Federal Reserve made up their own rules at peak of crisis

Friends protecting friends. In theory, the new Dodd-Frank law should make this impossible in the future but the Fed seems to think they are above the law.

And nearly three years after the loans were made, the Fed still hasn’t provided a satisfying answer for why it made loans to the London-based broker-dealer subsidiaries of Merrill Lynch, Goldman Sachs, Morgan Stanley, and Citigroup, as well as the U.S. broker-dealer subsidiaries of Merrill Lynch, Goldman Sachs, and Morgan Stanley, according to the Government Accounting Office’s newly released audit of the Federal Reserve’s financial crisis activities.

In September and November of 2008, the Federal Reserve extended credit to the affiliates of these Wall Street firms under terms very similar to those it was making under the Primary Dealer Credit Facility. But because these affiliates were not actually primary dealers, loans under that facility were not officially available.

But the Fed made the loans anyway, citing its powers under Section 13(3) of the Federal Reserve Act to extend loans in “exigent circumstances.” But it never explained exactly why it decided these loans qualified under this provision.

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On the Dem side, is it really down to phantom revenue vs. token revenue?

Update: Post-press conferences, this still seems right. In fact, it's likely the key sticking point. [GP]
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John wrote about this Washington Post article to point out what's apparently going on in Republican-land. I'd like to look at the Democratic side, as discussed in the same piece.

Keep in mind there are four discussions — revenue increases or not; safety net cuts or not; massive spending cuts or really massive spending cuts; McConnell's complex clean bill offer.

This is about the revenue discussion only, and only on the Dem side. If the Tea Party caves to a Dem "best offer" — if they find a point where there's no more juice in the orange and take what they have — what are the choices on the Dem side? What does that offer look like?

Here's the Wash Post on the Democratic side of the discussion (my emphasis):

President Obama and House Speaker John A. Boehner rushed Thursday to strike agreement on a far-reaching plan to reduce the national debt but faced a revolt from Democrats furious that the accord appeared to include no immediate provision to raise taxes.

With 12 days left until the Treasury begins to run short of cash, Obama and Boehner (R-Ohio) were still pursuing the most ambitious plan to restrain the national debt in at least 20 years. Talks focused on sharp cuts in agency spending and politically painful changes to cherished health and retirement programs aimed at saving roughly $3 trillion over the next decade.

More savings would be generated through an overhaul of the tax code that would lower personal and corporate income tax rates while eliminating or reducing an array of popular tax breaks, such as the deduction for home mortgage interest. But the talks envisioned no specific tax increases as part of legislation to lift the debt limit, and the tax rewrite would be postponed until next year. ... When “we heard these reports of these mega-trillion-dollar cuts with no revenues, it was like Mount Vesuvius. . . . Many of us were volcanic,” said Sen. Barbara A. Mikulski (D-Md.). ... After a lunchtime meeting between Lew and Senate Democrats, Majority Leader Harry M. Reid (D-Nev.) made no attempt to hide his anger, telling reporters that his caucus would oppose the “potential agreement” because it appeared to include no clear guarantee of increased revenue.

Reid goes on to discuss the president's need for "balance" — "this can't be all cuts" he is quoted as saying.

Given that the "balance" Obama offered earlier was heavily tilted toward spending cuts (80%–20% is not my idea of "balance"), and given that this was Obama's pre-shrunk starting position (with room on the downside to negotiate to) — I wonder if a 95%–5% split would make the angered Reid and the "volcanic" Mikulski feel calmer or more dormant. How about 96%–4%? Or 99%–1%?

Clearly, any revenue increase in that range has to be called "token." Would the Tea Party accept that? Dunno.

The other alternative is no revenue increase whatsoever, which Nancy Pelosi is talking about as we speak, so to speak (h/t Digby). And the way that's being talked about is as a "later date" discussion about revenue. In other words, a phantom revenue increase, a shimmering ghost of one, perfect for those ready to pretend to believe.

So what will it be? Phantom revenue or token revenue? It's amazing how small this discussion has been reduced to, and how little Team Legacy is going to get in exchange for those recovery-killing (and election-killing) spending cuts.

No drama? It's been nothing but.

GP Read the rest of this post...

The debt talks meltdown

1. Obama is being played.  Boehner knows that the President is incapable of walking away from a deal, any deal.  It was inevitable that Boehner would play the President at the last minute, hoping the President will give in like he always does when confronted by anyone.  That's what's happening now.

