There’s a lot to loathe about the current incarnation of the Senate, that elite club of millionaires where legislation goes to either get rewritten to serve corporate interests or killed.

What does that say about DOJ, then, that the Senate is doing such a better job at investigating crimes? In just one month’s time the Senate has produced two investigations that have left DOJ–and the SEC and FEC–looking toothless by comparison.

First there was Carl Levin’s investigation of the banksters, released last month. Matt Taibbi does us the favor of outlining the case Levin’s investigators made.

Here is where the supporters of Goldman and other big banks will stand up and start wanding the air full of confusing terms like “scienter” and “loss causation” — legalese mumbo jumbo that attempts to convince the ignorantly enraged onlooker that, according to American law, these grotesque tales of grand theft and fraud you’ve just heard are actually more innocent than you think. Yes, they will say, it may very well be a prosecutable crime for a corner-store Arab to take $2 from a customer selling tap water as Perrier. But that does not mean it’s a crime for Goldman Sachs to take $100 million from a foreign hedge fund doing the same thing! No, sir, not at all! Then you’ll be told that the Supreme Court has been limiting corporate liability for fraud for decades, that in order to gain a conviction one must prove a conscious intent to deceive, that the 1976 ruling in Ernst and Ernst clearly states….Leave all that aside for a moment. Though many legal experts agree there is a powerful argument that the Levin report supports a criminal charge of fraud, this stuff can keep the lawyers tied up for years. So let’s move on to something much simpler. In the spring of 2010, about a year into his investigation, Sen. Levin hauled all of the principals from these rotten Goldman deals to Washington, made them put their hands on the Bible and take oaths just like normal people, and demanded that they explain themselves. The legal definition of financial fraud may be murky and complex, but everybody knows you can’t lie to Congress.

“Article 18 of the United States Code, Section 1001,” says Loyola University law professor Michael Kaufman. “There are statutes that prohibit perjury and obstruction of justice, but this is the federal statute that explicitly prohibits lying to Congress.”

The law is simple: You’re guilty if you “knowingly and willfully” make a “materially false, fictitious or fraudulent statement or representation.” The punishment is up to five years in federal prison.

When Roger Clemens went to Washington and denied taking a shot of steroids in his ass, the feds indicted him — relying not on a year’s worth of graphically self-incriminating e-mails, but chiefly on the testimony of a single individual who had been given a deal by the government. Yet the Justice Department has shown no such prosecutorial zeal since April 27th of last year, when the Goldman executives who oversaw the Timberwolf, Hudson and Abacus deals arrived on the Hill and one by one — each seemingly wearing the same mask of faint boredom and irritated condescension — sat before Levin’s committee and dodged volleys of questions.

[snip]

Lloyd Blankfein went to Washington and testified under oath that Goldman Sachs didn’t make a massive short bet and didn’t bet against its clients. The Levin report proves that Goldman spent the whole summer of 2007 riding a “big short” and took a multibillion-dollar bet against its clients, a bet that incidentally made them enormous profits. Are we all missing something? Is there some different and higher standard of triple- and quadruple-lying that applies to bank CEOs but not to baseball players?

Then there’s the investigation of John Ensign. Scott Horton lambastes DOJ’s decision to indict Ensign’s cuckold but not Ensign himself.

Alarmingly, the Justice Department not only failed to act against Ensign, it actually indicted Doug Hampton, Ensign’s former senior staffer, who was clearly a victim of Ensign’s predatory conduct and who had blown the whistle on him. The new report does suggest that Hampton may have engaged in improper lobbying activities, with Ensign’s connivance. But it also makes clear that Hampton’s statements about what happened were truthful and complete, whereas Ensign’s were often cleverly misleading, and sometimes rank falsehoods. In this context, the Justice Department’s decision—to prosecute the victim who spoke with candor and against his own interests, and let the malefactor who lied about his conduct go free—is perverse. It is also completely in line with recent Justice Department pubic integrity prosecutions, which have displayed an unseemly appetite for political intrigue and an irrepressible desire to accommodate the powerful.

And the NYT writes a more sheepish article featuring both an FEC official who apparently wouldn’t go on the record with his shock–shock! that there was gambling going on in the casino someone lied to the FEC.

An election commission official, who asked not to be identified while the case was pending, acknowledged that the commission took the senator at his word, whereas the Senate dug deeper. This official expressed anger to learn the true circumstances behind the $96,000 payment.

“I hate it when people lie to us,” the official said, adding: “If somebody submits a sworn affidavit, we usually do not go back and question it, unless we have something else to go on. Maybe we should not be so trusting.”

