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It's clear that both parties expect a close race in today's special election for Sen. Kirsten Gillibrand's old House seat, because they're both downplaying expectations -- though Dems seem just a bit more confident.

The DCCC has released a detailed memo talking about all the obstacles they face here: The big GOP advantage in voter registration, Republican state House Minority Leader Jim Tedisco's name identification against the first-time Dem candidate Scott Murphy, and the early views from pundits that they would have a tough time holding it.

On the other hand, the memo boasts of just how far Murphy has come: "After more than $2 million in negative advertising against Murphy, how did NY-20 become competitive in eight short weeks? Quite simply, he ran a better campaign." They also credit Murphy's support for the Obama agenda, as having taken him this far: "This campaign was a fight between Murphy's message of bipartisan progress on the economy and Tedisco's embrace of Republicans' 'just say no' obstructionism."

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Bloomberg reported a frightening fact this morning: The U.S. government has spent committed nearly as much on to bailing out financial firms -- $12.8 trillion, when you total up guarantees and loans given by the Treasury, Fed, and FDIC -- as the nation's entire $14.2 trillion domestic product.

But that's not the only eye-popping bailout number that was released today. In a Senate Finance Committee hearing today, panel chairman Max Baucus (D-MT) noted that the Troubled Assets Relief Program (TARP) has put taxpayers on the book for at least $2.9 trillion. That number is almost equal to the U.S. government's total spending during the 2008 fiscal year, which you can find in Table 5 of this document.

Baucus described the bailout as a shadow U.S. budget "dedicated solely to saving the financial system, and that is truly surreal."

Yesterday we noticed the focus of the Case Against AIG And The Reckless Executives Inhaling Our Money had begun to shift from the exotic, futuristic sounding world of synthetic credit derivatives to the Old Economy business of dodging taxes. In fact, the two are inextricably intertwined -- AIG FP was by far the biggest underwriter of the inscrutable options that could generate the kind of phony capital gains losses that rich people and companies use to get out of paying taxes. To really understand what Cassano and his gang were up to, it helps to have a working knowledge of the company's history of run-ins with the IRS. Again and again AIG has been involved in schemes the IRS has deemed illegal, forcing the insurer and its clients to cough up some billions of dollars in back taxes over the past decade. The only real factor obscuring the magnitude of the malfeasance at AIG was arguably the many hundreds of banks, corporations and individuals who played along.

UPS: The platonic "ideal" tax structure AIG has been a go-to source for IRS shortchanging expertise at least since 1983, when it helped UPS form a Bermuda "reinsurance" subsidiary in 1983 to divert certain "excess value" charges into an ingenious tax haven from which the IRS, following a five year legal battle eventually recovered $1.44 billion of $2.3 billion in uncollected taxes. After the jaw-dropping penalty was announced, the insurance trade journal National Underwriter quoted KPMG partner Mark Anderson saying he still looked to AIG's UPS tax haven as an "ideal" when structuring his own clients' tax havens.

KPMG: The accounting industry folds But the taxman came for KPMG next, after discovering the firm had peddled tax shelter schemes -- a few of which came bundled with liability "insurance" to protect the tax benefits from AIG FP -- to hundreds of companies, including the baseball card manufacturer Upper Deck, which ended up suing AIG after coughing up almost a hundred million dollars in taxes after KPMG coughed up its client list as part of a half billion dollar plea agreement. Seventeen ex-KPMG executives were indicted in the "S2" tax shelter case, which was prosecuted in the aftermath of accounting scandals that nearly decimated all the industry's entrenched players. They didn't decimate AIG, however, which refused to make good on Upper Deck's insurance.

What Happens To A Prosecution Deferred... Shortly thereafter AIG FP's inimitable chief Joseph Cassano was charged in assisting PNC Financial in a similar fraud, though the three firms avoided formal criminal indictments by coughing up fees in deferred-prosecution agreements that in AIG's case anyway, meant the company was required to pay a government-appointed attorney to report on the company's operations.

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Bernie Madoff isn't the only Ponzi schemer on New York's Upper East Side, at least according to prosecutors. Last Thursday, Lawrence Salander, a prominent art gallery owner, joined Madoff on that illustrious list when he was charged with bilking a slew of high-profile clients, including John McEnroe and Robert DeNiro, out of $88 million on high-priced art deals, over more than fifteen years.

