Birthright Citizenship Opponents Try 'Everyone Else Is Doing It, We Should, Too' Argument

Many other nations limit birthright citizenship granted to the children of illegal immigrants, a fact that means "Congress should promote a serious discussion about whether the United States should automatically confer the benefits and burdens of U.S. citizenship ..." according to a report released by an organization that advocates limited immigration.

Supporters of birthright citizenship maintain, however, that the solution is in enactment of comprehensive immigration reform, not in "attacking the Constitution."

The issue of illegal immigration has come to the fore in recent months, with President Obama and congressional Democrats seeking to pass comprehensive immigration reform legislation.

Conservatives, however, recently have turned to looking seriously at a repeal of the 14th Amendment to the U.S. Constitution so as to strip children born to immigrants on U.S. soil the automatic American citizenship status that they enjoy today.

There are estimated to be some 12 million undocumented aliens currently residing in the United States.

The international trend is away from universal birthright citizenship, with such nations as the United Kingdom (1983), Australia (1986), India (1987), Malta (1989), Ireland (2005), New Zealand (2006), and the Dominican Republic (2010), all ending the practice, according to "Birthright Citizenship in the United States: A Global Comparison," from the the Center for Immigration Studies.

Of advanced economies, only Canada and the United States grant automatic citizenship to children born to illegal aliens, the report finds.

Overturning the 14th Amendment would require another amendment to the Constitution, which is an arduous process requiring not only supermajorities in the House and Senate, but also ratification by two-thirds of the nation's state legislatures. The 14th Amendment was ratified following the Civil War.

Other scholars continue to believe birthright citizenship is an important status that should continue.

"This proposal does not fix our immigration problems because we are in a situation where we need comprehensive immigration reform, not to be attacking the Constitution," says Gebe Martinez, with the Center for American Progress, a left-leaning Washington think tank. "First of all, if this were passed, you would not be able to document citizen children with great ease. You would be making nurses and doctors and hospital administrators into immigration enforcers. Secondly, you wouldn't be reducing undocumented immigration. In fact, you would probably be increasing it. Let's keep in mind that mothers don't always go to hospitals and doctors. Some of them, as back in our early years, are served by midwives. And there's no way to properly account sometimes who comes in to give birth, or who is born here when they know that federal agents are looking for them. It's just not practical.

"The bottom line is that we do need comprehensive immigration reform. People are complaining about undocumented immigration, and that's what we need to fix. We don't need to be attacking the children of immigrants," Martinez adds.


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Banks’ Self-Dealing Super-Charged Financial Crisis

by Jake Bernstein and Jesse Eisinger, ProPublica

Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged.

The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created -- and ultimately provided most of the money for -- new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

Individual instances of these questionable trades have been reported before, but ProPublica's investigation, done in partnership with NPR's Planet Money, shows that by late 2006 they became a common industry practice.

An analysis by research firm Thetica Systems, commissioned by ProPublica, shows that in the last years of the boom, CDOs had become the dominant purchaser of key, risky parts of other CDOs, largely replacing real investors like pension funds. By 2007, 67 percent of those slices were bought by other CDOs, up from 36 percent just three years earlier. The banks often orchestrated these purchases. In the last two years of the boom, nearly half of all CDOs sponsored by market leader Merrill Lynch bought significant portions of other Merrill CDOs.

ProPublica also found 85 instances during 2006 and 2007 in which two CDOs bought pieces of each other's unsold inventory. These trades, which involved $107 billion worth of CDOs, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other, the analysis shows.

There were supposed to be protections against this sort of abuse. While banks provided the blueprint for the CDOs and marketed them, they typically selected independent managers who chose the specific bonds to go inside them. The managers had a legal obligation to do what was best for the CDO. They were paid by the CDO, not the bank, and were supposed to serve as a bulwark against self-dealing by the banks, which had the fullest understanding of the complex and lightly regulated mortgage bonds.

It rarely worked out that way. The managers were beholden to the banks that sent them the business. On a billion-dollar deal, managers could earn a million dollars in fees, with little risk. Some small firms did several billion dollars of CDOs in a matter of months.

"All these banks for years were spawning trading partners," says a former executive from Financial Guaranty Insurance Company, a major insurer of the CDO market. "You don't have a trading partner? Create one."

The executive, like most of the dozens of people ProPublica spoke with about the inner workings of the market at the time, asked not to be named out of fear of being sucked into ongoing investigations or because they are involved in civil litigation.

Keeping the assembly line going had a wealth of short-term advantages for the banks. Fees rolled in. A typical CDO could net the bank that created it between $5 million and $10 million -- about half of which usually ended up as employee bonuses. Indeed, Wall Street awarded record bonuses in 2006, a hefty chunk of which came from the CDO business.

The self-dealing super-charged the market for CDOs, enticing some less-savvy investors to try their luck. Crucially, such deals maintained the value of mortgage bonds at a time when the lack of buyers should have driven their prices down.

But the strategy of speeding up the assembly line had devastating consequences for homeowners, the banks themselves and, ultimately, the global economy. Because of Wall Street's machinations, more mortgages had been granted to ever-shakier borrowers. The results can now be seen in foreclosed houses across America.

The incestuous trading also made the CDOs more intertwined and thus fragile, accelerating their decline in value that began in the fall of 2007 and deepened over the next year. Most are now worth pennies on the dollar. Nearly half of the nearly trillion dollars in losses to the global banking system came from CDOs, losses ultimately absorbed by taxpayers and investors around the world. The banks' troubles sent the world's economies into a tailspin from which they have yet to recover.

