On April 3, DOJ submitted a filing that argued that no citizen had the ability to sue if she had been wrongly wiretapped under Bush’s illegal wiretap program. The government, DOJ claimed, had sovereign immunity that protected it from such suits.

As set forth below, in the Wiretap Act and ECPA, Congress expressly preserved sovereign immunity against claims for damages and equitable relief, permitting such claims against only a “person or entity, other than the United States.” See 18 U.S.C. § 2520; 18 U.S.C. § 2707. Plaintiffs attempt to locate a waiver of sovereign immunity in other statutory provisions, primarily through a cause of action authorized by the Stored Communications Act, 18 U.S.C. § 2712, but this attempt fails. Section 2712 does not erase the express reservations of sovereign immunity noted above, because it applies solely to a narrow set of allegations not presented here: where the Government obtains information about a person through intelligence-gathering, and Government agents unlawfully disclose that information. Likewise, the Government preserves its position that Congress also has not waived sovereign immunity under in FISA to permit a damages claim against the United States.

Today, just 11 days later, we learn that,

As part of [presumably Glenn Fine’s  Inspector General] investigation [into the warrantless wiretap program], a senior F.B.I. agent recently came forward with what the inspector general’s office described as allegations of “significant misconduct” in the surveillance program, people with knowledge of the investigation said. Those allegations are said to involve the question of whether the N.S.A. targeted Americans in eavesdropping operations based on insufficient evidence tying them to terrorism.

So when Eric Holder’s DOJ made expansive claims arguing that no one could sue federal employees for being wrongly wiretapped under Bush’s illegal program, did he know this revelation from Glenn Fine’s investigation into the wiretapping program? When DOJ claimed sovreign immunity, were they thinking not so much of the Jewel plaintiffs, whose claim was focused on the dragnet collection of US person data, but of the Americans targeted in what Glenn Fine’s office considers "significant misconduct"?

Because if Holder did know (and the timing suggests it is quite likely he did), it makes those cynical claims of sovereign immunity all the more disturbing.

Fine’s investigation will contribute to the larger FAA-mandated Inspector General’s for which there is a presumption of openness. In other words, even if this hadn’t been leaked now, in April, it is supposed to be published in unclassified form in July. At that time, it seems, a lot more people are going to have a concrete basis for which to sue under FISA.

And potentially knowing those lawsuits were coming, Holder’s DOJ crafted their bogus sovereign immunity claim.

It’s pretty pathetic that, three years after they first broke the story of the Bush’s illegal wiretap program, Eric Lichtblau and James Risen are still reporting on illegal warrantless wiretapping of Americans.

Their story has two main revelations. First, in preparation for Holder’s first semi-annual certification of the FISA program to the FISC, NSA realized it was not complying with the law.

In recent weeks, the eavesdropping agency notified members of the congressional intelligence committees that it has encountered operational and legal problems in complying with the new wiretapping law, according to congressional officials .

Officials would not discuss details of the over-collection problem because it involves classified intelligence-gathering techniques. But the issue appears focused in part on technical problems in the N.S.A.’s inability at times to distinguish between communications inside the United States and those overseas as it uses its access to American telecommunications companies’ fiber-optic lines and its own spy satellites to intercept millions of calls and e-mails.

One official said that led the agency to inadvertently “target” groups of Americans and collect their domestic communications without proper court authority.

Sort of funny how this illegal collection wasn’t discovered six months ago, while Bush was still in charge, huh?

From the sounds of things, though, this was not just a technical violation–it flouted the few protections included in the FISA Amendment Act for civil liberties (which almost certainly means minimization, because there aren’t many other civil liberties protections in FAA). 

Notified of the problems by the N.S.A., officials with both the House and Senate intelligence committees said they had concerns that the N.S.A. had ignored civil liberties safeguards built into last year’s wiretapping law.

In addition to these ongoing violations of Americans’ privacy, the ongoing Inspector General investigation has discovered more troubling incidents when the warrantless wiretapping program was deliberately used under Bush to target–among other people–a Congressman traveling overseas.

As part of that investigation, a senior F.B.I. agent recently came forward with what the inspector general’s office described as allegations of “significant misconduct” in the surveillance program, people with knowledge of the investigation said. Those allegations are said to involve the question of whether the N.S.A. targeted Americans in eavesdropping operations based on insufficient evidence tying them to terrorism.

And in one previously undisclosed episode, the N.S.A. tried to wiretap a member of Congress without a warrant, according to a U.S. intelligence official with direct knowledge of the matter.

