Mojo - July 2010

So Did Congress Actually Reform Wall Street?

| Thu Jul. 15, 2010 3:23 PM PDT

On Thursday afternoon, the Senate passed the sprawling Dodd-Frank financial reform bill, the culmination of more than year of hearings, debates, negotiations, backroom deals, bickering, and an onslaught of lobbying by everyone from consumer advocates to the world's biggest banks. But despite the bill's 2,300-page length, Dodd-Frank leaves huge questions unanswered in the future of financial markets in the US. Here are five of the biggest unknowns in the bill, which now heads to President Obama's desk for signing next week.

1) Who Will Lead The CFPB?

The Dodd-Frank bill will create a new Consumer Financial Protection Bureau, housed in the Federal Reserve, solely devoted to combating consumer abuses in the marketplace. Think predatory mortgage lending, payday lenders, check cashers, and so on. (But not auto dealers.) The independent bureau will have a budget of around $450 million to $500 million, and more importantly, will be led by a presidential-appointee confirmed by the Senate. The first leader of the CFPB is crucial: It's could mean the difference between a tough, successful agency and a dud.

The creation of the Securities and Exchange Commission, in the 1930s, offers a telling example. President Franklin D. Roosevelt chose Joseph Kennedy as the SEC's first chairman, and while the two men weren't exactly friends, FDR couldn't have made a better choice. Kennedy quickly established the SEC as a regulatory force to be reckoned with, and set up the SEC for decades of success. (At least until that Madoff guy came along...)

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Congress' Mystery Finance Bill Probe

| Thu Jul. 15, 2010 8:37 AM PDT

[Update: Mother Jones reached out to Julie Domenick, the lobbyist mentioned in the New York Times' story today, who says the circumstances surrounding the event for Rep. Joe Crowley were much different from how the Times reported them. Her response is below.]

Eight members of Congress, Democrats and Republicans both, are under investigation for—get this—taking special interest money at the same time they write and pass major legislation. Which is to say, business as usual. The investigation, which the New York Times reports on today, is something of a head-scratcher.

On the one hand, there's no denying the huge conflict of interest when lawmakers take money from, say, auto dealers while writing a bill that may or may not impose new oversight on those same dealers. (As you might've heard, the dealers got what they wanted.) But, sad to say, that's how Washington operates. The only way House or Senate members can really get in trouble is if there's a clear quid pro quo. But here's the catch: proving that campaign funds (or some type of perk) directly resulted in some (in)action by a lawmaker is very hard to prove. 

Nonetheless, the Office of Congressional Ethics is investigating Democratic and Republican congressmen for receiving big-time financial sector money and attending industry-tied fund-raisers within 10 days of the House's December 11, 2009, passage of its version of financial reform. According to the Times' story, the eight members under investigation collectively hauled in $140,000, and seven of them held fundraisers during that period, too:

For example, on Dec. 10, one of the lawmakers under investigation, Representative Joseph Crowley, a New York Democrat who sits on the Ways and Means Committee, left the Capitol during the House debate to attend a fund-raising event for him hosted by a lobbyist at her nearby Capitol Hill town house that featured financial firms, along with other donors. After collecting thousands of dollars in checks, Mr. Crowley returned to the floor of the House just in time to vote against a series of amendments that would have imposed tougher restrictions on Wall Street.

That same day, Representative Tom Price, a Georgia Republican on the Financial Services Committee, scheduled what he called a “Financial Services Luncheon” at the Capitol Hill Club, as part of a fund-raising push that netted him nearly $23,000 in contributions from the industry in a two-month period around the vote.

In an area where the rules are murky, the investigators are taking an aggressive stance on what constitutes unethical conduct. The independent ethics office, led by a former federal prosecutor, has clashed repeatedly with lawmakers on the House Committee on Standards of Official Conduct, who have accused it of over-reaching. Given this history, observers believe it is unlikely that the committee will admonish any members, even if the investigators recommend action.

