Despite escalating outrage over rampant foreclosure fraud, the Federal Reserve now appears ready to eviscerate a key mortgage regulation in an effort to spare banks the losses from their own wrongdoing. Even as bank executives preposterously claim to have wronged nobody in the foreclosure process, they’re pushing hard to unwind the only serious federal rule that protects borrowers from predatory loans and improper foreclosures. As if the last decade of abuse wasn’t bad enough, banks are once again mobilizing to screw borrowers in the pursuit of epic bonuses. And once again, it appears that the Federal Reserve has become an accomplice to this nationwide mortgage scam.

Today, top mortgage officers from the nation’s largest banks are telling the Senate Banking Committee that they aren’t kicking the wrong people out of their homes. This is simply false. Problems at mortgage servicers have been going on for years, long before banks got into trouble for illegally robo-signing foreclosure documents. People are kicked out of their homes without cause in the United States every day. If the top executives at America’s largest banks don’t know this fact, they lack the competence needed to run their organizations.

Law firms that work with troubled borrowers are jam-packed with horror stories about foreclosures caused entirely by banks, not borrowers. Families who never miss a payment come home to an eviction notice, or a thug breaking down their door.

But it’s even more common for borrowers to find themselves in trouble because their bank engaged in blatantly predatory lending. There is only one serious federal remedy for predatory lending, and the Fed is now knowingly trying to gut that remedy in order to help banks avoid losses from their own fraud. The remedy is called rescission, and it works like this:

If a bank failed to make key consumer protection disclosures about a mortgage, the borrower can demand that all of the interest and closing costs on the loan be refunded. Equally important, the bank must also stop all foreclosure proceedings and give up its right to foreclose. Once the bank gives up its right to foreclose, the full amount of the mortgage, minus interest and closing costs, becomes due. This isn’t a free lunch for the borrower, especially when the value of her home has declined dramatically, but it’s better than nothing, and it does impose real costs on banks.

For this process to function at all, it is absolutely critical that the bank be barred from foreclosing before the borrower has to pay off the remainder of the loan. A borrower can easily owe hundreds of thousands of dollars after winning a rescission. Few victims of predatory lending actually have that kind of money on hand.

This is the whole point of rescission, and it’s been on the books since the Truth in Lending Act was passed in 1968. Without it, the consumer protections detailed by that law have no teeth. A bank is barred from engaging in predatory lending, but if it does it anyway, it faces no serious punishment.

Rescission, in other words, is the only federal legal device keeping banks in check on predatory lending (as the last decade proves, it’s nowhere near enough). Predatory lending is really bad. If banks engage in it, they should face dramatic consequences. They don’t get to foreclose and they give up all of the profit they expected to score from the predatory loan. If the borrower doesn’t have all of the money on hand to pay off what’s left, the bank has to deal with this money coming in over time.

The bank lobby and the Fed are now trying to completely gut the substance of this regulation. The Fed has just proposed a new rule that would reverse the order of payments and the right to foreclose under rescission. Under the new rule, a bank that has engaged in predatory lending does not have to give up its right to foreclose until after the borrower has paid off the full remaining balance of the loan.

Under the Fed’s proposal, if you’re the victim of illegal predatory lending, the bank will still get to foreclose on you unless you pony up hundreds of thousands of dollars all at once. And you’ll have to pony up what the bank says you owe, which may be very different from what you actually owe. That eliminates the usefulness of rescission, making the new rule a bailout for predators.

The Fed knows full well that it’s gutting the law here. The Board of Governors and their staff have met with key consumer lawyers no less than three times about this exact rule proposal, and the Fed is going ahead with it anyway.

Here’s what’s really going on. The largest banks don’t have enough capital to weather a bad housing market. And any process that sheds light on the documentation procedures at mortgage servicers will expose the big banks to investor lawsuits. But investors can’t sue without those documents. Rescission judgments create a paper trail for illegal loans. In addition to creating immediate losses for banks, rescission documents that banks sold illegal loans, giving investors who bought mortgage-backed securities ammunition for well-founded lawsuits. Those lawsuits, in turn, could sink some of the biggest names on Wall Street, something the Fed has been trying to prevent at all costs since 2008.

How close to the edge are the banks? Many mortgages that they account for as profitable assets are actually huge losses. The most obvious example of this insanity involves second lien mortgages. There are lots of kinds of second liens loans, but the important thing to remember is that they’re the first asset to be wiped out when housing prices decline. Right now, they’re in big trouble.

