In it, but not of it. TPM DC

Sen. John McCain (R-AZ) was in fine flip-flopping form during a speech today at the Heritage Foundation, as the Washington Independent reports.

"The problem started when we bailed out AIG," McCain told the conservative crowd at Heritage. "I would have let AIG go bankrupt. If they have to fail, they fail."

It's been well-noted in the blogosphere that McCain originally supported bailing out AIG in September, when his presidential run was in its, er, last throes. But what's most interesting, per the Independent, is that McCain came out against "controlling the salaries and bonuses of TARP-taking executives."

But I thought McCain wanted to let AIG fail exactly because that would deny bonuses to "greedy execs"! He told us so on his Twitter feed!* Sounds like it's time for some Straight Talk TM on AIG executives: Do we let the company fail to deny them bonuses, or let the company fail and make no attempt to prevent them from grabbing bonuses on their way out?

*This is the first and last time Twitter will appear in any of my posts.

This might not look too good for Jim Tedisco, the Republican candidate for Kirsten Gillibrand's old House seat in the special election this Tuesday.

A few days ago, the DCCC launched an attack ad against Tedisco for having written a letter to a judge in 2003, requesting leniency for a mortgage executive who pled guilty in a corporate corruption case.

The Albany Times Union reported at the time (via Nexis) that there were two notable people who wrote letters -- Tedisco, and a major state lobbyist named James Featherstonhaugh. Today's FEC filings show that Tedisco has just received yesterday a maximum donation of $2,400 from...James Featherstonhaugh.

Keep in mind that Tedisco and the GOP have been attacking Democratic candidate Scott Murphy, a businessman, as being one of a kind with the corrupt Wall Street leaders who gave us the AIG bonuses. So taking a maxed-out donation from a lobbyist who asked for leniency in a corporate crime case -- which Tedisco also asked for -- does kind of undercut the message.

The Tedisco campaign has not responded to a request for comment.

There were few details in today's outline of the House Republican budget alternative -- but on the thorny question of future bank bailouts, the GOP had a clear plan. And it looks a lot like Paul Krugman's preferred method.

TPMDC noted the first stirrings of the GOP's Krugman love earlier this week, when House Minority Whip Eric Cantor (R-VA) joined the liberal economist in lamenting the taxpayer subsidy built into the Obama Treasury's latest bank rescue plan. But today's Republican budget alternative goes even further, directly repeating Krugman's past criticism of the Treasury's bailout ethose:

In sum, the message with bailouts of this magnitude is that your profits will be private but your losses socialized.


Now, House Republicans go on to extrapolate a future of socialized losses as well as profits -- a prediction one suspects Krugman would reject. And then they go right back to Krugman-ville with this proposal:

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Stung by their stereotyping as the "party of no," House Republicans eagerly promoted the unveiling of their alternative to President Obama's budget today -- but when they finished speaking, reporters had one big question: Where's the actual budget? You know, the numbers that show deficit projections and discretionary spending?

There certainly was no hard budgetary data in the attractively designed 18-page packet that the House GOP handed out today, its blue cover emblazoned with an ambitious title: "The Republican Road to Recovery." When Minority Leader John Boehner (R-OH) was asked what his goal for deficit reduction would be -- President Obama aims to halve the nation's spending imbalance within five years -- Boehner responded simply: "To do better [than Obama]."

When pressed further by reporters, Boehner promised that Republicans would release their actual budget within the next few days and pointed a finger back at the president.

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Michele Bachmann's office is now clarifying her proposed legislation to require that the dollar remain the currency of this country, rather than switching to some kind of global money.

This comes after Bachmann questioned Tim Geithner over China's proposal to adopt a global currency -- more accurately, an exchange unit made up of a basket of individual countries' currencies -- rather than relying on the dollar as a reserve currency. You might recall that Bachmann interpreted this to mean the United states could abandon the dollar.

So is Bachmann trying to legislate against other countries and the global economy adopting different exchange mechanisms or reserve currencies? The answer is no. "She's talking about the United States," Bachmann spokesperson Debbee Keller told Greg Sargent. "This legislation would ensure that the U.S. dollar remain the currency of the United States."

Of course, nobody was even remotely pitching the idea of replacing the U.S. dollar here in the United States.