It remains unclear whether any of this violated laws. The SEC has said that it is actively looking at as many as 50 CDO managers as part of its broad examination of the CDO business' role in the financial crisis. In particular, the agency is focusing on the relationship between the banks and the managers. The SEC is exploring how deals were structured, if any quid pro quo arrangements existed, and whether banks pressured managers to take bad assets.

The banks declined to directly address ProPublica's questions. Asked about its relationship with managers and the cross-ownership among its CDOs, Citibank responded with a one-sentence statement:

"It has been widely reported that there are ongoing industry-wide investigations into CDO-related matters and we do not comment on pending investigations."

None of ProPublica's questions had mentioned the SEC or pending investigations.

Posed a similar list of questions, Bank of America, which now owns Merrill Lynch, said:

"These are very specific questions regarding individuals who left Merrill Lynch several years ago and a CDO origination business that, due to market conditions, was discontinued by Merrill before Bank of America acquired the company."

This is the second installment of a ProPublica series about the largely hidden history of the CDO boom and bust. Our first story looked at how one hedge fund helped create at least $40 billion in CDOs as part of a strategy to bet against the market. This story turns the focus on the banks.

Merrill Lynch Pioneers Pervert the Market

By 2004, the housing market was in full swing, and Wall Street bankers flocked to the CDO frenzy. It seemed to be the perfect money machine, and for a time everyone was happy.

Homeowners got easy mortgages. Banks and mortgage companies felt secure lending the money because they could sell the mortgages almost immediately to Wall Street and get back all their cash plus a little extra for their trouble. The investment banks charged massive fees for repackaging the mortgages into fancy financial products. Investors all around the world got to play in the then-phenomenal American housing market.

The mortgages were bundled into bonds, which were in turn combined into CDOs offering varying interest rates and levels of risk.

Investors holding the top tier of a CDO were first in line to get money coming from mortgages. By 2006, some banks often kept this layer, which credit agencies blessed with their highest rating of Triple A.

Buyers of the lower tiers took on more risk and got higher returns. They would be the first to take the hit if homeowners funding the CDO stopped paying their mortgages. (Here's a video explaining how CDOs worked.)

Over time, these risky slices became increasingly hard to sell, posing a problem for the banks. If they remained unsold, the sketchy assets stayed on their books, like rotting inventory. That would require the banks to set aside money to cover any losses. Banks hate doing that because it means the money can't be loaned out or put to other uses.

Being stuck with the risky portions of CDOs would ultimately lower profits and endanger the whole assembly line.

The banks, notably Merrill and Citibank, solved this problem by greatly expanding what had been a common and accepted practice: CDOs buying small pieces of other CDOs.

Architects of CDOs typically included what they called a "bucket" -- which held bits of other CDOs paying higher rates of interest. The idea was to boost overall returns of deals primarily composed of safer assets. In the early days, the bucket was a small portion of an overall CDO.

One pioneer of pushing CDOs to buy CDOs was Merrill Lynch's Chris Ricciardi, who had been brought to the firm in 2003 to take Merrill to the top of the CDO business. According to former colleagues, Ricciardi's team cultivated managers, especially smaller firms.

Merrill exercised its leverage over the managers. A strong relationship with Merrill could be the difference between a business that thrived and one that didn't. The more deals the banks gave a manager, the more money the manager got paid.

As the head of Merrill's CDO business, Ricciardi also wooed managers with golf outings and dinners. One Merrill executive summed up the overall arrangement: "I'm going to make you rich. You just have to be my bitch."

But not all managers went for it.

An executive from Trainer Wortham, a CDO manager, recalls a 2005 conversation with Ricciardi. "I wasn't going to buy other CDOs. Chris said: 'You don't get it. You have got to buy other guys' CDOs to get your deal done. That's how it works.'" When the manager refused, Ricciardi told him, "'That's it. You are not going to get another deal done.'" Trainer Wortham largely withdrew from the market, concerned about the practice and the overheated prices for CDOs.

Ricciardi declined multiple requests to comment.

Merrill CDOs often bought slices of other Merrill deals. This seems to have happened more in the second half of any given year, according to ProPublica's analysis, though the purchases were still a small portion compared to what would come later. Annual bonuses are based on the deals bankers completed by yearend.

Ricciardi left Merrill Lynch in February 2006. But the machine he put into place not only survived his departure, it became a model for competitors.

As Housing Market Wanes, Self-Dealing Takes Off

By mid-2006, the housing market was on the wane. This was particularly true for subprime mortgages, which were given to borrowers with spotty credit at higher interest rates. Subprime lenders began to fold, in what would become a mass extinction. In the first half of the year, the percentage of subprime borrowers who didn't even make the first month's mortgage payment tripled from the previous year.

That made CDO investors like pension funds and insurance companies increasingly nervous. If homeowners couldn't make their mortgage payments, then the stream of cash to CDOs would dry up. Real "buyers began to shrivel and shrivel," says Fiachra O'Driscoll, who co-ran Credit Suisse's CDO business from 2003 to 2008.

Faced with disappearing investor demand, bankers could have wound down the lucrative business and moved on. That's the way a market is supposed to work. Demand disappears; supply follows. But bankers were making lots of money. And they had amassed warehouses full of CDOs and other mortgage-based assets whose value was going down.

Rather than stop, bankers at Merrill, Citi, UBS and elsewhere kept making CDOs.