The NYT also cites several legal experts attributing DOJ’s impotence to embarrassment over the Ted Stevens trial (without, at the same time, wondering why William Welch is still at DOJ acting just as recklessly, only this time against whistleblowers and other leakers).

Several of these reviews of DOJ’s failure to act wonder why the understaffed Senate Ethics Committee or Levin’s Permanent Committee on Investigations–again, this is the hapless Senate!–managed to find so much dirt that the better staffed DOJ and regulatory bodies did not.

But Taibbi really gets at the underlying issue.

If the Justice Department fails to give the American people a chance to judge this case — if Goldman skates without so much as a trial — it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.

These two Senate committees did an excellent job mapping out the crimes of the powerful. But unless we see action from DOJ, the committees will also have, by comparison, mapped out the stark truth that DOJ refuses to apply the same laws we peons abide by to those powerful people.

The National Consumer Law Center just released a report on something that’s been a pet peeve of mine for some years: states’ increasing reliance on pre-paid cards to distribute unemployment compensation, rather than checks. (h/t Susie) As the report explains, issuing funds via a card is much cheaper for the states. But what’s really happening is that unemployment recipients end up paying for the cards out of series of fees the banks issuing the cards charge (which violates the law that says administrative costs should not come out of benefits).

The report spells out in detail how banks are screwing unemployment recipients in which state:

• US Bank refusing to let AR post its fee schedule
• PNC requiring recipients to work with customer service to transfer fees to their own bank account in IN
• Chase charging $1 for the very first in-network ATM withdrawal in TN
• Chase charging $2.75 for out-of-network ATM withdrawals in WV, even in areas without convenient access to a Chase branch
• Chase charging $.25 for cash back with a purchase in TN and RI
• Chase charging $.10 for every point-of-service use after the second one in CO
• Chase charging $.25 for PIN transactions in ME and TN
• US Bank charging $20 overdraft fees (on pre-paid cards!) in AR
• Chase charging $1.50 for denied transactions in MI and WV
• Chase charging $.50 to check a balance and $1 for insufficient funds in RI
• Regions Bank charging a $2.50 90-day inactivity fee in AL
• Chase charging $12.50 to issue a check to close out an account in CO and CT

Check out this state-by-state summary to see what your state’s card charges and how that compares with other states.

This list, of course, demonstrates another thing: Chase’s significant role in the market (it serves 13 of the 40 states that use pre-paid cards) and–aside from US Bank’s egregious overdraft fees–its use of the most abusive practices.

That’s notable because Chase’s parent company–and its CEO, Jamie Dimon–is also taking the lead in threatening to cut off poorer consumers because the government wants to limit what debit card issuers like Chase can charge merchants.

Bank executives have said they will raise their fees to compensate for losing debit card processing revenues.They predict that some people will be unable to afford the fees, forcing them out of the banking system into the realm of check cashers and payday lenders.

The term that the banks use for this is “unbanked.” The rules “will have the adverse consequences of making a portion of current bank clients unbanked.

You will not be able to profitably serve them,” Dimon told analysts during the bank’s fourth-quarter earnings conference call Friday.

About 5 percent of today’s banking customers “may be pushed out of the banking system,” he said.

You see the nice trap Dimon is setting for those who don’t profit mightily by sucking at the federal teat, like his bank does? Unbanked consumers are precisely those who, if they receive unemployment, will rely on these cards and have to pay their usurious fees. So after forcing them out of the banking system because JP Morgan refuses to cut its escalating profits in response to Dodd-Frank, JP Morgan will still profit off these people by nickel and diming them at the time they can least afford to be nickel and dimed.

To be fair, Steny Hoyer can’t lay sole claim to be the Congressman representing the National Security Agency–the NSA actually gets three Congressmen: Steny, John Sarbanes, and Dutch Ruppersberger.

But I think it fair to note that Steny has, at key times, been the beneficiary of big political contributions from corporations with NSA sensitivities–like AT&T and Mantech. Just as notably, he’s gotten even bigger money from the banksters (particularly JP Morgan Chase, which has its own chunk of federal business) and other finance companies that ruined our economy.

In other words, Steny’s opposition to contractor transparency might be considered self-interest.

Minority Whip Steny Hoyer (D-Md.) said government contracts should be awarded based solely on the reputation of the company and the substance of its bid. The issue of political contributions, he said, has no place in the process.

“The issue of contracting ought to be on the merits of the contractor’s application and bid and capabilities,” Hoyer told reporters at the Capitol. “There are some serious questions as to what implications there are if somehow we consider political contributions in the context of awarding contracts.”