The second-lien holdings of Citigroup, Wells Fargo, Bank of America and JPMorgan Chase are about equal to their total capital. If you wipeout second liens alone, these banks are done. Right now the banks are accounting for these second liens as if they were worth nearly 100 percent of their original value—even though these loans only trade at only about one-quarter of that value. If banks take the market’s value of just one class of assets, they’re gone.

This class of assets goes completely under if banks have to own up to the current foreclosure fraud mess. The only real way to fix the documentation fraud problems is a nationwide program reducing the amounts that borrowers owe on their mortgages to current home values. Doing that forces the banks to acknowledge that their second lien mortgages are, in fact, worthless.

So the big banks and their protectors at the Fed are launching a two-pronged strategy. First, they’re trying to prevent investors from obtaining the loan documents that will fuel well-justified lawsuits. Second, they’re trying to give banks even greater control over the foreclosure process, in order to allow banks to continue to game accounting rules. This is a premeditated strategy to save banks from losses created by their own fraudulent, predatory behavior. It has no place on the books of the Fed, particularly after the central bank’s total failure to prevent the mortgage abuses of the past decade.

It’s not too late for the Fed to turn back. It can, in fact, abandon this bailout, and leave consumer protection issues to the new Consumer Financial Protection Bureau, which is designed to handle exactly this sort of issue, for exactly this reason.

This is a joke. Politico is floating the idea that notorious Wall Street crony Rep. Melissa Bean, D-Ill., could be tapped to head the Consumer Financial Protection Bureau, if she loses her close election with Republican Joe Walsh. Even for Politico’s rumor-mill, this is pretty funny stuff—only slightly less absurd than suggesting that Alan Greenspan might be picked to head the new agency.

The idea just gets a single paragraph in Politico’s Morning Money column, and it even features an administration official shooting down the idea. With good reason, because it makes no sense. President Barack Obama went to the mat to put Elizabeth Warren in charge of the CFPB, and she is doing a terrific job setting up the agency. She’s named one of the world’s best researchers on consumer finance, Raj Date, as a top adviser, and has started cracking down on deceptive fine print in credit card contracts. There’s no reason to replace her with anybody, much less a notorious consumer foe.

Melissa Bean is probably the single greatest consumer antagonist in the Democratic Party. As financial reform moved through Congress, Bean repeatedly slipped in amendments aggressively defending Wall Street’s right to pillage our pocketbooks. She single-handedly held up negotiations in the House Financial Services Committee for months, hamstringing the reform process and earning plenty of enemies in the Democratic leadership and the Democratic base. She is simply unconfirmable.

Fortunately, Obama doesn’t need to do much looking to find a good CFPB director. He’s already got the best person for the job, Elizabeth Warren, steadily building a record of effectiveness getting the agency off the ground. When the time comes to name a permanent CFPB director, that record, along with Warren’s decades of work protecting the middle class, will make a very compelling case for her appointment. To be sure, the Republican leadership will filibuster whoever Obama nominates, but Warren already has strong relationships on Capitol Hill with members of both parties, and is extremely popular with the public. If anyone can survive a Republican filibuster, Warren can.

Here’s the silly plant in Politico:

MELISSA BEAN FLOATED AS CFPB HEAD – Buzz on Friday had Rep. Melissa Bean (D-Ill.) possibly getting tapped as the first Consumer Financial Protection Bureau head depending on the outcome of her too-close-to-call reelection race, in which Republican Joe Walsh maintained a slight lead as of Sunday afternoon. But a possible Bean nomination is not sitting well with reformers on the left who say the moderate Illinois congresswoman is far too close to the banking industry. Said one administration official: “It’s not clear she would be acceptable to the reformers.”

Welcome to the final edition of Campaign Cash, which tracked political spending during this year’s midterm elections. Stay tuned for more reporting on money in politics from members of The Media Consortium. To see more stories on campaign funding, follow the Twitter hashtag #campaigncash.

Anonymous millionaires just helped elect dozens of ultraconservative congressional candidates, by pumping millions of dollars into national Tea Party organizations. And guess what’s at the top of the legislative to-do list for those same Tea Party groups? Blocking campaign finance reform legislation.

As Stephanie Mencimer explains for Mother Jones, one of the nation’s largest Tea Party organizations, the Tea Party Patriots, is already coming out guns-a-blazing against any lame duck effort to crack down on secret corporate spending in elections.

And with good cause. The Tea Party’s appeal, after all, is based on its populist, grassroots image. If anybody knew that secret right-wing millionaires were bankrolling the entire operation, the “movement” would lose its luster.