The question was: Who would buy them?

The top 80 percent, the less risky layers or so-called "super senior," were held by the banks themselves. The beauty of owning that supposedly safe top portion was that it required hardly any money be held in reserve.

That left 20 percent, which the banks did not want to keep because it was riskier and required them to set aside reserves to cover any losses. Banks often sold the bottom, riskiest part to hedge funds. That left the middle layer, known on Wall Street as the "mezzanine," which was sold to new CDOs whose top 80 percent was ultimately owned by ... the banks.

"As we got further into 2006, the mezzanine was going into other CDOs," says Credit Suisse's O'Driscoll.

This was the daisy chain. On paper, the risky stuff was gone, held by new independent CDOs. In reality, however, the banks were buying their own otherwise unsellable assets.

How could something so seemingly short-sighted have happened?

It's one of the great mysteries of the crash. Banks have fleets of risk managers to defend against just such reckless behavior. Top executives have maintained that while they suspected that the housing market was cooling, they never imagined the crash. For those doing the deals, the payoff was immediate. The dangers seemed abstract and remote.

The CDO managers played a crucial role. CDOs were so complex that even buyers had a hard time seeing exactly what was in them -- making a neutral third party that much more essential.

"When you're investing in a CDO you are very much putting your faith in the manager," says Peter Nowell, a former London-based investor for the Royal Bank of Scotland. "The manager is choosing all the bonds that go into the CDO." (RBS suffered mightily in the global financial meltdown, posting the largest loss in United Kingdom history, and was de facto nationalized by the British government.)

By persuading managers to pick the unsold slices of CDOs, the banks helped keep the market going. "It guaranteed distribution when, quite frankly, there was not a huge market for them," says Nowell.

The counterintuitive result was that even as investors began to vanish, the mortgage CDO market more than doubled from 2005 to 2006, reaching $226 billion, according to the trade publication Asset-Backed Alert.

Citi and Merrill Hand Out Sweetheart Deals

As the CDO market grew, so did the number of CDO management firms, including many small shops that relied on a single bank for most of their business. According to Fitch, the number of CDO managers it rated rose from 89 in July 2006 to 140 in September 2007.

One CDO manager epitomized the devolution of the business, according to numerous industry insiders: a Wall Street veteran named Wing Chau.

Earlier in the decade, Chau had run the CDO department for Maxim Group, a boutique investment firm in New York. Chau had built a profitable business for Maxim based largely on his relationship with Merrill Lynch. In just a few years, Maxim had corralled more than $4 billion worth of assets under management just from Merrill CDOs.

In August 2006, Chau bolted from Maxim to start his own CDO management business, taking several colleagues with him. Chau's departure gave Merrill, the biggest CDO producer, one more avenue for unsold inventory.

Chau named the firm Harding, after the town in New Jersey where he lived. The CDO market was starting its most profitable stretch ever, and Harding would play a big part. In an eleven-month period, ending in August 2007, Harding managed $13 billion of CDOs, including more than $5 billion from Merrill, and another nearly $5 billion from Citigroup. (Chau would later earn a measure of notoriety for a cameo appearance in Michael Lewis' bestseller "The Big Short," where he is depicted as a cheerfully feckless "go-to buyer" for Merrill Lynch's CDO machine.)

Chau had a long-standing friendship with Ken Margolis, who was Merrill's top CDO salesman under Ricciardi. When Ricciardi left Merrill in 2006, Margolis became a co-head of Merrill's CDO group. He carried a genial, let's-just-get-the-deal-done demeanor into his new position. An avid poker player, Margolis told a friend that in a previous job he had stood down a casino owner during a foreclosure negotiation after the owner had threatened to put a fork through his eye.

Chau's close relationship with Merrill continued. In late 2006, Merrill sublet office space to Chau's startup in the Merrill tower in Lower Manhattan's financial district. A Merrill banker, David Moffitt, scheduled visits to Harding for prospective investors in the bank's CDOs. "It was a nice office," overlooking New York Harbor, recalls a CDO buyer. "But it did feel a little weird that it was Merrill's building," he said.

Moffitt did not respond to requests for comment.

Under Margolis, other small managers with meager track records were also suddenly handling CDOs valued at as much as $2 billion. Margolis declined to answer any questions about his own involvement in these matters.

A Wall Street Journal article ($) from late 2007, one of the first of its kind, described how Margolis worked with one inexperienced CDO manager called NIR on a CDO named Norma, in the spring of that year. The Long Island-based NIR made about $1.5 million a year for managing Norma, a CDO that imploded.

"NIR's collateral management business had arisen from efforts by Merrill Lynch to assemble a stable of captive small firms to manage its CDOs that would be beholden to Merrill Lynch on account of the business it funneled to them," alleged a lawsuit filed in New York state court against Merrill over Norma that was settled quietly after the plaintiffs received internal Merrill documents.

NIR declined to comment.

Banks had a variety of ways to influence managers' behavior.

Some of the few outside investors remaining in the market believed that the manager would do a better job if he owned a small slice of the CDO he was managing. That way, the manager would have more incentive to manage the investment well, since he, too, was an investor. But small management firms rarely had money to invest. Some banks solved this problem by advancing money to managers such as Harding.

Chau's group managed two Citigroup CDOs -- 888 Tactical Fund and Jupiter High-Grade VII -- in which the bank loaned Harding money to buy risky pieces of the deal. The loans would be paid back out of the fees the managers took from the CDO and its investors. The loans were disclosed to investors in a few sentences among the hundreds of pages of legalese accompanying the deals.