2. Boehner is trying to look "strong" for the Teabagger wing of his own party.

3. The President did a decent job in his press conference of faulting the Republicans for the breakdown in talks.

4. The President also did his usual job of blaming the Democratic base for all of his woes, and worse, equating Social Security and Medicare advocates with Teabaggers.  Be sure to remember the President's latest personal attack on his base when "Obama for America" calls asking for money.

5. In contrast to the ease with which the President slammed his base today, he just couldn't bring himself to blame the Republicans for the deficit and the national debt. He continually talks about both sides being to blame. He's wrong. Look at this chart, based on CBO data, detailing where the deficit and the national debt came from - via the NYT :

Click image to see larger version

6. Look at how far the President caved so far.

- Agreed to make the debt ceiling about deficit reduction.
- Agreed to put Social Security and Medicare on the table.
- Agreed to cut more from programs than would be raised from taxes.
- Agreed to cut more than even the Gang of Six wanted.
- And we hear that the latest deals being discussed would have been exclusively spending cuts, with no tax increases at all.

7. What have the Republicans caved on so far?  Nothing.  A few members of Congress have agreed to some "revenue enhancements," but not the leadership.

8. Even Nancy Pelosi caved today, agreeing to spending cuts without new taxes.  She argued that she was at least able to save entitlements.  That's a bit like handing the bully half of your lunch money and claiming victory because he didn't get the rest of it.

When it comes down to it, this is a negotiation between a hardline Republican and a man who desperately doesn't want to be seen as a Democrat.  With that in mind, it's no wonder that the deal - like pretty much every deal of late - keeps veering more and more to the right.  The President and his advisers seem convinced that Independents are 51% of the electorate.  Good luck with that. Read the rest of this post...

Obama press conference after Boehner withdrew from debt talks

Visit msnbc.com for breaking news, world news, and news about the economy

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Wall Street contributing millions to Obama 2012 campaign

As easy as he's been with them, they ought to be giving him a lot more than this. Anyone with an ounce of respect for the public would have bothered to hold them accountable for their mess. CNBC:

In fact, the Center found that one-third of the money Obama's elite fund-raising corps has raised on behalf of his re-election has come from the financial sector.

"Individuals who work in the finance, insurance and real estate sector are responsible for raising at least $11.3 million for Obama's campaign and the Democratic National Committee," the Center reported.

All of Obama's bundlers have raised a minimum of $34.95 million.

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Walking the streets of western Afghanistan

Each morning on our way to work we greet the green-clad guards at the gate with a hearty Salaam as we put our hands on our hearts, just as they do. We head down Herat's main road in the direction of the Hospital, where already vehicles and people are flooding in and out the front entrance. This is the third largest city in Afghanistan, fewer cars and chaos than in Kabul, less violence over the past few years as well.

So we wander down the street enjoying the sounds of a busy morning, along the way we encounter the usual amount of people selling cold drinks, perfume, and random trinkets that no one ever seems to buy. Every now and then there is the familiar site of a dusty figure slumped over in deep sleep on the sidewalk. Up ahead taxi drivers have parked their cars outside the hospital and are taking advantage of the downtime, and the cooler morning temperature, to hand-wash their cars. They hardly notice the two tall bearded western men with their clean shaven western clad Afghan interpreter as we stroll by without saying a word.

The few blocks remaining til the office go on as usual with children zipping past us on rickety Chinese bikes. We pass the Saffron shop which features a sign in English and Dari reading "Fine, Pure, Afghan Saffron." A little boy and a little girl stand outside the door of their home wearing little school bookbags over crisp green school shirts. They stop everything to stare at us, like most children do.

This city known as a famous stop along the ancient Silk Route doesn't make the international headlines very often. Herat is overshadowed by the regular reports out of violence prone Kandahar and even Kabul these days. Stories of people going to the hospital, school or work, don't qualify as interesting or newsworthy. Yet all I see every day are interesting people and stories the world doesn't know and has decided are not possible here.

Just when I thought I understood this place, I'm surprised as we return home from work by a battalion of the Afghan National Army in 6 or 7 light armored vehicles outside the hotel. Inside there are soldiers, Afghan and even a few Americans, wandering the halls. Outside my window and at various points throughout the hotel, Afghan military stand (or sit) guard. My calm and lovely day in this charming city has been interrupted by the arrival of VIP's from government and military for the "handing over of security" ceremony which is about to take place for Herat. After a string of attacks over the past week, some of which are the Taliban's response to these hand-over events, the authorities are obviously determined to keep anything from penetrating the walls of this building, which is the building I - a non VIP - happen to be staying in.