But whether reformers are able to force front-groups to disclose their donors or not, the broader effort to eliminate undue corporate influence from the political process will take years.

Welcome to the plutocracy

The Supreme Court’s decision in Citizens United v. Federal Elections Commission allowed corporations and deep-pocketed elites to spend unlimited amounts electing politicians of their choosing. So long as those expenditures are funneled through a front-group, nobody has to know who is buying an ugly attack ad or why. Instead ads are sponsored by groups with a innocuous-sounding names like “Americans for Prosperity” or “Americans for Job Security.” Nobody knows who ultimately foots the bill.

In organized crime, this process is called “money laundering.” And everyone is getting in on the game, from the Tea Party to Karl Rove to U.S. Chamber of Commerce. As Bill Moyers explains in this Boston University lecture carried by Truthout, it’s ravaging American democracy.

Rove, other conservative groups and the Chamber of Commerce have in fact created a “shadow party” … We have reached what … former Labor Secretary Robert Reich calls “the perfect storm that threatens American democracy: An unprecedented concentration of income and wealth at the top; a record amount of secret money flooding our democracy; and a public becoming increasingly angry and cynical about a government that’s raising its taxes, reducing its services, and unable to get it back to work. We’re losing our democracy to a different system. It’s called plutocracy.”

That, ultimately, is what is at stake with campaign finance reform. Can democracy continue to serve as a check on elite power? Or will America simply dance to the tune played by the super-rich. Citizens United made an undemocratic mess of this year’s election—but the influence of corporate cash is not going to simply melt away. Without serious reforms, the very concept of American elections will become a quaint, naive relic of the past.

Wall Street wins big

And while the plutocracy plainly organized itself against Democrats in this election, democrats have not exactly been strangers to corporate largesse. As Laura Flanders emphasizes for GRITtv, while President Barack Obama occasionally offered rhetorical rebukes against the Wall Street establishment, so far as public policy was concerned, he rarely did anything to ruffle their feathers. Obama continued the Bush bailouts, praised the executives of firms would eventually be investigated for fraud as “savvy,” and aimed pretty low on financial reform. But as Flanders notes, all those favors didn’t end up helping either Obama or his party on Nov. 2:

Having soaked up the government’s largesse, those banksters repaid Obama by pouring millions of anonymous dollars into defeating Democrats.

It worked. The most vocal Wall Street critics in the House and Senate—Rep. Alan Grayson (D-FL) and Sen. Russ Feingold (D-WI) were bombarded with attack ads courtesy of the U.S. Chamber of Commerce. Now they’re gone, along with the Democratic majority in the House.

Last-ditch effort on campaign finance reform

As Jesse Zwick emphasizes for The Washington Independent, Congress can still limit the damage in the coming months before the officials elected last night take office. A modest law that would require corporations to disclose their political expenditures and force front-groups to publicly identify their donors would help limit the damage.

After that, as Moyers emphasizes, it’s a long, hard fight.

But wait! There’s more.

• Andy Kroll at Mother Jones notes that Rick Scott didn’t really need money from outside groups to buy the Governor’s race in Florida. He did it himself.
• Jason Hancock reports for The Iowa Independent that outside groups spent more than $1 million to oust judges that ruled to legalize same-sex marriage in Iowa.
• John Nichols and Richard Kim of The Nation talk to GRITtv’s Laura Flanders and Democracy Now!’s Amy Goodman on the midterm results, and what to expect from corporate expenditures in 2012.

This post features links to the best independent, progressive reporting about the mid-term elections and campaign financing by members of The Media Consortium. It is free to reprint. Visit The Media Consortium for more articles on these issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Audit, The Mulch, The Pulse, and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

Economic policy has faced grave challenges over the past two years, hamstrung by obstructionist Republicans in the U.S. Senate and Wall Street-friendly advisers in the Obama administration. With the Republican Party now in control of the House, it seems certain that any major action to create jobs will face tremendous obstacles. This is a global calamity. But the political lesson of the past two years should be clear: all the good PR in the world can’t whitewash a terrible economy. For the next two years, President Obama and his Congressional allies must do everything they can to actually improve the job market. Without a better economy for ordinary Americans, Democrats are doomed in 2012.

Ezra Klein presents what he thinks is a rosy view of how policy could proceed after last night. To me, it looks like exactly the sort of empty political gesture that Democrats should be fighting. Ezra envisions Obama and new House Speaker John Boehner, R-Ohio, reaching a grand bargain on economic policy: the payroll tax is lifted for a year, $50 billion in infrastructure spending is approved, the unspent 2009 stimulus money is abandoned, and $400 billion in spending cuts over 10 years are approved.

