TPM News

Scientists at the Food and Drug Administration have taken the unusual step of writing a letter to the Obama transition team to complain about misconduct at the agency. The group of nine scientists claim that agency managers have used intimidation to hasten approval for medical devices that are not necessarily safe or effective. (Associated Press)

Senate Democrats are set to push for greater regulation over coal dumps after a Tennessee facility ruptured in December. It has recently come to light that thousands of facilities across the nation are under no regulation whatsoever. Accidents have serious environmental consequences and cleanups are very expensive. (Associated Press)

The new Congress has acted quickly to preserve certain Bush administration records, asking a federal judge to force documents pertaining to U.S. attorney firings to stay at the White House. Should the White House turn the documents over to the National Archives, they could take longer to retrieve for the ongoing investigation into the firings. Subpoenas have been issued for the documents. (Associated Press)

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As regular Muck readers know, we've been tracking the transparency -- or lack thereof -- of the Federal Reserve's program to buy up $500 billion worth of mortgage-backed securities in an effort to boost the housing market.

And today it's worth focusing on the issue of conflicts of interest.

The four outside investment firms hired by the Fed to manage the program -- Blackrock Inc., Goldman Sachs, Wellington Management, and PIMCO -- began buying up assets this week. So one assumes that the conflict of interest provisions that the Fed has said it has in its contracts with the four companies must be firmly in place by now.

But the Fed still is telling us almost nothing about what those crucial provisions entail. A department spokesman did not respond to a call from TPMmuckraker requesting information on what the Fed is doing to guard against conflicts of interest among the investment firms managing our money.

So far, all we know on the subject is what the Fed told us in a fact sheet posted last month on its website:

What measures will the Federal Reserve take to ensure that an investment manager implementing the MBS program will not have an unfair advantage relative to other market participants due to the information it receives about the MBS program?

Each investment manager will be required to implement ethical walls that appropriately segregate the investment management team that implements the Federal Reserve's agency MBS program from other advisory and proprietary trading activities of the firm. The New York Fed will monitor each investment manager's compliance with this requirement.


What sort of "ethical walls"? How will they work? How will the Fed monitor each investment manager's compliance? (After all, the Treasury doesn't appear to be taking its duty to monitor similar conflicts with TARP money all that seriously).

We're still in the dark.

It bears repeating: this isn't an abstract issue. The potential for these firms to improperly use, in their other investment work, the information they've been granted access to is enormous. Relatedly, the Fed's broader stonewalling on the structure of the contracts (or anything to do with the contracts whatsoever!) means we have no guarantee that the firms are being incentivized to get taxpayers the best possible deal.

In that same conversation with Senate Judiciary chair Pat Leahy, we also asked about the bizarre jab recently thrown by Leahy's Republican counterpart on the committee, Arlen Specter, who likened Attorney General nominee Eric Holder to Alberto Gonzales.

Leahy shook his head, almost amusedly, and said "a number of Republicans" have told him privately that "there's no way we could vote against Eric Holder -- there's no way we could explain it."

In other words, Specter's apparent crusade against Holder may turn out to be a lonelier effort than it might appear.

We just talked to Senate Judiciary chair Patrick Leahy (D-VT) as he left the official electoral vote count that designated the president-elect, and asked him something that's been on our mind here at TPMmuckraker: How much resources/time will Congress have to address the ongoing lawsuits against Harriet Miers and Josh Bolten for their failure to provide testimony and documents in the U.S. Attorney firings scandal?

The House officially voted to continue its legal efforts yesterday, but Leahy admitted that he was unsure about a timeframe for action in the Senate.

"I don't know," he said. "I actually raised the same question to my staff today."

Leahy explained that several senior members of his staff have taken a leave to help with Barack Obama's transition, a factor that could delay significant action for a time.

In October, Leahy's committee released a report on the firings saga which found that senior White House officials, including Karl Rove, helped compile the list of US Attorneys to be removed, and that former Attorney General Alberto Gonzales participated in a "cover up" to conceal the fact that the firings were politically motivated.