In response to ProPublica's questions, Chau's lawyer said, "Harding Advisory's dealings with investment banks were proper and fully disclosed."

Citigroup made similar deals with other managers. The bank lent money to a manager called Vanderbilt Capital Advisors for its Armitage CDO, completed in March 2007.

Vanderbilt declined to comment. It couldn't be learned how much money Citigroup loaned or whether it was ever repaid.

Yet again banks had masked their true stakes in CDO. Banks were lending money to CDO managers so they could buy the banks' dodgy assets. If the managers couldn't pay the loans back -- and most were thinly capitalized -- the banks were on the hook for even more losses when the CDO business collapsed.

Goldman, Merrill and Others Get Tough

When the housing market deteriorated, banks took advantage of a little-used power they had over managers.

The way CDOs are put together, there is a brief period when the bonds picked by managers sit on the banks' balance sheets. Because the value of such assets can fall, banks reserved the right to overrule managers' selections.

According to numerous bankers, managers and investors, banks rarely wielded that veto until late 2006, after which it became common. Merrill was in the lead.

"I would go to Merrill and tell them that I wanted to buy, say, a Citi bond," recalls a CDO manager. "They would say 'no.' I would suggest a UBS bond, they would say 'no.' Eventually, you got the joke." Managers could choose assets to put into their CDOs but they had to come from Merrill CDOs. One rival investment banker says Merrill treated CDO managers the way Henry Ford treated his Model T customers: You can have any color you want, as long as it's black.

Once, Merrill's Ken Margolis pushed a manager to buy a CDO slice for a Merrill-produced CDO called Port Jackson that was completed in the beginning of 2007: "'You don't have to buy the deal but you are crazy if you don't because of your business,'" an executive at the management firm recalls Margolis telling him. "'We have a big pipeline and only so many more mandates to give you.' You got the message." In other words: Take our stuff and we'll send you more business. If not, forget it.

Margolis declined to comment on the incident.

"All the managers complained about it," recalls O'Driscoll, the former Credit Suisse banker who competed with other investment banks to put deals together and market them. But "they were indentured slaves." O'Driscoll recalls managers grumbling that Merrill in particular told them "what to buy and when to buy it."

Other big CDO-producing banks quickly adopted the practice.

A little-noticed document released this year during a congressional investigation into Goldman Sachs' CDO business reveals that bank's thinking. The firm wrote a November 2006 internal memorandum about a CDO called Timberwolf, managed by Greywolf, a small manager headed by ex-Goldman bankers. In a section headed "Reasons To Pursue," the authors touted that "Goldman is approving every asset" that will end up in the CDO. What the bank intended to do with that approval power is clear from the memo: "We expect that a significant portion of the portfolio by closing will come from Goldman's offerings."

When asked to comment whether Goldman's memo demonstrates that it had effective control over the asset selection process and that Greywolf was not in fact an independent manager, the bank responded: "Greywolf was an experienced, independent manager and made its own decisions about what reference assets to include. The securities included in Timberwolf were fully disclosed to the professional investors who invested in the transaction."

Greywolf declined to comment. One of the investors, Basis Capital of Australia, filed a civil lawsuit in federal court in Manhattan against Goldman over the deal. The bank maintains the lawsuit is without merit.

By March 2007, the housing market's signals were flashing red. Existing home sales plunged at the fastest rate in almost 20 years. Foreclosures were on the rise. And yet, to CDO buyer Peter Nowell's surprise, banks continued to churn out CDOs.

"We were pulling back. We couldn't find anything safe enough," says Nowell. "We were amazed that April through June they were still printing deals. We thought things were over."

Instead, the CDO machine was in overdrive. Wall Street produced $70 billion in mortgage CDOs in the first quarter of the year.

Many shareholder lawsuits battling their way through the court system today focus on this period of the CDO market. They allege that the banks were using the sales of CDOs to other CDOs to prop up prices and hide their losses.

"Citi's CDO operations during late 2006 and 2007 functioned largely to sell CDOs to yet newer CDOs created by Citi to house them," charges a pending shareholder lawsuit against the bank that was filed in federal court in Manhattan in February 2009. "Citigroup concocted a scheme whereby it repackaged many of these investments into other freshly-baked vehicles to avoid incurring a loss."

Citigroup described the allegations as "irrational," saying the bank's executives would never knowingly take actions that would lead to "catastrophic losses."

In the Hall of Mirrors, Myopic Rating Agencies

The portion of CDOs owned by other CDOs grew right alongside the market. What had been 5 percent of CDOs (remember the "bucket") now came to constitute as much as 30 or 40 percent of new CDOs. (Wall Street also rolled out CDOs that were almost entirely made up of CDOs, called CDO squareds.)

The ever-expanding bucket provided new opportunities for incestuous trades.

It worked like this: A CDO would buy a piece of another CDO, which then returned the favor. The transactions moved both CDOs closer to completion, when bankers and managers would receive their fees.

ProPublica's analysis shows that in the final two years of the business, CDOs with cross-ownership amounted to about one-fifth of the market, about $107 billion.

Here's an example from early May 2007:

• A CDO called Jupiter VI bought a piece of a CDO called Tazlina II.


• Tazlina II bought a piece of Jupiter VI.