Ezra calls this the next chapter in an imaginary “universe where the government works.” It’s more like the next chapter in an imaginary world where the government works, and every policymaker is completely insane. Sure, the deal would convince voters that Democrats and Republicans can pass legislation (if it passed). But the result would be a neutral to negative impact on the job market. Continuing today’s avoidable economic suffering is bad enough in its own right, but it’s also a political disaster for Democrats.

If Obama heads into 2012 with double-digit unemployment, he will lose. End of story. Voters have a terrible view of Republicans, and they just sent over 60 new Republicans to Washington because Obama didn’t bring down the unemployment rate. Those results prove that Democrats’ backs are already up against the wall on 2012. Fixing the economy takes time, and we need strong, serious action as soon as possible, or we are headed for political calamity.

Why won’t Ezra’s policy package work? It has two useful elements—a tax cut to hire more workers, and $50 billion in infrastructure spending. Both of these would help some—if the tax cut was really wildly effective, they might combine to take the unemployment rate down by half a percentage point. But these useful policies would be offset by other spending cuts. And unless we’re only cutting $600 hammers in the Pentagon budget, those spending cuts are going to kill jobs. To get $400 billion in cuts, we’d have to find 667 million of those hammers.

Lifting the payroll tax really might help create jobs. We don’t know how many, but it surely wouldn’t be as effective as simply hiring people outright, and that’s what government spending—”stimulus” or otherwise—does. In other words, Ezra has outlined a proposal to kill jobs in order to maybe create some.

Showing that they can work with Republicans won’t save Democrats in 2012. Only real economic results will. Aggressive PR about how you really actually did fix things won’t convince people who are out of a job or in foreclosure. They know the economy still sucks, and even worse, they know you’re not telling the truth.

So Obama also has to get his messaging in order. It may very well prove to be the case that Republicans block all but the most modest of steps to create jobs. Obama can’t pretend that these steps are enough, and he cannot hesitate to attack Republicans, holding out hope that maybe, someday they will magically come to their senses and start approving policies that promote growth. He can’t keep repeating the Republican talking points Rahm Emmanuel fed him over the past two years—the government can create jobs. Right now, it’s the only entity that can.

Getting past “partisanship” doesn’t mean cutting whatever crappy deal you can with your political adversaries. It means eschewing political grandstanding for good policy. Without good policy, bipartisanship is a pyrrhic victory.

So Obama has to fight hard for policies that actually bring the unemployment rate down, and he must be willing to defend his policy proposals from Republican attacks, making a clear moral case for why spending to support jobs is a good idea. Republicans know that they can win the White House in 2012 by simply blocking Obama and letting the economy fall apart. They’ll do it. They already have. Obama has to hold Republicans rhetorically accountable so they fear the electoral consequences of obstruction enough to vote in favor of policies that actually work.

If Republicans refuse to cooperate, Democrats must at least demonstrate to voters that they are working for voters, not for bigwig bankers. The stimulus package approved in 2009 was too small for a variety of reasons, but one of them was due to the fact that Larry Summers and Timothy Geithner expected the financial system to help revive the economy. It didn’t, because the system is dominated by too-big-to-fail behemoths with massive losses embedded in their balance sheets.

It’s been very fashionable in D.C. to say that the bank bailouts “worked,” even though they were unpopular. But they didn’t work—banks aren’t lending. And they didn’t work because banks are still saddled with hundreds of billions of dollars worth of lousy assets. Regulators are allowing banks to account for those assets at inflated values, which protects the banks from losses. So banks trade securities instead of lending, and slowly recognize losses as they rake in gambling profits. This is why the foreclosure fraud scandal has sent bank stock prices on a downward trend—investors know that enough documentation will spark a new wave of losses, causing big trouble for Wall Street.

So we still need to fix the financial system. Banks must be forced to recognize their losses. Where those losses render a bank insolvent, the bank has to be restructured—shareholders wiped out, creditors taking a hit, and taxpayers putting up money only where doing so prevents a cascade of defaults. This will be painful, but no more painful than watching a recovery without credit.

And if Obama can’t get these policies, he needs to at least fight for them. Prosecute the deep fraud in the financial system that is being uncovered every day. Explain to voters that Republicans are obstructing job-creation.

These policies will be extremely difficult to secure in the face of anything close to the Republican obstruction we’ve seen over the past two years. But Democrats simply have no other choice. Without major action on the economy very soon, the White House is already gone.