That report accompanied contempt resolutions, against Rove and White House chief of staff Josh Bolten, passed by the committee last year. Rove and Bolten have refused to testify or turn over documents to the committee.

The Bush DOJ may not usually be inclined to hold its own members accountable for criminal wrongdoing. But when the alleged wrong-doing consists of embarrassing the administration by revealing the existence of a program that was illegally spying on the American people, the wheels of justice seem to start turning.

Last month, as we noted at the time, Newsweek unmasked the man, Thomas Tamm, who leaked to the New York Times the news that the NSA had been conducting a secret wiretapping program that was being concealed from the FISA court.

And as the magazine reported, Tamm, who spoke on the record to Newsweek for its story, has been in federal law enforcement's sights thanks to his fateful decision.

Now, DOJ has written a letter to his lawyer -- obtained by Salon's Glenn Greenwald -- asking whether, in light of his decision to speak to Newsweek, Tamm "is willing to reconsider his prior refusal to speak with agents of the FBI and/or to testify before the Grand Jury regarding his knowledge of and/or participation in the disclosure of TSP-related information to [James] Risen, Mr. Lichtblau and others."

(Risen and Lichtblau, of course, are the New York Times reporters who first reported on the program, based on Tamm's leak.)

The letter, signed by Steven Tyrrell, the chief of DOJ's fraud section, continues with what appears to be a veiled threat to subpoeana Tamm:

if I do not hear from you by [January 7], I will assume that Mr. Tamm is not interested in submitting to a voluntary interview or testifying before the Grand Jury.


In its report last month, Newsweek wrote that federal agents have "pursued [Tamm] relentlessly for the past two and a half years ... 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."

That pursuit appears to be continuing -- even as the department declines to bring charges against anyone in connection with the illegal program itself that Tamm revealed.

The Wall Street Journal is reporting on its homepage that, according to prosecutors, Bernard Madoff had $173 million in signed checks made out to his friends and employees in his office desk at the time of his arrest.

News reports immediately after Madoff's arrest revealed that, after confessing the alleged fraud to his sons, he asked them for time to distribute bonuses to his firm's employees.

From the Journal at the time:

Mr. Madoff told them he planned to surrender to authorities, but first, he wanted to pay certain employees portions of the $200 million to $300 million dollars that was left.


And earlier this week, the Associated Press reported:
Prosecutors on Monday said disgraced financier Bernard Madoff violated bail conditions by mailing about $1 million worth of jewelry and other assets to relatives and should be jailed without bail.


Investigators have been working to figure out what Madoff did with the billions he's alleged to have stolen.

Yesterday, the Journal reported that shortly before his arrest, Madoff received $250 million from Carl Shapiro, an early friend and backer, in what was believed to be an effort to stave off his firm's collapse.

Attorney General Michael Mukasey gave his sendoff speech yesterday, and, after the usual boilerplate -- "pleasure to work alongside a group of the most talented legal professionals anyone could ever hope to work with..." -- he made reference to the department's politicization under the Bush administration.

From Mukasey's prepared remarks:

As I suggested a few moments ago, not all of the news over the last 14 months was good news. We heard allegations, and saw revelations, of politically influenced functioning within the Department, principally in hiring, and of other deviations from established procedures and acceptable professional standards. Thankfully, we can draw a measure of satisfaction even from these painful episodes. After all, many of the revelations and solutions came from within the Department itself. And, in those cases where investigations have been warranted, the Department has shown that it is capable of conducting the necessary review of the conduct and practices of its own people and of others.

We have also responded to these troubling allegations by changing policies and procedures. We instituted rules that limit contact between the Department and the White House on ongoing cases; we restored the role of career lawyers in making hiring decisions in the Honors and Summer Law Intern Programs; and we took steps to ensure that hiring and recruitment decisions throughout the Department take place on the merits, and without regard for any improper consideration, be it politics, age, race or sexual orientation.


It's true that Mukasey's tenure hasn't seen the kind of blatant politicization in hiring that we saw under Alberto Gonzales -- and Mukasey's decision to appoint a special prosecutor to determine whether criminal wrongdoing occurred in regard to the US Attorneys firings may help us finally get to the bottom of that issue. But on crucial issues of the day like torture and warrantless wiretapping, he's been far from the model of independence that the Attorney General is supposed to represent.