Now, perhaps it’s the reporting, but consider the logic of this funny claim: “There are some serious questions as to what implications there are if somehow we consider political contributions in the context of awarding contracts.” Who is the “we” here? Contracting officers? If they were to consider donations to affirmatively award contracts, they’d be committing Hatch Act violations and risk losing their job. But seeing big donations from, say, Mitchell Wade to a powerful Congressman like Duke Cunningham might raise concerns from contracting officers about undue influence (though admittedly, Cunningham’s staffers made it pretty clear to contracting officers what they wanted).

Is the “we” Congressmen themselves? Is Steny really suggesting that Congressmen are not aware of who their donors are, are not intimately familiar with how much they’re raking in from contractors?

Which leaves the possibility that by “we” Steny means “us,” citizens, journalists, and good government advocates. Is Steny suggesting that “we” shouldn’t consider the (ahem) possibility that members of Congress push contracts for their campaign donors? That we shouldn’t consider the implications of such possibilities?

Then again, the guy who steered warrantless wiretapping immunity through Congress might simply want to avoid making it easier for us to understand not just how contracts tie to political donations, but legislation itself.

According to this post, this op-ed in the WSJ got badly edited after it was originally published. The bolded words are just some of what WSJ axed after the fact. (h/t Naked Capitalism)

The official wisdom is that Greece, Ireland and Portugal have been hit by a liquidity crisis, so they needed a momentary infusion of capital, after which everything would return to normal. But this official version is a lie, one that takes the ordinary people of Europe for idiots. They deserve better from politics and their leaders.

To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them. Let’s follow the money.

At the risk of being accused of populism, we’ll begin with the obvious: It is not the little guy that benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a kind of deadly symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever-more money back to our governments, keeping the scheme afloat.

In a true market economy, bad choices get penalized. Not here. When the inevitable failure of overindebted euro-zone countries came to light, a secret pact was made. Instead of accepting losses on unsound investments—which would have led to the probable collapse and national bailout of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund, Ireland’s NAMA and a lineup of special-purpose vehicles that make Enron look simple. Some politicians understood this; others just panicked and did as they were told.

The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.

The edits are interesting in their own right. But I couldn’t help but think of an op-ed Flynt Leverett wrote back in 2006. Though the entire op-ed was, according to CIA officials, unclassified, during the review process the White House decided the parts that described Iran’s cooperation with the United States after 9/11 had to be redacted.

Back in 2006, the fact that Iran had made significant efforts to reach out the US undercut the Village’s entire narrative about national security.

It’s not clear whether WSJ’s editors decided on their own that revealing that the serial bankster bailouts benefit just the banksters was too dangerous for WSJ’s readers, or whether someone in Timmeh Geithner’s neighborhood called to complain (as they did when an Irish Times columnist revealed that Timmeh was behind nixing the IMF’s efforts to restructure Ireland’s debt).

But when a counter-narrative comes to be viewed as this dangerous, it’s usually a testament to the fragility of the narrative it threatens. In Leverett’s case, the counter-narrative threatened the stupid efforts to shore up US hegemony in the Middle East by attacking Iran; in this case, the counter-narrative threatens our continuing willingness to embrace austerity so the banksters can get richer. Of course both narratives are about the same thing: sustaining US power.

I can’t decide whether it’s pathetic or funny that our power continues to rest on such fragile narratives.

The NYT has what I assume to be a bizarre form of beat sweetener on Goldman Sachs today. It spends most of 1,300 words speculating on who might replace CEO Lloyd Blankfein if he were to step down, exploring three possible candidates in depth.

But here’s the explanation for why they think such speculation appropriate:

Two friends of Mr. Blankfein, 56, say he has told them since last summer that he is exhausted from leading the company through the financial crisis and that he would consider stepping down when he could do so gracefully, without the move appearing to be anything but voluntary.

[snip]

To be sure, Mr. Blankfein may decide to stay a while, despite the chatter to the contrary. And as far as Goldman is concerned, Mr. Blankfein is not going anywhere. A spokesman for the firm, Lucas van Praag, declined to comment other than to note that Mr. Blankfein “says he has never felt so energetic and has no plans to retire.”

The NYT repeats that comment from the spokesperson without noting that its reliance on three sources “briefed on the situation” of discussions of Blankfein’s departure sort of contradicts that spin.

The most amazing part of the article, though, is the way in which it frames Blankfein’s possible departure in terms of an SEC probe settled a year ago. While it raises the Levin report on the causes of the financial crash, it somehow neglects to mention Levin’s announcement he was making a criminal referral to DOJ.

Roger Freeman, a financial analyst at Barclays Capital, said Mr. Blankfein might wait to see his firm through the final negotiations with Washington over new regulatory rules for the banking industry in the second half of 2011, before handing Goldman to a younger team in 2012. “This has been an exhausting period,” Mr. Freeman said. “It would not be a surprising time to see a change.”

