For reasons I explained here, I’m not going to do a full liveblog of Hank Greenberg’s appearance before Oversight today, though will keep half an eye on it. If you want to follow along, it’s on CSPAN3 and this Committee stream (which I can’t get to work).

Most interesting detail, thus far, is that Issa insisted that Greenberg’s lawyer be sworn in, as well as Greenberg. 

Greenberg’s complaining that by nationalizing AIG, it chased employees away. He’s saying it needs a new management team with experience in insurance (as if Edward Liddy doesn’t have insurance experience), emphasizing that said management team needed an internationalist focus, bc that’s what AIG is involved in. He’s arguing too that the govt should just limit its ownership to 15% so that private investors will get involved. He did say that AIGFP should be walled off–that’s a stance I suspect is smart.

Issa just asked Greenberg about the Ferguson case (involving Gen Re) in Connecticut, suggesting Greenberg was an unindicted co-conspirator. Greenberg’s name is all over that, but his lawyer wants to claim he was never tied to that. Also, apparently Greenberg has received a Wells Notice from the SEC. His lawyer didn’t explain what the Wells Notice pertained to.

Hank says to Kanjorski that he is a big fan of transparency. Issa takes that opportunity to introduce an SEC settlement showing that under Hank AIG was engaged in sham reinsurance schemes (this is the Gen Re thing). 

Lynch: The Maiden Lane CDS "are in the toilet."

Hank: Maiden Lane III terrible deal for the taxpayer. Purchased at par, even though the marks on those CDOs way down. 

Hank trying to assure Lynch that it was just chance that they picked OTS as regulator, rather than someone tougher. 

Patrick Kennedy just said he’s going to submit a bill to repeal the repeal of Glass-Steagall!!!

Hank had several conversations with Baxter NYF President, and two conversations with Geithner.

Hank Greenberg will testify before the House Oversight Committee about the AIG collapse today at 10 AM.

I’m uncertain that it’ll be useful in unpacking what happened with AIG at all. If Greenberg’s planned testimony from last fall is any indication (he called in sick for an October 7 AIG hearing, but had already submitted his testimony), he will say that the CDS before he left were hedged properly, not in subprime mortgages, and watched closely by management (that is, by him); but all that changed after he was forced out.  

AIG’s strategy, accordingly, was to look for opportunities in businesses that benefitted from its AAA rating, strong capital base, risk management skills, as well as the intellectual capital needed to manage such diversification.

That led to the creation of AIGFP in 1987. At that time, the derivative market was small and growing. From the beginning, AIG’s policy was that AIGFP conduct its business on a "hedged" basis – that is, its net profit should stem from the differences between the profit earned from the client and the cost of offsetting or hedging the risk in the market. AIGFP would therefore not be exposed to directional changes in the fixed income, foreign exchange or equity markets.

AIGFP, at that time, reported directly to me and Ed Matthews, Senior Vice Chairman, and later to William Dooley, Senior Vice President, supported by AIG’s credit risk and market risk departments. When I was AIG’s CEO, AIG management closely monitored AIGFP and its risk portfolio. AIGFP was subject to numerous internal risk controls, including credit risk monitoring by several independent units of AIG, review of AIGFP transactions by outside auditors and consultants, and scrutiny by AIGFP’s and AIG’s Boards of Directors. Every new type of transaction or any transaction of size, including most credit default swaps, had to pass review by AIG’s Chief Credit Officer.

[snip]

AIGFP reportedly wrote as many credit default swaps on collateralized debt obligations, or CDOs, in the nine months following my departure as it had written in the entire previous seven years combined.

Moreover, unlike what had been true during my tenure, the majority of the credit default swaps that AIGFP wrote in the nine months after I retired were reportedly exposed to sub-prime mortgages. By contrast, only a handful of the credit default swaps written over the entire prior seven years had any sub-prime exposure at all.

What I am interested in the hearing for is the squabble it has elicited both between Greengerg and AIG, and between Ed Towns (the Chair of the Committee) and Ranking member Darrell Issa.

AIG has already released a statement rebutting some of Greenberg’s claims–notably about whether or not the CDS were hedged properly before he left.

In a statement, AIG said that when Mr. Greenberg left in March 2005, the unit had already sold about half of the swaps that caused the biggest problems. AIG added that AIG’s exposure under the contracts wasn’t hedged.

To which Greenberg seems to backing off his earlier statement that everything was hedged properly.

Mr. Greenberg said the amount of exposure AIG faced under the contracts when he left was beside the point. When AIG lost its triple-A credit rating, which came after his departure as CEO, he would have hedged the exposure and tried to modify the collateral requirements, he said in the interview.

Which has led Darrell Issa to try to get Towns to cancel the hearing–or challenge Greenberg’s statement ahead of time.

