On Friday I mentioned how an outfit called the "International Swaps and Derivatives Association" (ISDA), a DC lobby one imagines might in line for a bit of rebranding, got some text in the 2005 bankruptcy bill that put derivatives counter-parties (see AIG catastrophe) at the front of line in bankruptcy proceedings.

TPMDC's Elana Schor takes a look at the worthies behind the ISDA ...

Late Update: An Anonymous TPM Reader responds ...

While the International Swaps & Derivatives Association ("ISDA") no doubt has lobbied for some self-interested outcomes that likely are contrary to the public good, know that their primary role and profile in the securities industry is for something unquestionably good: to wit, they have worked very hard to standardize the trading of swaps and other non-standard securities. Understand that a swap is ultimately a contract - a written agreement with varying terms that commits its parties to pay each other certain amounts under certain circumstances (it is literally a "swap" of income streams). This is quite a bit more complicated than by a share of IBM from a broker. "ISDA agreements" conforming to standard terms and formats promulgated by ISDA have been critical to making that market work, and facilitating liquidity within it. Whether or not derivatives need more regulation (and certainly they do), it is in everyone's interest that markets be as liquid as possible. One of the factors increasing the risk of downward-spiraling markets is illiquidity - i.e., the possibility that assets may be difficult or impossible to sell when necessary either because there is no ready market or because of barriers to sale such as the lack of common standardization (and subsequent need for costly negotiation and legal review) that ISDA has helped remedy.

So perhaps ISDA, like so many organizations, has greedy jerks involved in it and has pursued self-interest over the common good, but they are primarily known for promoting smooth and orderly markets. There are far worse players out there. Your ongoing posts implying that ISDA is worthy of nothing more than scorn and contempt are overly reductionist. You may have good points to make, but clothing them in what seems like willful know-nothing-ism detracts from your credibility with the audience that you most need to influence. Please be wary of implying, as you've lately been doing, that anybody involved in investment, finance and money-making is somehow an immoral enemy of the good. Lots of us in financial services are as liberal as they come.

This is probably as good a moment as any to address a few points. As someone running a growing business, who is routinely approached by investors, and exposed to all the upside and risks all that running a business entails, I have no problem with money-making. Nor do I have any problem with investment and finance. My guiding views in this whole situation amount to essentially three points -- each of which is in its own way a fundamentally conservative assumption and, I think in each case, widely shared.

First, to the greatest extent possible, those who took the risks and enjoyed the upside should suffer the downside -- a principle that seems straightforward but is far from the way we're running the current response to the crisis.

Second, the financial sector has become increasingly prone to excessive risk taking and spawned a climate of opacity that has bled into fraud. For both reasons, I believe we need a substantially expanded regulatory regime.

Third, I think the financial sector has become over-swollen. I concede at the outset that this is an assumption where I am most out of my depth in terms of specialized knowledge. But based on my own understanding and the opinions of more expert minds whose opinions I respect, I think we've developed a basic imbalance in the structure of the economy over the last couple decades in which the financial sector, the proper role of which is to efficiently allocate capital in (or in other words, service) the real economy, is dominating the economy and organizing the real economy in its own interests.

From TPM Reader DZ ...

It is very important I feel to frame the bigger picture here and SG fills in an important part of the puzzle regarding AIG. I agree with him that this a hoax for the Wall St. buddies to get out. Now for the bigger picture- Wall St has become ascendant over the last 8 years not just financially but politically. They are the ones who have the political clout now even though it doesn't come through in the most direct ways.

This is not some conspiracy theory that "they" have some detailed plot to take everything over but a recognition that the psyche of Wall St. and corporate finance has infiltrated the previous as well as the current administration. Additionally, as the facts show, all the supposed economic growth over the last 10 years was on Wall St. such that they have become the biggest economic force in this country. Collective greed inevitably throws its weight around and we are seeing that now. Geithner is a creature of this financial structure and as such he is completely blinded by what he knows. Obama has been good at getting a lot "experts" but in this case virtually all the experts are beholden to what got us in trouble in the first place. Volcker may be the only exception but he seems to have been effectively marginalized to the detriment of us all.

The biggest oversight in all of this is the mantra that what is good for Wall St. is good for the country. This is highly delusional at this moment in time. Wall St. has and still is extorting trillions of taxpayer dollars and the government is an accomplice in the crime. I am making this point to illustrate just how pervasive and how much political power the collective psyche of Wall St. actually has.

I don't agree with everything DZ says here. And some of it is more expressive than prescriptive. But I wanted to reprint his email because I think his overall point is critical. Some of our current predicament can only be understood in broader terms of political economy. The financial sector has grown far out of proportion to the function it is supposed to serve in the economy (the efficient allocation of capital) and has, for what it's worth, demonstrably failed in that core function. This swollen and unhealthy condition has led to vast concentrations of money, which have in turn purchased great political power in Washington. As DZ says, not based so much on specific contributions or transactions or the purchase of people, but the purchase -- or at least the long-term leasing -- of minds, the basic mentality about whose interests are the key ones in the economy, how the economy is supposed to function and where its leadership should come from.

In a speech yesterday in Omaha, the President of the Federal Reserve Bank of Kansas City broke with the Bernanke/Geithner line on the banks and suggested that temporary receivership and firing current management (which all amounts to the dreaded 'nationalization') is what is required to solve the banking crisis in a systematic fashion. Here's Bloomberg's run-down. And here's the speech itself.

And then today in the Times we have Alan Blinder, long-time advisor to Dems and former Fed Vice Chair, saying no. It's not a good idea.

As you know, I lean against Blinder's side of this argument. But at a minimum he raises some strong practical difficulties that would be involved in nationalization (particularly the where to draw the line issue). His suggestion is to return to the good bank/bad bank concept.

Late Update: Naked Capitalism has an ample takedown of Blinder's argument, which to my mind at least seem pretty persuasive.

As I noted last night, there is a growing body of evidence that February's Stimulus Bill was too small and an increasing likelihood that a second Stimulus Bill will be needed -- perhaps sooner than we imagine.

But aside from the math and economics, there's a point of media criticism that needs to be made. While the bill was being debated, the news media -- and particularly television -- focused almost entirely on the question of whether it was too big. The possibility that it was too small -- which now seems likely -- was seldom raised. As Krugman argues, it's a mini-version of the press failure in the lead up to the Iraq War, with depressingly familiar dynamics.

I think the administration deserves a small amount of the blame for this for not starting the debate with a much more aggressive and expansive bill, kicking off the game with the goalposts more advantageously placed, as it were. But fundamentally it goes back to that issue of DC and the national political media remaining wired for the GOP.

And with real consequences.

Republicans warn that Washington could turn health care into the DMV -- or worse, the IRS. That and other political news in today's TPMDC Saturday Roundup.

In Washington over the last two months, the debate was over whether the Stimulus Bill was too large. But the math -- that is to say, expected fall in aggregate demand compared with offsetting stimulus spending -- suggested a completely different problem. Namely, that it was too small, probably offsetting a half or less than half of the demand sucked out of the economy by the collapse of the housing bubble. And as the Post reports on tomorrow's front page, the verdict seems to be in: yep, it was too small.