In a month that has seen powerful political leaders attacked and killed, sometimes even by their own bodyguards, I hardly feel safe as I sit at dinner with fat 4 star generals and heavily armed Afghan military police sitting at the table next to me.

By morning the next day they're just about gone. A few soldiers remain in their vehicles looking us over as we walk out the front door and start our morning walk to work. (Perhaps they're surprised Westerners walk the streets, as so many are not allowed by their employers' security restrictions.) By the end of the work day all the military vehicles are gone. In their place, the cart venders have returned with their papaya-looking-fruit and watermelons. The hotel has regained its calm and welcoming atmosphere and we even take an evening stroll to celebrate. As we pass one of the many pharmacies along the road some kids take notice of us, as always. One smiles at us and shouts a quick "Hello Sir!"

Security experts and Afghanistan veterans will surely point out the danger that lies beneath the calm anywhere in this country. They would remind me and insist that just when things look good, they can and will get bad. One side effect is that we are told to only expect the worst and we behave accordingly. Me, whenever possible, I want to keep walking the streets and seeing the beauty. If some of us don't, how will we ever know the other truth about this amazing country?

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Murdoch paper uses Somalia famine as tool to deflect attention from Murdoch/News Corp

I'm so glad the Murdoch press has found the Somali famine useful. Read the rest of this post...

Justice to subpoena News Corp

Via ThinkProgress:

The Department of Justice (DoJ) is preparing subpoenas as part of an initial investigation into whether News Corp violated the Foreign Corrupts Practices Act (FCPA) when its British subsidiary allegedly bribed police officers in the U.K.:

The issuance of subpoenas would represent an escalation of scrutiny on the New York-based media company. While the company has sought to isolate the legal problems in the U.K., it has been bracing for increased scrutiny from both the Justice Department and the Securities and Exchange Commission, according to people familiar with the company’s strategy.

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Massive car bomb blows up in Norway

It took place near the Prime Minister's office. The images are Beirut/Oklahama City esque. Read the rest of this post...

Emerging budget deal to right of "gang of six," Boehner proposes repealing HCR too

Adding health care reform repeal to the budget talks? No one could have predicted that one. To think that the Republicans might try to take and take and take, and then take some more. But poor John Boehner has to deal with the Teabagger wing of his party, so let's make sure we give him something to save face. Because, as HuffPost Hill pointed out last night, he really hasn't gotten anything out of this deal.

More from the Washington Post:

Congressional and administration officials said the White House informed Democratic leaders about the talks after Obama met privately with Boehner and House Majority Leader Eric Cantor (R-Va.) late Wednesday. Congressional aides, speaking on the condition of anonymity to detail private discussions, said the White House acknowledged that the emerging agreement is “to the right of the Gang of Six” — a bipartisan Senate debt-reduction framework unveiled this week — and far removed from what Democrats have said would be acceptable.

The White House is seeking a trigger that would allow the Bush-era tax cuts to expire for the nation’s wealthiest households. Boehner has proposed repealing provisions of Obama’s health care law, including the requirement that all individuals purchase health insurance after 2014.

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Scandal deepens: Ex-Murdoch employees dispute testimony of James Murdoch

After Rupert and James Murdoch testified about the News Corp. hacking scandal, I wrote, "I suspect many people are scrutinizing the testimony of Rupert and James to see if what they said actually rings true." That's what happened. And, it seems some of James' testimony wasn't exactly truthful. He's being called out on his lies by former employees. Even the Prime Minister, a close ally of the Murdochs, weighed in. From the NYT:

Testimony by James Murdoch to a parliamentary committee investigating the phone hacking scandal came under renewed scrutiny on Friday with Prime Minister David Cameron saying Mr. Murdoch still had “questions to answer” and a lawmaker calling for the police to open a new inquiry.

The pressure on Mr. Murdoch built a day after two former executives of News International — the British susidiary of News Corporation — publicly contradicted evidence he gave to a parliamentary panel seeking to unravel the tangled story of phone hacking at the now defunct Murdoch tabloid, The News of the World.

“Clearly James Murdoch has got questions to answer in Parliament and I’m sure he will do that,” Mr. Cameron said during a visit to an auto plant in the British Midlands. “And clearly News International has got some big issues to deal with and a mess to clear up. That has to be done by the management of that company. In the end the management of the company must be an issue for the shareholders of that company, but the government wants to see this sorted out.”

The two executives said on Thursday that they told Mr. Murdoch in 2008 of evidence suggesting that phone hacking at one of the company’s tabloid newspapers was more widespread. The former executives said they informed Mr. Murdoch at the time that he was authorizing an unusually large secret settlement of a lawsuit brought by a hacking victim.