The committee’s ranking minority member, Rep. Darrell Issa (R-Calif.), urged Rep. Towns in a letter late Wednesday to "reconsider" allowing Mr. Greenberg to testify, "or at the very least, join me in publicly acknowledging the veracity of his testimony is questionable."

Though Issa may be just as anxious to prevent Towns’ questions about why AIG got multiple deferred prosecution agreements rather than real criminal investigations.

In November 2004, the Bush Justice Department and the Securities and Exchange Commission agreed not to prosecute AIG for allegedly helping companies fudge their books. In exchange, AIG agreed to host a government-appointed auditor in company meetings. At the time, Greenberg said it brought "finality to the claims raised by the SEC and the Department of Justice."

Towns said that Greenberg should be able to identify Bush administration officials involved in the decision-making around the settlement. Towns added the committee wants to know what Bush administration regulators knew about AIG’s credit default swaps and other highly risky positions that brought the company down.

Asked if he would be directly pursuing Bush administration officials, Towns said: "No doubt about it. That’s the reason I want to talk to Greenberg first. He might even point some folks out. That’s of great interest to us."

I always get kind of woozy when I sort of agree with Issa. But it sure seems like Greenberg plans to use his appearance today to pitch schemes that will increase the value of AIG stock (he remains a big stock-holder) by going after the CDS counterparties.

In a little noticed detail from Monday’s verdict on the auto industry, Obama named Ed Montgomery Director of Recovery for Auto Communities.

Today, the President appointed Ed Montgomery, former Deputy Secretary of the Labor Department and current Dean at the University of Maryland, to become Director of Recovery for Auto Communities and Workers. Dr. Montgomery has more than 25 years experience working on issues related to worker training and local economic development and has worked first hand with State and local government agencies and nonprofits in Michigan and Ohio on strategies to revitalizing areas hit by job loss.

In his new role, Dr. Montgomery will bring all parties – workers, firms, unions, other private sector employers, community-based organizations, state and local governments, and foundations – to the table to maximize communication and cooperation and to develop innovative strategies for relief and recovery. He will ensure that communities and workers can take full advantage of all available resources and to ensure that the funds are distributed quickly, efficiently and equitably He will work with the Administration, relevant Governors and Congressional leaders to launch new executive and legislative initiatives to support these distressed communities and help them retool and revitalize their economies. He will identify and pursue all possible opportunities, including for example,
initiatives to:

• Maximize the effectiveness of Recovery Act funds for new and more diverse economic development for new jobs, business and industry through various means including local infrastructure, housing, education and new industry.
• Deploy rapid response unit to communities facing plant closings to both meet immediate needs and to develop strategies for new job growth.
• Extend Trade-Adjustment-Assistance (TAA) to the auto industry, including retraining, healthcare extensions, income support and wage insurance.
• Attract major defense, research, green industry and other project to the region. Channel Workforce Investment Act (WIA) and other emergency grant funds to the region.
• Work with stakeholders to develop new legislative efforts to direct emergency support to affected communities and regions, and bring new jobs and economic opportunities to these areas. 

Today, Montgomery met with Governor Granholm (and, after this presser, with Detroit Mayor Ken Cockrel) to talk about the needs of Michigan’s blighted auto communities.

Montgomery strikes me as a good choice. Unlike Steven Rattner, Montgomery has the background to understand Michigan’s issues (and once taught at MSU), and the bureaucratic chops to actually do some good.

As he explained in the video above, his wife’s family is an auto family. Granholm also said he drives an American car–another distinguishing feature from most of those Obama chose to decide Detroit’s fate–though she didn’t say what kind. 

Montgomery’s introduction, above, provides about as much detail as he was ready to give. He’s here (48 hours after being appointed) to listen, at this point.

The bulk of the questions reflected the urgency of the situation in ways that weren’t designed to elicit real information: Will you lower the unemployment rate in Michigan? What can you do before Chrysler goes into bankruptcy in thirty days? Do you realize that if GM goes under, Michigan’s unemployment may double? What can you do in thirty days? How many cars do they have to sell not to get put into bankruptcy in 30 days? (Many of these questions seemed both unclear on the process going forward for Chrysler and GM, not to mention who is making those decisions; it’s not Montgomery, it remains Rattner.)

To these questions, Montgomery repeated that he’s working for those who have already been laid off as well as anyone who might be laid off in the future.

The most interesting question asked Montgomery to compare this situation in Michigan with the experience in Katrina. 

I didn’t get a chance to ask my question–which I will try to follow up on. But it would have been, "Will you be part of the larger discussions on health care reform?" After all, if we don’t pass a real health care reform package–as opposed to the one without a public option currently being championed by Blue Dogs–then we’ll be right here in 6 months talking about the imminent bankruptcy of Ford. (And of a bunch of other companies around the country.)

