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Karl Rove may be relegated to Fox News appearances and hoping to avoid prosecution once President Bush leaves office -- but the political career of one of his proteges, Tim Griffin, may just be getting started.

The Associated Press reports that Griffin, a former White House and RNC staffer, is mulling a run for the US Senate from Arkansas against Democrat Blanche Lincoln in 2010.

"I am certainly thinking about it," Griffin told the AP. "I'm going to spend some time going around the state and talking to folks and getting an idea of the interest level. ... I'm going to try and hit all 75 counties as soon as possible and I know that's a tall order trying to hit all of those in the next few months."

A DOJ report released this fall found that the department improperly fired Bud Cummins as US Attorney for the eastern district of Arkansas in order to make room for Griffin, thanks in part to pressure from the White House political office. Wrote Kyle Sampson, the DOJ point man for the round of politically motivated firings of which Cummins' was a part: "Getting [Griffin] appointed was important to Harriet, Karl, etc."

Griffin served six months as interim US Attorney but was never confirmed by the Senate.

Griffin has a long trck record as a partisan political knife-fighter. He has been accused of participating in a scheme to cage black voters in Florida in 2004, and was paid by the RNC to dig up dirt on both John Kerry in 2004 and Barack Obama this year.

After leaving the interim U.S. Attorney job last year, a tearful Griffin said public service was "not worth it" and that he had no plans to return to politics.

He appears to have reconsidered. And as someone who, the evidence suggests, consistently puts partisan advantage over the public interest, Griffin should fit right in with his Senate GOP colleagues if he wins the seat.

Four days after Bernard Madoff was arrested for allegedly running a "$50 billion ponzi scheme" disguised as an investment advisory business, attention is beginning to focus on what looks like a glaring failure of oversight by government regulators.

Let's step back for a second. Part of what may have helped Madoff escape scrutiny is that his company consisted of two separate arms -- a securities brokerage, which acted as a middleman between buyers and sellers of shares, and a straight investment business. According to the SEC complaint filed last week, Madoff ran the investment arm as a secretive business separate from the brokerage, and it was this arm that was used to perpetrate the alleged fraud.

Bloomberg reported yesterday that since Madoff registered the investment arm with the Securities and Exchange Commission in 2006, that agency hadn't got around to looking at the business's books. The SEC usually tries to go through the books of newly registered firms in their first year.

"If the SEC didn't come in and inspect (the Madoff hedge fund), then they have a hell of a lot to answer for," one expert told the Associated Press.

But the problem doesn't appear to have started in 2006.

As early as 1999, an executive in the securities industry had urged the SEC to probe Madoff, on the basis of the remarkably steady returns that his investment business seemed to provide. The executive, Harry Markopolos, argued that Madoff must be generating those returns by "front-running" -- that is, using the brokerage arm of his company to illegally provide information to the investment arm.

The SEC said in a statement that it had conducted two investigations into the brokerage arm -- not the investment arm -- of Madoff's company, in 2005 and 2007. The first, begun in response to allegations of front-running, found three violations of rules requiring brokers to obtain the best possible price for customer orders. That investigation appears to have led to Madoff agreeing to register with the SEC the following year, giving the agency access to far more information than it previously had. But the 2007 probe, conducted after Madoff registered, found no evidence of anything improper.

It's unclear why the probes focused on the brokerage arm when it was the investment arm that had generated complaints in the past -- and which apparently would have been the arm that improperly profited from any front-running activity.

So there are still far more questions than answers, including in regard to the performance of government regulators. But so far, the SEC doesn't appear to have covered itself in glory on this one.

When Congress was writing the bailout bill back in September, one of the major sticking points was its insistence on including limits on executive compensation for the banks that were going to be taking taxpayer money. The issue nearly derailed the bill, as Treasury argued that such limits would dissuade banks from participating. But Congress eventually won out.

Or at least it appeared to have. The Washington Post reports today that Treasury succeeded in getting a rather important loophole added in to the bill at the eleventh hour. It said that the pay limits would apply only to banks that participated in the bailout under the original plan in which Treasury would purchase the banks' troubled assets. Since the department quickly switched to a different approach, in which it simply injects equity into banks, the pay limits no longer apply.