The votes are in, and while some close races are still being tallied, there is a clear winner from the 2010 elections: Secret corporate cash.

Such unaccounted for political donations may end up allowing those accused of wrongdoing to go free. As Joshua Holland details for AlterNet, Citizens United v. Federal Election Commission may have provided a lifetime supply of get-out-of-jail-free cards to corporate criminals.

The Kentucky senate race serves as a prime example. The Democratic candidate, Jack Conway, is currently Kentucky’s attorney general. Conway is also currently prosecuting a nursing home for allegedly covering up the sexual abuse of one of its residents.

But that nursing home is owned by Terry Forcht, a millionaire who gives prodigiously to right-wing causes. He poured money into Karl Rove’s organization, American Crossroads GPS, which ran ads backing Conway’s Republican opponent, Rand Paul. Guess who came away with the victory last night?

As Holland emphasizes, the mid-term elections are just how the first phase of the justice system’s corruption plays out. Eventually the mere threat of attack ads could be enough to prevent needed prosecutions. Corporate bigwigs could literally get away with murder, and pay for it only through attack ads.

READ FULL POST

Today is the first election in American history in which corporations have been allowed to spend their own money to buy political favors. This legalized corruption comes courtesy of the Supreme Court’s ruling in Citizens United v. Federal Election Commission, which injected massive amounts of corporate cash and unprecedented levels of secrecy into American politics.

And all of this crazy corporate spending will not be restricted to elections. That’s right. As Jesse Zwick reports for The Washington Independent, two front-groups founded by GOP strategists Karl Rove and Ed Gillespie plan to keep running ads attacking Democrats well after the elections are over.

As Zwick emphasizes, this is actually a way to help keep one of the organizations, known as American Crossroads GPS, from breaking the law. Many groups that spend money on elections register as 501(c)(4) organizations, which must devote no more than half of their activity to political operations. In return for limiting their political activity—advocacy or condemnation of specific candidates—they don’t have to disclose who their donors are. So groups like American Crossroads GPS plan to run “issue ads” focusing on the budget deficit and immigration reform this fall to balance out the ads directed at specific candidates that they’ve already run.

Under the Citizens United ruling, so long as corporations or wealthy elites launder their political expenditures through a front-group, they can give as much as they want without ever being held publicly accountable. But the high court’s decision also allows these front-groups to keep their actual expenditures secret as well. It’s not just that we don’t know who is funding them—in many cases, we also don’t really know what they’re funding.

READ FULL POST

Tom Perriello always knew it would be hard to hold his seat in Congress. The progressive Democrat from Albemarle County, Va. represents a district designed to nullify liberal votes with a wide swath of conservative countryside. He was elected in 2008, riding President Obama’s coattails to victory by just 727 votes. He does not represent a swing district–he is a committed progressive in a solidly Republican district. But unlike his Blue Dog contemporaries, Perriello has voted like a progressive for the past two years. And unlike many Blue Dogs, he might actually pull out a victory tomorrow night, even in the face of a Republican wave fueled by double-digit unemployment. The mere fact that he’s in the running is a stunning accomplishment.

I lived in Perriello’s district for eight years before moving to Washington, D.C. this summer. For mountains, majesty, and rock ‘n roll, it simply can’t be beat. But there were problems, namely persistent racial tensions, a lousy economy and politicians who perpetuated these two troubles.  For all but the last two years we were represented by Virgil Goode, a conservative Republican and unabashed bigot. Years before Fox News made Islamophobia a mainstream political view, Goode was openly attacking Rep. Keith Ellison, D-Minn., on the grounds that he was – gasp!—a Muslim. Goode cruised to re-election every cycle, easily surviving the 2006 Democratic wave, despite being a Bush-backing war-monger in a year when voters were rejecting both Bush and his war in Iraq.

I lived in Charlottesville, a tiny outcropping of progressive politics at the northern tip of the Fifth District. From Charlottesville, the district fans out directly to the rural south, extending all the way to the North Carolina border. It’s a two-and-a-half hour drive straight south from Charlottesville to Danville, three hours southwest to Collinsville or southeast to Brunswick. All four towns are in the same district. Just 40,000 people live in Charlottesville—120,000 if you include Albemarle County (which is not as progressive as “the city”). But the district as a whole includes nearly 650,000 people, most of it tiny towns and farmland, and most of its inhabitants Republicans. Jerry Falwell’s right-wing conservative Christian enclave Liberty University is smack in the middle of Perriello country.