From all the press reports I've read, I'd have to agree. It's deeply troubling to see members of Congress ducking out of floor debates to attend fundraisers with lobbyists representing the very industry they're talking about regulating—but is there clear quid pro quo there? Is there hard proof that Crowley's fundraiser on December 10 resulted in his votes against new amendments that would've cracked down on Wall Street? Not on the face of it. (In a statement, a Crowley spokesman told the Times, "Congressman Crowley has always complied with the letter and spirit of all rules regarding fund-raising and standards of conduct.")

The Times article also mentions that ethics investigators have requested "all files, correspondence, e-mails, receipts, notes, and any other documents" on the fundraiser for Rep. Crowley from the lobbyist who hosted the event, Julie Domenick. If there's a smoking gun to be found, that's likely where investigators will find it. And maybe investigators do have an ace up their sleeve here, a damning email or letter that links money to votes that clinches the investigation.*

If they don't, though, it's hard to see how this probe will result in anything other than some embarrassing press clippings for the eight lawmakers under investigation.

* Mother Jones spoke with Domenick today, who said the Times' depiction of the event for Crowley was inaccurate and unfair. According to Domenick, whose clarifications were also reported today by the Center for Public Integrity, the Crowley fundraiser was scheduled for December 10 more than a month beforehand, in a set of emails in early November. As such, Domenick says, it was impossible for the event to be connected to the House's financial reform vote because no one knew a month in advance when the vote would occur, and she told CPI the event "had nothing to do with what was going on the House floor."

Here are the lawmakers in potential hot water:

Rep. Jeb Hensarling (R-Tex.)

Rep. Joseph Crowley (D-NY)

Rep. John Campbell (R-Calif.)

Rep. Christopher Lee (R-Calif.)

Rep. Earl Pomeroy (D-ND)

Rep. Mel Watt (D-NC)

Rep. Tom Price (R-Ga.)

Rep. Frank Lucas (R-Okla.)

Wall Street's Undercover College Scandal

| Thu Jul. 15, 2010 6:41 AM PDT

Critics of the for-profit higher education industry may stand to gain financially from mouthing off about its colleges and universities, many of which substitute a mission to educate with a fixation on shareholders and profit margins.

Government watchdog Citizens for Responsibility and Ethics in Washington (CREW) wrote to Sen. Tom Harkin (D-IA) on Wednesday requesting that he investigate the ulterior financial motives of the industry’s critics. Harkin chairs the Committee on Health, Education, Labor and Pensions.

CREW Executive Director Melanie Sloan says evidence suggests that individuals who stand to gain financially are making an effort to drive down stock prices of for-profit schools.

"While the for-profit education industry certainly merits congressional scrutiny, Congress must also examine the tactics and motives of the industry's critics," Sloan says. "Americans need to have confidence that legislative and regulatory processes are not being manipulated for private financial gain."

Late last week, ProPublica reported on one of these suspect critics. Johnette McConnell Early has been trying to fuel anger over for-profit trade schools that prey on vulnerable potential students. She even penned a letter to Secretary of Education Arne Duncan co-signed by 19 executives from homeless shelters and service agencies detailing her concerns. Yet Early works for an unnamed financial firm that likely stands to profit if the for-profit higher education industry tanks on the stock market.

Early claims not to know whether her firm is betting against the industry. She did admit that "an investment firm is not going to look into something unless they’re thinking about whether it's a good or bad investment."

We're Still at War: Photo of the Day for July 15, 2010

Thu Jul. 15, 2010 6:17 AM PDT

 

US Army Sgt. Phillip Toward, Provincial Reconstruction Team Zabul security forces gunner, secures the perimeter of a village during a dismounted patrol in Zabul Province, on July 13, 2010. Photo via the US Air Force by Senior Airman Nathanael Callon.

Clarence Thomas "Outraged" by Treatment of His Nephew

| Wed Jul. 14, 2010 2:13 PM PDT

Supreme Court Justice Clarence Thomas was reportedly "completely shocked and outraged" when he learned that his nephew, who suffers from epilepsy and was reportedly suicidal, was beaten and tased with a stun gun at a Louisiana hospital—apparently, for nothing more than some unruly behavior.