There are many different metrics to use to get to this judgment. But a key one is that the Obama budget, which came out at the end of last month, assumed an average unemployment rate of 8.1% during 2009. Presumably, that was the assumption behind the Stimulus math too. But since we now know that the unemployment rate spiked to 8.1% in February that prediction seems unrealistically optimistic -- perhaps by a long shot.

All of which is to say that the monthly economic data are rapidly catching up with the pessimists' assumption about kind of steep and lasting recession we have in store.

Nor is it only the size of the Stimulus Bill that is implicated in these changing numbers. Because if the administration has been assuming less bleak unemployment rates than we're likely to see, then the tax revenues that the budget is based on won't come in and 'stress tests' they're running the banks through probably aren't stressful enough.

Joining the chorus, Martin Feldstein says we're likely to need a second Stimulus Bill. Perhaps soon.

Just out from the Journal (sub.req.) ...

The beneficiaries of the government's bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.

Among those institutions are Goldman Sachs Group Inc. and Germany's Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.

The gist of the rest of the piece is that, as many have surmised, European banks had a disproportionate exposure to AIG's potential collapse.

And just to be clear, the named institutions and even the few specific dollar amounts are broadly in line with what people expected. The only difference being that this report appears to be based on actual documentation of where the money went rather than informed speculation.

RNC or Politico?

For now -- until the results from a St. Paul court room come in -- Democrats hold 58 seats in the Senate, meaning Democrats are so close, yet so far, from pushing through an unfettered liberal agenda.

On another point, there's also this sentence: "What's making Democrats even more anxious is the recent suggestion by Minnesota Republican Norm Coleman that he may push for a revote, which would leave that Senate seat open for several months longer."

I'm hearing a fair amount of this in the Drudge/Fox/Politico echo chamber. But are people really anxious about this? As this race has consistently shown, anything can happen. I don't want to say anything's impossible. But ... what's pretty clear in Minnesota, if not in Washington, is that Coleman doesn't have a revote option. There's nothing to push for. I could push for the Minnesota courts to seat me as a compromise candidate. But it's just not one of the menu options Minnesota law makes available.

According to Mike Allen, the people around Michael Steele are thinking he should bring on a co-chairman who will focus on organizing, management and fundraising and let Michael stay focused on TV appearances where he's doing such a bang-up job ...

Let's just stipulate DC Republicans are simply not part of the discussion when it comes to repairing the US economy or arresting our slide into deep economic misery. And any reporters who aren't clear about this are just lying to their readers or viewers. The latest Republican plan, in the face of today's new spike in unemployment, is a freeze on federal spending. I'm not even sure it's fair to say that this is a replay of the disastrous decisions the magnified the Great Depression between 1929 and 1933. It's more a parody of it. When the crisis is a rapid and catastrophic drop off in demand, you handcuff the one force that can create demand (i.e., the federal government) in the throes of the contraction. That's insane. Levels of stimulus are a decent question. Intensifying the contraction is just insane and frankly a joke. It's time to recognize that the only debate here is happening among Democrats and sundry non-affiliated sane people. The leaders of the GOP are simply not part of the conversation.

When you invite insurance and derivatives experts to explain their area of specialty and critique each other's understanding of the subject matter, be ready for an afternoon with a lot of squinting and head scratching.

(ed.note: For more on this whole AIG issue, do see this Wednesday post by Barry Ritholtz. I cannot see why the policy solution he proposes at the end wasn't the obvious non-taxpayer-ripoff solution.)

Illinois state prosecutors investigating Sen. Roland Burris (D) for perjury want to listen to the tapes the feds have of conversations between Burris and the brother of ousted Gov. Rod Blagojevich.

TPM Reader SG's take on the derivatives, bankruptcy and AIG issue ...

I beg to differ with GG on two points. First, the subsidiaries of AIG are insurance companies that are by law required to have enough reserves to manage situations like this, thanks to the remnants of Glass Steagall of course.  Now, I am not an expert on insurance biz but this claim by GG seems doubtful to me.  Second, I have traded derivatives myself and know this much that the market professionals (not the amateurs who think they have info) already have enough info on what AIG owes to whom and they are benefiting immensely by this weired Geithner process.  They are getting out calmly and coolly while the rest will be left holding the bag.  So, GG's contention that if Geithner releases the names it will have this domino effect doesn't pass the smell test on any count.  People who trade derivatives tend to be people who are in the KNOW and by definition know what is owed to whom.  Geithner releasing this info won't have any effect because this is already known to the "market" just not to the ordinary citizen who by definition again DOES NOT KNOW and DOES NOT TRADE these instruments.  If you don't believe me then ask Prof. Krugman.  My claim is that this is just all a hoax to let the wall street buddies get out while the going is good and then let these institutions fail.  Outcome will be the same whether the info is released now or later..."controlled-depression."

Back to the earlier question of what the argument would be for allowing derivatives to hop to the front of the line in bankruptcy proceedings. A number of very generous readers have written in and try to explain the arguments to me, whether they agree with those arguments or not. I think I understand it. But nearly well enough that I'm going to embarrass myself by trying to explain it to you. Having said that, my takeaway from the discussing is that a lot of this has to do with further gaming the difference between derivatives and insurance. Namely, the folks working with derivatives want them to be insurance when the issue is the 'rights' insurance has in bankruptcy proceedings but not be insurance when it comes to falling under the regulatory regimes that very tightly control actual insurance.

A few readers note that in place of CNBC's gonzo cheerleading and affective disorders, there is Bloomberg TV for financial news, which does not suck.

Justice Ginsburg, explaining why she attended Obama's address to Congress last week: "I ... wanted them to see I was alive and well, contrary to that senator who said I'd be dead within nine months."

The folks Michael Steele defeated for RNC chair are starting to step up their criticism.

Now that we get so much of our news from CNBC can they book some non-right-wing freaks for commentary?

The 11th Circuit has just handed down its ruling on former Alabama Gov. Don Siegelman's appeal of his conviction on public corruption charges. The court reversed his conviction on two counts, but affirmed the convictions on the other counts, which from my quick read of the opinion, amounts to affirming the heart of the case against Siegelman.

The case has been remanded to the district court for re-sentencing. I'm not enough of an expert on sentencing guidelines to predict how much this will change his sentence, but as I say, the heart of the case against him seems to have emerged intact from the appeal.

Late Update: Here's the interview I did with Siegelman last summer:

It occurred to me reading this morning's new unemployment figures that we have to be getting within range of the raw number of unemployed we had during the Great Depression. Comparing the rate of unemployment to historical norms is fine, but in terms of sheer suffering, the actual number is still useful.

Now there are all kinds of obstacles to comparing unemployment numbers from 1933, which was the high water mark for depression-era unemployment, to those today. The methodologies are very different. Even the rise of two-income families changes the calculus a bit.

What I really want is a graph that reconciles and correlates those differences to give an apples to apples comparison of the latest numbers to those from the 1930s. In looking around, I see some of the work on this has been done, though not with the latest numbers. But I want a graph, so I can see it. If you find one that meets these criteria, please send it my way.