Both Jupiter VI and Tazlina II were created by Merrill and were completed within a week of each other. Both were managed by small firms that did significant business with Merrill: Jupiter by Wing Chau's Harding, and Tazlina by Terwin Advisors. Chau did not respond to questions about this deal. Terwin Advisors could not reached.

Just a few weeks earlier, CDO managers completed a comparable swap between Jupiter VI and another Merrill CDO called Forge 1.

Forge has its own intriguing history. It was the only deal done by a tiny manager of the same name based in Tampa, Fla. The firm was started less than a year earlier by several former Wall Street executives with mortgage experience. It received seed money from Bryan Zwan, who in 2001 settled an SEC civil lawsuit over his company's accounting problems in a federal court in Florida. Zwan and Forge executives didn't respond to requests for comment.

After seemingly coming out of nowhere, Forge won the right to manage a $1.5 billion Merrill CDO. That earned Forge a visit from the rating agency Moody's.

"We just wanted to make sure that they actually existed," says a former Moody's executive. The rating agency saw that the group had an office near the airport and expertise to do the job.

Rating agencies regularly did such research on managers, but failed to ask more fundamental questions. The credit ratings agencies "did heavy, heavy due diligence on managers but they were looking for the wrong things: how you processed a ticket or how your surveillance systems worked," says an executive at a CDO manager. "They didn't check whether you were buying good bonds."

One Forge employee recalled in a recent interview that he was amazed Merrill had been able to find buyers so quickly. "They were able to sell all the tranches" -- slices of the CDO -- "in a fairly rapid period of time," said Rod Jensen, a former research analyst for Forge.

Forge achieved this feat because Merrill sold the slices to other CDOs, many linked to Merrill.

The ProPublica analysis shows that two Merrill CDOs, Maxim II and West Trade III, each bought pieces of Forge. Small managers oversaw both deals.

Forge, in turn, was filled with detritus from Merrill. Eighty-two percent of the CDO bonds owned by Forge came from other Merrill deals.

Citigroup did its own version of the shuffle, as these three CDOs demonstrate:

• A CDO called Octonion bought some of Adams Square Funding II.


• Adams Square II bought a piece of Octonion.


• A third CDO, Class V Funding III, also bought some of Octonion.


• Octonion, in turn, bought a piece of Class V Funding III.

All of these Citi deals were completed within days of each other. Wing Chau was once again a central player. His firm managed Octonion. The other two were managed by a unit of Credit Suisse. Credit Suisse declined to comment.

Not all cross-ownership deals were consummated.

In spring 2007, Deutsche Bank was creating a CDO and found a manager that wanted to take a piece of it. The manager was overseeing a CDO that Merrill was assembling. Merrill blocked the manager from putting the Deutsche bonds into the Merrill CDO. A former Deutsche Bank banker says that when Deutsche Bank complained to Andy Phelps, a Merrill CDO executive, Phelps offered a quid pro quo: If Deutsche was willing to have the manager of its CDO buy some Merrill bonds, Merrill would stop blocking the purchase. Phelps declined to comment.

The Deutsche banker, who says its managers were independent, recalls being shocked: "We said we don't control what people buy in their deals." The swap didn't happen.

The Missing Regulators and the Aftermath

In September 2007, as the market finally started to catch up with Merrill Lynch, Ken Margolis left the firm to join Wing Chau at Harding.

Chau and Margolis circulated a marketing plan for a new hedge fund to prospective investors touting their expertise in how CDOs were made and what was in them. The fund proposed to buy failed CDOs -- at bargain basement prices. In the end, Margolis and Chau couldn't make the business work and dropped the idea.

Why didn't regulators intervene during the boom to stop the self-dealing that had permeated the CDO market?

No one agency had authority over the whole business. Since the business came and went in just a few years, it may have been too much to expect even assertive regulators to comprehend what was happening in time to stop it.

While the financial regulatory bill passed by Congress in July creates more oversight powers, it's unclear whether regulators have sufficient tools to prevent a replay of the debacle.

In just two years, the CDO market had cut a swath of destruction. Partly because CDOs had bought so many pieces of each other, they collapsed in unison. Merrill Lynch and Citigroup, the biggest perpetrators of the self-dealing, were among the biggest losers. Merrill lost about $26 billion on mortgage CDOs and Citigroup about $34 billion.

Additional reporting by Kitty Bennett, Krista Kjellman Schmidt, Lisa Schwartz and Karen Weise.

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Dems Launch TV Ad To Hold Obey's Seat

Democrats will begin running a television ad on Tuesday in the no-holds-barred race to hold onto the seat of retiring Rep. David Obey (D-Wis.).

The ad, paid for by the Democratic Congressional Campaign Committee (DCCC), calls out GOP candidate Sean Duffy for his support for a leading Republican's economic proposals, particularly Social Security privatization.

Democratic state Sen. Julie Lassa is vying with Duffy to succeed Obey, the powerful chairman of the House Appropriations Committee who has represented Wisconsin's 7th District for more than 40 years.

Although Duffy, a former reality TV celebrity, claims not to support privatizing Social Security, the DCCC says he has twice stated his support for Rep. Paul Ryan’s “budget blueprint” that would privatize Social Security.

A fellow Wisconsin lawmaker, Ryan has emerged as a GOP point man on economic policy.

The DCCC cites video footage in which Duffy appears to endorse Ryan's budget blueprint.

The DCCC, the arm of the Democratic Party charged with electing Democrats to the House, also cites an independent analysis that finds Ryan’s “Roadmap for America’s Future” includes changes to Social Security including diverting large sums from Social Security to private accounts.