The agency believed that the congressman, whose identity could not be determined, was in contact as part of a congressional delegation to the Middle East in 2005 or 2006 with an extremist who had possible terrorist ties and was already under surveillance, the official said. The agency then sought to eavesdrop on the congressman’s conversations to gather more intelligence, the official said.

The official said the plan was ultimately blocked because of concerns from some officials in the intelligence community about the idea of using the N.S.A., without court oversight, to spy on a member of Congress.

Let’s hope this time around, the knowledge that members of Congress themselves were targets, will spur Congress to fix this once and for all.

TPMM has two posts noting that DOJ has been reluctant to turn over to the Oversight Committee the documents pertaining to its Delayed Prosecution Agreement with AIG, whereas SEC has been more forthcoming.

Last month, as we noted at the time, House Oversight committee chair Ed Towns formally asked the Justice Department for records kept by a government monitor, who since 2004 has had access to high-level internal deliberations at AIG.

But DOJ seems to be dragging its heels.

Today — 15 days after Towns made his legally binding request, and 13 days after the deadline he set for Justice to respond — department spokesman Ian McCaleb told TPMmuckraker: "We’re working on submitting a response." Asked what was causing the hold up, McCaleb declined to elaborate.

At issue is information compiled by James Cole, a lawyer with Bryan Cave, who was placed as a government monitor inside AIG, as part of a 2004 deferred prosecution agreement after AIG had been charged with helping clients avoid taxes. As Towns put it in his letter, Cole "had a seat at the table" for the string of cataclysmic developments at AIG over the last few years. Whatever reports or other information he compiled could therefore be of great value to investigators, like Towns, who are probing the causes of last fall’s financial collapse, which was triggered by the failure of AIG’s Financial Products unit.

There are a couple of data points that might begin to explain DOJ’s reluctance to turn over what it has received from Cole.

First, DOJ signed not one, but two deferred prosecution agreements with AIG. The first, in 2004, pertained to a scheme AIG-FP engaged in with PNC to shift assets off its books. The second, in 2006, pertained to a deal with Gen Re, again to shift assets around to hide risk. Now, both these schemes go back to 2000 and 2001; the actions AIG took did not take place while Cole was monitoring it. Nevertheless, AIG got two bites at the Delayed Prosecution Agreement, which does not appear to be true for any other corporations as of May of last year.  And, as this article on these early scams make clear, the intent was largely the same with both: to hide risk. So you might think AIG’s failure to admit to the second scheme until 2005 would undermine its claim to be cooperating in good faith with the DPA in 2004.

More interesting, though, is the squabble that the Fraud section at DOJ had with the US Attorney’s office in CT a few weeks back.  In the last year, DOJ has won convictions of five of the executives involved in the Gen Re scheme (that is, prosecutions that arose out of the second DPA). Yet the judge in the case actually awarded all the defendants shorter prison terms than federal guidelines suggest. And since then, prosecutors from CT and Fraud seem to have disagreed whether to force the defendants to remain in custody pending appeal.

In December prosecutors from DOJ in D.C. and the U.S. attorney’s office in Connecticut, which handled the case together, filed a motion against giving GenRe’s former CEO bail pending an appeal of his conviction. (The defendant, Ron Ferguson (pictured, left), was later sentenced to two years in prison.) Then in January the government withdrew its motion, and he was granted bail.

Prosecutors repeated the dance in February, when they filed a 25-page motion opposing bail pending appeal for another defendant, a former AIG executive, who had been sentenced to four years in prison. Two weeks ago, prosecutors withdrew the objection. The defendant, Christian Milton (pictured, second from right), and the others will now almost certainly remain free.

Apparently in response to the most recent of these head fakes, the prosecutors from DOJ’s Fraud section withdrew from the case.

After the second about-face by the government, two prosecutors from DOJ’s fraud section, Principal Deputy Chief Paul E. Pelletier and Assistant Chief Adam G. Safwat, withdrew from the case, signaling that there was a spat between Washington and Connecticut prosecutors over the bail issue.

I’m particularly interested in Pelletier’s withdrawal from the case. His name was on the DPAs in both 2004 and 2006, and appears to be the one person who has been involved in the AIG cases from the start. (Note, too, that the several AIG cases involve several jurisdictions, including at least ED VA, Indiana, and CT, so the federal focus seems key to the case.) And of course, Hank Greenberg is understood to be one of the unindicted co-conspirators in this case. Just as significant, I think, the defendants in this case repeatedly tried to get evidence that might have shown how widespread the practices they were indicted for were in AIG–and that various law firms involved should have or did discover the schemes earlier on. In some cases, the defendants asked for materials right up through the restatement of earnings in this case in 2005–that is, for a time when Cole was already monitoring AIG. For the most part, these requests for discovery were denied.