I'm sure the knowledgeable people already know this. But it turns out that one of the features of the 2005 Bankruptcy bill was to put derivative counter parties at the front of the line ahead of other creditors in bankruptcy proceedings. Actually, from what I can tell, they don't just go to the head of the line. They got to skip the line entirely. As the Financial Times noted last fall, "the 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed company's assets until a court decides how to apportion them among creditors." As the article notes, ironically, this provision which Wall Street pushed for and got to protect investment banks actually ended up hastening the collapse of Lehman and Bear Stearns last year.

Down in the article there are also the mentions of the entertainingly named "International Swaps and Derivatives Association", one of the lobbies that helped get the change in place.

Along these lines, TPM Reader GG sent in this last night ...

Respectfully, you guys are totally misunderstanding something crucial in the AIG bailout: Derivatives claims are not stayed in bankruptcy. (Yet another brilliant innovation from the 2005 bankruptcy reform legislation.)

If AIG were to go down, derivatives counterparties would be able to seize cash/collateral while other creditors and claimants would have to stand by and wait. Depending on how aggressive the insurance regulators in the hundreds of jurisdictions AIG operates have been, the subsidiaries might or might not have enough cash to stay afloat. If policyholders at AIG and other insurance companies started to cancel/cash in policies, there would definitely not be enough cash to pay them. Insurers would be forced to liquidate portfolios of equities and bonds into a collapsing market.

In other words, I don't think the fear was so much about the counterparties as about the smoking heap of rubble they would leave in their wake.

Additionally, naming AIG's counterparties without knowing/naming those counterparties' counterparties and clients would be at best useless, and very likely dangerous. Let's say Geithner acknowledges that Big French Bank is a significant AIG counterparty. (Likely, but I have no direct knowledge.) BFB then issues a statement confirming this, but stating it was structuring deals for its clients, who bear all the risk on the deals, and who it can't name due to confidentiality clauses. Since everyone knows BFB specialized in setting up derivatives transactions for state-affiliated banks in Central and Eastern Europe, these already wobbly institutions start to face runs. In some cases this leads to actual riots in the streets, especially since the governments there don't have the reserves to help out. If you're Tim Geithner, do you risk it? Or do you grit your teeth and let a bunch of senators call you a scumbag for a few more hours?

I'd be curious to hear what other knowledgeable readers think about this. But separate from the immediate financial implications related to AIG, it does point us toward the larger political economy point: the self-reinforcing cycle in which financialization leads to vast sums of money concentrated in the hands of paper-jobbers, who then mobilize that money in Washington to rewrite the laws to privilege them for even greater profits.

A final question, I'd be curious to hear from people who work in this space what even the notional rationale would be for having derivative counter parties able to skip the line in a bankruptcy proceeding.

Over at Cafe, Greg Mitchell and others have been discussing Mitchell's latest book-- "Why Obama Won." Want a distraction from an 8.1% unemployment rate? Join us as we pick apart the ways the new media shaped the epic '08 campaign.

The new crew at DOJ pulls the plug on one of Bradley Schlozman's lawsuits to force Missouri to suppress voter participation.

Looking over the consolidation of the financial services industry you see a distressing pattern. Find one company that brings together a lot of decently run and profitable companies under one roof. Then set up one subsidiary which sells a long run of risky and substantially fraudulent 'financial products' which sucks the entire conglomerated company to the brink of bankruptcy ... or rather into bankruptcy, but is held just on the brink by permanent infusions of taxpayer funds, much of which is siphoned off into bonuses to keep the prized talent at the bankrupt company from leaving and going to other de facto bankrupt companies.

Another point. The more I learn what got a lot of these companies into trouble, foolish bets or excessive risk taking don't really capture what we're talking about. A lot of this stuff just amounts to fraud. So where are the criminal investigations. Not just hassling CEOs up on Capitol Hill, which is fine. But accountability before the law for the people who ruined the economy? There may be some short term prudential argument for not getting distracted while we're in crisis mode. But I'm not sure I buy that. I lot of this was simply criminal.

It is a small subset of the larger problems we are facing. But when historians look back to write the history of this crisis, it will be difficult to explain why everyone conspired together to face the crisis with an unstaffed Treasury Department. It's truly astounding. There were hints of this back in January. But it's really only bleeding into the press now. Just yesterday, likely nominees for two critical positions pulled their names out of consideration.

The reasons for the delays seem clear at least in broad outlines. The Obama administration has set pretty stringent ethics requirements, relating to lobbying and conflicts of interests. That's taken lots of people out of contention. And that's been aggravated by the vetting snafus on Geithner and Daschle, which have probably made them still more gun-shy.

Then there's a whole separate obstacle. Lots of the people who would staff a Treasury at the moment are compromised by their own roles in the debacle we're facing. Whether that's because so many of the people with the requisite experience are tainted or whether it's just that so many of the people the principals -- Geithner, Summers, et al. -- know and trust are compromised is unclear to me.

Nor is it only people who caused the mess in the private sector but people in the regulatory agencies who enabled it or failed to prevent it.

To some degree, you can knock the Republicans for not helping to fast-track the confirmations of anyone who is immediately needed at Treasury. As I mentioned last night, Republicans are holding up two critical appointments on the National Economic Council for what they readily admit is payback. But fundamentally it's a Democratic administration and a Democratic Congress. We're in the midst of the worst economic crisis in almost anyone's living memory. And we have a Treasury Department where a lot of the key offices are empty.

Senate Republicans forced a delay last night in passage of the omnibus spending bill. That and the day's other political news in the TPMDC Morning Roundup.

New unemployment figures out. Bad news all the way around.

Is switching parties Sen. Specter's only hope of remaining in the senate?

There's often a lot of game-playing in getting appointees approved by the senate. But this requires more attention. The senate Republicans are refusing to give a vote to two of President Obama's key (hopefully soon to be) economic advisors -- Austan Goolsbee and Cecilia Rouse. So for the moment they're barred from advising the president at all. The Republicans seem pretty candid about the fact that this is pay back for stuff that happened back in the Bush era. But aren't we in the throes of a catastrophic economic crisis?

We don't know who AIG's counter parties were, i.e., who got the money. And the folks at the Fed and the Treasury aren't saying. But there are a lot of snippets and shreds of information out there that do allow us to get a decent picture of who some of the major beneficiaries are. Zack Roth has the details in this piece today at TPMmuckraker.

And then there's this from a close observer of the AIG matter ...

Josh, your reporting on the AIG credit default swap/counterparties issue has been spot-on. But to understand what happened there, you have to understand the Fed's "Maiden Lane" vehicles and how it's used them to avoid what Congress intended with TARP, which was the real story that came out of Dodd's hearing on the AIG mess today. And the roots of it go back to the Bear Stearns rescue last year.

By law, the Fed isn't allowed to buy assets -- it can only lend, as lender of last resort. That was a problem for the Bear Stearns bailout, because JP Morgan said it would only buy Bear if someone else assumed responsibility for the crap. Fed came up with this idea to start a shadow company, called a special purpose vehicle (SPVs were how Enron operated, creating "Chewco" and the like named after Chewbacca - the New York Fed called their SPV "Maiden Lane LLC" for name of the street the NY Fed is located on in southern Manhattan). The deal then was JP Morgan put $1 billion into Maiden Lane, the Fed put $29 billion in cash into it. Maiden Lane paid Bear Stearns $30 billion, which went straight back to JP Morgan as this deal happened simultaneously to JP's purchase of Bear. So Morgan got $30 billion in cash ($29 billion net) and the Fed got stuck owning the crap, but was legally only making a loan to Maiden Lane, who was the legal owner (Maiden Lane was incorporated not in NYC, but in Delaware to avoid paying taxes). By the Fed's own accounting - which is very different from a real company's accounting - Maiden Lane has lost $5 billion between its creation and today.