Salander never fired any US Attorneys, or helped bring down the financial system -- so far as we know. But we thought he was worth our attention because the charges against him are part of a surge in Ponzi cases brought by authorities since the start of the year. That uptick appears to be the result, in part, of the financial crisis, which, as in Madoff's case, caused investors to withdraw their money en masse, leaving schemers without enough capital to keep up the charade. Call him another mini-Madoff.

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How did Joe Cassano -- the man who brought down AIG, and with it, perhaps the entire global financial system, with those disastrous credit default swaps -- talk about what his unit, AIG Financial Products, was up to?

We've been looking through a presentation that Cassano gave to a group of entrepreneurs and analysts in May 2007 -- just as the extent of the collapse of the sub-prime market was becoming clear. In his speech (accessed by Nexis), Cassano detailed AIGFP's various business lines, and, of course, painted a rosy picture of the unit's future earning potential.

The entire performance has an almost poignant quality, looked at in light of the tumult that would soon befall AIGFP. (Less than nine months later, it would announce Cassano's resignation after an $11.1 billion writedown of credit-default swaps.) But we've pulled out a few of Cassano's comments that day that are particularly noteworthy...

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Sen. Jim Bunning (R-KY), who has been in a face-off with his national party leadership and has openly accused them of trying to force him into retirement, told local reporters back home that his fundraising for this past quarter has been "lousy."

Remember that Bunning, who only won by 51%-49% in the very Republican year of 2004 and could be in a tough race again, has said that his fundraising has been sabotaged by his party leadership spreading rumors that he might retire, along with a possible primary challenge from state Senate President David Williams. Bunning has also singled out his co-Senator, Minority Leader Mitch McConnell, for continuing to raise money for himself even though he was just re-elected and Bunning is approaching his next race.

On the bright side, Bunning said the fundraising pace has picked up just recently: "Maybe I finally have convinced everybody, in spite of my leadership, that I am running."

The most recent FEC filings showed Bunning with only $149,991.09 cash on hand as of December 31, 2008. We'll find out soon enough what he has now.

Elana reported below on Greenpeace's efforts to push the House's climate change debate to the left, noting some of their early reactions to the Waxman-Markey legislation unveiled today.

Greenpeace also highlights one politically difficult question that was left unanswered by Waxman and Markey: Would emissions credits be given away free to fossil-fuel-burning businesses, or auctioned off to raise money for green transit and/or taxpayer rebates?


As it happens, Markey addressed that very question today during his conference call with reporters. His answer was somewhat vague--he refused to announce any goals about the proportion of emissions he'd like to see sold at auction, for instance. But he did note that, in the final bill, "what is most likely to happen is a combination of the two"--some will be given away, the rest will be auctioned.

That won't please Greenpeace, and it's not what Obama asked for, but if Markey's saying that now, it's likely that there's no way around it.

A new Rasmussen poll finds that Michele Bachmann's new pet issue of preventing Americans from being sucked into a new one-world government currency -- a threat that doesn't actually exist -- could potentially have some real popular appeal.

Keep in mind that this would hardly be the first time that public opinion turned on things that weren't true. It can very often be more important what voters think is being proposed, rather than what is actually going on.

The pollster's analysis acknowledges: "At issue is not replacing the money in Americans' wallets but what currency will be the world standard against which all other monies are measured." But the questions themselves don't clearly make this distinction for the respondents, asking about the proposal "to replace the dollar with a new global currency."

To a degree, this was a deliberate choice, Scott Rasmussen told TPM. "I was really curious where the suspicion level was going to be on this particular question," said Rasmussen, noting that this is a story that hasn't been discussed or explained very much, and where public opinion is very fluid.

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The climate change draft bill released today by House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Ed Markey (D-MA) goes further than the White House in terms of its emissions targets -- but the plan also tacks right in some notable ways, as Greenpeace is noting in its newly released response.

Steven Biel, director of Greenpeace's U.S. global warming campaign, raised questions about two elements of the Waxman-Markey plan and called for it to be "strengthened" by Congress.

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A few minutes ago on the floor of the Senate, Barbara Boxer called out Republicans for their... call it 'selective opposition' to the budget reconciliation process.



Boxer chairs the Environment and Public Works committee, and spent the early afternoon fending off Republican attempts to explicitly prevent the Senate from using reconciliation to pass climate change legislation. We'll try to get that document she submitted for the record and when we do, we'll post it here.

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