Last Call

Convicted fraudster Bernie Madoff is having the last laugh after all, taunting the SEC by saying he should have been caught sooner.

Jailed swindler Bernie Madoff said it was "amazing" that he didn't get caught sooner in his multi-billion-dollar Ponzi scheme, and that everything the SEC did to investigate him prior to 2006 was a waste of time, according to a jailhouse interview he gave to SEC Inspector General H. David Kotz.

Madoff also told Kotz that SEC Chairwoman Mary Schapiro was a "dear friend," although she "probably thinks, 'I wish I never knew this guy.'"

Gee, a lot of people are thinking that.

Madoff says that in multiple encounters with SEC investigators over the years, he never had to tell them about his role in the industry because "they already knew."

The Inspector General's report, released in early September, found multiple lapses at the SEC, but said there was no evidence of improper influence by Madoff.

And the best part is, the Obama watchdogs are still letting them get away with it. There are frauds out there that make Bernie's billions look like chump change, but there's even less we'll ever be able to do about it.

Just For The Record

...Wingnuts don't check facts, you know. That would require honesty and integrity, and all that other inconvenient crapola. Case in point, all the knuckleheads who screamed that Jeremiah Wright and Bill Ayers visited the White House...

But as the original post by White House ethics counselor Norm Eisen makes clear, the “William Ayers” and “Jeremiah Wright” on the list are actually different individuals who merely share the same name:

Given this large amount of data, the records we are publishing today include a few “false positives” – names that make you think of a well-known person, but are actually someone else. In September, requests were submitted for the names of some famous or controversial figures (for example Michael Jordan, William Ayers, Michael Moore, Jeremiah Wright, Robert Kelly (”R. Kelly”), and Malik Shabazz). The well-known individuals with those names never actually came to the White House. Nevertheless, we were asked for those names and so we have included records for those individuals who were here and share the same names.

Mainstream news outlets have reported this fact accurately. But for the right wing, the story was simply too good to be fact-checked.

I can see how Cap'n Crunch missed it, but the Moonie Times and not one but two different Weekly Standard meatheads were simply just not intelligent enough to realize that there may be more than one Jeremiah Wright or William Ayers in the world.

Their first instinct is to just lie. It really, really does not matter to some of them if what they say about Obama is true or not. They don't check facts, and they assume you won't either.

CIT Is DOA

CIT Group officially filed for bankruptcy this afternoon, as widely expected.

CIT, which filed for bankruptcy protection in the Southern District of New York, plans to reduce its total debt by about $10 billion. The company had about $65 billion in liabilities as of mid-June and $800 million of debt is coming due next week.

Under the bankruptcy plan approved by bondholders, creditors will end up owning the company. Most bondholders will also end up with new CIT debt worth about 70 percent of the face value of their old debt. Preferred shareholders, including the U.S. government, will get money only after other creditors are paid back. Current common shareholders will receive nothing.

The U.S. government invested $2.33 billion in CIT preferred shares in December 2008 through the Troubled Asset Relief Program.

CIT financed itself mainly by borrowing from bond markets, which has proven to be a flawed strategy as the credit crunch that began in 2007 has made it much more expensive for troubled companies to fund themselves.

Yeah, that was $2.33 billion well spent, wasn't it? As CalcRisk notes:

CIT provides financing for about one million small businesses, so the key question is how will this impact the ability of many small businesses to obtain financing.

Monday's not going to be pretty at all.

Perspective, Can I Haz It?

TBogg reminds us that even should Doug Hoffman win, the fact that Bill Owens is anywhere close to victory on Tuesday is in and of itself a major deal, considering that a Democrat hasn't won this seat in one hundred and forty years.

It should be the safest seat in the known universe for the GOP, and yet it's a statistical tie between the Democrat and the Conservative Party nutbar because the Republican has dropped out.

As I have have said multiple times and will continue to say: It's not the Democrats who are in trouble in 2010.

Launching The Escape Pods From The Starship Lieberman

Joe F'ckin Lieberman has upped the ante and now says he prefers no health care reform whatsoever to a public option bill.

On CBS’ Face The Nation today, however, host Bob Schieffer put the question to Sen. Joe Lieberman (I-CT), who claims that he is “all for health care reform, but is threatening to join a Republican filibuster to stop any reform bill that has a public option.

“But wouldn’t that mean that you might wind up with nothing instead of something?” asked Schieffer. Lieberman responded by saying that supporters of the public option are “stopping us from getting something done” because they’re making the option “the litmus test.” Pressed again by Schieffer, Lieberman admitted that he would prefer “nothing”:

SCHIEFFER: But is what you’re also saying is that nothing is better than a government health insurance, or a health insurance reform that includes a public option? Nothing is better than that?