The same problem happened in AIG, but this time there was no buyer. In Sept, the Fed bought AIG (80%) in exchange for an $85 bill loan. By Oct, it was clear AIG was still dying, so the Fed lent it another $40 billion. This $40 billion was restructured in November when the Treasury put in $40 billion of TARP funds, which was needed to bail out the Fed's loan which had by this time gone bad. But essentially AIG had 2 problems: it had lent out safe securities with real values and used that money to buy shit mortgage backed securities -- this was called 'Secured Lending Facility' which was done right under the nose of the state insurance commissioners. It was in the hole $20 billion. The other problem was the crappy insurance that AIG's financial products company had written on other people's shit mortgage backed securities - the credit default swaps (CDS). When the bad mortgages that AIG insured went bad, the insurance had to pay-up -- but because it wasn't called insurance, but rather derivatives, AIG hadn't reserved any money against it. This had lost about $25 billion.

Using the loophole it had learned during Bear Stearns, the Fed set up two new companies: Maiden Lane II and Maiden Lane III. Two dealt with the secured lending and Three the shitty credit default swaps. The Fed lent each Maiden Lane $20 billion and $25 billion and then Maiden Lane paid off the investors that had either lent AIG the money to buy the shitty mortgage backed securities (ML II) and those who had the shitty mortgages and the corresponding insurance (ML III). To avoid booking a loss on the Fed's balance sheet, because the Fed had some legal problems if either of these Maiden Lanes lost money, and because of a reporting requirement that Dodd had put into TARP which actually required the Fed to report to the Congress and the public about the cost to taxpayers from ML I, the Fed did some creative accounting. They still paid all of the investors off at full value (par), so that they didn't lose anything. But they booked the loss on AIG's balance sheet and kept Maiden Lane clean. This is the hidden story behind how AIG went from losing $38 billion during the first 9 months of 2008 to losing $61 billion in the 4th quarter.

This was all exposed at today's hearing. And despite repeated requests from Senators on both sides - Dodd, Shelby, Corker, Warner - the Fed is still refusing to say who it bailed out through Maiden Lane II and III.

Former Rep. Pat Toomey to challenge Arlen Specter in PA senate primary.

Sorta. But it's not quite that simple.

We get a lot of questions about the mechanics of filibusters and the very loosely true claim that budget bills can't be filibustered (hint: it's not that simple). So this evening TPMDC's Elena Schor walks us through just what kind of budget-related bills can and can't be filibustered.

Fired US Atty David Iglesias: Make the Rove and Miers interviews public asap.

Photos from today's Prop 8 protests at the California Supreme Court.

These are proud times for John Boehner.

According to the new Fox News poll, Obama is more popular than Reagan.

Following up on yesterday's post, the initial round of resistance to the Obama budget from senate Democratic centrists suggests to me that their opposition is rooted in optics and positioning rather than actual policy disagreements about how we should be running the federal government during the worst economic downturn in eighty years. The key tell so far I think is that they've decided to go on record saying they have serious disagreements but they apparently haven't decided yet what they disagree with, or are not willing to disclose what that might be.

That may be an arch way to put it. And maybe they haven't seen the granular details that will come out in January.

But still, for me that suggests a certain logical disconnect.

Remember, as a number of commentators noted during the Stimulus Bill debate, the 'moderates' who hash out the final deal complained that one of their big beefs was that a lot of spending was insufficiently stimulative -- and then they proceeded to cut out a lot of the spending that would have had the most immediate stimulative effect. Like I said, optics, not policy.

Bill Daley likely to run for Obama's senate seat.

A cover letter from Gregory Craig and a compromise on revealing the contents of a key memo from the Bush White House Counsel's office both suggest the Obama White House took a very active role in negotiating a resolution to the standoff over Karl Rove's and Harriet Miers' testimony before Congress.

Are you or were you at the Prop 8 protests outside the Supreme Court in San Francisco today? If so and you took pictures, send them to us for inclusion in a slide show we're putting together. Send them to tpmphotos (at) talkingpointsmemo.com. Help us share what happened with our readers.

Oh, this is getting good. A RNC national committeeperson is calling on Michael Steele to step down. But it's better than that.

It's a black supporter of the crypto-segregationist RNC candidate Katon Dawson. But wait, it's better than that too.

Remember BMW Direct? The GOP direct mail firm that raises tons of money for hopeless candidates but ends up getting little or none of it to candidates in question? Well, the committeeperson is one of those candidates, Ada Fisher of North Carolina.

Republican senators put secret hold on David Ogden, Obama's nominee as deputy attorney general.

Rove: Every administration politicizes DOJ -- even RFK did!

Simon Johnson on confusion, tunneling and looting in the on-going bank bailout.

TPMmuckraker has obtained a copy of the "deal" that gets Karl Rove and Harriet Miers testifying to Congress on the politicization of the Bush-era Justice Department.

The document is here, and Zack Roth highlights some of the key terms here.

RNC Chair Michael Steele says he's "in the business of ticking people off," but I take that not to include ticking off the wrong people because he took his "mea culpa to Rush" tour on to Hannity's show last night:

See more at Foxnews.com.

Katrina-ravaged areas are getting some love today, with a visit from key figures in the new administration: DHS Secretary Janet Napolitano, HUD Secretary Shaun Donovan, and FEMA Director-designate Craig Fugate. That and the day's other political news in the TPMDC Morning Roundup.

and other moral hazards:

I can see as well as you that my calls for disclosing the identities of the AIG counter parties have fallen on deaf ears. When Sen. Cantwell (D-WA) asked Secretary Geithner today who they were, his answer was an argument that letting AIG default on its obligations posed too grave a systemic risk to the US and global economies -- a claim which I concede may be true but nevertheless ignored the question: who's getting the money?

So how about this? Can we get a clear explanation of why we can't know?

To the extent there is a good reason I figure it must be some form of argument to the effect that our effort to prevent the collapse or undermining of the counter parties would be undermined by disclosing who they are. In other words, if Bank X is owed mountains of cash by AIG. And the cash is only coming from Uncle Sam. Then maybe Bank X is actually in trouble. And you'll get a run on bank us. This is a pretty crude example, I admit. But I figure some argument of this sort must be the rationale. But these sorts of arguments are too easy to make, too simple a way just to keep information secret because that's what big institutions -- be they treasuries, or banks or Feds -- like to do.

So if we're really not allowed who are billions of dollars are going to, can we at least have a clear explanation of why it is not in our collective interest for this information to remain secret?

(ed.note: And in case you're wondering, no, this is only half meant in jest. Maybe there is a good reason not to disclose this. But the public is owed a very clear explanation of why. Very clear. Literally just ignoring the question amounts to treating us, the public, with genuine contempt. These are massive amounts of money we're paying. Quite likely it will get up to a quarter of a trillion dollars with AIG. We deserves serious answers.)