As the economy stumbled, Goldman’s success brought harsh public criticism, as lawmakers and even some clients complained that Goldman was no longer putting clients first.

That argument gained strength after the Securities and Exchange Commission accused Goldman of fraud last April in connection with a mortgage security it had created and sold. Goldman settled the case last July, paying a penalty of $550 million.

While the firm is clearly doing well, the public ire persists, especially in Washington. On Wednesday, after issuing a report examining the roots of the financial crisis, Senator Carl Levin of Michigan was sharply critical of Goldman’s bet against housing. “Why would Goldman deny what was so obvious, that they were engaged in a huge short in the year 2007?” Senator Levin said. “Because they gained at the expense of their clients and they used abusive practices to do it.”

Hey, NYT? Here’s what Levin also said:

But Levin made clear he has bigger hopes for this examination: he sees the report as perhaps one last chance for U.S. prosecutors to finally reel in the big fish that has eluded them since the markets started melting down in 2007.Levin said he believes execs at Goldman (GS) crossed the line in trying to soft-pedal the extent of the firm’s bets against the staggering U.S. housing market as the credit bubble collapsed in 2006 and 2007.

The firm privately referred to these multibillion-dollar positions as “the big short,” the report indicates – showing, in Levin’s view, that Goldman did indeed have the systematic wager against U.S. housing that it has long denied. He said he was referring the case to the Justice Department and the Securities and Exchange Commission.

“In my judgment, Goldman clearly misled their clients and they misled Congress,” Levin told reporters on a conference call Wednesday morning before the report was released. [my emphasis]

Now, I assume a story like this is all about helping Goldman push Blankfein out as part of a deal it eventually will make with DOJ to persuade it to settle any investigation arising from the Levin referral. That is, this is all about supporting Goldman’s effort to make it look like Blankfein is leaving–if he does–on his own terms. And, in turn, supporting DOJ’s apparent fierce determination not to try any of the criminals who crashed our economy.

It’s just not clear why the NYT really thinks the story–lacking the crucial detail to explain why this might be news–is “news.”

The AP wrote a story on the hoax GE Press Release reprinted in its entirely below; after GE informed them it was a hoax, they withdrew the story.

But of the reports on the hoax, few seem to get it.

Business Insider notes it “OBVIOUSLY reads like a hoax” because of “comments in there about new policies about creating one American job for every one created abroad.” And the Chicago Tribune included this much of the explanation a self-described member of the Yes Men–which claimed credit–offered in an interview:

The “Yes Men” sent the release to draw attention to GE’s approach to taxes, Boyd said in a phone interview.

Yet aside from that, most of the coverage has focused on GE’s explanations for why they’ve paid so little in taxes, pointing to GE Capital’s big losses in recent years.

That is, no one really wants to report on what GE’s approach to taxes is. To the extent they do, they accept GE’s explanation unquestioningly. But if the AP had a sense of what GE’s real approach to taxes is, they would never have fallen for the hoax in the first place.

As such, the reporting on the hoax is revealing much about press ignorance.

Here is the explanation Jeff Immelt offered for GE’s tax scam a few weeks ago at DC’s economic club:

Now GE has taken criticism lately over our tax rate over the past two years. Like any American, we do like to keep our tax rate low. But we do it in a compliant way and there are no exceptions. The reason why our tax rate was so low in 2009 and 2008, or 2009 and ’10 is simple. We lost $32 billion in GE Capital as a result of the global financial crisis. Our tax rate will be much higher in 2011 as GE Capital recovers. But make no mistake, make no mistake. Business rarely speaks with one voice about anything. About anything. But we do on taxes. That’s because our system is old, complex, and uncompetitive. The purpose of the tax code should be that everyone pays their fair share, including GE. But it also should help to promote jobs and competitiveness and it does the opposite today. Like most of our business colleagues, GE favors closing loopholes, a lower corporate rate, and a territorial system. This would put us in line with every other developed country in the world — Germany, Japan, United Kingdom — all of them. Taxes are an important part of jobs and competitiveness and we think it deserves a healthy debate.

Now, this speech was reported credulously by the press, which in and of itself is a testament to the sorry state of our journalism. That coverage allowed Immelt to focus on loopholes in the corporate tax system and not the entire system of havens that multinational businesses like GE exploit. It accepted Immelt’s claim that all the losses GE Capital took took place in the US, but doesn’t ask why GE Capital’s profits of years past weren’t themselves registered in the US. And it accepted that Immelt’s claim that taxes are about the competitiveness of one country over another, rather than the optimization of taxes over many countries.