One sidenote: The press release containing Mukasey's comments was dated: "TUESDAY, JANUARY 8, 2008" Two mistakes by DOJ in one attempt to render today's date! Really gives you confidence in our federal law enforcement system.

We've heard talk from various quarters in recent weeks about the pressing need to re-regulate the financial markets, in response to the SEC's failure in the Bernard Madoff case, and to the broader financial crisis.

And in his interview yesterday with CNBC, Barack Obama added a bit more detail to the picture of what we can expect, and when.

Perhaps most importantly, he suggested that the overlapping "alphabet soup" of financial regulatory agencies -- the SEC, the FDIC, the OTS, and so on -- might be combined into one super-regulator. He signaled he'd be more interested than his predecessor in working with overseas allies on a global financial regulatory system. And he said he'll have a proposal by early spring.

Here's his answer in full:

CNBC: How extensive an overhaul of the financial regulatory apparatus will you propose and support? When will you do that? And do you think there is a global regulatory apparatus that needs to be created? You've got the G-20 coming up in April in London.

Obama: Well, by the time that G-20 meeting takes place, we, I believe, will have presented our approach to financial regulation. I think some international coordination has to be done. But right now, we just have to take care ... (unintelligible) ... and Wall Street has not worked, our regulatory system has not worked the way it's supposed to. So it's going to be a substantial overhaul. We're going to have better enforcement, better oversight, better disclosure, increased transparency. We're going to have to look at this alphabet soup of agencies and figure out how do we get them to work together more effectively. We've got to stop splintering functions in such a way that capital in one form is treated one way and capital in another form is treated another way, because these days in global financial markets, they're all fungible. And there's systemic risks that are possible, whether it's in the form of derivatives or insurance or traditional bank deposits. So we've got to update the whole system to meet the needs of the 21st century. This is an assignment that my team is already beginning to work on and I think that we will have, fairly shortly, a package that we've worked alongside Barney Frank and Chris Dodd, to present to the American people.


In a sign pointing in a similar direction, Obama yesterday announced that he intended to keep Sheila Bair on as chair of the FDIC (pending any massive reorganization of the regulatory system that would abolish the agency, presumably). Though she's a Republican, Bair, who has pushed for stronger efforts to prevent foreclosures, was described by the New Republic as "the high-ranking government official most likely to attack Obama's economic policies from the left."

Six veterans are suing the Central Intelligence Agency and the Defense Department over experiments they were subject to without their consent. The veterans say that although, during the Cold War, they volunteered for tests, they were not told the tests would include chemical and biological weapons and mind-control techniques. (Associated Press)

A Pentagon-focused advisory group will release a report today that's expected to be highly critical of the Defense Department's oversight of its nuclear weapons programs. The report comes on the heels of a separate report issued in September that slammed the Air Force for several embarrassing episodes, including a bomber flying cross country while mistakenly carrying nuclear-tipped cruise missiles. The report will recommend creation of a top-level oversight position. (Associated Press)

The new Congress kicked off its session Wednesday with two votes, one that will require public disclosure of presidential library donations and another making it harder to conceal presidential records from the public record. The library bill will not work retroactively; the document bill will overturn Bush's executive order of November 2001 allowing sitting and former presidents to delay document release for years. (Associated Press)

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In case you were worried, the coming of a new Congress won't stop House leaders from continuing their long-running effort to obtain documents and testimony about the US Attorney firings from White House chief of staff Josh Bolten and former White House counsel Harriet Miers.

As part of the rules package voted on by members yesterday, the House voted to continue its lawsuit against the White House, which seeks to compel Miers and Bolten to testify and hand over the documents, reports the Las Vegas Sun. Citing executive privilege, the two have been defying subpoenas issued by the House Judiciary committee, creating a protracted legal struggle.

Those subpoenas expired with the start of the new Congress, so as part of the rules package, the House passed rules ensuring the subpoenas could be promptly reissued.

Let the legal maneuvering continue!

TPMLivewire