TPM News

"More Quickly Than It Began, The Banking Crisis Is Over" declares longtime financial journalist Douglas McIntyre in a column posted this morning on the TIME website. Well miracles of miracles! Noting yesterday's news from Wells Fargo that the bank made more than twice analysts' projections during the first quarter and the positive buzz about the progress of the Treasury Department "stress tests" being run to assess banks' abilities to withstand further economic downturns, he wonders why the heck they're bothering to run "stress tests" at all. Isn't it obvious we're out of the woods?

Oddly absent from the discussion of how well Wells Fargo did is why the government was in the midst of testing bank balance sheets at all. The experts at the Treasury had been thrown off the scent and consequently had missed the fact that there was not need to test what is already working well. The same holds true for the Geithner plan to take toxic assets off bank balance sheets. It is academic now. What banks are earning from the difference between the cost of capital and the income from lending is now great enough for the banking system to be self-sustaining again.
Hallelujah, but: zombie banks don't rise from the dead every day. On CNBC this morning CEO Howard Atkins credited Wachovia, the bank it hastily acquired in the thick of the panic of '08, for bringing the good news. And indeed, an analyst tells Forbes the Wachovia deal has been much more auspicious than experts initially expected, when Wells told analysts it anticipated writing down $10 billion in bad and "non-performing" loans held by Wachovia; thus far, they've only had to write down $77 million.

There's probably a very good reason for that, according to mortgage blogger Ken Watson -- the Financial Accounting Standards Board just relaxed mark-to-market accounting restrictions, meaning Wells can value those loans a bit more creatively than before.

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My colleague Zack Roth reported yesterday that Eugene Robinson joined the growing ranks of Washington Post employees who've spoken out against George Will.

In that same appearance, though, Robinson attacked a couple different bits of fiction that we've been tracking here on the TPMDC site--the Republican claims that cap and trade legislation will cost American households over $3,000 a piece, and the other Republican claim that the administration's defense budget proposal amounts to a spending cut. Watch:

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Did Karl Rove compile a "loyalty file" on former GOP congressman Tom Feeney? That's what Rove himself has reportedly claimed.

Politico reports on a chance encounter at Charlie Palmer's Steak last night between Bush's brain and Jason Roe, a former chief of staff to Feeney, the Florida congressman who was defeated for reelection last fall*.

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The SEC has stepped into the corruption probe in New Mexico that saved Gov. Bill Richardson the hassle of amending years of tax returns. The new angle involves one of those enticing "toxic derivatives" deals we can't stop reading about, although there's a sexual harassment component, too.

Frank Foy used to manage the state teachers' pension fund, and in 2007 he says he got a call from a guy from a Chicago investment adviser -- and soon-to-be Richardson donor -- named Vanderbilt Capital Advisors. He told the Santa Fe Reporter he was too swamped to meet with him:

"This guy calls me up and says, 'I want to talk to you about a CDO.' I said, 'Call me back in a month. I don't have time to screw with it, dude,'" Foy recalls. "He didn't like that answer."

Soon after, Foy told the Reporter, he got a call from [Foy's Richardson-appointed boss Bruce] Malott. "He said, 'You were very rude to Pat Livney. I think he has a good investment and you ought to talk to him.'...I'd never been called by the chairman before. I thought, 'This stinks.'"
The investment was the lowest-rated slice of a collateralized debt obligation -- called the "equity tranche", presumably because like a stock its value can go all the way to zero. (Which it -- surprise! -- essentially did, after paying out about $4 million in interest payments to the fund, according to State Investment Officer Gary Bland.) Vanderbilt's CDO was the most toxic brand of the sort of "toxic" securities dragging down bank balance sheets right now; most banks, according to this handy primer on CDOs, didn't attempt to sell them to investors. But Livney, a former head trader of asset-backed securities at JP Morgan, nabbed a $90 million investment from the teachers' pension fund, despite what Foy claims were his strenuous objections. Malott, Foy says, told him the investment had been ordered by Bill Richardson's chief of staff. Shortly thereafter, a female employee accused Foy of sexually harassing her, and he was demoted.

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Add the name of Sen. Russ Feingold (D-WI) to the growing list of observers who are deeply concerned by the Obama administration's invocation of the state secrets privilege in the Jewel v. NSA case.

Statement of Sen. Russ Feingold on the Obama DOJ's brief in Jewel:

I am troubled that once again the Obama administration has decided to invoke the state secrets privilege in a case challenging the previous administration's alleged misconduct. The Obama administration's action, on top of Congress's mistaken decision last year to give immunity to the telecommunications companies that allegedly participated in the warrantless wiretapping program, will make it even harder for courts to rule on the legality of that program. In February, I asked for a classified briefing so that I can understand the reasons for the Department's decision to invoke the privilege in another case, and I intend to seek information on this new case as well. I also encourage the greatest possible public accounting of the use of the state secrets privilege and welcome the Attorney General's statement that he hopes to share his review with the American people.

Beyond the particular case at issue here, it is clear that there is an urgent need for legislation to give better guidance to the courts on how to handle assertions of the state secrets privilege. The American people must be able to have confidence that the privilege is not being used to shield government misconduct. That is why I am working with Senators Leahy, Specter, and others to pass the State Secrets Protection Act as soon as possible.

We told you yesterday about the developing consensus in opposition to the Obama administration's state secrets claim in the Jewel v. NSA case, in which the government is being sued over the warrantless wiretapping program.

Here's the Justice Department's statement on the matter:

The administration recognizes that invoking the states secret privilege is a significant step that should be taken only when absolutely necessary. After careful consideration by senior intelligence and Department of Justice officials, it was clear that pursuing this case could unavoidably put at risk the disclosure of sensitive information that would harm national security.

An examination by the Director of National Intelligence and an internal review team established by the Attorney General determined that attempting to address the allegations in this case could require the disclosure of intelligence sources and methods that are used in a lawful manner to protect national security. The administration cannot risk the disclosure of information that could cause such exceptional harm to national security.

While the assertion of states secrets privilege is necessary to protect national security, the intelligence community's surveillance activities are designed and executed to comply fully with the laws protecting the privacy and civil liberties of Americans. There is a robust oversight system to ensure this compliance.

A great catch from our old friend Greg Sargent over at the Plum Line...

Barack Obama's campaign website still cites the fact that "the Bush administration has ignored public disclosure rules and has invoked a legal tool known as the 'state secrets' privilege more than any other previous administration to get cases thrown out of civil court." The site declares: "Secrecy Dominates Government Actions."

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The latest score in NY-20 shows that Democrat Scott Murphy is currently ahead in this nail-biter of a result -- but if GOPer Jim Tedisco doesn't like it, he could just wait 15 minutes.

The official state results show that Murphy has taken an eight-vote lead as of 4:30 p.m. ET yesterday, as absentee ballots begin to be counted. However, there is some more recent data that shows Murphy's lead is actually somewhat larger at the moment.

Columbia County has provided their latest numbers to TPM, showing Murphy picking up another 15 net votes, on a 99-42 margin, compared to the 55-13 in the state's current tally of absentees from here. In addition, the Albany Times Union reports that Murphy has picked up 26 votes, an 88-62 margin, in Essex County.

So as of right now, Scott Murphy leads by 49 votes -- though there are still plenty of ballots left to count. (Late Update: Murphy's newest lead is 46 votes.)

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