Conventional wisdom dictates that Democratic politicians in such districts vote like Republicans. Otherwise, a Republican runs against you, points out that you’re not a Republican, and beats you.

But Perriello decided to take a different tack when he was elected. Instead of capitulating to policies and votes he didn’t believe in, he would do what he thought was right, and make an aggressive case to voters that he was, in fact, right.

On every major vote in the past two years, Perriello voted with progressives, at times even voting against President Obama on the grounds that his policies were not progressive enough. He voted for healthcare reform and the stimulus package, but he voted against Wall Street reform because it didn’t hit the big banks hard enough, and he voted against disbursing the second round of bailout money to the banks (he wasn’t in office when the bank bailout was approved).

He never apologized for these votes or caved to right-wing rhetorical frames, and he hit the road to campaign on his record, explaining his positions directly to voters. This was old-school campaigning, and it wasn’t glamorous—trekking from Danville to Martinsville to Charlottesville every week, making speeches, shaking hands and answering questions in town-hall meetings. But Perriello is not your standard politician waiting for a cushy lobbyist job. He has a deep background in social justice work—he’s in Congress because he wants to make a difference, not to score a sweet paycheck.

All of that campaigning has paid off. Voters are pissed off this year. They’ve watched Wall Street profits soar on the back of a taxpayer-financed bailout, even as ordinary Americans have been laid off by the millions. Whether Republicans take control of the House tomorrow night or not, they will certainly make big gains as voters reject policymakers who cater to big banks while failing to tackle the jobs problem—either out of political cowardice or ideological blindness.

But Perriello is holding even with Republican challenger Robert Hurt. The fact that Perriello even has a chance in this election ought to be viewed as something of a miracle. Or maybe it’s just good governing, combined with good politics.

Tim Fernholz almost gets it right in his profile of Perriello for The American Prospect. But he misses the mark with this comment, which is going to be echoed by the Beltway establishment on Wednesday morning, however the race turns out:

“If Perriello can beat the odds tomorrow, it is not only his reputation, and the president’s, that will be burnished . . . . Should he lose, the voices who call for a more timid Democratic Party will have a point in their favor.”

This is wrong. Perriello won in 2008 by just 727 votes. Any Democrat who entered office by so slim a margin is almost certain to lose this year. By any conventional political analysis, Perriello should be getting trounced He faces a massive voter registration disadvantage, representing a district that is designed to crush progressive voices during what is expected to be a wave election for Republicans, amid strong anti-incumbent attitudes sparked by high unemployment. But he’s holding even. That’s incredible. Even if things go well for Democrats tomorrow, and they hold the House, candidates in much safer districts than Perreillo’s are going to lose.

The Perriello lesson, in other words, is already clear.  Whether he wins or loses on November 2, having the courage to govern by his convictions and do real work to sell those policies has paid off. It might not get him re-elected. But in an all-but-impossible district, losing close sends a clear signal to actual swing districts. Governing like a pretend-Republican only reinforces the Republican world-view and aligns voters against you. If you want to have a chance, you have to stand for something. Tom Perriello stood for something these past two years, and even if it can’t overcome a terrible economy to win him two more years, the political establishment should take heart.

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This is cross-posted from the Media Consortium.

Two Tea Party leaders, Mark Meckler and Jenny Beth Martin, have been jet-setting all over the country ginning up support for conservative politicians. Literally.

They’ve been flying around in a private jet like Wall Street CEOs, except they’re heading to “grassroots” rallies instead of merger talks. Meckler and Martin don’t say how outraged, ordinary citizens can find the money to support such extravagance, and they don’t have to. Thanks to the Supreme Court’s ruling in this year’s Citizens United v. the Federal Election Commission, they can now accept unlimited funding without disclosing the identities of their donors. READ FULL POST

After several weeks of officially pleasant interactions, signs are emerging that the Treasury Department’s knives may be coming out against Elizabeth Warren. In recent weeks, Treasury officials have leaked details about Warren to Politico as part of what appears to be an effort to paint her as some kind of prima donna. These relatively silly stories raise troubling questions, however, about what Treasury officials may be leaking with fewer fingerprints and greater ramifications.

The Politico pieces have been petty, but there’s no doubt they both came from Treasury. On Oct. 12, Politico ran a piece featuring this anonymous nugget (among others):

Some at Treasury grumble that Warren, in her early memos, spent much time detailing what press she was going to do . . . rather than the nuts and bolts of setting up an agency.