LIEBERMAN: Well, the truth is that nothing is better than that because I think we ought to follow, if I may, the doctor’s oath in Congress as we deal with health care reform, do no harm.

To support his claim that the public option would do harm, Lieberman said that the Congressional Budget Office found that under the House’s health care plan, premiums for the public option would be higher than the average premium in private plans in the exchange. But as TPMDC’s Brian Beutler reported, this is actually an argument for a more robust public option.

But logic doesn't matter. Joe wants to be the Most Important Man In Washington.

And until the Dems show him the door, he will be. Remember that when you think back on all this. I know personally that it's time for re-enrolling in my employer's health care plan this month. 2010 premiums for the same coverage I had last year are up another 12% or so over 2009. But I'm sure that Joe's Nothing will work out just fine for America.

Zandar's Thought Of The Day

Since apparently Rush Limbaugh doesn't have enough of a media audience during your average week to attack the president, it's nice of FOX News to give him an extra half-hour on Sunday to lay into Obama. I guess they had to compromise since the clocks rolled back an hour and all. Perhaps Glenn Beck got the other 30 minutes.

"They will put their political survival and their political power being gained over everything else," he bellowed. As evidence, Limbaugh insisted that throughout the Iraq War, "it was Barack Obama and the Democratic Party which actively sought the defeat of the U.S. military."

Simply accuse Obama of everything you knew that George W. Bush did.

A Pyrrhic Victory In New York -- UPDATED

Frank Rich's opinion on the Hoffman Effect is definitely worth reading today as he takes the limiters off and tears into the Teabaggers.

The right’s embrace of Hoffman is a double-barreled suicide for the G.O.P. On Saturday, the battered Scozzafava suspended her campaign, further scrambling the race. It’s still conceivable that the Democratic candidate could capture a seat the Republicans should own. But it’s even better for Democrats if Hoffman wins. Punch-drunk with this triumph, the right will redouble its support of primary challengers to 2010 G.O.P. candidates they regard as impure. That’s bad news for even a Republican as conservative as Kay Bailey Hutchison, whose primary opponent in the Texas governor’s race, the incumbent Rick Perry, floated the possibility of secession at a teabagger rally in April and hastily endorsed Hoffman on Thursday.

The more rightists who win G.O.P. primaries, the greater the Democrats’ prospects next year. But the electoral math is less interesting than the pathology of this movement. Its antecedent can be found in the early 1960s, when radical-right hysteria carried some of the same traits we’re seeing now: seething rage, fear of minorities, maniacal contempt for government, and a Freudian tendency to mimic the excesses of political foes. Writing in 1964 of that era’s equivalent to today’s tea party cells, the historian Richard Hofstadter observed that the John Birch Society’s “ruthless prosecution” of its own ideological war often mimicked the tactics of its Communist enemies.

The same could be said of Beck, Palin and their acolytes. Though they constantly liken the president to various totalitarian dictators, it is they who are re-enacting Stalinism in full purge mode. They drove out Arlen Specter, and now want to “melt Snowe” (as the blog Red State put it). The same Republicans who once deplored Democrats for refusing to let an anti-abortion dissident, Gov. Robert Casey of Pennsylvania, speak at the 1992 Clinton convention now routinely banish any dissenters in their own camp.

Kudos to Rich for this one...and better still, he digs into the whole picture of Obama Derangement Syndrome and the Teabagger victim card, and why it will continue to be a loser.

These conservatives’ whiny cries of victimization also parrot a tic they once condemned in liberals. After Rush Limbaugh was booted from an ownership group bidding on the St. Louis Rams, he moaned about being done in by the “race card.” What actually did him in, of course, was the free-market American capitalism he claims to champion. Limbaugh didn’t understand that in an increasingly diverse nation, profit-seeking N.F.L. franchises actually want to court black ticket buyers, not drive them away.

This same note of self-martyrdom was sounded in a much-noticed recent column by the former Nixon hand Pat Buchanan. Ol’ Pat sounded like the dispossessed antebellum grandees in “Gone With the Wind” when lamenting the plight of white working-class voters. “America was once their country,” he wrote. “They sense they are losing it. And they are right.”

They are right. That America was lost years ago, and no national political party can thrive if it lives in denial of that truth. The right still may want to believe, as Palin said during the campaign, that Alaska, with its small black and Hispanic populations, is a “microcosm of America.” (New York’s 23rd also has few blacks or Hispanics.) But most Americans like their country’s 21st-century profile.

