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Lazy Saturday News and Views

Out of Town News, Harvard Sq., Cambridge, MA

Good Morning, Conflucians!!!!

It’s a gorgeous Saturday morning here in the Boston ‘burbs. I just love Spring!

Personally, I’m still mainly interested in the Blago-Rezko-Obama story, but there is some other news today.


ECONOMIC MELTDOWN

The New York Times informs us that Rating Agency Data Aided Wall Street in Mortgage Deals Yes, as you probably already guessed, the fix was in on those “complex investments” from the very beginning. The ratings agencies were collaborating with the investment banks to make sure all those “high risk” bets came out the way the banks wanted them to.

The rating agencies made public computer models that were used to devise ratings to make the process less secretive. That way, banks and others issuing bonds — companies and states, for instance — wouldn’t be surprised by a weak rating that could make it harder to sell the bonds or that would require them to offer a higher interest rate.

But by routinely sharing their models, the agencies in effect gave bankers the tools to tinker with their complicated mortgage deals until the models produced the desired ratings. [....]

But for Goldman and other banks, a road map to the right ratings wasn’t enough. Analysts from the agencies were hired to help construct the deals.

In 2005, for instance, Goldman hired Shin Yukawa, a ratings expert at Fitch, who later worked with the bank’s mortgage unit to devise the Abacus investments.

It really is time to break up these greedy “too big to fail” (TBTF) banks, but the Obama administration still defends their right to exist. Scarecrow at FDL has a great post on Larry Summers’ latest excuse for TBTF: Why Is Larry Summers Afraid of Having Many Small Banks? Summers says we can’t do that because that’s what was tried before the Great Depression, and it failed.

…if we broke up the megabanks and instead had many smaller regulated banks, it would be the end of America and the financial industry as we know it.

And that would be bad why? Scarecrow:

Funny, I always thought the smaller bank system, if that’s what it was, failed because Wall Street wasn’t sufficiently regulated, and the local bank runs happened because we didn’t have the FDIC at the time. So is Larry now saying that having the FDIC to take over smaller bank failures has been a failure?

And what’s he saying about needing diversified megabanks that lose money on risky stuff but loot, uh, borrow money from better managed activities? Surely he doesn’t mean to argue for letting the investment casino borrow from the government-guaranteed deposit-based divisions?

Reuters: Goldman emails: firm lauds profits from shorts

Goldman Sachs Group Inc officials discussed making “serious money” in 2007 off the subprime crisis as mortgages were starting to falter in rapid numbers, according to a collection of e-mails released by a Senate panel on Saturday.

“Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,” Goldman Sachs Chief Executive Lloyd Blankfein said in an e-mail from November 2007.

“Sounds like we will make some serious money,” said Goldman Sachs executive Donald Mullen in a separate series of e-mails from October 2007 about the performance of deteriorating second-lien positions in a collateralized debt obligation, or CDO.


IMMIGRATION

Yesterday, Governor Jan Brewer of Arizona signed a draconian new immigration law.

The law, which will take effect in 90 days, will make it a state crime to be in the country illegally. The measure would require migrants to produce papers verifying their status when asked to do so by a police officer, according to a story in The Arizona Republic.

How do they tell which people are the the “migrants?” I hope everyone in Arizona is ready to produce a passport or birth certificate at a moment’s notice.

LA Times: Obama presses for immigration reform

“Our failure to act responsibly at the federal level will only open the door to irresponsibility by others,” Obama said. “And that includes, for example, the recent efforts in Arizona, which threatened to undermine basic notions of fairness that we cherish as Americans, as well as the trust between police and their communities that is so crucial to keeping us safe.”

The president said he had instructed his administration “to closely monitor the situation” in Arizona and “examine the civil rights and other implications” of the Arizona legislation. It points to the need for federal legislation, the president said.


THE CHICAGO BOYS

And now back to the story that is making me smile. Rod Blagojevich is not going to let President Obama off the hook without getting something in return.

John Kass, Chicago Tribune: Blagojevich sends not-so-subtle message to Obama

Obama’s former patron and real estate fairy, the convicted influence peddler Tony Rezko, is a key player in the government’s case. Blagojevich’s aim is to undercut what Rezko has told investigators.

“President Obama has pertinent information as to the character of Mr. Rezko,” the Blagojevich filing states. “President Obama can testify to Mr. Rezko’s reputation for truthfulness, as well as his own opinion of Mr. Rezko’s character. Based on the relationship that President Obama and Mr. Rezko had, President Obama can provide important information as to Mr. Rezko’s plan, intent, opportunity, habit and modus operandi.”