Then yesterday, in Politico’s Morning Money column:

NEW PAINT JOB – We also hear that while Warren is out west, her Treasury office is getting a makeover (Warren will have digs both at Treasury and the CFPB’s L Street headquarters). That’s something of a rarity for Treasury officials, who usually leave their offices as-is. There is much internal debate as to exactly what color it is that is going up on Warren’s walls. One person called it “Arizona sunset,” another “terra cotta.”

Both of these represent the kind of meaningless, issue-free pseudo-news that serves as Politico’s bread-and-butter. The actual complaints themselves, of course, are preposterous. Warren is painting her office and making media appearances—exactly the sort of things you’d expect the head of a new federal agency to be doing during her first weeks on the job. But look at the frame Treasury is putting on the stories. In both, Warren is portrayed as an ego-centric fluff-monger, not a serious policymaker. Look at fancy Elizabeth Warren painting her office! Our humble boss Timothy Geithner would never do such a thing!

Just days before an election, it’s somewhat astonishing that Treasury officials would be working the media to smear Warren instead of, say, talking about the economy. And it’s certainly counterproductive for Treasury to be creating these distractions for the new, can’t-be-independent-soon-enough agency as it sets out to re-regulate Wall Street.

This sort of bad judgment is surprising even in light of the burdens Treasury’s failures have created for the White House over the past two years. But this silly back-biting wouldn’t be that troubling on its own. A few childish press people going rogue, maybe, or perhaps petty payback for some perceived bureaucratic slight. But last night’s HuffPost Hill newsletter subtly connects the leaks to a brutally dishonest article that appeared in The New York Times this week:

TREASURY GUNNING FOR ELIZABETH WARREN? – Shahien Nasiripour sends us word: “This morning, Politico’s Ben White reported that Elizabeth Warren’s ‘Treasury office is getting a makeover … something of a rarity for Treasury officials.’ . . . . The latest leak by Treasury officials against Warren has reform advocates worried. ‘There’s no doubt they’re trying to undermine her,’ one source says. Observers of the new agency also have been scratching their heads about who may have been behind a controversial New York Times story on Wednesday about Elizabeth Warren aide Raj Date, who worked closely with consumer advocates and was hailed for his efforts during the financial reform debate. Date attracted strong defense on the blogosphere in the aftermath of a story reformers consider to be an unfair hit piece.

If in fact Treasury officials played any sort of role behind the Times story, it’s hard to state just how disgusting such behavior would be. The article in question is an outrageous smear targeting Raj Date, one of the most committed and effective consumer advocates in the United States. No reporter who had even tangentially covered the Wall Street reform bill would have written it, and the fact that the Times’ editors allowed it to be printed is a grave embarrassment.  Few people I’ve spoken to say they’d be surprised if it was planted by somebody pursuing an agenda against Warren and the CFPB.

As I explained on Wednesday, the Times story is a pack of innuendo and distortion that tries to portray Date’s years of work on behalf of consumers as a bank lobby plot to enrich subprime lenders. The article absolutely shocked consumer advocates and members of Americans for Financial Reform who worked closely with Date to rein in Wall Street (disclosure: I have been a member of AFR’s steering committee since August), and there has been considerable pushback to the story’s mischaracterizations this week from reform advocates.

I had assumed the Times piece was planted by a bank lobbyist looking to hamstring the young agency—until I saw Thursday’s Morning Money, and realized that Treasury people weren’t just griping with reporters on background—they were actively leaking attacks, however childish.

Treasury officials would be making a serious error if they think they can scapegoat Warren in an effort to deflect criticism from the Department’s own very real failings. As Chair of the Congressional Oversight Panel for the Troubled Asset Relief Program, Warren has been highlighting major problems with the Treasury’s foreclosure relief plan for literally years. But Geithner and Treasury have steadfastly refused to change the program, as millions of avoidable foreclosures have rained down on the economy.

The result, ultimately, has been bad for the bigwig bankers and too-big-to-fail behemoths that Geithner has boasted about subsidizing stabilizing. Last week, while Treasury continued to deny that the ever-escalating foreclosure fraud outbreak is a serious problem, investors started placing bets that Bank of America’s stock will sink below $3.00 a share.

So Wall Street reform advocates are concerned, and you can bet they’ll be watching Treasury very closely over the coming months, because their willingness to work with Warren will indicate a tremendous amount about Treasury’s commitment to financial reform of any variety.