Compare what real Jeff Immelt had to say to his corporate buddies a few weeks ago with what this hoax release says. Hoax Immelt focuses on GE’s use of tax havens as a strategy to avoid taxes.

Immelt acknowledged no wrongdoing. “All seven of our foreign tax havens are entirely legal,” Immelt noted.

And the changes Hoax Immelt lays out to fix the problem also focus on multinationals’ ability to shift profits from jurisdiction to jurisdiction to avoid taxes.

Immelt outlined several concrete steps he would take to push for modernized tax policies that reflect the realities of the global economy. “I will personally ask President Obama to work with Congress to require country-by-country reporting by multi-national corporations of the sales made, profits earned and taxes paid in every jurisdiction where an entity operates. Instead of moving money via “transfer pricing,” corporations ought to pay taxes in the jurisdictions where profits are actually made. If Congress is able to establish standard industry-wide solutions, GE will close our tax haven operations abroad, including our subsidiaries in Bermuda, Singapore and Luxembourg.”

In other words, Hoax Immelt gets right to the core of the tax cheat strategies of all multinationals, not just those that have become finance companies while they gut their manufacturing operations in this country.

Sure. As Business Insider noted, Hoax Immelt’s claim that GE would create one job here for every job it created overseas should have been a tip-off that this Press Release couldn’t possibly come from the company that has been shipping jobs overseas. But the larger point of the hoax–the improbability that GE would stop its shell games to avoid taxes–seems to have entirely skipped the notice of most coverage of this so far.

———- Forwarded message ———-

From: GE Communications

Date: Wed, Apr 13, 2011 at 5:43 AM

Subject: FOR IMMEDIATE RELEASE: GE Responds to Public Outcry – Will Donate Entire $3.2 Billion Tax Refund to Help Offset Cuts and Save American Jobs

To: [email protected]

GE Responds to Public Outcry – Will Donate Entire $3.2 Billion Tax Refund to Help Offset Cuts and Save American Jobs

Fairfield, CT, 13th April, 2011– GE CEO Jeffrey Immelt has informed the Obama administration that the company will be gifting its entire 2010 tax refund, worth $3.2 Billion, to the US Treasury on April 18, Tax Day, and will furthermore adopt a host of new policies that secure its position as a leader in corporate social responsibility.

“We want the public to know that we’ve heard them, and that we know many Americans are going through tough times,” said GE CEO Jeffrey Immelt. “GE will therefore give our 2010 tax refund back to the public and allow the public to decide how to spend it.”

Immelt acknowledged no wrongdoing. “All seven of our foreign tax havens are entirely legal,” Immelt noted. “But Americans have made it clear that they deplore laws that enable tax avoidance. While we owe it to our shareholders to use every legal loophole to maximize returns – we also owe something to the American people. We didn’t write the laws that let us legally avoid paying taxes. Congress did. But we benefit from those laws, and now we’d like to share those benefits. We are proud to be giving something back to America, and we are proud to set an example for all industry to follow.”

Over the coming weeks, GE will conduct a nationwide survey to determine how the company’s $3.2 billion returned refund is to be allocated. The survey will be conducted both online and offline, and will permit the public to weigh in on which of the recently-enacted budget cuts they would like to see reversed.

In tandem with the gift, the company is also announcing a host of new policies to restore public faith in the GE brand, including a commitment to keep American jobs in America, and to create one U.S. job for each new job created abroad. The ambitious plan will overhaul accounting systems to allow public transparency and phase out the use of tax havens in five years. “Given my recent appointment as President Obama’s Chairman of the Council on Jobs and Competitiveness, it is no longer appropriate for GE to engage in practices that, whether by fact or perception, are at odds with the greater good of the nation,” Immelt said.

Immelt outlined several concrete steps he would take to push for modernized tax policies that reflect the realities of the global economy. “I will personally ask President Obama to work with Congress to require country-by-country reporting by multi-national corporations of the sales made, profits earned and taxes paid in every jurisdiction where an entity operates. Instead of moving money via “transfer pricing,” corporations ought to pay taxes in the jurisdictions where profits are actually made. If Congress is able to establish standard industry-wide solutions, GE will close our tax haven operations abroad, including our subsidiaries in Bermuda, Singapore and Luxembourg.”

Further details on GE’s new policy will be released in the coming weeks.

About GE

GE (NYSE: GE) is an advanced technology, services and finance company taking on the world’s toughest challenges. Dedicated to innovation in energy, health, transportation and infrastructure, GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company’s Web site at www.ge.com.