No, of course Obama won’t have to testify, but I like Blago’s chutzpah anyway. Here’s Kass’s interpretation of the “message to Obama”:

It’s no secret that some in journalism get offended when anyone dares mention that the president was involved in Chicago politics. But the filing is not only a legal document, it’s a political message from Blagojevich to Obama. So allow me to translate the Chicago Way.

“Dear Barack, my old friend. I want you to use all your powers, all your skills, to make me an offer I can’t refuse. I’m Mr. Celebrity-get-me-out-of-here, and you better get me out of here. Thanks, Rod.”

Here are some of the portions of the Blagojevich request for Obama to be subpoenaed that were supposed to be redected, but accidentally-on-purpose got released to the media (hee hee hee). Yes, they are from Free Republic, please don’t yell at me. This part is particularly interesting:

…the defense has a good faith belief that Mr. Rezko, President Obama’s former friend, fund-raiser, and neighbor told the FBI and the United States Attorneys a different story about President Obama. In a recent in camera proceeding, the government tendered a three paragraph letter indicating that Rezko “has stated in interviews with the government that he engaged in election law violations by personally contributing a large sum of cash to the campaign of a public official who is not Rod Blagojevich. … Further, the public official denies being aware of cash contributions to his campaign by Rezko or others and denies having conversations with Rezko related to cash contributions. … Rezko has also stated in interviews with the government that he believed he transmitted a quid pro quo offer from a lobbyist to the public official, whereby the lobbyist would hold a fundraiser for the official in exchange for favorable official action, but that the public official rejected the offer. The public official denies any such conversation. In addition, Rezko has stated to the government that he and the public official had certain conversations about gaming legislation and administration, which the public official denies having had.

[Footnote No. 10 - The defense has a good faith belief that this public official is Barack Obama.]

23. President Obama is the only one who can testify as to the veracity of Mr. Rezko’s allegations above.

24. President Obama has pertinent information as to the character of Mr. Rezko. President Obama can testify to Mr. Rezko’s reputation for truthfulness [ahem] as well as his own opinion of Mr. Rezko’s character.

25. Based on the relationship that President Obama and Mr. Rezko had, President Obama can provide important information as to Mr. Rezko’s plan, intent, opportunity, habit and modus operandi.

Blagojevich also subpoenaed Sen. Dick Durbin (D-IL):

“Whether I’m going to be called, I don’t know,” Durbin said, later adding in a statement that he received the subpoena on April 16. “But, you know, a subpoena is an order of the court to appear. And if I’m called to appear, I will.”

Here is ABC News’ take on whether Obama will testify in the corruption trial. Their experts think it’s unlikely, but who knows? After all, Bill Clinton was forced to answer questions about sex.

“It’s unusual, but far from unprecedented, for a president to provide testimony, albeit at a physical distance from the actual court proceedings,” said presidential historian Richard Norton Smith, former director of five presidential libraries.

Meanwhile, another one of President Obama’s Chicago pals, Alexi Giannoulias, is having financial problems: Broadway Bank’s failure a twin blow for Giannoulias

The failure of Chicago-based Broadway, which was unable to raise the $85 million it needed to remain independent, was anticipated, and its worsening health has weighed on Giannoulias’ Democratic bid for President Barack Obama’s old Senate seat. The bank had been struggling in recent years with real estate loans gone bad, losing $75 million last year.

Giannoulias worked for his father at Broadway before entering politics, and during his successful run for state treasurer in 2006 he used his banking experience as one of his chief qualifications. But in the Senate race, he has tried to distance himself from the bank’s troubles.

So what are you reading this morning? Please share your links in the comments and have a great Saturday!

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13 Responses

  1. I hope everyone in Arizona is ready to produce a passport or birth certificate at a moment’s notice.

    Wouldn’t it be sweet if a couple of cops (I think that is all it would take), would start demanding that from every driver they pull over? And if they can’t prove their status, off to the pokey for them! This law would be overturned in a heartbeat.

  2. Well the difference b/w this president and Clinton testifying is that sex is dirty and harms the peace and prosperity of the working class…

  3. What are the odds on Rezko living through the year ?

  4. I love that Blago is not letting Obama off the hook. Definitely smile worthy. :-)

  5. Also, in Chicago, per my tabloids update

    http://edgeoforever.wordpress.com/2010/04/24/tabloids-arizona-immigration-iraq-bombings/

    - the Dem candidate for Obama’s seat just had his bank seized by the Feds

  6. stay out of Arizona if you are here illegally

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