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Washington has a way of blurring the human impact of a major policy debate -- such as the one going on right now over the stimulus -- by using vague and dense terminology to describe certain programs. Take, for instance, this talk of "state stabilization funds" that were cut back by $40 billion this weekend in the deal cut by Senate centrists.

The term sounds bone-dry, but the stabilization funds are a crucial bulwark against budget deficits that are already forcing layoffs, cutbacks, and higher taxes and fees in 39 states, 21 of which have at least one GOP senator. You heard right: Senate Republicans are insisting on cutting federal aid to their own states in the name of fiscal responsibility -- while some of these state governments are actually pulling back on tax breaks in response.

"If you take a combination of the [budget] gaps for the rest of the current fiscal year, the gaps for the next fiscal year, and the gaps for 2011, [when] unemployment is still going to be high ... we estimate that the [total state budget] gap is $350 billion to $370 billion," Nick Johnson, director of the state fiscal project at the Center on Budget and Policy Priorities (CBPP), told me.

Compare that two-year deficit to the $79 billion in state stabilization funding that was included in both the House and Senate's original stimulus bills; then consider that the Senate's compromise left states with only $39 billion to close their budget gaps. Better yet, consider the plights of Maine and Arizona ...

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The White House has just announced that President Obama will be campaigning for the stimulus plan tomorrow in Fort Myers, Florida -- where he'll be introduced by Republican Governor Charlie Crist.

It's odd to think that Crist -- who hit the campaign trail in a big way for John McCain last year, and has been courted to run for the open Senate seat -- has now broken ranks in such a conspicuous manner as to publicly appear with Obama.

It's not just that, but his official statement praises Obama in language that one would normally use for a political ally: "I am eager to welcome President Obama to the Sunshine State as he continues to work hard to reignite the US economy."

So what to make of the allegation against newly elected GOP chairman Michael Steele, that his 2006 Senate campaign made payments to a company run by his sister, for work that was never performed?

It's not yet clear. The claim comes from a court filing made last March by Alan Fabian -- Steele's finance chair during that campaign -- who was facing unrelated fraud charges and hoped, in vain, to get credit for cooperation. In the end, Fabian was sentenced to nine years in jail for swindling millions from businesses and banks.

So there's reason to be skeptical.

But there isn't reason to dismiss the claim out of hand. For one thing, the Feds appear to be taking it seriously: Agents have spoken to Steele's sister about the issue, according to a Steele spokesman.

Steele told ABC's This Week that the FBI is "winding this thing down" but didn't explain how he knew that. And although Steele added that the payments were for legitimate work, the explanations from his camp don't yet add up.

At issue is a February 2007 payment of more than $37,000 made by Steele's unsuccessful Senate campaign to Brown Sugar Unlimited, a company run by Monica Turner, Steele's sister (and also the former Mrs. Mike Tyson, incidentally).

According to campaign finance records, reports the Post, the payments were for "catering/web services." But a Steele spokesman told the paper that Turner "did a lot of media stuff" for the campaign. The spokesman then showed the paper an invoice for catering services for two events. But the invoice was dated December 2006, although the events occurred in October 2006 and July 2007. The spokesman attributed this to a typo.

So, was it media, web services, or catering? How many companies do all three?

There's also the fact that, as the Post reports, "Turner filed papers to dissolve the company 11 months before the payment was received". (Steele told ABC yesterday that Turner believed the company was still in existence when the payments were made.)

The payments to Turner aren't the only allegations Fabian is making against Steele. There are three additional -- and apparently less serious -- claims.

One is that Steele, who at the time was Maryland's lieutenant-governor, used his state campaign to pay bills invoiced to his 2006 Senate campaign for printing services, totaling around $38,000 -- which would violate campaign finance law. Steele's spokesman says the printing was related to Steele's lieutenant governor's office.

Another claim is that Steele paid $75,000 from the state campaign to the law firm of Baker Hostetler, for work that was never performed. The payment was listed in campaign finance records as an in-kind contribution to the state GOP. And a lawyer for Baker Hostetler -- who was also chief counsel for the RNC -- told the Post that the payment was for legal work on challenging Maryland's 2002 legislative redistricting.

Finally, Fabian claims that Steele or an aide transferred more than $500,000 in campaign cash from one bank to another without appropriate authorization. The bank transfer appears to have angered aides to former Maryland governor Bob Ehrlich, who had hoped to use the money for other states races, including Ehrlich's. But there doesn't appear to be evidence that it was illegal.

There's also no evidence that the Feds are looking into any of these latter three claims. So it's those payments to Steele's sister's company that appear to be where the action is. And until we get a fuller explanation of what those payments were really for, this story will probably linger.