In any case, I liked Montgomery. He seemed way more measured than the panicked Michiganders asking him the questions. But it remains to be seen whether this position will work. After all, aren’t our elected representatives supposed to be able to pave the way with the Federal government for us? What does it say–Constitutionally and practically–that Michigan and other auto communities will have a designated champion within the Executive Branch, even as the Executive Branch is dismantling our largest industry?

By now, you’ve heard Sy Hersh’s explanation for why he hasn’t yet gotten the flood of revelations about the Bush Administration he had expected.

HERSH: I’ll make it worse. I think he’s put people left. He’s put people back. They call it a stay behind. It’s sort of an intelligence term of art. When you leave a country and, you know, you’ve driven out the, you know, you’ve lost the war. You leave people behind. It’s a stay behind that you can continue to contacts with, to do sabotage, whatever you want to do. Cheney’s left a stay behind. He’s got people in a lot of agencies that still tell him what’s going on. Particularly in defense, obviously. Also in the NSA, there’s still people that talk to him. He still knows what’s going on. Can he still control policy up to a point? Probably up to a point, a minor point. But he’s still there. He’s still a presence. [my emphasis]

This is not remotely surprising. We discussed the likelihood this was happening just days after Obama took over, as dead-enders tried to spike Obama’s promise to withdraw from Iraq. And there has been a ton of reporting on the burrowing of loyal appointees that Cheney accomplished before leaving.

But Hersh’s report that such stay behind includes NSA is of particular concern.

Not only does this raise concerns about the warrantless wiretap program and its use (particularly given reports that the NSA was segregating contacts with journalists, like Hersh, who has lots of contacts in the Middle East). But it raises concerns about whether or not Cheney sustains the practice–publicized during the John Bolton confirmation hearings–of getting the US person end of NSA intercepts (I have no idea whether Cheney would do this through dead-enders, whether he’s getting that much more directly, or whether he’s getting help from Israelis involved in our wiretap programs). A number of people suspected that Bolton had used NSA intercepts to undermine North Korean diplomacy (among other things). Such a practice obviously fits Cheney’s MO.

Yet more reason we need to reassess our use of electronic wiretapping  within the US.

I’ve been meaning to point to Andy Stern’s call to give Ken Lewis, CEO of Bank of America, the same treatment Obama gave Wagoner–the boot.

Both Rick Wagoner and Ken Lewis sunk large public companies — putting thousands out of work and toppling the American economy — while accepting billions in taxpayer bailouts. Yet only Wagoner got a pink slip. It’s time for Treasury Secretary Geithner to replace Ken Lewis as CEO and let real reform take hold at Bank of America.

And Change to Win’s petition calling to fire Lewis. 

But this tidbit–courtesy of Howie–will really make you want to oust Ken Lewis.

In its last days as an independent company, Merrill gave performance-based bonuses exclusively to employees earning $300,000 a year or more and holding a rank of vice president or higher, according to their financial statements. $3.62 billion was handed out to these executives – a sum equal to 36.2 percent of the $10 billion in taxpayer funds that were allocated to Merrill as part of the Troubled Asset Relief Program (TARP) before the bonuses were paid.

The company had been failing as a result of misadventures in the now infamous mortgaged-backed securities market which began crumbling with the decline of home values as the bubble burst.

The performance bonuses were determined by Merrill’s compensation committee on December 8, 2008, before Merrill revealed that it lost $15 billion in the final three months of 2008, unusual timing according to court documents filed by New York Attorney General Andrew Cuomo in an ongoing suit against Merrill’s former CEO.

In prior years, Merrill paid performance bonuses of this type after the end of the year, in January or February of the next year.

[snip]

The questionable timing and the amounts of these bonuses were not revealed to Bank of America shareholders when they voted to acquire Merrill. These facts raise questions about what government officials knew about the bonuses and when they knew it, according to Kucinich’s letter. 

$3.62 billion would keep all of GM in business for a month or two. But you and I are dumping that on a bunch of Merrill Lynch guys who brought down our finance system. 

Remember how when Congress passed the FISA Amendment Act last year, they required that the Inspectors General of the various agencies involved in the warrantless wiretapping produce a report on the program? They did an interim report–basically describing the scope of the report–last September (and produced in unclassified form last November). It took Secrecy News pulling teeth to get this released (six months after the fact), but here is the interim report.

General Scope

I’m going to show you the whole scope-related section, then unpack it line by line.

The DoJ IG is completing work on a broadly-scoped review of the Program, which the DoJ IG has been conducting over the past 18 months. In accord with its normal procedures and consistent with classification requirements, the DoJ IG will release its report when completed. The DoJ IG’s review examines the involvement of the DoJ and the Federal Bureau of Investigation (FBI) in the Program, including the use of and control over Program information; compliance with relevant authorities governing the Program as these authorities changed over time; and the impact and effectiveness of Program information on DoJ’s and FBI’s counterterrorism efforts. The review also describes various legal assessments of the Program, legal and operational changes to the Program, any use of Program information in the FISA process, and the transition to Foreign Intelligence Surveillance Court orders related to the Program.