That changing complexion is part of why the McCain-Palin ticket lost every demographic group by large margins in 2008 except white senior citizens and the dwindling fifth of America that’s still rural. It’s also why the G.O.P. has been in a nosedive since the inauguration, whatever Obama’s ups and downs. In the latest Wall Street Journal-NBC News poll, only 17 percent of Americans identify themselves as Republicans (as opposed to 30 percent for the Democrats, and 44 for independents).

Needless to say, Rich is already being attacked by the usual suspects this morning who are throwing hissy fits that anyone would dare say such a thing as the truth about these idiots.

It's the speed and the vehemence of the reaction to Rich's column that assures you that he has hit an artery on the Body Wingnut. The civil war in the GOP I've long been predicting is now in full swing, and the Teabaggers are winning. They will most likely win this battle.

And they will now lose the greater war.

[UPDATE 10:16 AM] Dan Riehl's reaction is All-Star Wingnut material.

As for moderates, too few to worry about are talking about a purge driven by the Right. Everyone with any sense knows there are districts where we must cooperate. Worse than that, it is precisely these moderates who have been so vocal in demonizing the Right as Far Right crazies, which we are not. They should learn their lesson and shut-up, as they have no clue what they are talking about.

"We're not crazies and we're not trying to purge you. NOW SHUT UP BEFORE WE PURGE YOU!"

[UPDATE 12:37 PM] The paper of record in NY-23, the Watertown Daily Times, is reporting that Dede Scozzafava is privately pushing her supporters to vote for the Democrat in the race, Bill Owens.

In her statement Saturday morning, the assemblywoman explained the reasons behind her decision: "It is increasingly clear that pressure is mounting on many of my supporters to shift their support. Consequently, I hereby release those individuals who have endorsed and supported my campaign to transfer their support as they see fit to do so."

During the day Saturday, she began to quietly and thoughtfully encourage her supporters to vote for Democrat William L. Owens.

...as is the Watertown Daily Times, now openly endorsing Owens.

The Watertown Daily Times initially endorsed Ms. Scozzafava as the best-qualified candidate in the race. We still think she is. However, in suspending her campaign she released her supporters' commitment to her. That left voters to choose between Mr. Owens and Mr. Hoffman.

Of the two, Bill Owens is by far the superior and only choice.

The Wingers are now apoplectic, but at least one seems to think that driving moderates out of the GOP and into the Democrats' tent just might be a bad idea in 2010. But make no mistake, the GOP has now all but fully thrown in their lot with the Teabaggers. The remaining moderates will be excised from the party.

And along with it, any chance they might of had in 2010 or 2012. I've said this before: the Democrats will need a corrective force to prevent them from making the mistakes of excess. As long as the Republicans are reduced to a fringe party of extremists, then that will never happen.

Betting On Double Zero

The other big story breaking this weekend is McClatchy's Greg Gordon revealing just how Goldman Sachs became this big winner in the financial meltdown by betting everything would go sour. The article's a must read, but highlights include this (emphasis mine):

"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted."

John Coffee, a Columbia University law professor who served on an advisory committee to the New York Stock Exchange, said that investment banks have wide latitude to manage their assets, and so the legality of Goldman's maneuvers depends on what its executives knew at the time.

"It would look much more damaging," Coffee said, "if it appeared that the firm was dumping these investments because it saw them as toxic waste and virtually worthless."

Lloyd Blankfein, Goldman's chairman and chief executive, declined to be interviewed for this article.

A Goldman spokesman, Michael DuVally, said that the firm decided in December 2006 to reduce its mortgage risks and did so by selling off subprime-related securities and making myriad insurance-like bets, called credit-default swaps, to "hedge" against a housing downturn.

DuVally told McClatchy that Goldman "had no obligation to disclose how it was managing its risk, nor would investors have expected us to do so ... other market participants had access to the same information we did."

For the past year, Goldman has been on the defensive over its Washington connections and the billions in federal bailout funds it received. Scant attention has been paid, however, to how it became the only major Wall Street player to extricate itself from the subprime securities market before the housing bubble burst.

In other words, there's a very, very good chance that Goldman Sachs knew it was selling toxic waste to investors while the company itself arranged its own finances to bet that the very financial products it was selling would collapse completely.

It is very much fraud, on a massive, economy destroying scale, and Goldman made billions from it. If it can be proven that Goldman Sachs knowingly sold products that it was convinced would collapse in value, then it's over for them.