Now, none of this explains why DOJ would be squeamish about what it got from Cole. It may be they’re still protecting a case against Greenberg. It may be DOJ’s own turmoil with regards to AIG, particularly with Pelletier having withdrawn from at least this case against AIG.

But it seems there are a number of potential reasons why DOJ would want to shield what they should have known about AIG going back five years. 

In her post on the changing plans to release stress test results, Yves congratulated the Administration for planting a story that blamed everything on Goldman.

Back to the New York Times:

While all of the banks are expected to pass the tests, some are expected to be graded more highly than others. Officials have deliberately left murky just how much they intend to reveal — or to encourage the banks to reveal — about how well they would weather difficult economic conditions over the next two years….

Yves here. That means this is being negotiated. Wonder if the Times story was leaked to box the banks in and (as you will see later) blame it on Goldman. If so, this crowd would be playing a much smarter game than I have given them credit for (the "Goldman made us do it" part, the leak alone is a more predictable move). And this story was clearly planted. The Times reports it came from "senior officials"; as we noted, the Journal also has a story up.

Keep that in mind as you review coverage–both in Sanger’s story on the stress tests, and in a completely separate story–of FDIC backed lending. Sanger sort of throws the reference in at the precise point most designed to blame Goldman Sachs for forcing the Administration’s hand on the stress tests.

The Goldman move also puts pressure on the administration to decide what conditions will apply to institutions that return their bailout funds. It is unclear if Goldman, for example, will continue to be allowed to benefit from an indirect subsidy effectively worth billions of dollars from a federal government guarantee on its debt, a program the Federal Deposit Insurance Corporation adopted last fall when the credit markets froze and it was virtually impossible for companies to raise cash.  In ordinary times, regulators do not reveal the results of bank exams or disclose the names of troubled banks for fear of instigating bank runs or market stampedes out of a stock. But as top officials at the Treasury and the Federal Reserve Bank focused on the intensity with which the markets would look for signals about the nation’s biggest banks at the conclusion of the stress tests, the administration reconsidered its earlier decision to say little.

“The purpose of this program is to prevent panics, not cause them,” said one senior official involved in the stress tests who declined to speak on the record because the extent of the disclosures were still being debated. “And it’s becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum.”

Shorter Anonymous Senior Official: "Goddamn it Goldman, you risk starting a panic here! And as punishment, we’re going to reconsider the terms of that FDIC backing."

And to explain what that means, the NYT provides the accompanying story (and the handy graphic, which shows up in both stories online). 

Goldman Sachs, you see (and Bank of America, and JP Morgan Chase, and Citi, and Morgan Stanley, and Wells Fargo) have been benefiting from higher credit ratings than they themselves merit because the FDIC has been backing their loans to the tune of billions of dollars. 

Banks have been benefiting from an indirect subsidy adopted by the federal government at the height of the financial crisis last fall that allows them to issue their debt cheaply with the backing of the Federal Deposit Insurance Corporation.

That debt — more than $300 billion for the banking industry so far — helped otherwise cash-strained banks to keep their businesses running even when it was virtually impossible for other companies to raise funds. The program will continue to bolster scores of banks through at least the middle of 2012.

[snip]

Rather than relying on a direct infusion of taxpayer money, the agency is helping the banks raise debt from private investors by endowing them with the equivalent of an AAA rating. If any of the banks relying on the guarantees ran into trouble, the F.D.I.C. would make good on those bonds.

Gosh. The ability to access credit with an artificially high credit rating? I bet Chrysler would love that boondoggle right about now, huh JP Morgan Chase (and note, three of the other beneficiaries–Citi, Morgan Stanley, and Goldman Sachs–are also Chrysler creditors)?

The story on the FDIC boondoggle quotes Goldman CFO David Viniar trying to downplay the benefit of the FDIC backing, along with others calling it an "invaluable" subsidy from the government. It’s worth it to click through and see Viniar squirm, really it is.

Now, frankly I’m most interested in this from the same perspective that Yves is. These two stories, taken together, appear to be a welcome new tactic from the Administration, to start laying out all the value the government has given the banksters. It’s time to make these banks squirm with the recognition that they’re deadbeats for a change.

The Obama Administration has reversed its approach from earlier this week and last, and decided it will reveal the results of stress tests. But it warns that it will be grading on a curve to make sure all the zombie banks can pass into the next grade and eventually graduate (rumor has it that JP Morgan Chase also wants to be cleared to play football).

The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.