"The flimsy executive-compensation restrictions in the original bill are now all but gone," said Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, told the Post.

Questioned by the Post, Treasury insisted it has "all the remedies available to us for a breach of contract," should banks refuse to abide by the limits.

But legal experts appear to disagree.

David M. Lynn, former chief counsel of the Securities and Exchange Commission's division of corporation finance, said courts have sometimes placed limits on the government's ability to impose penalties if there was no fair warning.

"Treasury might find its hands tied down the road," said Lynn, who is also co-author of "The Executive Compensation Disclosure Treatise and Reporting Guide."

It seems fair to conclude that there is strong internal resistance at Treasury to instituting the pay limits in a serious way. In addition to fighting Congress's efforts to impose them in the first place -- then adding the loophole which the Post highlights, there also some at Treasury who support a voluntary system of compliance, according to a finding of the recently released GAO report on the department's bailout spending, which we highlighted at the time.

And more broadly, Treasury appears uninterested in requiring banks to track what they do with the taxpayer money they're getting. And the House last week passed an amendment to the auto bailout bill that would require banks to say more about what they're doing with the bailout money -- a second bite at the apple after the rush to pass the bailout legislation in September.

It looks like Republicans on the Senate Judiciary committee have won at least a partial victory in that battle with Judiciary chair Pat Leahy over the timing of confirmation hearings for Eric Holder, Barack Obama's nominee for Attorney General.

In a press release sent moments ago, Leahy wrote the he was delaying the hearings, and made clear he wasn't happy about it:

The Committee has not yet received the names of other designees for high-ranking Department of Justice officials that we had anticipated and more time is now available to the Judiciary Committee. Therefore, to accommodate the Republicans on the Judiciary Committee, at their request we are delaying the hearing, again, until January 15. ...

It is disappointing to me that they are insisting that we delay at a time when the nation needs its top law enforcement officer and national security team in place and working.

The delay is only a week, since Leahy had been planning to begin the hearings on January 8. He had argued that, after the politicization of the Bush years, it's particularly important for fresh leadership to be installed quickly.

The committee's GOP minority, led by Arlen Specter, has been arguing that Leahy's schedule doesn't allow enough time to review documents pertaining to Holder's role in the controversial pardon of Marc Rich in the waning days of the Clinton administration.

The dispute had gotten unusually pointed for an intra-committee disagreement. Leahy, in a letter to Specter, implied that the Republican's trip to Europe and the middle east this month was a congressionally sponsored junket. Leahy also dredged up a year-old quote from Republican Jon Kyl, arguing for a speedy confirmation of Michael Mukasey as Attorney General, which appears to contrast with today's GOP position on Holder. In announcing the delay today, Leahy again brought up Kyl's quote on Mukasey.

The full release follows after the jump...

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Mitchell Wade, the contractor who in 2006 pleaded guilty to bribing Duke Cunningham to the tune of over $1 million, was sentenced moments ago to 30 months in federal prison, and ordered to pay a $25,000 fine.

The relative leniency of the sentence suggests that Wade may have provided prosecutors with valuable information as they seek to build cases against others involved in the scandal.

A memo filed by Wade's lawyers two weeks ago claimed that he had helped prosecutors look into five other members of Congress.

Cunningham is currently serving an eight-year sentence in connection with the scandal.

We told you last month about the role of the credit ratings agencies in helping to cause the financial crisis. A major part of the problem, in a nutshell, is that the major ratings agencies -- Moody's, Standard & Poor's, and Fitch -- are paid by the institutions (often investment banks) who are issuing the bonds. That gives the agencies a clear incentive to produce favorable ratings, or risk seeing the banks hire a different ratings agency that's willing to offer a better rating.

But over the weekend, in a profile of Sen. Chuck Schumer, the New York Times revealed that the veteran New York Democratic lawmaker -- who, with seats on both the finance and banking committees, has built a reputation as a key ally of the financial sector, a major industry in his home state -- played a major role in stymieing efforts to fix that problem.