The NSA IG’s review will examine the evolution of the Presidential authorization as it affected NSA, the technical operation of the Program, the preparation and dissemination of the product of the Program, and communications with and representations made to private sector entities. The review will address access by NSA to legal reviews and information concerning the Program and will also examine NSA’s interaction with the Foreign Intelligence Surveillance Court and the transition of Program activities to operations under court orders. The review will also include a description of NSA’s oversight of the Program. To conduct the review of the Program, the NSA IG will both initiate new work and draw upon a substantial body of completed evaluations.

The DoD IG will examine the involvement of the Office of the Secretary of Defense in the establishment and implementation of the Program.

The ODNI IG will examine the involvement of DNI senior leadership in the Program and DNI communication with private-sector entities concerning the Program. The ODNI IG will also examine the role of the National Counterterrorism Center (NCTC) in drafting and coordinating the threat assessments and legal certifications supporting periodic reauthorization of the Program; NCTC’s role in identifying targets and tasking Program collection; and NCTC’s use of the product to support counterterrorism analysis.

The CIA IG will examine CIA’s participation in the program, including the Agency’s role in preparing the threat assessments and legal certifications supporting periodic reauthorization of the Program.

Three points about the general scope. First, it’s clear from this description that CIA had the least claimed involvement in the program of the five agencies. And CIA’s former IG, John Helgerson, has just resigned (more detail–thanks for the reminder, MD and bmaz). Yet CIA’s IG, John Helgerson, is managing the reporting for the report (if I’m not mistaken, Helgerson CIA’s IG is less independent, at least in theory, than the other IGs). So they may be shielding certain information by having the least knowledgable agency do this review. 

Also, note the absence of Treasury or Office of Foreign Asset Contol. From the al Haramain suit, we know that OFAC was involved–at least tangentially–in the program (and my have been involved in preparing threat assessments). But we get no word on Treasury’s involvement in the program, if any.

And finally, remember the rules about IG reports in general–that they can’t require cooperation from the White House–and this report specifically–that telecom involvement is off limits. So we’re not going to learn some of the most important bits about this program, by design. 

DOJ Scope

And here’s the (almost) line by line:

 The DoJ IG is completing work on a broadly-scoped review of the Program, which the DoJ IG has been conducting over the past 18 months.

DOJ started this in March 2006, not long after the discovery of the program.  Remember, Bush tried to spike this investigation by refusing clearance for the investigators in OPR.

The DoJ IG’s review examines the involvement of the DoJ and the Federal Bureau of Investigation (FBI) in the Program, including the use of and control over Program information; compliance with relevant authorities governing the Program as these authorities changed over time; and the impact and effectiveness of Program information on DoJ’s and FBI’s counterterrorism efforts. The review also describes various legal assessments of the Program, legal and operational changes to the Program, any use of Program information in the FISA process, and the transition to Foreign Intelligence Surveillance Court orders related to the Program.

Several points here. First, DOJ OIG is investigating whether any information from the program got dumped into FISA warrants later. I’m also curious about the "compliance with relevant authorities," because it suggests that even in an illegal program there may have been abuses (remember how many reports Glenn Fine has done about FBI’s abuse of National Security Letters–this is right up his alley).

The big one, of course, is this: "use of and control over Program information." At least last September, Fine was investigating (and had been for a long time) whether or not the information collected pursuant to counterterrorism was used as such. Lucky for us, Fine is the standout among Bush-era IGs.

And then the parallel to OPR’s investigation of the torture memos (and I believe this, too, is conducted in conjunction with OPR).

 The review also describes various legal assessments of the Program, legal and operational changes to the Program,

Fine is investigating the OLC memos and how they changed as Cheney’s dreams got wider and wider. 

NSA Scope

Like Fine, NSA’s IG (George Ellard) is investigating how the program evolved and how the authorization evolved. 

The NSA IG’s review will examine the evolution of the Presidential authorization as it affected NSA, the technical operation of the Program, the preparation and dissemination of the product of the Program,

And it’ll tell us–or Congress, at least–the technical aspects of the program. 

The review will address access by NSA to legal reviews and information concerning the Program and will also examine NSA’s interaction with the Foreign Intelligence Surveillance Court and the transition of Program activities to operations under court orders.

It strikes me that the NSA wants to tell Congress that it didn’t have access to John Yoo’s crappy memos authorizing this. And that it wants to talk about how it worked with FISC–perhaps to retain credibility lost because of this program.

And note that NSA, like DOJ, wants to talk about the transition period. There’s something that happened in that transition period (the first half of 2007, basically) that they want to tell us about.

Also like DOJ, NSA had started on this process before Congress ordered it to do a report.