While all of the banks are expected to pass the tests, some are expected to be graded more highly than others.

Understand, though, at least as David Sanger tells it, the Adminstration is not revealing the results of the stress test because it decided transparency is good. Rather, it is doing so because Goldman Sachs and Wells Fargo forced its hand.

The administration’s hand may have been forced in part by the investment firm Goldman Sachs, which successfully sold $5 billion in new stock on Tuesday and declared that it would use the proceeds and other private capital to repay the $10 billion it accepted from the government in October.

That money came from the Troubled Asset Relief Program, or TARP, and Goldman’s action was seen as a way of predisclosing to the markets the company’s confidence that it would pass its stress test with flying colors.

[snip]

Citigroup and Bank of America made positive statements about the current quarter weeks ago, and last week, John Stumpf, the chief executive of Wells Fargo, said the bank was in good shape and expected a $3 billion profit this quarter. The Wells Fargo statement appeared to frustrate some Treasury officials, and regulators clearly fear it will be more difficult for them to issue negative assessments of banks that have already proclaimed that they are in good shape.

A Wells Fargo spokeswoman, Janis Smith, said the company would not comment on interactions with its regulator.

At this point, the Obama Administration needs to realize something else about their plans to bring back the banking industry. These banksters believe they will be and can be immune from regulation. They are treating their gravy train and regulator like a doormat. 

So it’s probably a good idea to impose the new regulations now, before doling out more money in PPIP. Because until that happens, these banks will be doing nothing but gaming the system. 

Update: See Yves at Naked Capitalism on this.  She’s particularly impressed that the Administration planted a story to blame this all on Goldman Sachs. 

Just to lay out a few details based on this article explaining that Obama continues to waver on what parts of the 2005 Bradbury torture memos to reveal. (h/t Steve)

1. According to the WSJ,  it’s not the description of water-boarding that the CIA wants to hide. It’s the description of how the CIA threw people against the wall.

Among the details in the still-classified memos is approval for a technique in which a prisoner’s head could be struck against a wall as long as the head was being held and the force of the blow was controlled by the interrogator, according to people familiar with the memos.

2. We know from the ICRC report this technique had been used, three years before Bradbury wrote his OLC memos, with Abu Zubaydah.

I was taken out of my cell and one of the interrogators wrapped a towel around my neck, they then used it to swing me around and smash me repeatedly against the hard walls of the room.

[snip]

When I was let out of the box I saw that one of the walls of the room had been covered with plywood sheeting. From now on it was against this wall that I was then smashed with the towel around my neck. I think that the plywood was put there to provide some absorption of the impact of my body. The interrogators realized that smashing me against the hard wall would probably quickly result in physical injury.

(According to the report, five more of the High Value Detainees described the same treatment.)

3. We know that Abu Zubaydah now has mental injuries and–apparently–cannot stand trial.

The WSJ quotes intelligence officials claiming that, if these details are made public, it’ll be a propaganda tool for the terrorists.

Intelligence officials also believe that making the techniques public would give al Qaeda a propaganda tool just as the administration is stepping up its fight against the terrorist group in Afghanistan and Pakistan

But these details have already been made public, in the ICRC report and elsewhere. What the intelligence officials want to hide is that–even after they did this damage to Abu Zubadaydah (though before the ICRC called it torture in 2007)–Steven Bradbury wrote an OLC memo declaring this treatment legal.

Whoops. That little investment in fraudster and Iranian ally Ahmed Chalabi keeps looking like a worse and worse idea, huh, Bush? (h/t Tom Ricks)

[Al-Hayat]: What would you tell George Bush if you met him, in a party for example?

[Chalabi]: I would say: thank you for toppling Saddam but I am displeased with what you did afterwards.

[Al-Hayat]: Do you believe that it is possible for a superpower to commit such terrible mistakes?

[Chalabi]: Yes, very possible.

[Al-Hayat]: If you want to describe George Bush, then how would you describe him?

[Chalabi]: A man with very little skill and knowledge.

[Al-Hayat]: He did Iran a great service by toppling Saddam?

[Chalabi]: Iran benefited from toppling Saddam. Bush didn’t mean to do it a favor but it was clear that Iran would benefit from Saddam’s fall. I am convinced that Saddam would not have fallen except for an implicit agreement between America and Iran.

But my favorite part is where Ahmed Chalabi takes credit for getting George Tenet fired.

[Chalabi]: I accused the director of the CIA George Tenet and I said that he was behind the [May 2004 raid on Chalabi’s compound] despite the fact that I received a letter through one of my friends that stressed that I shouldn’t attack the CIA. When Tenet was ousted 10 days later, Hillary Clinton, a senator at the time, said that Ahmad Chalabi was behind Tenet’s dismissal. When I was asked about this, I answered: I am in Al-Najaf, how could I oust him?

