ECONOMY
Pulling The TARP Over Your Eyes

When Treasury Secretary Henry Paulson initially presented his plan for the $700 billion Troubled Assets Relief Program (TARP) to Congress, it was three pages long and included no oversight mechanism, stating that decisions by the Secretary are "committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Emphatically rejecting that approach, Congress crafted a series of supposed checks on Paulson's power to use the TARP -- including an independent inspector general and an oversight board appointed by both parties -- and required Paulson to ask Congress if he wanted to access further installments of the money, after the first $350 billion was exhausted. However, it has become clear that Paulson and the Treasury are increasingly operating without oversight of any kind. Despite repeated promises from lawmakers and Paulson himself, the allocation of the TARP funds do not appear to be receiving much scrutiny.

NOT WHAT CONGRESS INTENDED: Initially, Paulson said that "the single most effective thing we can do to help homeowners, the American people, and stimulate our economy" was to buy troubled assets from financial institutions. However, Paulson abruptly changed course, deciding to recapitalize banks instead. While this was likely a wise policy decision, it was made with seemingly no input from Congress. Furthermore, Paulson has never used the TARP to address the root cause of the financial meltdown -- the mortgage market -- much to the chagrin of Congressional members, who claimed Paulson was ignoring the intent of the legislation. Rep. Gary Ackerman (D-NY) expressed his dismay with Paulson, telling him, "[Y]ou seem to be flying a $700 billion plane by the seat of your pants." Furthermore, while the TARP debate was raging in September, Treasury slipped through a tax change giving a $140 billion tax break to the very banks being bailed out. "This is part of our overall effort to provide relief," a Treasury spokesman said, defending the change. "Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no," said George K. Yin, the former chief of staff of the Joint Committee on Taxation.

OVERSIGHT FAILURE: Paulson was able to change course with the TARP because of a breakdown in oversight and because the overall TARP structure decilnes to hold banks accountable. Elizabeth Warren, the chairwoman of the congressional oversight panel, said in an interview that the Treasury seems "to be lurching from one tactic to the next" but admits that the panel is "still in the early stages" of its research. The Government Accountability Office (GAO), meanwhile, said in a report released yesterday that "the Treasury Department has failed to address a number of critical issues while implementing the $700 billion financial rescue plan, including how to ensure its efforts are successful." The GAO report says that the Treasury "has no policies or procedures in place for ensuring the institutions...are using the capital investments in a manner that helps meet the purposes of the act," as banks have been using the funds to bolster their balance sheets and to make acquisitions, rather than lending. Treasury, meanwhile, "has not yet determined if it will impose reporting requirements on the participating financial institutions." Not all of the oversight failures are the Treasury's fault, however. The TARP legislation calls for a special inspector general to be appointed by the White House, which has nominated assistant U.S. attorney Neil Barofsky. However, his nomination is currently being blocked by an unknown Republican senator.

OTHERS LEAD THE WAY: While Paulson has been continually resistant to using TARP funds to buy and restructure troubled mortgages -- saying that the TARP "is not a panacea for all our economic difficulties" -- others have been less hesitant. Sheila Bair, Chairman of the Federal Deposit Insurance Corp., has put forth a plan that would prevent 1.5 million foreclosures for $24.4 billion dollars, modeled on a successful plan implemented after the takeover of IndyMac. "We think it's essential that we actually strike at the underlying cause of the problems in the financial markets," said Michael Krimminger, special adviser for policy at the FDIC. "We think it's time to make a decisive difference in the housing markets on foreclosures." Federal Reserve Chairman Ben Bernanke, meanwhile, issued a plan last week to revive the U.S. housing market by spending $100 billion to buy the debt of Fannie Mae and Freddie Mac and another $500 billion to buy mortgage-backed securities that are guaranteed by Fannie, Freddie, and Ginnie Mae.In the otherwise badly orchestrated bailout of Citigroup, a caveat was included that mandates Citigroup use the "mortgage modification procedures" adopted by the FDIC. As Ed Paisley, Vice President for Editorial at the Center for American Progress Action Fund wrote, "These and other measures to help stabilize the housing market and then address the root cause of our economy's present ills is what Congress envisioned when it passed its $700 billion financial rescue package. ... Paulson should get with the program."