"Outraged" we can understand: What happened to 24-year-old Derek Thomas does qualify as outrageous. According to an account on Raw Story:

Derek Thomas was admitted to West Jefferson Hospital in Jefferson Parish, Louisiana, Thursday, after a possible suicide attempt, reports ABC affiliate WGNO.

When the Supreme Court justice's nephew refused to put on a hospital gown and said he wanted to leave the hospital, doctors ordered security to restrain him.

Security guards "punched him in his lip, pulled out more than a fistful of his dreadlocks and tasered him to restrain him," a statement from Thomas' family said.

Shortly afterwards, family members say, Thomas suffered a "massive epileptic seizure."

When Police Shoot And Kill Unarmed Men

| Wed Jul. 14, 2010 10:38 AM PDT

Last week, Kevin Drum wrote about Johannes Mehserle, the white former transit cop who was convicted of involuntary manslaughter for shooting and killing an unarmed black man, Oscar Grant, who was lying face down and handcuffed. Elizabeth Gettelman covered the post-verdict headlines which focused on looting committed by 49 out-of-town recreational anarchists and detracted from the cause of initially peaceful protests. Incidentally, Mehserle's five-years max sentence, with a chance of added time, is especially confusing considering that last year a California man convicted of growing marijuana was sentenced to a minimum of 10 years in federal prison. But almost more puzzling is how often unarmed men are shot by police officers in this country and the reasons given and accepted for the violence. More on that after the jump.

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The Gangsta Rap Campaign Attack

| Wed Jul. 14, 2010 9:07 AM PDT

Competing in a three-way Republican primary, Tennessee congressional hopeful George Flinn has become the subject of an unlikely campaign to portray him as a gangsta rap overlord.

The latest campaign attack in Tennessee's 8th district has assailed Flinn for owning a Memphis radio station, Hot 107.1 FM, which bills itself as broadcasting "Non-Stop Hip-Hop," Politico's Alex Isenstadt reports. Behind the offensive is the brother of Ronald Kirkland, one of Flinn's primary opponents, who's spent nearly $1 million on ad expenditures in the campaign. "A TV ad hammers Flinn for broadcasting music that 'promotes gang violence, drug abuse, and insults women,' while a companion mailer accuses him of bringing 'filthy gangster rap into our district,'" writes Isenstadt.

Commercial hip-hop has become so mainstream and anodyne that it's hard to see the attempt to paint Flinn as the next Suge Knight gaining much traction, even in a GOP Tennessee primary. In a neighboring district, in fact, another House candidate made a memorable attempt to use his hip-hop cred to his advantage. Behold Rep. Steve Cohen (D-TN), who broke it down for supporters in the majority-black 9th district:

Menendez, Schumer: Investigate BP's Lockerbie "Blood Money"

| Wed Jul. 14, 2010 8:57 AM PDT

The Democratic senators from New York and New Jersey are now calling on BP to suspend drilling operations in Libya's Gulf of Sidra until an investigation can be completed into whether the company pushed for the release of a convicted terrorist in order to seal a major oil deal.

Robert Menendez (D-NJ) decried the release last August of Lockerbie bomber Abdelbaset al-Megrahi a "moral outrage" at a press conference on Wednesday. Megrahi is the only person who has been convicted of the Pan Am Flight 103 bombing that killed 270 people in 1988. BP has admitted that it lobbied for a prisoner exchange—they have just not said which prisoners. Now Menendez and three other senators have called on the State Department and the British government to investigate precisely what role BP may have played in negotiating his release, as the company has since admitted that they pushed for a prisoner transfer to help ensure the $900 million oil deal went through. In recent weeks, one of the doctors who gave the dire prognosis for Megrahi that led to his release from a Scottish prison has come forward to say that the Libyan government paid him to make that determination. He now says Megrahi may live for another 10 years, and there are rumors that he has secured a book deal.

"If BP is found to have gained access to Libyan oil reserves by using a mass murderer as a bargaining chip, then make no mistake, any money it makes off that oil is blood money," said Menendez.

Chuck Schumer (D-NY) said: "Until this deal is properly investigated, this project off the coast of Libya should not break ground. If BP is dealing in good faith, it should cooperate with this investigation."

