crazy news week. Between the BP oil spill in the Gulf and the attempted terrorist attack in New York City, it's been easy to forget about the crucial primary elections happening today in Ohio, Indiana, and North Carolina.

In Ohio, Secretary of State Jennifer Brunner and Lt. Governor Lee Fisher are pushing through the final hours of a bruising Senate primary. Fisher is ahead in the polls, boosted by a big ad blitz and the support of Gov. Ted Strickland, but Brunner is the favorite of party liberals. The winner will take on Rob Portman, George W. Bush's budget director, who's sitting on a $7.6 million war chest.

In Indiana, former Senator and longtime Washington lobbyist Dan Coats is the favorite to win the GOP nomination to run for the Senate seat being vacated by retiring Dem Evan Bayh. But Coats' DC ties make him damaged goods, and some Republicans worry that a narrow win in the primary could damage their candidate.

Elsewhere in the Hoosier state, Rep. Dan Burton faces a titanic struggle in the Republican primary for the seat he's held for nearly three decades. He won his 2008 primary by just seven points and faces four challengers this year. Most observers think Burton's only hope is if the other candidates split the vote against him, allowing him to squeak through with mere plurality support. Rep. Mark Souder, another Republican, also faces a tough primary. And former Rep. Mike Sodrel, who beat incumbent Dem Baron Hill on his second try in 2004 before Hill took the seat back in 2006 (and won again in '08), is trying to win the GOP nod for a very unusual fifth shot at Hill.

Meanwhile, in North Carolina, three Dems are battling for the right to run against incumbent Sen. Richard Burr. Secretary of State Elaine Marshall and state Sen. Cal Cunningham are the two candidates most likely to garner more than 40 percent of the vote. If one of them can pass that barrier, he or she won't have to deal with a contentious—and expensive—runoff in June. Marshall is the favorite of liberals, but Cunningham has the most support from the DC establishment. Whoever wins will have a decent shot at Burr. North Carolinians don't much like incumbent senators—no one has been re-elected to the seat currently held by Burr since Democrat Sam Ervin won his last race in 1968.

Can Marshall in North Carolina or Brunner in Ohio win one for liberals? Will Coats win easily in Indiana? The results tonight will help us get a better picture of what November's most hard-fought races are going to look like.