Since it's apparently ground zero for the rebirth of the Republican party, I've decided to set up a twitter account: joshtpm.

No one rat me out.

Here's an exchange from this afternoon between Sen. Cantwell and Secretary Geithner. Cantwell asks the question we and a lot of others have been asking: where's all the money going? Who are the counter-parties?

We grabbed this exchange because I want to flag that this question appears to be gathering momentum up on the hill. But the exchange itself is interesting for two reasons. First, Geithner simply won't engage. He just ignores the question. But in the course of doing so he provides the administration's rationale for why we have no choice but to keep shoveling money down this hole. But clearly, talk to the hand on the counter-parties ...

Will Wall Street be able to turn the populist rage against Obama before it eats them alive? Robert Reich considers.

When does Michael Steele get his own reality show?

To explain the Michael Steele trainwreck former Bush spokesperson and now talking head Nicolle Wallace compares him to the freakshow singers in the early auditions on American Idol ...

How can we believe in Obama now that Democrats have made fun of Rush?

The White House has apparently brokered a deal between the House Judiciary Committee and former President Bush that will require Karl Rove and Harriet Miers to testify about the politicization of the Justice Department.

More from Zack Roth.

From TPM Reader LF ...

During the campaign, McCain hammered away on earmarks as if it were the end-all, be-all of reform. Obama basically humored him, but pointed out that there were much more important things. Now that Obama won, McCain is blasting Obama for not keeping McCain's campaign promises.

Deep Thought:

Did anyone mention to McCain that he lost?

Via Ezra Klein, when David Frum nails it, the guy nails it ...

Here's the duel that Obama and Limbaugh are jointly arranging:

On the one side, the president of the United States: soft-spoken and conciliatory, never angry, always invoking the recession and its victims. This president invokes the language of "responsibility," and in his own life seems to epitomize that ideal: He is physically honed and disciplined, his worst vice an occasional cigarette. He is at the same time an apparently devoted husband and father. Unsurprisingly, women voters trust and admire him.

And for the leader of the Republicans? A man who is aggressive and bombastic, cutting and sarcastic, who dismisses the concerned citizens in network news focus groups as "losers." With his private plane and his cigars, his history of drug dependency and his personal bulk, not to mention his tangled marital history, Rush is a walking stereotype of self-indulgence - exactly the image that Barack Obama most wants to affix to our philosophy and our party. And we're cooperating! Those images of crowds of CPACers cheering Rush's every rancorous word - we'll be seeing them rebroadcast for a long time.

Rush knows what he is doing. The worse conservatives do, the more important Rush becomes as leader of the ardent remnant. The better conservatives succeed, the more we become a broad national governing coalition, the more Rush will be sidelined.

These are trying times. So I appreciate the right wing media's efforts to keep me rolling in laughs. I happened over to Drudge's site to see "Enemies List: White House Plots Limbaugh Coverage". That links through to Jonathan Martin's piece in The Politico. And Michael Scherer picks it up in Time in a sort of broad-ranging homage to the greatness of David Broder.

It seems the Obama White House is mobilizing the vast power of the federal government to make Rush really popular among GOP nutball dead-enders, then coax various Republican officials to criticize Rush and then compel these same officials to issue craven and humiliating recantations of those criticisms.

The right's capacity for gonzo victimhood really knows no end. Let's focus on the realities here. Most people don't like Rush Limbaugh. But for whatever reason he remains a redeemer-like figure for the rump of the Republican party. Politically that's a very bad place for the GOP to be. They're unable to criticize him. And their need to kowtow to him marginalizes them. But enough of the structural ins and outs of it. Fundamentally, it's bad for Republicans because Rush is really where the GOP is right now. That's all that's left. And most Americans really don't like that.

DC Madame scandal vet Sen. Vitter (R-LA) pushing to take family planning money out of the omnibus budget bill.

Time's Michael Scherer reads Jonathan Martin's piece in Politico on how happy the Dems are to let the GOP brand themselves as the party of Rush and concludes, incredibly, "this entire controversy has been cooked up and force fed to the American people by Obama's advisers."

I'll let Greg Sargent do the honors of taking down this nonsense.

Vanity Fair runs down Tom Friedman's 5 worst predictions.

As I mentioned Monday, we're hearing a lot of banks saying they've had it with TARP and they want to give back the money -- only to hear oh ... maybe they'll get around to it in ten years or something. But now, courtesy of an article by Daniel Gross in Newsweek, finally we've got a bank that's actually on the level with their gripes.

Give a hand to Iberia Bank of Lafayette, Louisiana. (Maybe Bobby had something to do with it?)

They got $90 million in TARP money in December. A couple weeks ago they decided they didn't like the scrutiny and interference. So they're paying it back with interest. And not when they get around to it. They say they'll have it paid off by the end of March.

I got no beef with that.

Late Update: Damn that Paul Kiel! It seems that on Tuesday the aforesaid TPM alum found that another bank has gone ahead and done the right thing. TCF Financial is giving back its $361 million.

Over the last week, there's been a growing realization that President Obama's budget makes big structural changes to the federal budget and thus to the federal government in general. As the preferred cliches have it, he's going long or swinging for the fences. And in the last few days we've begun to hear not only about Republican opposition, which is expected, but substantial Democratic opposition, or perhaps better to say, resistance. Fourteen Democratic senators (plus Joe Lieberman) met yesterday to discuss their opposition to various parts of the 2010 budget.

In the case of the Stimulus bill, a lot of the objections struck me as pretty weak. That is not to say that there were no grounds for opposition. But the reasons the opposers actually brought forward didn't really even hold up logically, let alone on policy terms. You don't think the bill provides enough stimulus, so you cut the parts which provide the most efficient stimulus, and so forth. So my general sense was that the objections were driven more by optics and positioning than specific disagreements on policy.

So we're digging in on this story to get our best sense of who the opposers are, what's motivating them, who opposes which provisions and so forth.

This isn't just any legislative battle. These are big changes and they'll have profound effects on the country going years and likely decades into the future, especially if they're perpetrated out through an eight year presidency. So this basic cleavage within the Democratic party, how deep it is, what's driving it, how imbedded it is, is of the greatest importance. We're kicking into high gear on the reporting side. But we want your input and insights, and of course your tips if you're up there on the Hill watching or somewhere else that gives you some angle into what's happening.

Reid spokesman on Coleman: "Just because Mr. Coleman is not happy with the results of the election/recount doesn't mean he gets to schedule another one."

Whodathunk this Rasmussen poll question would generate 81% "No" answers from Republicans:

Agree or Disagree: 'Rush Limbaugh is the leader of the Republican Party -- he says jump and they say how high.'

Isn't that about the equivalent of, Are you Rush's bitch -- yes or no?