Now this is odd. After Quinnipiac came out with a poll showing Sen. Arlen Specter (R-PA) losing his 2010 primary to likely challenger Pat Toomey, now Franklin & Marshall College has a survey showing...Specter ahead?

The numbers: Specter 33%, Toomey 18%, plus Peg Luksik, a right-wing activist who has already declared her candidacy, at two percent. By contrast, Quinnipiac had Toomey up 41%-27%.

One possible cause of the difference could be that Quinnipiac didn't include Luksik, so the addition of a third candidate's name could cause anti-Specter voters to shift to the undecided column -- and it's not a great sign that an incumbent is stuck in the 30s in a good poll. Either that, or one or both of these polls are just totally wrong.

Meanwhile, the Pittsburgh Post-Gazette reports that Specter is sounding out GOP state Senators back home, about the idea of the state switching from a closed-primary system to an open primary that allows independents in. This would greatly benefit Specter by creating a Republican primary electorate that goes beyond just the conservative base. And a bunch of legislators are strenuously opposed to it.

The very tight special election for Kirsten Gillibrand's former House seat ran into another wrinkle yesterday, with Libertarian candidate Eric Sundwall getting kicked off the ballot with only days to spare, after the State Elections Board ruled that he didn't have enough valid petition signatures under the law's strict requirements.

The complaint was brought by two voters who were registered with New York's Republican and Conservative parties.* As such, some Democrats believe this was really engineered by the GOP side. As one Dem source told us: "The only reason the Republicans fought to keep Eric Sundwall off the ballot is because they knew he was stealing from their flawed candidate's fading support."

Adam Kramer, the spokesman for Republican candidate Jim Tedisco, denied that their campaign had any involvement. "Jim welcomed Mr. Sundwall to the race," said Kramer. "Our campaign was not involved in the complaint against Mr. Sundwall's petitions."

One Republican source told TPM that the board's decision was probably helpful to their side, but on the other hand there are people who would have voted for a third-party candidate because they didn't like either of the major two.

(*Note: New York uses a fusion voting system, leading to the proliferation of smaller parties who supplement and often work within the big two.)

Earlier in the hearing (i.e. before the Bachus query), Geithner had an interesting exchange with Rep. Keith Ellison (D-MN) about what regulatory requirements the Geithner plan would impose on Hedge funds.



Ellison: Could you discuss in greater detail how a capital adequacy regime would work for [hedge funds]?

Geithner: We did not propose to establish capital requirements for hedge funds. What we are saying, though, is that the large institutions, principally the banks and the major large complex regulated financial institutions, are held to a set of requirements on capital, liquidity, reserves, risk management, that are commensurate with the risk they pose. And because their risks are greater and because the consequences of their failure is greater they need to be subject to a higher set of standards and greater constraints on leverage. But we're not proposing to establish cap requirements for the broad universe of hedge funds and private pools of capital that exist in our markets. We want them to register with the SEC if they reach a certain scale and in the future if some of them individually reach a size where they may be systemic, then at that point we believe they should be brought within a regulatory framework that's similar to that which exists for banks.


There were obviously a lot of reasons Bernie Madoff got away with his Ponzi scheme for as long as he did. But it's probably fair to say that if he'd been held to hard capital requirements he'd have had a harder time getting his scheme off the ground, or his jig would likely have been up much more quickly.

Video shortly.

Rep. Spencer Bachus (R-AL) just raised a new objection to the AIG counterparty payments--specifically that while AIG used government money to pay off their CDS obligations dollar-for-dollar to major (sometimes foreign) financial institutions, it repaid smaller U.S. institutions that made secured loans to AIG subsidiaries at a rate of only about 20 to 30 cents on the dollar.

Video forthcoming, but Geithner had no immediate answer to the query, which, to amateur ears anyhow, sounds like an interesting one. We'll follow up.

Late Update:

Treasury Secretary Timothy Geithner is back before the House Financial Services committee today to argue the case for greater federal regulatory power over non-bank financial institutions. In many members' minds, though, he's still on the line for the AIG bonus flap and for allowing bad financial actors to take too big a role in shaping bailout policy.

The outline of the Treasury's new regulatory reform framework is here. We'll keep a close eye on his testimony.

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