PRESS CONTACT

Samuel Winnacker

GE Corporate, Assistant Director

Communications & Public Affairs

+1 615 375 6658

[email protected]

Matt Taibbi is out with his take on the Fed’s bailout lending revealed last month. He focuses on how two rich housewives with no apparent business experience got almost a quarter of a billion dollars in the TALF program.

In August 2009, John Mack, at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper BeerEast Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him.

The Macks make for an interesting couple. John, a Lebanese-American nicknamed “Mack the Knife” for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of “palm healing.” The only other notable fact on her public résumé is that her sister was married to Charlie Rose.

It’s hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that’s exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan’s penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.

[snip]

In the case of Waterfall TALF Opportunity, here’s what we know: The company was founded in June 2009 with $14.87 million of investment capital, money that likely came from Christy Mack and Susan Karches. The two Wall Street wives then used the $220 million they got from the Fed to buy up a bunch of securities, including a large pool of commercial mortgages managed by Credit Suisse, a company John Mack once headed. Those securities were valued at $253.6 million, though the Fed refuses to explain how it arrived at that estimate. And here’s the kicker: Of the $220 million the two wives got from the Fed, roughly $150 million had not been paid back as of last fall — meaning that you and I are still on the hook for most of whatever the Wall Street spouses bought on their government-funded shopping spree.

But the kicker is that these two Real Housewives of Wall Street incorporated their little slush fund … in the Cayman Islands.

Perhaps the most irritating facet of all of these transactions is the fact that hundreds of millions of Fed dollars were given out to hedge funds and other investors with addresses in the Cayman Islands. Many of those addresses belong to companies with American affiliations — including prominent Wall Street names like Pimco, Blackstone and . . . Christy Mack. Yes, even Waterfall TALF Opportunity is an offshore company. It’s one thing for the federal government to look the other way when Wall Street hotshots evade U.S. taxes by registering their investment companies in the Cayman Islands. But subsidizing tax evasion? Giving it a federal bailout? What the fuck?

Back when we had a chance of shaming TurboTax Timmeh Geithner into withdrawing his nomination to be Treasury Secretary, we should have suspected he and his associates had a soft spot for tax havens.

But by that point, it was already too late. Timmeh and Helicopter Ben had been shoveling money into the pockets of rich housewives so they could hide it in the Cayman Islands.

Yet we have to cut aid to poor kids, because we’re broke.

DDay reported on OCC’s attempt to preempt a foreclosure settlement on Monday. Today, Yves Smith has a long post giving the consent decrees the banks are trying to roll out in lieu of a real foreclosure settlement the disdain they deserve.

Wow, the Obama administration has openly negotiated against itself on behalf of the banks. I don’t think I’ve ever seen anything so craven heretofore.

[snip]

The part I am puzzled by is who is behind this rearguard action. It clearly guts the Federal part of the settlement negotiations. If you pull out your supposed big gun (ex having done a real exam to find real problems, and it’s weaker than your negotiating demands, you’ve just demonstrated you have no threat. Now obviously, a much more aggressive cease and desist order could have been presented; it’s blindingly obvious that the only reason for putting this one forward was not to pressure the banks, as American Banker incorrectly argued, but to undermine the AGs and whatever banking/housing regulators stood with them (HUD and the DoJ were parties to the first face to face talks).

So the only part that I’d still love to know was who exactly is behind the C&D order? Is it just the OCC?

But what I’d like to know is why, coincident with the roll-out of this Potemkin resolution to the foreclosure problem, someone told Reuters that the Administration was considering Jennifer Granholm and/or Sarah Raskin to head the Consumer Finance Protection Board.

The White House is considering Federal Reserve Governor Sarah Raskin and former Michigan Gov. Jennifer Granholm to head a new agency charged with protecting consumers of financial products, a source aware of the process said Tuesday.

You see, as Yves reminds us, one part of the whole AG settlement that this consent decree seems intended to replace was that Tom Miller, Iowa’s Attorney General, would get the CFPB position as his reward for shepherding through such a crappy settlement.

So now, with the consent decrees the apparent new plan to appear to address foreclosures without penalizing the banksters, the Administration rolls out the claim that it is considering Granholm and Raskin?

And the report is all the more weird given that Granholm was previously floated for the position in late March, at which point she declined to be considered and–the next day–accepted a position with Pew. This morning, in response to the Reuters story, Granholm tweeted,

This story says I’m under consideration for the CFPB job. I have declined to be considered for this post. I’m happy in my new roles at Pew, Berkeley and Dow. And, by the way, while I don’t know Raskin and she may be great, I think nominating Elizabeth Warren is a fight worth waging.