For up-to-the minute info. on the Murdoch scandal, check out the Guardian's live coverage. This scandal isn't going away any time soon. Read the rest of this post...

Defense Secretary, Joint Chiefs will certify DADT repeal today

A critical step will be achieved today when Secretary of Defense Leon Panetta and the Joint Chiefs certify DADT repeal. Stars and Stripes:

The Department of Defense will certify Friday that the military is ready for the repeal of the controversial "don't ask, don't tell" law, setting the stage for openly gay troops to begin serving in the military in late September, U.S. officials confirmed.

The certification comes after months of training for military personnel to prepare them for the presence of openly gay uniformed colleagues for the first time in history, and starts the 60-day waiting period before the law is completely removed.

Under rules outlined by Congress in December, the president, defense secretary and chairman of the Joint Chiefs of Staff were required to certify that the services are ready for the dramatic personnel change before the law could be repealed.

The President has to certify the repeal, then send it Congress. From that point, there's another 60-day wait until DADT is officially over. Certification and the 60-day wait were compromises added to the DADT repeal legislation last May.

Ending DADT is now viewed as one of the top achievements of the Obama administration. The President mentions it at almost every Democratic fundraising event. But, as we watch the President capitulate on Social Security and Medicare, it's important to remember that passing DADT repeal in 2010 was never the plan of the Obama administration. That was forced on them by members of Congress, SLDN, SU, GetEQUAL, LGBT bloggers and committed "direct action" activists. The usual suspects in DC (HRC and other insiders like CAP's Winnie Stachelberg) were willing to go along with whatever Jim Messina told them. It was a struggle and a lot of folks bear scars. (Check out John's post, Understanding LGBT disappointment with Obama.)

It's key to remember that back in February of 2010, Robert Gates announced that he was conducting a DADT study, due on December 1, 2010 -- and he wanted no legislation til the study was completed. He wasn't thinking lame duck. He meant 2011. Imagine where we'd be in this Congress with DADT repeal if the White House plan prevailed.

My point isn't to denigrate what's happening today. It's great. But, there's an important back story. Progressives should heed the lessons of DADT repeal.

The White House geniuses, led by Messina and Rahm, thought taking up gay issues was politically dangerous. They were wrong about that -- and wrong about so much more. That's continuing with the new crew in charge of the White House. They are damaging relations with the rest of the Democratic base. Read the rest of this post...

Obama’s Chief of Staff Bill Daley "behind the White House’s capitulation"

Politico's David Rogers and Carrie Budoff Brown report on the $3 trillion deal under discussion between Obama and Boehner. And, despite denials, it appears that Obama and Boehner are negotiating and the number is $3 trillion, mostly in spending cuts. Towards the end of the article is this nugget:

At the same time, the White House’s tactics in this situation most infuriate Senate Democrats, who complain that the president’s chief of staff, Bill Daley, is too quick to make concessions to Boehner, even at the party’s expense.

Yes, they are quick to make concessions at the White House. Like everyone, I've been trying to figure out what's really going on. One trusted source told me that one problem is definitely Daley:

Bill Daley is behind the White House's capitulation. He's the Democrat's Neville Chamberlain. It's dominoes of caving -- one cave leads to another. They are so desperate for a deal that they'll take anything at any price. They won't fight for anything.

Now, of course, Daley works for Obama. He hired Daley, who used to be on the Board of Third Way, the group always willing to sell out on Democratic principle. And, that's what Daley is doing on Obama's behalf.

It sounds like Obama's Budget Director, Jacob Lew, got the crap kicked out of him at a meeting with Democratic Senators yesterday. They're furious about the deal-making between Obama and Boehner:

Democrats were outraged about reports that Obama was willing to accept major spending cuts in exchange for reforming the tax code at some point in the future as part of a deal to raise the $14.3 trillion debt ceiling.

Reid and other Democrats warned the administration officials in the meeting that they might not support a deal between Obama and Boehner if kept out of the loop.

“It was a heated session,” said a senior Democratic senator who attended the lunch. “There’s a basic lack of trust with the president.”

There is growing lack of trust between the President and his base. I realize people aren't surprised anymore that Obama is caving. It's not actually caving if this is what Obama really believes. Medicare and Social Security are on the table, thanks to Obama. Those items are there because the President wants them there. It's who he is. And, Daley is a problem, but he's doing what Obama wants him to do. Read the rest of this post...