“It also would divert substantial sums from the Social Security trust funds into private accounts and then maintain Social Security solvency by transferring funds to Social Security from the rest of the budget,” the Washington-based Center for Budget and Policy Priorities says of the Ryan plan.

Further, the DCCC cites the libertarian Cato Institute as saying that there’s no difference between privatization and personal accounts. The DCCC quotes the the Star Tribune newspaper as saying, “The word ‘privatization’ has been part of the Social Security debate for many years and has been used by many Republicans. The Cato Institute, a libertarian think tank in Washington and an advocate of the idea, used to call its effort ‘the project on Social Security privatization.’”

Republicans, however, are also reportedly spending on advertising in Wisconsin's 7th District in an attempt to pull it from Democratic hands.

The district, however, has increasingly tilted Democratic in recent years. Sen. John Kerry (D-Mass.) narrowly carried it with 51 percent in his failed 2004 presidential race, and President Obama won the district by an even wider 55.91 percent four years later.



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Republican Boehner To Attack Obama On Iraq Ahead Of Presidential Address

Rep. John Boehner plans to criticize President Obama regarding the war in Iraq on the same day that Obama plans to address the nation about the end of combat operations in that nation.

Boehner will deliver his remarks at a meeting of the American Legion, the nation's largest veterans service organization. It is being billed as a "major speech," the second such event the Ohio Republican has held in as many weeks. Last week, Boehner blasted Obama for his economic policies.

The House GOP leader, Boehner is running a fierce campaign against Obama and his fellow Democrats in an attempt to regain House control in this year's midterm elections. Boehner likely would become speaker if Republicans succeeded in wresting the speaker's gavel away from current Speaker Nancy Pelosi.

Previewing Boehner's speech Tuesday, in a statement the American Legion cited an op-ed published Aug. 27 in the right-wing newspaper Human Events, in which Boehner said the Aug. 31 shift of U.S. forces from combat to an advisory mission "was made possible by the very surge that President Obama and Vice President Biden opposed," referring to votes against a 2007 troop increase that Obama and Biden took as members of the Senate.

"With all due respect to them, our troops who have served so courageously in Iraq deserve the credit for the success of the surge and, along with the Iraqi people, the turnaround in Iraq," Boehner says.

Boehner's speech to some 10,000 members of the American Legion will come as Obama visits with soldiers at Fort Bliss, Texas, and just hours before an Oval Office address, both intended to mark this month's end of combat operations in Iraq. The pullout, a promise on which Obama campaigned in 2008, came ahead of schedule. Some 50,000 U.S. troops remain in Iraq for training and advisory purposes.

Obama has long opposed the war in Iraq, which began early in 2003 under then-President George W. Bush.

The American Legion this week is holding its 92nd American Legion National Convention. The organization also notes that members of the Obama administration, including Defense Secretary Robert Gates and Air Force Secretary Michael Donley also will address the Legion members.

Others scheduled to speak include: Sen. Russell Feingold, (D-Wis.); Rep. Gwen Moore (D-Wis.); Milwaukee Mayor Tom Barrett, Rep. Bob Filner (D-Calif.); and Rep. Steve Buyer (R-Ind.). The convention is being held in Milwaukee.



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Take It With a Grain of (Sea) Salt: Gulf Microbe Study Was Funded by BP

by Marian Wang, ProPublica

Last week, major news outlets ran with headlines about how a new microbe has been found eating up BP’s oil, and how microbes have degraded the hydrocarbons so efficiently that the vast plumes of oil in the Gulf are now undetectable. No joke.

A bit skeptical of all the oil-is-mostly-gone claims, the day that microbe study was released we chose instead to focus on the Gulf’s thousands of dead fish. Lucky for us.

Have you filed a claim for Gulf Spill damages? ProPublica's reporters want to hear from you.

MIT’s Science Tracker, in a post published yesterday, noted that the microbe study was conducted by U.C. Berkeley scientists through a grant with the Energy Biosciences Institute, and that the Energy Biosciences Institute is funded by none other than BP, through a $500 million, 10-year grant. (To the researchers' credit, they also mentioned the funding in their press release — you just had to read about three-quarters of the way through.)

That relationship shouldn't have been a total surprise. In July, news reports had noted the U.C. Berkeley-BP connection. Activists had protested the $500 million in funding, worried that the funding source would influence the science. The response from U.C. Berkeley? From the Associated Press, emphasis added:

But UC Berkeley officials say the institute has nothing to do with the Gulf spill, and the university has no plans to end its research partnership with BP.

That was late July — less than a month before Berkeley Lab scientist Terry Hazen announced that his team’s research found that the deep water plumes “went away fairly rapidly after the well was capped.”

While having BP as a funding source doesn’t invalidate the research, in the very least it’s probably at least worth mentioning in the same breath.

Separately, a scientist from the Woods Hole Oceanographic Institution, which produced plume findings two weeks ago, made the point that sometimes both scientists and reporters overreach when describing research — scientists to have their work recognized, and reporters to make a story sound more impressive, or in the case of the Gulf, to fit a more exciting narrative that pits scientists against each other.

“The research added new information to an unfolding investigation, but the media seemed more interested in whether our work decided whether NOAA or the Georgia group was right,” Christopher Reddy, a Woods Hole scientist, wrote on CNN regarding his experience sharing research with the press.

