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After the Bernard Madoff fraud came to light, costing investors an estimated $50 billion, it emerged that the SEC had fallen down on the job, in part because, as we detailed last month, it had soft-pedaled its enforcement duty. And today, the head of the agency's Office of Compliance, Inspections and Examinations, Lori Richards, testified before the Senate Banking committee about how to prevent future Madoffs.

Richards said the agency plans to increase the frequency of its examinations of investment advisers, investigate the existence of unregulated advisers, and broadly consider different regulatory structures -- an idea that seems to have gained ground lately.

Richards said that in recent years, the number of registered investment advisers has grown past 10,000. OCIE has just 425 employees to oversee them. And Madoff wasn't even registered -- hence the need to begin monitoring them too.

It'll be a while until we know how all this will play out. But it certainly looks like under President Obama and new agency chair Mary Schapiro, enforcement will no longer take a backseat at SEC, as it did during the Bush years.

On the second floor of the Senate, a herd of reporters and camera-people have been eagerly awaiting the president's appearance ... for more than 30 minutes.

What was supposed to be a 1pm briefing on Obama's visit to the House Republican conference, before the president's 1:25 meeting with Senate GOPers, looks to have been thrown off course. Reporters attempting to talk to other senators have been shooed out of the way to clear the path for an arrival.

Hmmm, it can't be an attempt by House Republicans to drown Obama in questions about a bill they're likely to oppose en masse in the end. Can it?

Chip Saltsman, the candidate for RNC chairman who has gotten in trouble for sending out a gift CD to committee members that contained a parody song called "Barack The Magic Negro," had an incredible interview this morning on MSNBC, blaming the whole flap on the media.

Contessa Brewer asked Saltsman about the offense that people have taken. "You know I think it highlighted a couple things, one that we're definitely not playing on a level playing field with the media," Saltsman said, complaining that the media didn't go after the Los Angeles Times for running a column that served as the basis of right-wing satirist Paul Shanklin's song.

(By the way, the piece was not from the LAT itself, but was an op-ed written by David Ehrenstein, who is black.)

Brewer insisted that there are many people out there who are offended by the parody song, which features the white conservative Shanklin doing an Amos & Andy-style impression of Al Sharpton. "Well, I think there's some people that--" Saltsman began in a confrontational tone, before stopping short and simply replying, "I understand that."

Late Update: Here's the video:

On the question of whether we'll get to the bottom of the Bush White House's role in the US Attorney firings, it's starting to look more and more like the ball is squarely in President Obama's court.

Yesterday, as we noted, House Judiciary chair John Conyers issued a subpoena to Karl Rove, ordering him to testify about the affair February 2nd and declaring ominously: "It's time for him to talk."

(Rove, making a claim to executive privilege backed by President Bush, had defied a subpoena issued by the last Congress. That Congress ended before the full House could vote on contempt charges against Rove.)

And just now, Rove's lawyer, Robert Luskin, told TPMmuckraker that he had already forwarded Conyers' subpoena to the Obama White House, asking them to give an opinion as to whether President Bush retains his ability to assert executive privilege.

In other words, the Obama White House will decide, essentially, whether to back Rove's claim of privilege, or to deny it. (And given that Rove is supposed to appear February 2, that decision from the White House should come soon.) In the latter case, said Luskin, a negotiation would ensue between the Obama White House, President Bush, and Rove. That would likely result in the matter going to court.

That's not the only strand of the effort to uncover information about the firings on which Obama will likely have a major say. Conyers is also seeking testimony on the matter from former White House officials Harriet Miers and Josh Bolten, who, like Rove, are relying on Bush to claim executive privilege. That case is in court, and the Obama White House is scheduled to file an appeal brief February 18th. That brief may make clear whether it backs the privilege claim for Miers and Bolten, and could help determine the case.

Obama's executive order on presidential records, issued last week, suggests that his White House believes that former presidents do not retain their right to assert executive privilege. But that doesn't mean it's a sure thing that Obama won't uphold Rove's claim, and/or Miers and Bolten's. Either way, we should soon find out.