That can't be a prospect that will please a Republican Party that just made Steele its major national spokesman.

Yet another poll, this time from CNN, shows that President Obama is viewed very positively in the legislative battles over the stimulus bill, while the Republican Party remains the unpopular player in this game

Obama has a 76% overall job approval and 23% disapproval. On the economy specifically, his rating is 72%-28%. Meanwhile, Congress has a very poor rating of 29%-71% -- but it quickly becomes clear that this should be not be simply laid at the feet of the majority Democrats, and is instead the GOP's fault.

The Democratic leadership in Congress has a solid rating of 60%-39%, while the Republican leaders are at 44%-55%. Furthermore, respondents said by 74%-25% that Obama is doing enough to cooperate with Republicans, while they say by a 60%-39% margin that Republicans are not doing enough to cooperate with him.

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The Franken legal team just made another shot at forcing Norm Coleman to pick the up the pace of this trial -- and missed.

Franken lawyer David Lillehaug objected to the Coleman team's procedure so far of reviewing ballots one by one, withdrawing some along the way and keeping their complaint that it should be counted for others. "The problem is the contestant has really not sat down and decided which ballots they are going to go through and which they are not," said Lillehaug. "And that is why this trial is taking so long."

Lillehaug called for Coleman to be barred from introducing ballots until he first answered the Franken camp's interrogatories and conducted a more thorough sorting process, paring the list down.

Coleman lawyer James Langdon responded they have given sufficient information on these ballots. "If they're really curious as to how many of these we're serious about, the short answer is all of them," said Langdon, though he added that something might come up during questioning of county officials that would cause them to withdraw a claim.

The judges went into a recess and just came back with their answer: The Franken camp's motion is denied. Instead, Judge Kurt Marben said the panel and the two sides will discuss later today whether there is any more expedient way of doing this.

One month ago, TPM broke the news of a new Sustainable Energy & Environment Caucus being formed in the House to push for environmentally friendly recovery proposals in the stimulus bill.

The SEEC is now stepping up its efforts to ensure that the final version of the stimulus measure keeps its promise of investment in renewable energy and mass transit -- both of them proven job creators. Led by co-chairmen Jay Inslee (D-WA) and Steve Israel (D-NY), 25 members of the SEEC have written a letter to House leaders outlining their priorities.

Amid a flurry of coverage criticizing the shortcomings of the stimulus, the SEEC letter is a healthy reminder that the recovery plan does contain incentives for the nation to wean itself from fossil-fuel addiction ... if the House and Senate can be persuaded not to remove any worthy provisions during conference talks, that is.

We're getting way past flogging a dead horse territory here, but yesterday, in a rich and lengthy rundown on the troubled Merrill-Bank of America marriage, the New York Times had some great new details about John Thain's narcissism and self-delusion (a subject close to our hearts). Still, as entertaining as those are, this is definitely a story in which no one comes out looking good.

As for Thain, the former Merrill CEO, we learn that he believed he was entitled to that $40 million bonus he initially requested, on account of his "deal-making heroics", in the Times' words, in putting together the agreement with B of A.

His actual record, of course, was less heroic. The Times reports that Thain put a lot of effort into self-promotion, bringing in Margaret Tutwiler, with whom he had worked at the New York Stock Exchange, to run communications for the firm. Tutwiler -- a veteran of Republican Washington, who was George H. W. Bush's press secretary and in 2003 ran the State Department's unsuccessful effort to boost America's image abroad -- "largely spent her time cultivating Mr. Thain's image." (Thain, of course, was a major John McCain backer, who was mentioned as a possible Treasury Secretary in a McCain administration.)

For instance:

Ms. Tutwiler quickly scheduled a series of interviews for Mr. Thain from Merrill's trading floor. As the cameras flashed, he shook hands with the troops. When the cameras left, so did Mr. Thain.


But in terms of substance, the Times makes clear there were numerous missteps. Before the B of A takeover, Thain might have made moves to mitigate the damage done to Merrill by the toxic assets on its books, but didn't.

First:
For months, there were inquiries from hedge funds and other buyers about a range of mortgage assets and securities, but Merrill's mortgage desk was blocked from distributing price lists because Merrill's management refused to agree on market estimates, according to Merrill insiders.


And:
Despite the fact that Mr. Thain inherited these assets, Merrill insiders say they could have been hedged -- moves well within Mr. Thain's purview as head of risk management at the firm. Yet he never did so, according to three people who worked closely with him. An individual familiar with Mr. Thain's thinking said that Mr. Thain didn't believe hedges would have been effective.

Losses in those so-called legacy assets would reach $10 billion in the quarter.


Unsurprisingly, Thain wasn't too popular with B of A rank and file. When news broke of his firing last month, reports the paper, "[s]pontaneous applause broke out across the trading floor and bets were placed on which one of Mr. Thain's highly paid lieutenants would be next."