Any financial reform must start with the prosecution of those responsible for creating, packaging, and selling these financial products to serve as a warning that it will never be allowed to happen again.

But what are the odds of that happening? Obama's financial team is compromised to the hilt by connections to financial companies, especially Goldman Sachs. Do you think Timmy, Helicopter Ben, or Larry Summers are going to allow anything to happen to Goldman or any of the Too Big To Fail Banks? Do you think Congress, taking millions in lobbyist dollars, will allow any of that to happen?

Perhaps when the next bubble bursts and throws us into a real depression, people will pay attention. But it won't happen otherwise.

Yves Smith at nakedcap surmises that Goldman Sachs's escape tunnel went through AIG:

Goldman used another route….and the road, not surprisingly, was through AIG. From an e-mail over the summer:

This also points out a *VERY* good nugget re: banks who used CDOs/AIG offensively as opposed to as a hedge. This is likely what bothered me most about the AIG debacle. The trades GS had on with AIG were generally *not* super senior CDOs GS was long simply because they had
underwritten CDOs and were “stuck” with the AAA risk as a result. Rather, GS had a whole program of issuance — something they called “Abacus” — which were deals they put together with the sole purpose
of getting short subprime/CDO risk. Their sole purpose in doing the deals was to get long protection/short risk on the underlying collateral. AIG was simply the vehicle they chose to moneitze that PnL. Call me crazy, but I put the AIG counterparties in two different camps: guys like SocGen, who bought bonds in good faith and then hedged the credit risk by buying CDS from AIG, and guys like GS, who used AIG as their lottery ticket for offensively constructed trades to capitalize on mispriced subprime risk. The former, to me, seem much more deserving of a bailout than the latter…

DeutscheBank had a broadly similar program called Start.

This of course makes complete sense. There simply was not enough insurance capacity (the monolines plus the volume on the Markit indexes) to account for the big names that went short (Paulson, Goldman, one other large but secretive player we are aware of). That road had to go through AIG as well.

The evidence is starting to build up. In 2006 the smart financial firms were making money off the Bush Boom. The really smart financial firms were planning to make even more money off the Bush collapse.

And they left us holding the check. The roulette wheel came up 00 just as Goldman Sachs put everything down on it. Everyone else on the board was wiped out.

But not Goldman Sachs.

The Only Way To Win Is Not To Play

The political problems in Afghanistan just got a whole lot worse this morning as opposition candidate Abdullah Abdullah has dropped out of next week's presidential runoff election, stating that the Nov. 7th contest will also be fixed by Hamid Karzai's followers.

"I want this to be an example for the future so that no one again tries to use fraud to abuse the rights of the Afghan people," Abdullah said at an emotional news conference announcing his decision.

President Hamid Karzai agreed to the runoff, set for Saturday, after he claimed victory in the first ballot in August. A review by a U.N.-backed panel of election monitors threw out nearly one-third of his votes, citing fraud. The result left Karzai short of the 50 percent-plus-one needed to avoid a runoff.

Abdullah had called for the resignations of top election officials and politicians to avert electoral fraud in the runoff. He argued that the commissioners, who are hired by Karzai, cannot be impartial.

But that request was not met, he said Sunday, and he did not believe a transparent election was possible.

"I spoke to Karzai about the Independent Election Commission abusing its powers, but he denied it and refused to dismiss them," he said.

The election commission, which denied any wrongdoing, slammed the candidate's accusations. Unless Abdullah has proof of such bias, he is in no position to ask any Afghan official to step down, said Azizullah Lodin, IEC president.

Abdullah did not address any plans to be part of a coalition government, which the election commission said Saturday was unconstitutional.

"I will not focus on that," he told CNN's Christiane Amanpour, adding that his goal was to contribute to a better Afghanistan in whatever capacity he was in. He urged his supporters to remain calm and not take to the streets in protest.

"I will be available to serve country," he said. "I am in consultations with followers ... a movement for change will be there and I will lead that movement."

If you thought political stability in Afghanistan was a problem before, it's going to get exponentially worse as long as Abdullah can keep saying that Karzai is leading a Potemkin village of US puppets. That means our troops will be at risk by being in Afghanistan, and adding more troops will only make Abdullah's point painfully clear to the Afghan people.

It's been eight years now. What have we accomplished in Afghanistan? The GOP will tell you the answer is another decade or two to iron out the kinks. We can't afford it financially, morally, or strategically. Neither can Afghanistan.

What will Obama do? The Karzai government will never have any legitimacy now. And that means there is no military solution.

Of course, there never was one.