On his first day on the job, Treasury Secretary Tim Geithner has issued new rules designed to curb lobbyists' influence over the bailout, limit conflicts of interest and increase transparency over the department's investment decisions.

From a Treasury statement:

Combating lobbyist influence in the EESA process: The Treasury Department will implement safeguards to prevent lobbyist influence over the program, including restricting contacts with lobbyists in connection with applications for, or disbursements of, EESA funds.

Keeping politics out of funding decisions: The Treasury Department will ensure that political influence does not interfere with EESA decision making, using as a model for these protections the limits on political influence over tax matters.

Certification to Congress on objective decision making: In reporting to Congress, the Office of Financial Stability (OFS) will certify that each investment decision is based only on investment criteria and the facts of the case.

The investment process will be transparent and based on objective criteria:

-Only banks recommended by the primary bank regulator will be eligible for capital investments.

-OFS will publish a detailed description of the investment review process undertaken by the regulators and OFS.

-The Treasury Department will ensure adequate resources exist to process applications as quickly as possible with priority to the date of the application as received by OFS and will formulate procedures to ensure integrity and regularity in the application process.


Over the weekend, the New York Times reported that many of the banks receiving bailout funds continued to lobby the government -- including on the bailout itself.

The devil, of course, will be in the details -- and those details don't yet appear to be forthcoming. What sort of safeguards, for instance, will limit the lobbying and political influence? How will OFS guarantee that investment decisions are on the level? Etc. Etc.

Still, combined with Geithner's assurance in his confirmation testimony that Treasury will insist that banks do more to track the funds they receive, we can at least hope that the second half of the bailout will be slightly better run than the first.

CNBC's Charlie Gasparino just reported that New York Attorney General Andrew Cuomo has subpoenaed former Merrill Lynch CEO John Thain for testimony about Merrill's awarding of billions of dollars in bonuses in December.

Cuomo has been investigating the decision by Merrill to award the bonuses -- and in particular, the allegation that they were made on an accelerated schedule, before Bank of America took control of the company January 1.

Gasparino added that Bank of America chief administrative officer J. Steele Alphin, who Thain has claimed was aware of the bonuses, has also been subpoenaed.

Gasparino suggested that Cuomo could ultimately bring charges of criminal fraud against those involved in the payouts, under the Martin Act.

This looks like it could get should get interesting...

Late Update: CNBC has now posted a written story.

And here's Cuomo's statement on the subpoenas.

The chairman of the House Judiciary Committee has issued a subpoena for Karl Rove's testimony regarding the firing of nine U.S. attorneys in 2006. Rove and two other senior aides to Bush, Harriet Miers and Josh Bolten, have been subpoenaed before but refused to appear, citing executive privilege. It is unknown how Rove will react now that the President is unlikely to exert executive privilege on his behalf. (Associated Press)

FINRA, the self-regulatory body for the financial services industry, has begun an inquiry into firms that referred clients to Bernard Madoff. Along with a request for lists of clients referred to Madoff, FINRA is seeking descriptions of any due diligence performed on brokerage firms that referred clients to Madoff or to feeder funds that invested with him. (New York Times)

Former New York state health commissioner Antonia Novello is the subject of a new report by the state inspector general's office, alleging that Novello abused her power by ordering employees to run personal errands for her and take her on shopping trips. The report refers a criminal case and potential felony charges to the district attorney. (New York Times)

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Oh, those coquettish Republicans.

First they "are being listened to" by the president on a stimulus bill that includes more than $250 billion in tax cuts. Then they realize that they just can't support a stimulus without more tax cuts -- and the elimination of family planning aid.

They get their way on the latter, though perhaps not the former ... but then they realize that the problem isn't President Obama. It's the Democrats!

From Senate Minority Leader Mitch McConnell's (R-KY) interview with the Today show (emphasis mine):

Frankly, what's developing here is, [Obama's] biggest problem is with his own party, the Democratic Party, which seems to be drifting away from what he said he wanted, which was for the package to include at least 40 percent tax relief and to be earmark-free.

So he could, ironically, end up with better supporters in trying to achieve the kind of stimulus package -- which would be timely, targeted and temporary -- from us than he's getting from the Democratic majority, at least so far here in the Congress.