Under the Radar

ADMINISTRATION -- ROVE IS ORCHESTRATING THE 'BUSH LEGACY PROJECT': President Bush's interview with ABC's Charlie Gibson this week was the "first of several planned 'exit interviews.'" According to White House press secretary Dana Perino, Bush's next interview will be with ABC's Cynthia McFadden on the topic of the faith-based initiative, which will air on Nightline next week. If the first interview with Gibson provides any clue as to what we can expect from these interviews, Bush will paint a rosy picture of his legacy and "refuse to take responsibility for a single thing that went wrong on his watch," as the Washington Post's Dan Froomkin observed. On CNN yesterday, the Weekly Standard's Stephen Hayes revealed that former Bush adviser Karl Rove is currently orchestrating the Bush legacy project. "There's an ongoing Bush legacy project that's been meeting in the White House, really, with senior advisers, Karl Rove, Karen Hughes has been involved, current senior Bush administration advisers," said Hayes. "They are looking at how to sort of roll out the President's legacy." Rove has previously been reported to be advising the George W. Bush Presidential Library Foundation and is said to be spearheading the conservative Institute for Democracy think tank that will accompany the future Bush library at Southern Methodist University.

MILITARY -- CONTRACTOR HOLDS FOREIGN WORKERS IN WAREHOUSE OUTSIDE BAGDHAD: "About 1,000 Asian men who were hired by a Kuwaiti subcontractor to the U.S. military have been confined for as long as three months in windowless warehouses near the Baghdad airport without money or a place to work," McClatchy reports. The company is a subcontractor to KBR, the notorious military contracting company that has been embroiled in scandals, including numerous sexual assault charges from its female employees. The 1,000 employees were hired from India, Nepal, Sri Lanka, and Bangladesh. The contractor then held them in conditions that "appear to violate guidelines the U.S. military handed down in 2006 that urged contractors to deter human trafficking to the war zone by shunning recruiters that charged excessive fees." The workers said the company had seized their passports, in violation of the military's rules. "A group of about 50 men living in tents about a mile away were even worse off than the men in the warehouses, and they appeared to be victims of human trafficking. They live in huts they built with tarps and pieces of carpet, and said they had no access to food or water," noted McClatchy. In August, a Washington law firm sued KBR for allegedly engaging in the human trafficking of Nepali workers who were sent to Iraq. 

ADMINISTRATION -- WHITE HOUSE DECIDES AGAINST HANGING 'IMPEACH BUSH' ORNAMENT: When First Lady Laura Bush asked members of Congress to pick local artists to decorate the White House Christmas tree, Rep. Jim McDermott (D-WA) turned to a local arts organization who assigned the task to Deborah Lawrence. The Seattle-based artist said, "I was at first nauseated, then realized it was an opportunity to highlight Jim McDermott because he's a hero of mine." So Lawrence, who frequently combines politics and satire in her work, covered a nine-inch ball "with swirly red and white stripes -- and, in tiny glued-on text, salutes the Democratic congressman's support for a resolution to impeach President Bush." But unfortunately for Lawrence, Sally McDonough, a spokeswoman for Laura Bush, reported yesterday afternoon that the ornament would not be displayed. "It's inappropriate and it's not being hung. ... We reviewed the ornament along with all the [other] ornaments, and Mrs. Bush deemed it inappropriate for the holiday tree," McDonough said. Lawrence responded, "Oh, dear. This doesn't really surprise me. But it's disappointing that I won't get to see it on the tree." While Lawrence's ornament was deemed "inappropriate" for public display on the tree, Lawrence was still  allowed to attend "the White House reception for the artists yesterday ('They let us in') but didn't get a chance to chat with the hostess."

Think Fast

Former Gov. Jeb Bush (R-FL) told Politico, "I am considering" a run for Senate, after Sen. Mel Martinez (R-FL) announced yesterday he would retire in 2010. "A lot of people are calling him and contacting him and encouraging him to look seriously at this," a source close to Bush said. In an e-mail to ABC's The Note, Bush wrote, "I am going to think about it for the next month or so."