Not that I disbelieve Chalabi had a part (though remember that Chalabi ally Dick Cheney had other reasons to want to take Tenet out in the days after he got questioned in the Plame leak).  I’m just amused that the notion that Chalabi could get the Director of CIA fired is plausible enough for this consummate fraudster to claim.

Atrios and others have been having some perverse fun tracking the number and frequency of banks getting eated. But there’s another disturbing trend passing largely unnoticed (save for its more spectacular examples): the number of Ponzi schemes the SEC busts up.

Counting just the schemes the SEC issues a press release on and labels a Ponzi scheme (and using the SEC’s most conservative estimate for the size of the scheme), there have been 19 Ponzi schemes in the last year, amounting to $17,848 million dollars in fraud (Bernie Madoff counts for the bulk of that–$17 billion–and I did not include Stanford’s scheme, since SEC has not used the word "Ponzi" in their public releases on it yet). 

Date		Name	Amount (000s)
4/13/09		Maximum Return Investments	23,000
4/9/09		Richard Copeland	35,000
4/8/09		Shawn Merriman	17,000
4/6/09		Overseas China Fund	50,000
4/1/09		Gemini Fund	50,000
3/26/09		Millenium Bank	68,000
3/11/09		Equity Investment Management and Trading	40,000
2/19/09		Billion Coupons	4,400
1/15/09		CRE Capital Corporation	25,000
1/8/09		Joseph Forte	50,000
12/30/08		Creative Capital Consortium	23,000
12/11/08		Madoff	17,000,000
11/12/08		Biltmore Financial	25,000
10/30/08		Bottom Line and Summit	30,000
10/6/08		Norman Hsu	60,000
9/16/08		Cornerstone Capital Management	15,000
9/15/08		PIPE Investments	52,700
8/11/08		Wextrust	255,000
5/2/08		Safevest	25,000
			17,848,100

And in an April 1 press release, the SEC said it had shut down 75 Ponzi schemes in the last two years (it only released a press release for one more Ponzi scheme in that time). In other words, the SEC has actually been shutting down more Ponzi schemes than the number of banks the FDIC eated. 

Now, a lot of those schemes target a particular potentially vulnerable or trusting class of people. (One Ponzi scheme targeted the deaf, for example, and others targeted particular ethnic groups.) 

Even accounting for the ways these schemers have instilled trust among their targets, this is still a big number of Ponzi schemes. Doesn’t anyone look for the tangible product at the end of a money-making scheme anymore?

Bob Corker attacked the US automakers for months, arguing they had a failed business model. But as soon as bankruptcy looked likely, Corker suddenly remembered many of his constituents–the GM workers at Tennessee’s Spring Hill plant–work for one of those "failed" automakers. Since then, he’s been pitching the relative merits of Spring Hill. He has gone so far as to suggest that if anything were to happen to Spring Hill, it could only be because of politics.

With sweeping new power the White House will be deciding which plants will survive and which won’t, so in essence, this administration has decided they know better than our courts and our free market process how to deal with these companies.

It’s been a long time since Washington has seen the kind of kowtowing that’s about to occur among members of Congress trying to curry favor with the administration to keep plants in their states open, and it will be interesting to see if the administration makes these decisions based on a red state and blue state strategy or based on efficiency and capable, skilled workers at each plant. If they use the latter, our GM plant in Spring Hill, Tennessee should do very well.

It’s a nice narrative for Corker, one that absolves him of  any responsibility for talking the company into bankruptcy. Yet there’s a detail Corker doesn’t want you to know. 

It’s that the Spring Hill facilities have already been mortgaged away as collateral to secure credit.

Note that GM has approximately $29 Billion in debt; $7 Billion of which is secured by Saturn assets (including Spring Hill, TN plant). The government’s $13.4 Billion loan to GM is also considered secured debt, with a vast amount of assets up as collateral. [my emphasis]

In other words, politics will have nothing to do with the decision on whether or not to close Spring Hill (not that any of you would believe a word Corker says, anyway). That decision will be left entirely up to whatever buyer comes along and buys it, because it will be the first thing liquidated in bankruptcy.

I guess Corker should have thought of that before he joined the plantation caucus, huh?

Hiring someone who doesn’t know the difference between the Bay of Pigs and the Cuban Missile Crisis to do crisis communications for big evil corporations?

I’ve got a feeling this may end badly. But we might get some laughs along the way.