See, best as I can guess (and this is a guess), by pulling the plug on the AG settlement, the Administration lost its best case for appointing someone not named Elizabeth Warren to assume the CFPB position. Whereas they might have been able to claim (falsely) that Miller had achieved this great progressive settlement for homeowners, now they’ve decided to stick with the status quo rather than even a bad settlement. Which leaves them with the increasingly urgent problem of who heads the CFPB when it goes live in July.

And so they float a report that the one blond woman who is as much of a rock star as Warren is might get the position? Do they think Democrats can’t tell the difference between charismatic blonde women (or that progressives would confuse the down-to-earth but centrist Granholm for Warren)?

It’s like they’ve got a Craigslist posting up somewhere:

Wanted: blonde woman with great people skills and rock star looks to serve as figurehead for a position purported to exercise real power to protect American consumers, but which will instead be asked to serve up Timmeh Geithner coffee and complete deference. Democratic affiliation a plus but not necessary.

I’ve been thinking a lot about SWIFT lately. Partly that’s because of the renewed discussion on how some big banks relied on cash from drug cartels to survive as the housing bubble began to pop. Partly that’s because of advance publicity for Nicholas Shaxson’s Treasure Islands and coverage of corporate tax dodging. And partly it’s because of this piece, declaring privacy dead without realizing that privacy is only dead for the little people.

You see, I’m increasingly convinced SWIFT will one day be the ultimate battleground over whether the US government can just suck up and analyze all the data it wants.

As a reminder, SWIFT (or Society for Worldwide Interbank Financial Telecommunicatiom) is the online messaging system the world’s finance industry uses to transfer funds internationally. It records the flows of trillions of dollars each day.

It first got big news coverage when Eric Lichtblau and James Risen reported on how our government uses it to track terrorist financing. But of course, the database tracks all sorts of financial flows, not just terrorist financing. Thus, it could be used to track drug finance, tax cheats (both corporate and individual), and the looting of various nations’ riches by their elites.

Swift, a former government official said, was “the mother lode, the Rosetta stone” for financial data.

Indeed, according to Lichtblau’s Bush’s Law, the database appears to track even more information than tax havens would ever collect.

[T]he routing instructions that the company used to move money around the globe often included much more detailed data than any other system: passport information, phone numbers and local addresses, critical identifying information about the senders and the recipients, the purpose of the transaction, and more. (243)

In a world where–as described in Shaxson’s book–our financial system largely runs on the strategic shifting of money behind the cloak of corporate anonymity or secret back accounts, SWIFT appears to be the one place where there is full transparency.

The US and UK in particular, according to Shaxson, have used the secrecy that corporate laws and associated tax havens can offer to sustain their hegemonic position in the world. As we saw, giving a bunch of drug cartels means to launder their money allowed Wachovia to survive for years after the time when it should have collapsed; the US and UK are just larger versions of the same gimmick.

Which is why, I’ve become convinced, the response to NYT’s reporting on SWIFT was (and remains) so much more intense than even their exposure of the illegal wiretap program. The shell game of international finance only works so long as we sustain the myth that money moves in secret; but of course there has to be one place, like SWIFT, where those secrets are revealed. And so, in revealing that the US was using SWIFT to track terror financing, the NYT was also making it clear that there is such a window of transparency on a purportedly secret system.

And the CIA has, alone among the world’s intelligence services, access to it.

There are hints in Lichtblau’s book that back my suspicion that revealing SWIFT was so problematic because it reveals monetary transfers aren’t as secret as the banksters would like you to think they are. One reason people grew uncomfortable with the program was because “some foreign officials feared that the United States could turn the giant database against them.” (234) Others worried that the US might be “delving into corporate trade secrets of overseas companies.” (248) And when Alan Greenspan helped persuade SWIFT to continue offering US access to the database, he admitted how dangerous it was.

If the world’s financiers were to find out how their sensitive internal data was being used, he acknowledged, it could hurt the stability of the global banking systems. (246)

Now, Lichtblau doesn’t describe explicitly what these risks entail, but this all seems to be about letting the CIA see, unfettered, the most valuable secrets in the world, financial secrets. The world’s globalized elite has to trust in the secrecy of their banking system, but in fact the CIA (of all entities!) has violated that trust.

Mind you, the CIA says that (after getting the entire contents of the SWIFT database at first) there were safeguards put in place to make sure the CIA wasn’t using the database to find corrupt politicians who could be blackmailed to spy for the US or to see what scams other countries’ banks were using to make money. When Lichtblau and Risen broke this story in 2006, the safeguards then consisted of Booz Allen Hamilton (which is hard to claim is independent from our spy agencies) auditing the searches and SWIFT employees overseeing the CIA’s use of the data. But reports of a recent European audit on our use of SWIFT suggests that these safeguards have been oversold. Significantly, the US augments very generalized data requests with verbal requests, meaning the individual searches can’t be audited. (Indeed, I’ve been told–though haven’t confirmed–that the European audit was supposed to have replaced the function of the BAH audit; given how much of a joke the European audit is, that would suggest the US used its squabble with Europe over SWIFT access to lower the protections that had been in place.)