Listening to what he said he wanted, we think we may be closer to that, oddly enough, than the Democratic majority, which seems to be pulling in the direction of fewer tax -- less tax relief and things like fixing up the [National] Mall. You know, most people don't think that's the way we ought to spend stimulus money.


Late Update: Here's the video:



Later Wish-List Update: The Republicans have successfully stripped family-planning aid from the stimulus, but that's not the end of their wheeling and dealing. McClatchy reports on several other provisions GOPers aim to jettison from the bill ... before most of them vote against it anyway. Here's the list.

$5 billion for colleges and universities, many of them already with billion-dollar endowments.

$600 million for new cars for the federal government.

$200 million to improve the National Mall, including $21 million for new grass.

$50 million for the National Endowment for the Arts.

The AP reports this morning that House Democrats are on the verge of removing a Medicaid provision added to their stimulus bill which would have eliminated the need for states to seek a waiver before providing more family-planning services to lower-income women.

The Medicaid provision had become controversial over the past few days not because of its monetary value -- in fact, it would save states an estimated $400 million over 10 years -- but because Republicans had loudly moaned that it amounted to "taxpayer funding" for "the abortion industry."

Never mind that a GOP president helped create the waiver program. Never mind that eight GOP governors participate in it. Family planning must be stopped in order to get "bipartisan support" for the stimulus bill.

And buried in the middle of the AP story is one notable tidbit:

Several Democrats said Monday night that Obama had spoken personally with Rep. Henry Waxman, D-Calif., about removing the provision. Waxman is chairman of the committee with jurisdiction over Medicaid and a close ally of Speaker Nancy Pelosi, D-Calif.

Obama Visiting The Hill Today President Obama is headed to Capitol Hill today to work with lawmakers on crafting his economic stimulus plan. Press Secretary Robert Gibbs told reporters that Obama wants to hear lawmakers' ideas, and will take good ones into consideration.

Minnesota Trial Continues Today The Minnesota election trial is continuing all day today, beginning at 10 a.m. ET in St. Paul. Yesterday was very interesting to say the least, with the Coleman campaign having been revealed to be using altered evidence -- they say the changes were accidental -- and we'll see how today turns out. The pooled video feed is easily available at The Uptake.

Coleman Going On Hannity Tonight Norm Coleman will be appearing on Fox News tonight, for an interview with Sean Hannity. This should be interesting.

Blago Impeachment Trial Keeps Moving To the southeast of Minnesota, the Illinois state Senate's impeachment trial of Gov. Rod Blagojevich is also going into its second day. The state Senate will be hearing from FBI Special Agent Daniel Cain, who will review wiretaps allegedly showing Blago shaking down horse-racing industry officials for campaign money, as Blagojevich himself continues to boycott the trial.

Mitchell In Egypt Today President Obama's new Middle East envoy George Mitchell has arrived in Cairo for his tour of the Middle East today, a mission to help solidify the Gaza ceasefire and to restart the Israeli-Palestinian peace process. Mitchell will be traveling through Israel, the West Bank, Jordan, Saudi Arabia, France and Britain.

Gillibrand To Be Sworn In Today Senator-designate Kirsten Gillibrand (D-NY) will be sworn in today as the newly-appointed occupant of Hillary Clinton's former Senate seat. Gillibrand will be sworn in by Vice President Biden in the afternoon.

NYT: Geography Divides Dems On Energy The New York Times reports that the energy debate is revealing divides among Democrats between those from the coasts, who are more favorable to environmentalists, and the industry-friendly Midwesterners. "It's up to those of us in the Midwest to show how important manufacturing is," said Sen. Sherrod Brown (D-OH). "If we pass a climate bill the wrong way, it will hurt American jobs and the American economy, as more and more production jobs go to places like China, where it's cheaper."

Terry McAuliffe: Virginia Political Outsider Check out this new TV ad from Terry McAuliffe, in which the former Democratic National Committee chairman presents himself as a political outsider who hasn't been connected to the legislative fights in Virginia, but is instead a successful businessman:



"It goes to show, the best ideas don't always come out of Richmond," says McAuliffe.

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