For the record, here’s what we wrote about the Woods Hole study:

And then I know we pointed this out on Wednesday, but independent scientists kept piling on the research this week about their own spill findings — some outright contradicted the government’s report; others added to what we know about the oil’s movement and location.

The latest, released Thursday, seems to fall into the latter category. Scientists at the Woods Hole Oceanographic Institution measured a plume of dispersed oil that’s “at least 22 miles long and more than 3,000 feet below the surface of the Gulf,” they announced. The Wall Street Journal noted that’s the size of Manhattan.

Readers can judge where we stand in this debate.

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Rich To Benefit Even From Middle Class Tax Cuts, Analysis Finds

Lost in the debate over whether to extend Bush-era tax cuts for the wealthiest Americans is this fact: The richest taxpayers will benefit disproprotionally even if only the middle-income cuts are renewed, as President Obama wants, according to an independent analysis.

Conservatives are pushing hard to extend all tax cuts enacted during the early years of George W. Bush's administration, while the Obama administration wants to extend only those for the middle class and allow the cuts targeted for the top 2 percent of taxpayers to expire.

The Bush-era cuts are due to end at the close of 2010 unless Congress extends them.

The Obama administration argues forcefully that tax cuts benefiting the wealthy would be an unwise expenditure that needlessly would add about $700 billion to the federal budget deficit at a time that the deficit already is ballooning.

The partisan battle over the future of the tax cuts is shaping up as a potentially signnificant campaign issue in the 2010 midterm elections.

But even without specific cuts directed toward them, single U.S. taxpayers earning more than $200,000 annually and married couples making more than $250,000 still would see great savings under the middle-income cuts that President Obama wants to maintain, according to analysts at the Center for Budget and Policy Priorities (CBPP), a Washington-based think tank.

"This is because the 2001 tax law’s reductions in the lower tax brackets benefit not only people whose incomes fall within the lower brackets but also those whose incomes exceed those brackets," the analysts say in a recent blog posting. "In fact, high-income people actually receive much larger benefits in dollar terms from the so-called “middle-class tax cuts” than middle-class people do."

Chuck Marr, director of federal tax policy at CBPP, and his colleague Gillian Brunet, cite figures from the congressional Joint Committee on Taxation that show that extending just the middle-class tax cuts would provide more than $6,300 in tax cuts to households with incomes above $200,000, on average, compared to $1,132 in tax cuts for households with incomes between $50,000 and $75,000.

And the tax plan Obama has in mind would be even more generous, they say.

"The middle-class tax-cut package the Joint Tax Committee analyzed does not extend the reduction in the tax rate on dividends for couples with incomes over $250,000 (and singles over $200,000)," Marr and Brunet add. "President Obama has proposed, however, that the dividend top rate for high-income people be permanently set at 20 percent, rather than being allowed to return to its pre-2001 level of 39.6 percent. If Congress follows that approach and incorporates this proposal into a middle-class tax-cut package, the average tax cut that high-income households will receive from enactment of such a package will be considerably larger than the figures just cited, and the dollar amount by which the average tax cut going to high-income households exceeds the average tax cut for middle-income households will be significantly larger, as well."



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Capitol Idea: A Republican's Worst Nightmare: The Poor Vote

By Scott Nance

Republicans have spent the last 20 months hammering the American poor and unemployed at nearly every turn. From the economic stimulus, to extension of unemployment benefits, Republicans have tried only to stand in the way of offering any help to those who borne the worst of the Great Recession.

They have done so only for the most crass political reasons, hoping to retake control of Congress by energizing the votes of anti-government conservatives, but what if, instead of tea party types, Republicans are met at the ballot box by the very people they've been attacking? Yes, what if unemployed and low-income Americans come out in November and turn GOP dreams into nightmares?

Don't think it can happen? Don't be so sure.

With the nation suffering its worst period of long-term joblessness (workers unemployed for six months or more) since World War II, and its unemployment rate dangerously close to double digits, there are some 15 million out-of-work Americans out there, and an affiliate of the AFL-CIO labor union is launching a campaign to mobilize unemployed workers across the nation for the November midterm elections.

"Millions of people are unemployed and underemployed, and millions more are worried about the future. Twenty-five percent of Working America members who are working are afraid they will lose their jobs," says Karen Nussbaum, director of Working America, the labor affiliate behind the voter drive. "Yet some politicians are willing to play politics with the survival of unemployed workers and their families. We'll make sure that unemployed workers get out and vote, and that they know the records of the candidates on issues like extending unemployment insurance, investing in jobs and preventing outsourcing."

That's just the unemployed. How about the rest of the low-income Americans who can — and should — vote? The Americans who aren't counted as unemployed because the economy has gotten so bad they've simply given up looking for work. Or those who are working, but working for such little pay that they live at, or below, the poverty line.

Demos, a Washington-based policy center, wants to get these millions of low-income Americans into the political process, as well. It's not only wishful thinking, either. Demos points to an often-neglected provision of the National Voter Registration Act of 1993 (NVRA) that requires states to provide voter registration services to applicants and recipients of public assistance benefits. NVRA is better known for the so-called "motor voter" provisions that enable Americans to register to vote at their state motor-vehicle departments.

But the time is ripe, Demos says, to ensure that voter registration is provided at public assistance offices: Many public assistance programs are experiencing significant growth, with participation in the Supplemental Nutrition Assistance Program ("SNAP," formerly food stamps), one of the largest programs, now at an all-time high, having increased dramatically over the past year.