Here's what happened:

In 2006, Christopher Cox, the Bush-appointed chair of the Securities and Exchange Commission -- and hardly a left-wing proponent of heavy-handed government regulation -- became convinced that the conflict of interest problem needed to be addressed.

A plan to give the SEC more regulatory authority "drew broad, bipartisan support," says the Times. But it was opposed, of course, by the ratings agencies themselves ... who turned to Schumer.

"They knew Schumer would support them," one former Moody's executive told the Times. "He was their go-to guy."

The paper adds: "While the Manhattan-based agencies were not significant campaign donors to Mr. Schumer or the Senate campaign committee, their lobbyists and many of their clients were."

As an alternative to Cox's plan, Schumer advocated a largely voluntary approach in which regulators would simply encourage the agencies to disclose their ratings methods. "They're making good-faith efforts," Schumer told Cox at a 2006 Senate hearing.

Ultimately, says the Times, Schumer was able to get the measure amended "so that it explicitly prohibited the S.E.C. from regulating the procedures and methods the agencies use to determine ratings."

In other words, he appears to have blocked the crucial part of the legislation. Sean Egan, of Egan-Jones Ratings -- one of the few agencies that largely avoided buying into the mortgage bubble, perhaps in part because it's structured to avoid conflicts of interest -- told the Times: "The bill was eviscerated. You have stripped away basic safeguards for the investors."

And sure enough, under the weak regulatory system that Schumer had helped to ensure, the agencies,as we've seen, offered high ratings to bonds based on risky sub-prime loans, encouraging investors to see them as secure, and ultimately helping to inflate the mortgage bubble.

Schumer claims to have learned from his mistakes. He supported a belated but necessary SEC move earlier this month to meaningfully address the conflict of interest problem, and related issues, saying: "The work at these ratings firms was severely compromised, and the companies were some of the biggest contributors to the current financial crisis."

But had Schumer adopted that position back in 2006, when the SEC did, the ratings agencies might not have wound up as a significant cause of our current financial turmoil.

The New York Times and Pro Publica got an advanced look at a report on the American reconstruction of Iraq -- and it's not pretty.

The report concludes, in the words of the Times and Pro Publica, that even now, "the United States government has in place neither the policies and technical capacity nor the organizational structure that would be needed to undertake such a program on anything approaching this scale."

And it quotes Colin Powell saying that, in the months after the invasion, DOD "kept inventing numbers of Iraqi security forces -- the number would jump 20,000 a week! 'We now have 80,000, we now have 100,000, we now have 120,000.'"

But here's our favorite detail:

When the Office of Management and Budget balked at the American occupation authority's abrupt request for about $20 billion in new reconstruction money in August 2003, a veteran Republican lobbyist working for the authority made a bluntly partisan appeal to Joshua B. Bolten, then the O.M.B. director and now the White House chief of staff. "To delay getting our funds would be a political disaster for the President," wrote the lobbyist, Tom C. Korologos. "His election will hang for a large part on show of progress in Iraq and without the funding this year, progress will grind to a halt." With administration backing, Congress allocated the money later that year.

There was no evidence in the story that the Times and Pro Publica had offered Korologos a chance to respond, so TPMmuckraker contacted him. He responded in an email:
They did NOT give me a chance to comment. That all came from a 3 page memo I wrote on strategy for passing that first Iraq supplemental in 2003. Some $60 (b) billion was for the military side and $20 (b) billion was for the civilian side. The next sentence said, "The quicker we succeed at CPA the quicker our 150,000 boys will come marching home again."

That response doesn't do much to change the clear impression created by the IG report that Korologos cited President Bush's need to get reelected as a reason to support spending $20 billion of taxpayer money. And that OMB ultimately went along with the request.