And all that pertains just to our acknowledged use of SWIFT to track terrorist financing.

But underlying that use of it, there appears to be one of DOJ’s wacky set of legal authorizations that would suggest the database should be accessible for a whole range of other uses. As Licthblau and Risen’s original story described, DOJ basically claimed that there is no legal bank privacy for SWIFT.

Treasury officials said Swift was exempt from American laws restricting government access to private financial records because the cooperative was considered a messaging service, not a bank or financial institution.

But at the outset of the operation, Treasury and Justice Department lawyers debated whether the program had to comply with such laws before concluding that it did not, people with knowledge of the debate said.

[snip]

In 1976, the Supreme Court ruled that Americans had no constitutional right to privacy for their records held by banks or other financial institutions. In response, Congress passed the Right to Financial Privacy Act two years later, restricting government access to Americans’ banking records. In considering the Swift program, some government lawyers were particularly concerned about whether the law prohibited officials from gaining access to records without a warrant or subpoena based on some level of suspicion about each target.

[snip]

After an initial debate, Treasury Department lawyers, consulting with the Justice Department, concluded that the privacy laws applied to banks, not to a banking cooperative like Swift. They also said the law protected individual customers and small companies, not the major institutions that route money through Swift on behalf of their customers.

[snip]

Treasury officials said they considered the government’s authority to subpoena the Swift records to be clear. “People do not have a privacy interest in their international wire transactions,” Mr. Levey, the Treasury under secretary, said.

In other words, while our government claims it only uses SWIFT to track terrorist financing, there is a legal argument probably hidden in an unknown John Yoo memo that says no one–not corrupt politicians, not GE, not Goldman Sachs–have any right to privacy as SWIFT records them transferring money internationally.

Now, as Greenspan suggested, that theory could radically destabilize the financial shell game the world’s elites depend on.

Thus far, though, it hasn’t. Which I take to mean the US has largely stood by its promise not to use SWIFT to uncover all the crimes it could reveal–like what Bank of America and GE did with the money they should pay in taxes, or who really crashed the global economy. Presumably, DOJ is sitting on a bunch of legal opinions saying they could use SWIFT to pursue those crimes, but it has chosen not to.

I get it. Our country likes to pretend terrorism is a bigger existential threat to us than the looting and financial shenanigans that have dismantled our middle class and have led to increased instability and deaths here and in other countries. That’s laughable on its face, mind you, but it’s a nice story elites like to tell.

But they have to tell that story. Because otherwise, knowing that DOJ has authorized itself to access SWIFT with no privacy restrictions, if we all acknowledged that this looting has already done more damage than terrorists will ever do, then DOJ would actually have to use the tools it has at hand to pursue this looting.

Last June, Bloomberg did a long story on the Deferred Prosecution Agreement that Wachovia negotiated with DOJ. As “punishment” for helping Mexican drug gangs to launder more than $363 billion  through casas de cambios for three years, Wachovia had to pay $50 million fine and a $110 million forfeiture of the proceeds that were clearly from drug gangs.

In my post on Bloomberg’s article last year, I compared the size of this business (plus some other illegal ones Wachovia engaged in) to how much Wachovia was losing in mortgage shitpile.

So $373 billion in wire services (some of which were surely legal), $4 billion in bulk cash services, and some portion of $47 billion in digital pouch services (again, some of which is surely legal and may pertain to remittances). Compare those numbers to the $40 to $60 billion or so in Wachovia subprime losses Wells Fargo ate when it took over Wachovia. Was Wachovia laundering money for drug cartels because it was so badly exposed in mortgage-backed securities, or was it so heavily involved in products that could be used for money laundering just for fun?

It sure looked to me like Wachovia was covering this up–and berating their own money laundering guy who kept pointing to these transactions–because they were so deep in the shitpile.

The Guardian just did its own long story on this (h/t NC) that, among other things, confirms my suspicion there was a connection between the shitpile and the money laundering.

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse. “Inter-bank loans were funded by money that originated from the drugs trade,” he said. “There were signs that some banks were rescued that way.”

Of course, it almost certainly wasn’t just drug lords. Our banks were almost certainly overlooking other dubious cash transfers during this time, from oil dictators to the mob to illegal corporate gains.

And we couldn’t prosecute such money laundering, the Guardian article suggests, because doing so would have hastened the collapse of the bubble.