I've been picking up word that Republicans on the Hill genuinely think Norm Coleman is going to get the results of the November elections tossed and have a revote. And if not genuinely, that they've all convinced themselves to say they believe it. As I told one friend who passed word on to me about this, the Coleman people must be smoking some powerful weed. Because nothing that has happened in the trial gives the remotest indication that anything like that will happen. Indeed, there's simply no basis in Minnesota law for throwing out the results of an election. To be clear, I think it's highly unlikely that the Court will come down with a judgment that will make it possible to Coleman to reclaim his seat. There's just no indication of that. But while that's very unlikely, actually throwing out the results entirely isn't even on the menu of options the judges have before them.

Now, here's one thing to consider. Are the Republicans trying to lay the groundwork for filibustering any effort to seat Franken, even after the state of Minnesota tells Norm it's over and he has to go home? Keep an eye out for it.

Steele: No one has any idea what I'm doing -- and that's just how I like it!

It's all Limbaugh all the time, with the GOP embracing the talk radio host as the maximum leader and Democrats doing everything they can to encourage that warm hug. That and the day's other political news in the TPMDC Morning Roundup.

Remember how we're not allowed to know which companies the AIG bailout money is really going to? Seems Sen. Wyden (D-OR) isn't happy about it either.

How long do you give Michael Steele as Chairman of the RNC?

Just out from WBAL in Baltimore ...

The WBAL TV 11 News I-Team is raising new questions about the campaign spending of former Maryland lieutenant governor and U.S. Senate candidate Michael Steele, as well as former Gov. Robert Ehrlich.

...

According to campaign records, some of the biggest payments from their accounts went to the same firm -- a Prince George's County firm that went by the name Allied Berton, LLC.

The firm's Web site said it was in the business of trading commodities, such as minerals, metals, coffee and sugar. But the campaign payments it received, according to the candidates' accounting, were for a wide range of other activities, according to campaign filings.

See the rest here.

Remember, this comes on the heels of other accusations of financial shenanigans from Steele's 2006 campaign, albeit based on accusations from a former campaign official who was facing time on unrelated charges and thus had strong incentives to try to cut a deal. The FBI is currently investigating those other charges.

Also, think about this. Who's more likely to be dropping a dime on Michael Steele right now? Republicans or Democrats? I trust that question answers itself.

From the News Star ...

Louisiana Gov. Bobby Jindal brought most of his Cabinet here Monday afternoon to offer moral and tangible support to a group of 500 desperate Pilgrim's Pride contract growers and employees whose livelihoods are at risk following the company's decision to idle its northeastern Louisiana and southern Arkansas operations.

...

Jindal said that the state would apply for Trade Adjustment Assistance from the federal government, which would expand unemployment benefits to employees and provide benefits to growers who aren't eligible for unemployment benefits. The state was recently granted Trade Adjustment Assistance for International Paper workers who lost their jobs when IP closed its Bastrop paper mill late last year.

TPM Reader PD chimes in from the Rush Wars ...

You know what's great about all this Rush nonsense? It looks like the Democrats, from Robert Gibbs to Rahm to the DCCC, are finally using some of the techniques of bitch-slap politics against the Republicans. If GOPers are put on the spot and agree with Rush, they're taking an unpopular position about the direction of the country. If they disagree, they're immediately forced to grovel and look weak doing it. Only in this case it's sort of like the bitch-slap theory combined with jujitsu, because the Dems are actually getting Rush to administer the slaps. I'm about your age, and I'm not sure I've ever seen the Dems have the confidence to make Republicans look weak like this.

Fidel Castro blogging about Cuban government shake-up.

The Simpsons has been on for twenty years.

Party committees put out a lot of claptrap. But, okay, I'll bite. This one's pretty funny. The DCCC has put together an automated Rush Apology Widget. You use the pull down menus to tell Rush what breach you're apologizing for, what you really meant to say, how you could have erred so grievously, etc.

Obama administration to dispatch two senior officials to Syria for talks with Assad regime.

Jared Bernstein, late a TPMCafe blogger, now VP Biden's Chief Economist, tees off on James Cramer's "shovel ready nonsense."

Gov. Pawlenty (R-MN) reportedly said this morning that US government Treasury bonds will soon be as worthless as all those toxic mortgage assets.

From the Saint Paul Legal Ledger's Capitol Report, quoting Pawlenty (emphasis added) ...

Secretary of State Clinton, in China about a week ago, [was] publicly pleading with the Chinese to buy our debt, because the federal government is now so reliant on debt financing that the point at which China or sovereign wealth funds or others discontinue buying the federal debt, the house of cards they have constructed in Washington DC comes tumbling down. They're going to have the government debt equivalent, some years from now, of today's mortgage crisis, in my opinion.

According to US News, Republican insiders are getting concerned that Michael Steele may be too big a moron to remain RNC Chairman.

From Rush's show today. We're sort of dragged in as a way of knocking Greg Sargent, who'd caught Rush out on his Obama mumbojumbo. So he was a little touchy ...

"Until a couple months ago, just so you know who Greg Sargent is. He was a blogger at a far left blog post, calls itself Talking Points Memo. This is the website that is now trying to distort Bobby Jindal's story about Hurricane Katrina, in order to make it look like Bobby Jindal lied in his response to Obama a week ago. So that's the place Greg Sargent comes from."

Late Update: TPM Reader LP raises an interesting and ominous question: how long before TPM is forced to recite an abject apology to Rush?

As we've noted, a Republican can't go much longer than a day criticizing Rush Limbaugh before having to recant his offending remarks. Now, over the weekend, House Minority Whip Eric Cantor criticized Rush's 'fail' rhetoric about Barack Obama without going so far as to criticize the Great Leader directly. And then today Rush is saying that Cantor really didn't criticize him. So we called up Eric Cantor's office. And we asked, were you criticizing Rush or not? He ducked the question.

If Rush is Chief, what becomes of Hannity?

The new logo for projects funded by the Obama stimulus package:

Let's go back for a second to this issue of who the AIG bailout money is really going to. Nocera said AIG considered the information 'trade secrets'. TPM Reader SR says what he probably means is that the contracts are subject to mutual confidentiality agreements between both parties, which sounds to me like something that would be routine in cases like this. And a number of other readers have made the same point; and noted that this is not a bad thing.

Says SR ...

I would be stunned if AIG's credit default swaps weren't subject to mutual confidentiality provisions as a matter of contract. ("Trade secret" is a different area of law, though it interacts with contract law to some degree.) AIG/Uncle Sam may have their own reasons for wanting to keep the identity of the beneficiaries of AIG's ill-advised credit default swaps secret, but what they don't want is to get sued by the other parties for breaching those provisions.

And, if you were a party to a credit default swap with AIG that's getting paid off by the government, would you want that fact revealed?

AIG is still bound by its contracts. Nationalization doesn't change that. At least, not in this country.

When I wrote back to SR, what I said was yes, but ... it really depends on what construct you're working within on the payouts of this money. If you think that AIG is a public company in which the US government has purchased a majority interest, then, sure, the contracts still apply. But as best I understand this, by any reasonable measure, AIG went bankrupt. And the parties that were unfortunate or foolish enough to buy these credit default swaps that AIG had no ability to pay out on are out of luck. The other party went bust. That's capitalism -- the fate of companies poorly judge risk.