Here are some other eyebrow-raising nuggets from the report:
In an illustration of the hasty and haphazard planning, a civilian official at the United States Agency for International Development was at one point given four hours to determine how many miles of Iraqi roads would need to be reopened and repaired. The official searched through the agency's reference library, and his estimate went directly into a master plan. Whatever the quality of the agency's plan, it eventually began running what amounted to a parallel reconstruction effort in the provinces that had little relation with the rest of the American effort.


Money for many of the local construction projects still under way is divided up by a spoils system controlled by neighborhood politicians and tribal chiefs. "Our district council chairman has become the Tony Soprano of Rasheed, in terms of controlling resources," said an American Embassy official working in a dangerous Baghdad neighborhood. " 'You will use my contractor or the work will not get done.'"

And here's a passage that won't exactly boost Donald Rumsfeld's already rock-bottom reputation for knowing what he was talking about:
On the eve of the invasion, as it began to dawn on a few American officials that the price for rebuilding Iraq would be vastly greater than they had been told, the degree of miscalculation was illustrated in an encounter between Donald H. Rumsfeld, then the defense secretary, and Jay Garner, the retired lieutenant general who had hastily been named the chief of what would be a short-lived civilian authority called the Office of Reconstruction and Humanitarian Assistance.

The history records how Mr. Garner presented Mr. Rumsfeld with several alternative rebuilding plans, including one that would include projects across Iraq.

"What do you think that'll cost?" Mr. Rumsfeld asked of the more expansive plan.

"I think it's going to cost billions of dollars," Mr. Garner said.

"My friend," Mr. Rumsfeld replied, "if you think we're going to spend a billion dollars of our money over there, you are sadly mistaken."

In a way he never anticipated, Mr. Rumsfeld turned out to be correct: before that year was out, the United States had appropriated more than $20 billion for the reconstruction, which would indeed involve projects across the entire country.

The report was compiled by Stuart Bowen, a Republican lawyer who serves as the special inspector general for postwar reconstruction in Iraq. The Times and Pro Publica obtained their copies from people outside Bowen's office. The report will be presented February 2nd at a Congressional hearing.

The Washington Post chronicles yet another example of oversight of the bailout bill. Congress required that executives receive limited bonuses -- but only for those companies that receive federal money through the Toxic Asset Relief Program. Since the Treasury has shifted gears on how to use the money, the pay restrictions "are now all but gone," says Sen. Chuck Grassley (R-IA). (Washington Post)

"The United States government has in place neither the policies and technical capacity nor the organizational structure that would be needed" to successfully rebuild Iraq, according to the draft of a lengthy government report obtained by the New York Times and ProPublica. When progress was slow, government officials invented evidence, such as inflating the number of Iraqi troops, the report finds. So far the effort has cost $117 billion and done little more than "restore what was destroyed during the invasion and the convulsive looting that followed." (New York Times/ProPublica)

The pharmaceutical company Wyeth has become the focus of an investigation by Senator Charles Grassley (R-IA) after it came to light that the company pays ghostwriters to author positive journal articles regarding its products. The inquiry focuses particularly on articles encouraging hormone therapy for menopausal women. (The New York Times)

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Newsweek reveals the identity of the previously anonymous source who in 2004 tipped off the New York Times to a secret NSA wiretapping program that was eavesdropping on Americans, and was apparently being concealed from the FISA court which, by law, had to approve such programs.

Thomas Tamm, a veteran prosecutor, learned of the program while working at a Justice Department unit handling wiretaps of suspected terrorists and spies. Here's Newsweek's dramatic description of Tamm's Arlington-parking-garage moment:

For weeks, Tamm couldn't sleep. The idea of lawlessness at the Justice Department angered him. Finally, one day during his lunch hour, Tamm ducked into a subway station near the U.S. District Courthouse on Pennsylvania Avenue. He headed for a pair of adjoining pay phones partially concealed by large, illuminated Metro maps. Tamm had been eyeing the phone booths on his way to work in the morning. Now, as he slipped through the parade of midday subway riders, his heart was pounding, his body trembling. Tamm felt like a spy. After looking around to make sure nobody was watching, he picked up a phone and called The New York Times.