To conduct the review of the Program, the NSA IG will both initiate new work and draw upon a substantial body of completed evaluations.

DOD Scope

DOD’s side of the investigation is rather limited. 

The DoD IG will examine the involvement of the Office of the Secretary of Defense in the establishment and implementation of the Program.

Though this may be interesting in any case for two reasons. First, because Rummy brought John Poindexter in to do Total Information Awareness under DARPA in the first place.  And because DOD was prohibited from using funds to do such data mining starting in 2003. But DOD’s IG department is not as honest as DOJ of CIA IG, so who knows what we’ll actually learn?

ODNI and CIA Scope

Now, the most curious aspect of the ODNI scope is that ODNI was only established by statute in December 2004–after some of the more troublesome known aspects of the warrantless wiretap program.

The ODNI IG will examine the involvement of DNI senior leadership in the Program and DNI communication with private-sector entities concerning the Program.

So what will we learn about communication with telecoms, when most of the really pressing communcications happened earlier, in 2001 and 2002, when establishing the program, and 2004, when the telecoms were asked to wiretap based on the say so of President Bush and Gonzales alone? Do we get to learn about those earlier communications? 

And then there’s this similar scope for both ODNI and CIA.

The ODNI IG will also examine the role of the National Counterterrorism Center (NCTC) in drafting and coordinating the threat assessments and legal certifications supporting periodic reauthorization of the Program; NCTC’s role in identifying targets and tasking Program collection; and NCTC’s use of the product to support counterterrorism analysis.

The CIA IG will examine CIA’s participation in the program, including the Agency’s role in preparing the threat assessments and legal certifications supporting periodic reauthorization of the Program.

Well, this is news. Apparently, the NCTC and CIA (but not the OFAC, if you believe this scope) prepared threat assessments and legal certifications supporting this program. It will be interesting to see how those reports were used. In his declarations in support of state secrets in the al Haramain case, then DNI John Negroponte talked a lot about hiding the true nature of al Qaeda for his rationale for state secrets. 

Well, given that it took 6 months to get the scope of this report published, I’m not holding my breath for the report (due in July). But this gives you some idea of what we might learn, come July September December next March.

Darrell Issa and the Republicans on the Oversight Committee are complaining that their committee got only a bigger-than-inflation but smaller-than-other-committees 3.43% increase in funding this year.  Oversight still has the second largest budget of any House Committee, with $22.3 million.

In what some might call a great example of "what goes around comes around," Republican members of the House Oversight and Government Reform Committee (OGR) are up in arms over what they consider a paltry budget increase for the panel tasked with tracking the operations and spending of the federal government. Democrats say they’re practicing fiscal restraint and that oversight will continue no matter who occupies the White House.

Committee budgets are set by the Committee on House Administration, responsible for the day-to-day operations of the House of Representatives. The panel, chaired by Rep. Robert A. Brady (D-Pa.), gave OGR a 3.43 percent budget increase this year, less than the 10.9 percent bump it requested. The full House is scheduled to vote on the budget increases later this week. OGR’s $22.3 million budget is second only to the House Energy and Commerce Committee.

"We have the second largest budget, but that number is deceiving: we have the largest staff as well," said Kurt Bardella, spokesman for OGR’s Republican members.

I thought Republicans didn’t want any Federal money to go to governance. So why does Issa want an inflation-busting increase?

If Issa weren’t such an asshole, I might be all in favor of an increase in oversight. But seeing as how two months into his tenure as Ranking Member at Oversight, he has already proven to a hypocritical, fairweather advocate of oversight, I have just this to say to Issa:

Darrell? Elections have consequences.

Dick Durbin and Sheldon Whitehouse want to know why the Office of Professional Responsibility gave OLC a chance to review their report on John Yoo’s and Steven Bradbury’s torture memos.

Just last week, they got a response from DOJ on the process the OPR review has gone through, revealing that the report already integrated comments from Mukasey and "OLC" (whose acting head was Steven Bradbury), and was giving Bradbury, Yoo, and Jay Bybee an opportunity to comment, as well. It will take "substantial time" before this review process is done, DOJ says.

OPR has completed its investigation of this matter and in late December 2008, provided the draft report to Attorney General Mukasey and invited comment. Attorney General Mukasey shared the report with Deputy Attorney General Filip and OLC. Thereafter, Attorney General Mukasey, Deputy Attorney General Filip and OLC provided comments, and OPR revised the draft report to the extent it deemed appropriate based on those comments.