A top UK official has acknowledged that oil interests played "a very big part" in his release—and in securing BP's big deal. The senators argue that the Megrahi example, and the overarching issue of a private company using a business deal to sway the justice system, presents a national security concern. The case "undermines our ability to hold international terrorists accountable," said Sen. Kirsten Gillibrand (D-NY).

The State Department has yet to formally responded to the request for an investigation, and the agency has not responded to a request for comment. BP, meanwhile, is expected to start drilling in the Gulf of Sidra next month.

Chamber v. Obama: Jobs Throwdown

| Wed Jul. 14, 2010 7:42 AM PDT

On Wednesday the US Chamber of Commerce hosts its much-anticipated jobs summit here in Washington, dubbed "Let's Talk Jobs," and to keep things feisty, the Chamber's president previewed the event by ripping the Obama administration for stifling job creation and generally being anti-business. In an open letter to the White House set for release today, Chamber president and CEO Tom Donohue says the administration has "created an economic environment that is fundamentally incompatible with our desire to expand investment and create jobs." The letter, excerpted by Politico, goes on to say, "Uncertainty is the enemy of growth, investment, and job creation. Through their legislative and regulatory proposals—some passed, some pending, and others simply talked about—Congress and the administration have created an economic environment that is fundamentally incompatible with our desire to expand investment and create jobs."

At the same time, Stan Anderson, who leads the Chamber's Campaign for Free Enterprise, told the Wall Street Journal that "We are not going to engage in a debate over whether the White House is pro- or anti-business. We really want to talk about policy." From the looks of it, however, there's no debate needed—huge swaths of the business community, fairly or not, already believe the White House is anti-business.

The administration, predictably, responded today by releasing a report laying out the number of jobs saved or created through the White House's efforts to jump-start the economy, like the hundreds of billions of dollars in stimulus funds. By the end of June, the report says, the stimulus had boosted employment by 2.5 million to 3.6 million jobs and raised the nation's GDP by about 3 percent. Christina Romer, one of the president's top economic advisers, will also hold a conference call at noon hammering away at the White House's job creation efforts and pushing back against the Chamber and Donohue.

The Chamber's event today certainly won't sing the praises of the stimulus. Its roster of speakers includes fiscal conservatives like Sen. Judd Gregg (R-RI), Rep. Paul Ryan (R-Wisc.), and Erskine Bowles, who co-chairs Obama's National Commission on Fiscal Responsibility and Reform. The solutions tossed out will probably be revolve in some way around tax cuts—in other words, liberal economist Paul Krugman's worst nightmare. But at a time when there's a 9.5 percent unemployment rate, there are nearly six jobless workers for every one available job, and nearly half of all unemployed have been out of work for six months or more, any discussion of how to get the American job machine chugging again is worth having.

Bill O'Reilly vs.... John Sifton

| Wed Jul. 14, 2010 7:32 AM PDT

Last month, Daniel Schulman and I revealed that John Sifton and his private investigation firm, One World Research, were hired by the ACLU to obtain photographs of CIA interrogators for Guantanamo lawyers defending high-value terrorist suspects. Someone at Bill O'Reilly's show, "The O'Reilly Factor," evidently read the piece, because the Fox News Channel show sent a producer to Sifton's house last week to ask questions about his work in an ambush-style interview:

Beyond O'Reilly's aggressive tactics, two things stick out about this segment. First, it was great to see O'Reilly refer to our scoop—but rather aggravating that he didn't credit us with the story. Also, O'Reilly refers to what Sifton did as an "illegal operation." That's far from clear. While the Justice Department is investigating Gitmo defense lawyers for showing the photos Sifton took to detainees, there's no indication—so far—that Sifton himself is being investigated. And even if Sifton was under investigation, that wouldn't be proof that what he did was "illegal." Taking photographs of people in public places isn't, generally, against the law—even if you know that they're CIA officers. Nor is it necessarily illegal to research the identities of CIA officers. Anyway, you can read more about the operation here, and judge for yourself.