But for Tamm himself, the decision hasn't necessarily worked out well. Reports the magazine:
The FBI has pursued him relentlessly for the past two and a half years. Agents have raided his house, hauled away personal possessions and grilled his wife, a teenage daughter and a grown son. More recently, they've been questioning Tamm's friends and associates about nearly every aspect of his life. Tamm has resisted pressure to plead to a felony for divulging classified information. But he is living under a pall, never sure if or when federal agents might arrest him.


Tamm is haunted by the consequences of what he did--and what could yet happen to him. He is no longer employed at Justice and has been struggling to make a living practicing law. He does occasional work for a local public defender's office, handles a few wills and estates--and is more than $30,000 in debt. (To cover legal costs, he recently set up a defense fund.) He says he has suffered from depression.

At the time he made his fateful decision, Tam worked at DOJ's Office of Intelligence Policy and Review (OIPR), which was charged with asking FISA court for permission for national-security wiretaps. But Tamm learned that some wiretap requests bypassed the court and went straight to the Attorney General. These related to what was referred to only as "the program." Though Tamm didn't know it at the time, president Bush had signed a series of secret orders that authorized the NSA for the first time to eavesdrop on phone calls and e-mails between the US and a foreign country without approval by the FISA court.

Here's Newsweek's description of how the program worked:
The NSA identified domestic targets based on leads that were often derived from the seizure of Qaeda computers and cell phones overseas. If, for example, a Qaeda cell phone seized in Pakistan had dialed a phone number in the United States, the NSA would target the U.S. phone number--which would then lead agents to look at other numbers in the United States and abroad called by the targeted phone. Other parts of the program were far more sweeping. The NSA, with the secret cooperation of U.S. telecommunications companies, had begun collecting vast amounts of information about the phone and e-mail records of American citizens. Separately, the NSA was also able to access, for the first time, massive volumes of personal financial records--such as credit-card transactions, wire transfers and bank withdrawals--that were being reported to the Treasury Department by financial institutions. These included millions of "suspicious-activity reports," or SARS, according to two former Treasury officials who declined to be identified talking about sensitive programs. (It was one such report that tipped FBI agents to former New York governor Eliot Spitzer's use of prostitutes.) These records were fed into NSA supercomputers for the purpose of "data mining"--looking for links or patterns that might (or might not) suggest terrorist activity.

Newsweek editors have framed the story as a question: "Is he a hero or a criminal?" reads the sub-hed. But, at least in Tamm's view, we might not have learned about the program had he not made that phone call. Looked at in that light, the answer to Newsweek's question seems clear.

Since the complaint against Rod Blagojevich was made public Tuesday, we've been wondering about the identity of the "Tribune Financial Adviser" who is said to have met with John Harris, the governor's then chief of staff, about the possibility of firing Tribune editorial writers who had been critical of Blagojevich.

Now the Tribune itself is reporting that it's Nils Larsen, a Tribune exec and managing director of the Equity Group, a private investment group started by Tribune CEO Sam Zell. Larsen has been interviewed by the FBI, adds the paper.

Larsen had been at the top of our list of suspects. The complaint says that the person is someone mentioned in media reports as a top financial adviser to Zell, who played a major role in Zell's purchase of the Tribune Company.

And Larsen appears to fit the bill. Consider this paragraph from a profile in Chicago Business last year:

Mr. Larsen, 37, is a managing director at Equity Group Investments LLC, Chicago billionaire Sam Zell's private investment firm -- and the company that will lead Tribune Co. when it goes private later this year. He's been Mr. Zell's point man in arranging and negotiating $11.2 billion in financing for the deal, scoping the future of Tribune's 23 television stations and running the sale of the Chicago Cubs.

We called Larsen yesterday to ask if he was the financial adviser named in the charging documents, but he didn't respond. He didn't respond to the Tribune either, and neither did Zell.

The paper adds that the feds have also issued a subpoena to the Tribune Company (probably wasn't hard for them to get the scoop!), seeking memos that might shed light on the governor's apparent efforts to get the editorial writers fired.