But at least he kept believing in himself. After his ouster, the Times reports, Mr. Thain paced the halls of Merrill, venting his frustration to at least two people. "I don't know how these people can run this company without me," he told them.

Not that Bank of America and its CEO, Ken Lewis, come out looking much better. Since last month, Merrill and B of A have been squabbling over what the latter firm knew, and when, about Merrill's massive fourth-quarter losses, and its decision to award bonuses -- subjects being probed by the New York and North Carolina attorneys general (B of A has provided "reams of documents" to the NY investigators, says the Times). And the evidence is mounting that Bank of America knew, or should have known, just about everything.

The Times reports:
Although Mr. Lewis contends that he was surprised by the magnitude of Merrill's losses, his financial team on the ground in New York had daily access to Merrill's trading books, which would have allowed them to detect the mounting exposures.


To be specific:
A Bank of America executive was sent to New York from Charlotte to act as an interim chief financial officer and had daily access to Merrill's profit-and-loss statements.

Likewise, Bank of America was well aware of the $3.2 billion in bonuses that Merrill paid to its rank and file in late December. The two companies had agreed in September that Merrill might pay up to $5.8 billion, according to a private agreement reviewed by The New York Times.


That "Bank of America executive," by the way, appears to be J. Steele Alphin, B of A's chief administrative officer and a close confidant of Lewis, who Thain has claimed knew about the bonuses, and who has been subpoenaed by the New York investigators.

And according to one Times source, at a December 9 B of A board meeting, Lewis did not question Thain about Merrill's losses, even though 60 percent of those losses were already visible. Nor did Lewis tell his shareholders, who two days earlier had voted to approve the merger, about the Merrill losses.

Indeed, Lewis may have been kept as much important information from Thain as vice versa. We knew that, after seeing the losses, Lewis had gone to the government during the last two weeks of December, requesting bailout money to help digest Merrill. What we didn't know is that, according to one source, Lewis didn't tell Thain about his talks with the Feds till January 5.

Like we said, there aren't many heroes here.

If you haven't read Sen. Arlen Specter's (R-PA) op-ed in today's Washington Post, it's worth checking out. Just make sure you've already digested your breakfast, because the exultant-yet-threatening tone he uses to discuss the Senate centrists' stimulus plan may trigger some nausea.

Specter admits, candidly, that House Speaker Nancy Pelosi's (D-CA) critical response to the Senate stimulus means that he and fellow centrist GOPers have pushed the envelope about as far as it can go. But his choice of words is particularly telling (emphasis mine):

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In an interview with Minnesota Public Radio on Friday, Norm Coleman was asked what his next step would be if the election trial ends with him still behind. And he didn't rule out an appeals process, which could hold up the certification of a Franken victory even longer.

"I don't know if there is a next step," Coleman said, explaining that it's a question of whether there would still be outstanding issues such as improperly-rejected absentee ballots, double-counted absentees, and other questions.

When pressed further on whether he would appeal, Coleman responded: "If those issues are resolved, there's not much to appeal."

In plain English: Get ready for some appeals.

Meanwhile, Al Franken gave his own interview to MPR. Among other things, he commented on Coleman's decision to take a temporary consulting job with the Republican Jewish Coalition: "I think it may be a more permanent job."

A scandal may be brewing at the Federal Emergency Management Agency, as a debate grows over whether the agency was correct to deny 650,000 applications for housing after Hurricane Ike. FEMA claims that 90 percent of claimants don't understand the organization's mission and the limited scope of the help it can provide. Critics allege that FEMA inspectors are unqualified, poorly trained, and motivated by a flat payment for each inspection they make, giving them an incentive to work quickly. Inspectors are responsible for surveying damage to houses caused by Ike; quick inspections are sometimes unable to properly assess damages. (Associated Press)

Pennsylvania governor Ed Rendell (D) will testify Monday in the trial of state Sen. Vincent Fumo (D) who allegedly defrauded the state Senate and two non-profits out of $3.5 million. Rendell, the star witness for the defense in the trial, is expected to vouch for Fumo's work ethic and the long hours he put in as a state lawmaker, according to defense lawyers. (Associated Press)

Prosecutors filed new charges against former Illinois governor Rod Blagojevich's chief fundraiser. Prosecutors allege in the new indictment that Christopher Kelly used $1.1 million in fraudulently obtained proceeds to pay personal debt expenses, including $383,000 in gambling debts. Kelly is already facing 11 counts of mail fraud and six counts of money laundering related to a bid-rigging scheme for an $8.5 million dollar contract at Chicago's O'Hare International Airport. (Associated Press)

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