Now, maybe these counter-parties decide to petition the US government for relief. And perhaps at the level of systemic risk, it's in our interest to make good on these contracts. But that's a different kind of arrangement. That's something outside the strictures of the original contract. I know there's a separate issue of whether too much transparency could trigger runs on banks or other similar panics. I'll set that aside for the moment; because I don't have the understanding to really evaluate that properly. But with regards to the counter-parties themselves, mustn't some 'beggars can't be choosers' logic apply?

In those Office of Legal Counsel memos released yesterday is a telling footnote that appears to try to exonerate the DOJ crew that gave the now-discredited legal advice on things like torture, domestic surveillance, and the scope of executive power.

Funny thing is, the author of the footnote is Steven Bradbury, the acting OLC chief under Bush whose own conduct was reportedly criticized in an internal Justice Department investigation into whether OLC lawyers failed to meet professional standards when they concocted their legal theories.

The internal report from the Office of Professional Responsibility was mostly completed last fall, but apparently ran into such resistance from then-Attorney General Michael Mukasey that he declined to authorize its public release, Newsweek reported last month.

So then along comes Bradbury, writing his January memo (.pdf) explaining why all those post-9/11 OLC opinions were withdrawn, and punctuating it with this odd footnote, in a pre-emptive strike of sorts against the OPR's findings.

But it was only pre-emptive in the sense that the OPR's findings were not yet public. Those findings were already known at the top levels of the Justice Department -- and in fact, according to Newsweek, Mukasey's second in command was demanding that the report include responses from Bradbury and the others. So it's possible, though not certain, that Bradbury had already seen the preliminary report from OPR when he wrote the self-exonerating footnote.

John McCain still not happy about losing the election.

ABC reporter who doesn't understand how income taxes work finds rich people who don't know either and makes a story out of it.

As I noted yesterday, the real question with the AIG bailout is who's getting the money? AIG isn't 'getting it'. For all intents and purposes, AIG doesn't even exist anymore. The company still has some more conventional insurance companies that remain profitable. But the part we're dealing with is little more than a pass through at this point. The money we're giving AIG is being used to make good on credit-default swaps, or de facto insurance policies AIG had with various banks and financial institutions. Basically, AIG was insuring the toxic assets.

So who are the counter-parties? Who's getting the money.

The short and sweet of it is that it's a secret.

Here's what the Times' Joe Nocera explained last night on the Newshour ...

Basically, the money has been handed over to the counterparties.

You know, there`s a saying now you hear on Wall Street, which is that it`s not a bailout of AIG. It`s a bailout of the counterparties. Now, who are these counterparties? In fact, we don`t know precisely, because the government won`t tell us. And AIG views this information as a trade secret.

Why AIG has any standing to have trade secrets at this point escapes me since the US taxpayer has already shelled out many times the companies worth to keep the company from going belly up.

And in case you missed it, AIG just sued the IRS over $300 million in unpaid taxes stemming from its "tax arbitrage" operations.

Gov. Bobby Jindal (R-LA) falls in line behind the "Great Leader" Rush Limbaugh -- and scorns Michael Steele's temporary deviation from the party line.

Minnesota Gov. Tim Pawlenty (R) says it's time for the GOP to move beyond Reagan. (Maybe they could settle for moving beyond Rush?) That and the day's other political news in the TPMDC Morning Roundup.

Photo: Jeff Malet, maletphoto.com.

We've raised this question several times over recent weeks and months. Now the Times is asking too. In an editorial in Tuesday's paper, the editors ask: just who's getting the money the federal government keeps forking over to AIG? And they're casting a suspicious eye on Goldman Sachs ...

The A.I.G. bailouts fail the basic test of transparency: Who ends up with the money? Major financial institutions are not innocent victims of A.I.G.'s demise. They are sophisticated investors, and they should have known the risks being taken -- and who profited mightily from the relationship before it all came crashing down.

Whomever the recipients are, they should be investigated for their roles in the crash and, to the extent possible, be made to pay for the bailouts.

The serial A.I.G. bailouts are especially problematic for their connection to the Wall Street bank Goldman Sachs. At the time of the first A.I.G. rescue last fall, it was reported by Gretchen Morgenson in The Times that Goldman was A.I.G.'s largest trading partner, with some $20 billion of business tied into the insurer. Goldman has said that its exposure to risk from A.I.G. was offset, or hedged, by other investments.

As the Times' Joe Nocera explained in a column over the weekend, AIG's key role in the economic meltdown was selling credit-default swaps, which amounted to insurance policies on those toxic mortgage securities which have upended the world financial system. As he writes ...

These exotic instruments acted as a form of insurance for the [mortgage] securities. In effect, A.I.G. was saying if, by some remote chance (ha!) those mortgage-backed securities suffered losses, the company would be on the hook for the losses. And because A.I.G. had that AAA rating, when it sprinkled its holy water over those mortgage-backed securities, suddenly they had AAA ratings too.

AIG's trading partners weren't defrauded or hoodwinked. They knew what they were doing as well as AIG did. But the AIG bailout isn't really a bailout of AIG, which is the ultimate financial zombie institution at this point. It's a backdoor bailout of lots of different banks and financial institutions here in the US and worldwide. The argument is that letting AIG default on these obligations would trigger the ultimate domino effect, upending numerous other institutions and making the whole crisis vastly worse. In other words, the systemic risk an AIG failure poses to the entire international financial system justifies the bailout.

Whether that is true or not, I don't feel capable of answering. But if we're going to pay hundreds of billions of dollars to unwing the AIG mess, as some are now predicting we may do, we need a clearer understanding of who is really getting bailed out with this money

TPM Reader GC makes an apt point about proper hang time measurement ...

Don't start the "hang time" clock when the original anti-Rush statement is made. Instead, measure the time it takes for the offender to confess his sin once Limbaugh expresses his disapproval.

For example, Steele made his blasphemous comments on Saturday and apologized on Monday afternoon, for a hang time of about 42 hours. But Limbaugh waited until Monday to publicly humiliate Steele, so he could do it on his radio show. Steele apologized almost immediately, for a true hang time of 3 hours. It is possible that Steele was living in ignorant bliss, not even realizing he had sinned, from Saturday night until Monday afternoon.

Republicans are on the comeback trail.

Eric Kleefeld and I are analyzing the various digs and semi-digs at Rush Limbaugh, followed by various sorts of apologies. And we're trying to put together some good systematic data on pre-apology hang-time. In other words, how long post-dig did it take for the different Republicans to succumb to the force of Rush's power and recant.

So far it seems like Steele may have held out for almost 48 hours, which is longer than the mere 24 that Rep. Gingrey managed. On the other hand, Steele may have had an advantage because his original comments were buried on CNN's DL Hughley show. So probably not many people saw it.

So there's probably some legitimate question as to proper scoring.

Meanwhile, Eric Cantor did a very mild rebuke of Rush's 'fail' rhetoric on the Sunday shows yesterday. And so far he's hit roughly the 36 hour mark with no clear recantation on the books.

Dems gloat after Rush awards himself sole custody of Steele's testicles.

Just out from Gov. Tim Kaine, Steele's counterpart at the DNC ...