In addition, during the course of the investigation, counsel for the former Department attorneys asked OPR for an opportunity to review and comment on the report prior to any disclosure of its results to Congress or the public. Attorney General Mukasey and Deputy Attorney General Filip likewise requested that OPR provide the former Department attorneys with such an opportunity. For these reasons, OPR is now in the process of sharing the revised draft report with them. When the review and comment period is concluded, OPR intends to review the comments submitted and make any modifications it deems appropriate to the findings and conclusions. OPR will then provide a final report to the Attorney General and Deputy Attorney General. After any additional review they deem appropriate, the Department will determine what disclosures should be made. Due to the complexity and classification level of the draft report, the review process described above likely will require substantial time and effort.

Which of course raises a whole slew of questions, some of which Durbin and Whitehouse have now posed to DOJ. Such as whether OLC’s review of the document influenced Steven Bradbury’s January 15 OLC memo withdrawing certain earlier opinions. 

Your letter does not indicate whether Steven Bradbury was recused from reviewing and providing comments on the draft report.  Mr. Bradbury, who was then the Principal Deputy Assistant Attorney General of OLC, is reportedly a subject of the OPR investigation. As such, it would appear to be a conflict of interest for Mr. Bradbury to review and comment on the OPR report.  We note that on January 15, 2009, Mr. Bradbury issued a “Memorandum for the Files” criticizing OLC opinions issued in 2001-2003.  He wrote that the January 15^th memorandum and a previous memorandum were not “intended to suggest in any way that the attorneys involved in the preparation of the opinions in question did not satisfy all applicable standards of professional responsibility.”  If Mr. Bradbury did review the OPR report, this could have improperly influenced the opinions he expressed on OLC’s behalf in the January 15^th memorandum, particularly his decision to emphasize that the authors of discredited OLC opinions on detainee issues had not necessarily violated their professional responsibilities.

As well as a bunch of questions about whether allowing the subjects of an investigation normally get to comment on the outcome of it. 

1. Was Steven Bradbury involved in reviewing and commenting on the draft OPR report?   
2. Is there any precedent for allowing the subject of an OPR investigation to review and provide comments on a draft report on OPR’s findings and conclusions?
3. Have the former Justice Department attorneys who are the subjects of the investigation been given a deadline for responding?
4. Will OPR provide Attorney General Holder and Deputy Attorney General Ogden with the draft report that it provided to Attorney General Mukasey so that Attorney General Holder and Deputy Attorney General Ogden will know what revisions have been made to the report?

Somehow, I get the feeling Mukasey tried to stall this out for several months. 

Of course, Durbin and Whitehouse don’t ask the natural follow-up–will Holder let them continue to stall this out?

David Sirota pointed to this absolutely disgusting quote in a Pool Boy/Mike Allen Politico article suggesting the White House retains confidence in banksters but not in auto execs.

[A Democratic official close to the White House said] "They have more confidence in the leadership on the banking side – that there are people in place who understand what went wrong and the steps necessary to deal with this disaster. They have no sense of confidence that the auto industry has the capacity or plans to structure a workout."

Now, Sirota is right to be appalled. And I have no doubt that many of the bankster enablers close to Obama, and maybe Obama himself, believe this.

But it pays to look at how Pool Boy (aka Jim VandeHei) and Allen make their argument. Here’s their claim:

Critics of President Obama’s do-or-die plan for General Motors and Chrysler are making this a fight over fairness: Why do banks get carrots and the autos get the heavy stick?

It’s a fair question, and one likely to resonate with those who feel Obama has gone light on insurance giant AIG and bailed-out banks like Citigroup. But, based on conversations with White House officials and advisers, the president has a much more jaundiced view of the automakers – and sees limited upside for bailing them out.

How to find a source that says what you want

First, take a look at who the White House officials and advisers behind this story are–and precisely what each one is saying.

Obama:

We’ve reached the end of that road. And we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what’s necessary to solve them. 

(The complete context of that quote blame a failure of leadership in Detroit and DC.)

A Democratic official close to the White House:

"The likelihood of failure here is too high to invest any more political or financial capital at the moment," said a Democratic official close to the White House. "For all the negative aspects of structured bankruptcy [a likely outcome for GM], it doesn’t necessarily collapse the domestic auto industry for all of time. It will continue to exist in some form."  

[snip]

"They have more confidence in the leadership on the banking side – that there are people in place who understand what went wrong and the steps necessary to deal with this disaster. They have no sense of confidence that the auto industry has the capacity or plans to structure a workout."

[snip]

"While the impact of the auto industry is huge, it doesn’t touch everyone who needs to get credit or hire someone, like the banks do," said the Democrat close to the White House. "The optics aren’t good, but the autos are a more discrete problem that can be dealt with on a targeted basis."  

White House spokesman:

… confirmed to POLITICO that the federal government’s loans to GM and Chrysler have no special priority in the bankruptcy process.

Matt Bennett, the vice president for public affairs at Third Way, a progressive think tank:

"There’s a lot of residual frustration and anger with the automobile industry for driving itself into the ground,"

[snip]

"Responsibility resided at the top. They can’t compete, they’re not going forward on green stuff, they’ve done everything wrong. The administration feels they’re not admitting fundamental errors – they’re blind to mistakes that have been made."