When President Barack Obama named Warren to her current post, he did so in an unusual manner. The new head of the CFPB would require 60 votes for Senate confirmation, and it appeared that a confirmation process would be both long and difficult. So instead of formally nominating Warren as CFPB Director, Obama named her a special adviser to both the president and Treasury. Since the Treasury has temporary authority over the CFPB, Warren’s new post allows her to set-up the agency without going through a confirmation battle.

Reform advocates were divided by the maneuver. It was either a clever piece of strategy—allowing Warren to build up her political appeal for confirmation by demonstrating her effectiveness—or it was an effort to scuttle her away into a powerless role. In either case, reformers promised to keep an eye on any efforts at Treasury to undermine her work.

If Treasury is indeed behind the Date hit-piece, there could be no real question about Geithner’s machinations. Trash-talking Warren, her top advisers and the CFPB itself would be an unmistakable effort to compromise the entire enterprise. If it worked, Geithner could deny Warren the formal nomination as CFPB director, Warren would go the way of Brooksley Born, and less consumer-friendly officials could quietly crush the young agency.

That would be a shame, since a strong CFPB headed by Warren is the signature accomplishment of the Wall Street reform bill Obama signed this summer. Whatever its other shortcomings, the legislation created the opportunity to level the playing field between bigwig bankers and ordinary citizens and strengthen the financial security of American households.
That’s a big if, of course. But reformers will be watching Treasury very closely from here on out.

Corporate cash does funny things to people. Sen. Jim DeMint (R-SC) got into office by pledging to fight “special interests,” but just a decade or so later, he’s running one of the biggest special interest shows in Washington. It’s easy to see the appeal. As the fancy funding backing the Tea Party demonstrates, big money buys big things—from elections to populist outrage.

In a piece for Mother Jones, Kate Sheppard details some of DeMint’s serious campaign finance flip-floppery. During his first bid for Congress in 1998, DeMint denounced the Political Action Committee (PAC) mechanism as a tool deployed by “special interests” that “corrupts” the electoral process. But today, DeMint is the single most important figure and fundraiser for Senate Tea Party races. He has endorsed and pledged millions of dollars to support fringe right-wingers Senate candidates Christine O’Donnell (Delaware) and Rand Paul (Kentucky). DeMint has funneled this money through his own Political Action Committee (PAC) known as the Senate Conservatives Fund. DeMint even pledged to “fight for reforms that allow only individual contributions to campaigns.”

But as I note in a blog for Campaign for America’s Future, DeMint isn’t the only power player pouring money into the Tea Party. DeMint’s 12 Tea Party Senate candidates have reaped over $4.6 million from Wall Street for this election—excluding Wall Street cash that has been funneled through DeMint’s PAC. So much for all that grassroots rage against bailed-out elites.

The Tea Party bubble

And Wall Street’s new Tea Party investment might just be the next big economic bubble. Joshua Holland at AlterNet surveys the campaign contributions of America’s bailout barons. The 23 firms that received at least $1 billion in bailout money from taxpayers spent $1.4 million on campaign contributions—in September alone.

And these are just campaign contributions, which are essentially unaffected by the high court’s ruling in Citizens United v. Federal Election Commission. The real corporate money is running through front-groups that run their own ads—not the official campaigns operated by political candidates. And these front-groups don’t have to disclose where their money comes from.

Writing for Campus Progress, Simeon Tally highlights a frightening trend toward secrecy in U.S. elections, fueled by the Supreme Court’s Citizens United decision. Back in 2004, 98 percent of outside groups disclosed who their donors were. Today, that number is just 32 percent. We’re not just fighting corporate money bombs, we’re fighting secret corporate money bombs.

Who really has the advantage?

While there’s been much debate over who really comes out on top thanks to the post-Citizens United rules, Jesse Zwick notes for The Washington Independent, these stories are only talking about direct campaign contributions. Some might argue that Democrats have an advantage in disclosed funding, but Republicans have a six-to-one advantage money flowing through outside groups.

But wait, there’s more!

• Check out Matthew Reichbach and Trip Jennings’ reporting for The New Mexico Independent on the fact that all of this spending from outside groups usually means money from outside the states where candidates are running. Outside expenditures have swelled to $5 million in two New Mexico House races—both in relatively cheap media markets.
• AlterNet has been running loads of stories on crooked corporate cash, covering everything from the U.S. Chamber of Commerce’s dirty dealings with AIG to the political spending habits of bailed-out banks. Joshua Holland rounds up eight of the articles here for AlterNet.
• Comic artist Matt Bors makes light of America’s new “growth industries” at Campus Progress, pointing to makers of anonymous political attack ads.

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