"I was briefly encouraged by the courageous comments made my counterpart in the Republican Party over the weekend challenging Rush Limbaugh as the leader of the Republican Party and referring to his show as 'incendiary' and 'ugly.' However, Chairman Steele's reversal this evening and his apology to Limbaugh proves the unfortunate point that Limbaugh is the leading force behind the Republican Party, its politics and its obstruction of President Obama's agenda in Washington. Just this weekend, Rush Limbaugh repeated his claim that he is rooting for the President to fail. The last time Rush Limbaugh said he wanted the President to fail, virtually every single Republican in Congress followed his lead and voted against the President's plan to create or save 3.5 million jobs.

"As Congress works to pass the President's budget, Republicans need to stop following divisive figures like Rush Limbaugh, stop apologizing to him and put aside the failed politics of the past so we can put our economy back on track, reform our health care system, break our dependence on foreign oil, improve our schools, and lay the foundation for long-term growth in the 21st Century."

I mean, I'm not sure how else to put it. This guy has to be about the worst, most embarrassing party chair we've seen in recent memory. It's embarrassing enough that Steele is like, what? ... the third Republican to criticize Rush and then make it less than 36 hours before being forced to undergo the 21st century Republican version of a Maoist self-criticism session. It's sad for the Republican party that no one can criticize Rush without having to be hauled out for this sort of humiliation a day or so later. But for Steele not to have realized that or not to have been sufficiently in control of his mouth to avoid saying this just shows once again that this dude is really, really not ready for prime time.

The RNC chair issues groveling apology to ... Rush Limbaugh.

This is really pathetic:

"I went back at that tape and I realized words that I said weren't what I was thinking," Steele said. "It was one of those things where I thinking I was saying one thing, and it came out differently. What I was trying to say was a lot of people ... want to make Rush the scapegoat, the bogeyman, and he's not."

Every day now I see a new article quoting this or that bank CEO saying it was a mistake to take government aid and that they've decided to give it back. Yesterday it was Northern Trust. Today it's Bank of America. Yet each time I look down into the articles, the headlines about paying the money back are never borne out in the articles themselves. Northern Trust doesn't want to be hassled any more about lavish events. So they're giving the money back. When? As soon as they can manage it.

Now Bank of America's Ken Lewis says they made a "tactical mistake" in asking for and receiving more money to absorb Merrill Lynch. So when are they paying it back? Hopefully in "two to three years."

How can you say it was a mistake when you won't be able to pay it back for years? I think that means you need it.

It seems to me that if you're saying it was a mistake and you're going to give it back and then you say you're not going to pay it back for years, I think that means it wasn't a mistake since obviously you cannot make do without the money. What am I missing?

What it looks like to me is that a lot of these TARPers are getting headlines on the cheap saying they either didn't want the money, don't need it or are actually giving it back, when it turns out they plan to hold on to the money for years.

I just want to give props to the Democratic psyops operation that's paying off Michael Steele to get into a gonzo spat with Rush. Great work, guys.

The Justice Department releases nine Bush-era memos penned by the Office of Legal Counsel.

From The Politico ...

In a little-noticed interview Saturday night, Steele dismissed Limbaugh as an "entertainer" whose show is "incendiary" and "ugly."

Steele's criticism makes him the highest-ranking Republican to pick a fight with the popular and polarizing conservative talk show host.

Over the weekend, Mark Leibovich had an interesting an entertaining piece in the Times on how "socialism" has become the Republicans' new all-purpose smear word attacking Obama in particular and Democrats generally.

Now, you can have a whole conversation about whether ramping marginal tax rates back to where they were in the go-go 1990s really constitutes socialism. But a different point occurred to me when I read the piece. I think this is probably the best evidence there is that the 'liberal' label simply doesn't have the punch that it had going back a good thirty years in American politics.

If it did, they'd still be using it, since it at least has some relationship to reality. But it doesn't, so they're not.

A key Coleman witness admits on cross examination that her political sympathies lie with Coleman.

The Coleman camp is lucky this witness, as compromised as she may be, can even be heard. Earlier today, the election court stopped short of striking her testimony and instead fined Coleman's lawyers for withholding from the Franken team evidence related to her testimony.

Attorney General Eric Holder reverses Mukasey death penalty decision after trial had already begun.

TPM Reader GL is on to something here:

The significance of what Gates said yesterday about the different "styles" of Bush and Obama isn't that Obama asks people's opinions. It's that he makes his advisors voice their views in meetings in front of their colleagues -- and thus be accountable for them. Cheney famously never spoke up in meetings. Cheney was never responsible for his opinions and policies. His insanity never had to withstand scrutiny. That is the point. That is what led to catastrophe.

Does Obama's pronouncement of the end of combat missions in 2010 signal victory in Iraq? Who's the better listener, Obama or Bush? And is Rush Limbaugh really the current leader of the conservative movement? All that and more in today's Sunday Show Roundup ...

Full-size video at TPMtv.com.

You'd think serving on Elizabeth Warren's TARP oversight board would be reason enough for former Sen. John Sununu (R-NH) not to also take a seat on the board of a subsidiary of Bank of New York Mellon -- which is itself a recipient of TARP funds and was hired by Treasury to administer the TARP program.

But, alas, no.

President Obama will unveil Kathleen Sebelius as his post-Daschle nominee for Secretary of Health and Human Services at 1 p.m. ET. That and the day's other political news in the TPMDC Morning Roundup.

Jonathan Taplin takes stock of the highspeed collapse of conservatism.

Eric Cantor distances himself from Rush Limbaugh's public desire for Obama to fail. That and other political news in today's TPMDC Sunday Roundup.

Newsday editorial: Obama Budget gives it to us straight.

After reading Joe Nocera's piece on AIG, which I recommended below, the same point occurred to me as occurred to TPM Reader JP ...

RE: Joe Nocera's piece in the Times on 02/27

Why is it only the American government/taxpayer putting money into AIG when it is an international problem? Are European governments anteing up? Has the leadership, those responsible, at AIG changed?

"....and all those European banks whose toxic assets are supposedly insured by AIG would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed."

I believe the highest level of leadership was booted. They have a new CEO etc. I'm not sure how deep the purge cut, however. And the point about the US taking the whole hit for losses that would be suffered by European banks, yeah, not getting that. Clearly you are dealing with an international banking system in which you can easily cordon off systemic risk by continent. But the pattern of losses Nocera points to do suggest we should not be picking up the whole bill.

(photo: wdcpix.com/lauren v. burke)

Late Update: The winner so far may be TPM Reader MS who wryly suggests: "I have three issues with Obama's budget."

Atrios pointed me to Joe Nocera's piece in the Times on AIG and just what it was they were doing and why we're now having to spend perhaps hundreds of billions of dollars to clean up the mess.

I strongly recommend reading it.

For those of us who aren't well versed in economics or complex financial instruments, just what it was these difference banks and investment houses and insurance companies were doing can be really difficult to understand. But Nocera breaks it down in a very clear and thus highly infuriating way.

Though he doesn't explicitly make the point, the article also suggests one reason why basically every big financial institution is now living by the grace of the federal government. Even if they could, for an institution like Goldman Sachs, it wouldn't matter if they gave back the TARP money. We're shelling out so much money to "AIG" because we need to protect its trading partners from the folly of their dealings with AIG. We're making good on the various reckless bets that AIG made with its various trading partners.