Another official (no tie to the White House indicated):

"There’s a feeling that the failure of these two autos is already priced into the market but that really shaking up the banks could be catastrophically risky."  

Judd Gregg:

it "makes no sense" to give the auto companies more money at this time, in part because "the auto industry is not a systemic industry" like the financial sector.  

Top White House official:

A top White House official went as far as to point out that Chrysler doesn’t produce a single car that made Consumer Reports list of top vehicles. The White House made plain it will let Chrysler simply die if it doesn’t move quickly to cement the alliance with Fiat SpA.  

Lobbyist close to the White House:

"You can’t allow these to be a black hole for taxpayer dollars," said a lobbyist close to the White House. "At some point, the American people say: Enough is enough. The American people have already voted on this with their car purchases."  

White House advisor:

"The politics of this are brutal," a White House adviser said. "The president knew the Michigan delegation would be unhappy. But the politics of wasting hundreds of billions of dollars in a failed efforts to save this company are worse than the politics of allow them to die after taking real but not extreme measures."

"Taxpayers are already in revolt over spending all this money," the adviser added. "The image of pushing out a CEO is very helpful – very smart.""

In addition, there are several sentences that attribute agency to Obama, but offer no basis for that agency:

Obama is convinced that if AIG or some of the big banks collapsed, the economy could go down with them. That’s not the case with Chrysler, for sure, and probably GM, too.  [this may be based on Obama’s budget, which calls for alternative transporation]

For Obama, this is a great opportunity to show he’s intolerant of big bailouts that could leave taxpayers forever holding the bag. [this seems to be based on conversation with the White House advisor, above]

Now, the comment made by "top White House official" basically comes from the administration assessment of Chrysler. And the spokesperson confirmation is available at Treasury. So the only thing that is a White House comment for this article is that of the "advisor" talking about the tough politics of this and the importance of pushing out a CEO. And the only thing even attributed to the White House that claims banks are worse than auto companies (based on no apparent reason, though) is the claim that "Obama is convinced" that AIG could bring the economy down, but Chrysler couldn’t (and GM probably wouldn’t).

The rest of the basis for Pool Boy and Allen’s argument that the President has a more jaundiced view of the auto industry comes from sources that may or may not speak for the White House: Judd Gregg (!), Matt Bennett, a Democratic official close to the White House, a lobbyist close to the White House, and another official. Not only could several of these people be the same source, but we know Gregg and Bennett shouldn’t be viewed as neutral observers, so there’s no reason to believe the others, who won’t go on the record, are either. 

Unless, of course, you believe Pool Boy.

So I have zero doubt that people like Tim Geithner and Larry Summers love them some banksters and disdain the auto companies. Just as I’m sure the Third Way and a bunch of other lobbyists and DLC and Blue Dog types that might claim closeness to the White House love them some banksters. But because Pool Boy and Allen have given these self-interested parties anonymity, all they’ve done is prove that a bunch of people in DC sucking on the bankster’s dole think banksters aren’t as bad as auto companies.

Pool Boy logic for banksters

But that’s not what is really reprehensible about this article. As I said, it may well be that Obama et al think banksters are the shit.

Based on these quotes, Pool Boy and Allen do "reporting" that consists of making unproven (and in some cases, nonsensical) assertions about the auto industry, and, without questioning, claiming that such assertions cannot be made about the banksters. 

For example, they claim that we shouldn’t mock banksters because we’ll get our money back from them, whereas we won’t from the auto companies.

It is easy to ridicule the bailed-out banks, especially with reports that the companies still throw around million-dollar bonuses, buy fancy planes and throw five-star retreats for executives. But at least there’s a chance some or all the federal money they got will one day be returned to taxpayers. In fact, some banks are already talking about sending the cash back, if for no other reason than to stay clear of government-mandated restrictions on pay and bonuses.  

But with GM & Chrysler, things are different-which may explain why the Obama Administration is being tougher with both firms than it has with most of the financial industry. GM already has $13.4 billion in government loans, while Chrysler owes the government $4 billion. Now, federal officials are talking about a bankruptcy filing for one or both companies.  

Apparently, Pool Boy hasn’t read any of the numerous analyses about how we risk losing our shirts in the Public-Private Partnership, not to mention the Maiden Lanes, and $80 billion loan to AIG, the value of which has been tanking. And he’ll just take Goldman’s word that they’re going to pay us back early (without noting, of course, that we’ve already given them $12.9 billion, almost as much as GM has gotten, just by recovering full value on their bets with AIG). 

Nope, Pool Boy doesn’t have to look at the question of whether the banksters will pay us back. The Third Way told him they would, so I’m sure they’re good for the money.

(And if you believe that, I’ve got a tranche of AAA mortgage backed securities I’d like to sell you.)