CNN reports that President-elect Barack Obama has a "hearty appetite for intelligence." Obama is receiving intelligence briefings on all seven days of the week, "exceeding the six days given to President Bush." Director of National Intelligence Mike McConnell jokingly wondered aloud whether "there's a little bit of competition" between the men.

Exxon CEO Rex Tillerson "was awarded a $4 million bonus in 2008" and was granted 225,000 shares of restricted stock. He will also receive a 10 percent increase in his annual salary in 2009, raising his base salary to $2.06 million.

Yesterday, federal prosecutors expanded the corruption indictment against former NYC police commissioner Bernie Kerik. "The main charges -- that Kerik accepted free apartment renovations from a would-be city contractor, lied to the White House and filed false income tax returns -- remain," but the indictment adds new details regarding Kerik's lies about his finances.

Yesterday, the White House approved "one of the most contentious" regulations officials are trying to push through in Bush's final weeks in office, making it "easier for coal companies to dump rock and dirt from mountaintop mining operations into nearby streams and valleys." Environmental Protection Agency Administrator Stephen Johnson claimed that the new rule would "protect fish, wildlife and streams." More »

Government unions are criticizing a White House executive order signed Monday that bars roughly 8,600 federal employees from joining a union "because they are engaged in intelligence gathering, investigations and other national security work." Peter Winch of the American Federation of Government Employees called the move "an abuse of discretion in the last few days."

According to a new annual report from the National Center for Public Policy and Higher Education, "The rising cost of college -- even before the recession -- threatens to put higher education out of reach for most Americans." Tuition and fees "increased 439 percent from 1982 to 2007" while “students from lower-income families…get smaller grants from the colleges they attend than students from more affluent families."

The poor state of the U.S. economy is helping the Army's retention rate. In 2008, "more young members of the Army, Air Force and Navy decided to re-up" and Pentagon officials acknowledge that the "bad news for the economy" may have been "good news for the military." "We do benefit when things look less positive in civil society," said David Chu, undersecretary of defense for personnel and readiness.

Obama will name Gov. Bill Richardson (D-NM) as his commerce secretary at a press conference today in Chicago. Additionally, Obama has reportedly offered Rep. Xavier Becerra (D-CA) the position of U.S. Trade Representative, but a Becerra spokesperson said, "There's no announcement."

And finally: Although District and federal officials expect approximately four million people to descend upon the nation’s capital for Barack Obama’s inauguration, many Republican staffers are planning to "surrender the town for warmer weather and, in some cases, a nice profit." GOP lobbyist Jason Roe said, "I am hoping to capitalize on the enthusiasm by renting my house for $2,000 a night and spending it in the Virgin Islands." Sen. John Barrasso (R-WY) aide Gregory Keeley said he would unfortunately likely stay in town for work. "It's not going to be my favorite place to be, put it that way," Keeley said. "If there's a horse out of Dodge, I'd like to be on it."

Good News

Yesterday, "lawmakers and hundreds of onlookers packed into the US Capitol" for the inauguration of the new Capitol Visitor Center.

State Watch

TEXAS: Dept. of Justice charges that residents of Texas schools for the disabled are in so much danger of mistreatment "that their constitutional rights have been violated."

FLORIDA: State GOP refuses to seat white supremacist.

HAWAII: State endorses "effort to build an alternative transportation system based on electric vehicles."

Blog Watch

THINK PROGRESS: Freshman Rep. Duncan Hunter (R-CA): There is more violence in Tijuana than in Iraq and Afghanistan.

WONK ROOM: The economic imperative for clean energy.

HUFFINGTON POST: Karl Rove and Bill Kristol claim that President Bush wouldn't have invaded Iraq if he knew there were no weapons of mass destruction.

FEMINISTE: Newsflash to anti-choice bloggers: Planned Parenthood is a health care service provider.

Daily Grill

"I never sought to privatize Social Security."
-- Sen. Saxby Chambliss (R-GA), 12/1/08

VERSUS

"Chambliss, in contrast, signed a pledge...promising to support individual accounts if he was elected."
-- Michael Tanner of SocialSecurityChoice.org, 11/18/02