And then there’s this assertion, which is pretty much every stupid assumption about cars rolled up into one.

The bottom line for Obama – and the auto industry – is many people don’t want American-made cars. General Motors, which is building more popular vehicles than Chrysler, has been bleeding money for years, losing $82 billion since 2004. The company made a terrible bet that SUVs were the future – just as Toyota and Honda were putting their money on hybrids and more efficient, more reliable cars.

So it’s no wonder sales are down and unlikely to rebound even if with prices lower than ever.

Let’s see the problems with this. "American-made cars." Like Ford, which has not taken bailout cash? Like Toyota’s Camrys, made in Kentucky? Or for that matter, the 3.5 million plus cars GM sold in North America last year? Pool Boy apparently doesn’t know the difference between domestic and transplant, much less what market share is, the poor idiot!

Then he claims that GM’s bottom line is tied exclusively to declining sales. I guess he’s never figured that sales and profit are different things. 

And then the classic idiotic claim: that GM is failing because it makes SUVs, which not only ignores that hybrids are not terribly profitable, but also that Honda and Toyota have been racing into SUVs for the same reason GM does: because they’re usually tons more profitable than hybrids and compacts.

I’m not sure whether Pool Boy–or his sources–are just this dumb. Or whether Pool Boy and the Third Way think false conventional wisdom like this amounts to a real argument.

Besides which.

AIG lost $61.7 billion in in just three months last year!!! An all-time record in the US. But for some reason, Pool Boy presents it as conventional wisdom that AIG is a safe bet. 

Now, like I said, I think it pays to assume this reflects the views of at least the banksters enablers at the White House. But it’s telling how stupid Pool Boy has to be to make their case for them. 

Nate, who is more of a Michigander than I am, drew this not-pretty picture of GM’s operating margin over the last half century. He explains that this picture shows that GM has been using health care and pension promises to put off the time it registers these real costs on its balance sheet as a way to get the benefit of labor but put off paying the true costs of it.

GM was willing to cut its employees some very attractive deals in the 1950s through the 1980s — provided that they took them in the form of retirement benefits rather than salary, which wouldn’t hit GM’s books until much later and which until 1992 weren’t even required to be carried on its balance sheets all, making its financial statements (superficially) more appealing to its shareholders. That health care costs have risen so substantially in the United States have made a bad matter worse.

Nate’s absolutely right about the systemic issue underlying GM’s woes.

But I’d add another point. While his not-pretty picture doesn’t show when this happened, we know that sometime around the time when GM’s operating margin first hit zero, GM began to face stronger competitors domestically: the Japanese. And for the first decade and more after the Japanese started competing in the US, GM was competing against companies the bulk of the labor for which received cheaper health care and pensions in Japan. And even as Japanese companies opened factories in the US, it took decades before their first employees retired, meaning the Big 2.5 were paying pensions for two generations of retirees, while Japanse transplants were paying nothing, yet, in pension costs. All other factors being equal (they weren’t, but just pretend they were), that meant it has always been a lot easier for Japan to make a profit off its cars, partly because Japan pays for health care differently than we do, and partly because they entered the US market relatively recently.

In addition to making it easier to make a profit on a car, this makes it a lot easier for Japanese companies to make investments in their cars pay off.

That means that the Japanese–who in the early years were competitive with the US on hybrid technology–could forecast the profitability of the technology and decide it made sense, whereas the US companies would make the same calculations and decide it didn’t make sense. They were both making the same kind of business calculation, but the underlying numbers were different. A lot of the decisions that outsiders attack–particularly the technological ones–made sense from a business perspective when you factor in these legacy costs. The US couldn’t invest in these technologies because they had to spend money for legacy costs instead.

Here’s how the Administration’s assessment of GM’s viability described this:

As GM moves through its forecast period, its cash needs associated with legacy liabilities grow, reaching approximately $6 billion per year in 2013 and 2014. To meet this cash outflow, GM needs to sell 900,000 additional cars per year, creating a difficult burden that leaves it fighting to maximize volume rather than return on investment.

The entire current annualized volume of cars in the US right now is 9 million. The Administration is saying that one tenth of all cars sold in the US this year will go to pay for GM’s legacy costs. (This is why GM and Ford’s expansion in overseas, more profitable markets is so important, because without those profits, these numbers would have already doomed these companies.)

A lot of people (like Bob Corker) like to pretend this is only a problem the auto industry has experienced. But that’s not true. We’ve already seen the airline and the steel industry go through this, among others. 

Sadly, though, aside from the mention of GM’s legacy costs, yesterday’s announcements ignored this systemic problem for what it was–one of the key underlying causes of the "bad" decisions the auto industry has made for the last two decades. Yes, Obama is pushing for health care. But the reason we need health care (and need to retain social security, among other things) is because it is killing our businesses.