"As the full effect of the economic downturn is felt throughout the country and increasing numbers of individuals turn to public assistance, the NVRA has never been more important for ensuring that low-income citizens have a voice in the democratic process," Demos says on its website.

And the law is successful. In a report on NVRA, Demos notes:

Ohio’s Department of Job and Family Services reported more than 84,000 voter registration applications completed at its offices in just the first five months of data reporting following a settlement agreement with Demos and its partners, an average of almost 17,000 registrations per month. Ohio’s public assistance agencies reported an average of only 1,775 registrations per month in the two years prior to the filing of the lawsuit.

In Missouri, 235,774 low-income citizens applied for voter registration at the state’s Department of Social Services in the 21 months following a successful court action to improve compliance, an increase of almost 1,600 percent over the number of clients the state was previously registering.

In North Carolina, well over 100,000 low-income citizens have applied to register to vote through the state’s public assistance agencies since the State Board of Elections worked cooperatively with Demos and others to improve NVRA compliance, a six-fold increase over the state’s previous performance.

Similarly, the number of voter registration applications from Virginia’s public assistance agencies increased five-fold after Demos worked cooperatively with state officials to improve their procedures.

Voter registrations from Illinois’ Department of Human Services increased to an average of 5,266 per month under a settlement agreement with the Department of Justice, compared to an average of only 446 in the preceding two years, an increase of more than 1,000 percent.

So, tea partiers, feel free to come to vote in November, but be warned: you may be standing in line behind a bunch of unemployed and poor neighbors even angrier than you.

Scott Nance has covered Congress and the federal government for more than a decade. Capitol Idea is his regular column from Washington. This article was first published as A Republican's Worst Nightmare: The Poor Vote on Blogcritics.



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Congress Slow to Act on Food Safety, Despite Outbreaks and Frequent Warnings

by Marian Wang, ProPublica

Years before last week’s recall of more than half a billion salmonella-contaminated eggs, a government watchdog report said federal oversight of food safety is a “high-risk area,” noting that responsibility for food safety is fragmented among at least 15 agencies [PDF].

That same report, from 2007, noted that expenditures between the two main agencies—the Food and Drug Administration and the U.S. Department of Agriculture—showed the FDA holding the short end of the stick.

From the report:

For example, the majority of federal expenditures for food safety inspection were directed toward USDA’s programs for ensuring the safety of meat, poultry, and egg products; however, USDA is responsible for regulating only about 20 percent of the food supply. In contrast, FDA, which is responsible for regulating about 80 percent of the food supply, accounted for only about 24 percent of expenditures.

The report also noted that food recalls are voluntary and neither the FDA nor the USDA have the authority to order them—except for the FDA’s authority to force a recall of infant formula. The report proposed that Congress enact an overhaul and, in particular, give these agencies the authority to order food recalls.

Three years later, at the request of Congress, the Institute of Medicine and the National Research Council produced a 500-page report—another document saying much the same thing. It, too, called for an overhaul of the food safety system and the Food and Drug Administration.

The report noted gaps in the system that were “most obvious in two areas—imported foods and on-farm food safety,” and noted again that the FDA lacked authority to order food recalls. It also noted that for on-farm regulation, the “FDA relies almost completely on voluntary guidance documents and initiatives” and “occasionally” inspects farms, “but almost exclusively in periods of crisis.”

FDA chief Margaret Hamburg, in Monday morning interviews on the major TV networks, hammered on her agency’s lack of regulatory power and called for the passage of a pending food safety bill that would give the FDA greater authority over imported food and the ability to force recalls. That bill—a version of which was passed by the House in 2009—has stalled in the Senate despite bipartisan support, as Politico noted.

Reuters pointed out in March that there were concerns that the bill—which provides more oversight of imported food—would affect trade. And industry lobbyists—namely, the Chamber of Commerce and the Grocery Manufacturers Assocation—also played their part in delaying the bill by fighting over a single amendment. Here’s what The Washington Post reported about the fight in April:

The food industry and major business groups, including the U.S. Chamber of Commerce, are threatening to withdraw support for a long-pending bill to improve food safety, saying they are upset by a proposed amendment that would ban bisphenol-A, a controversial chemical, from food and beverage containers.

A compromise was still being worked out earlier this month by the Senate health panel, The Hill noted, and the amendment banning BPA in food and beverage containers was left out. Sen. Dianne Feinstein, D-Calif., who inserted the original amendment, has said she will offer another that bans the chemical from baby bottles, baby food and infant formula.

The Senate legislation was also the subject of lobbying efforts by at least 196 organizations, according to OpenSecrets.org. Those groups included such businesses as Dunkin’ Brands, Starbucks, Kraft, Nestle, Procter & Gamble, Yum! Brands (the parent company of Taco Bell, which was linked to a salmonella outbreak this summer), Cargill (which recently resolved an E. coli lawsuit), and ConAgra Foods (which recently recalled Marie Callender's frozen entrees after they were linked to a salmonella outbreak), according to Food Safety News.

The bill had also initially been opposed by smaller farms and the National Sustainable Agriculture Coalition, an advocacy group, until they won amendments allowing the FDA to grant small farming operations exemptions or modifications to new regulations.

The bill is expected to go up for a vote when the Senate returns in September.

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Environmentalists, Others Celebrate Court Ruling Upholding L.A. Clean Truck Program

An alliance of U.S. truck drivers and environmental, labor, community, faith, civil rights and public health groups cheered the news that a federal judge on Thursday lifted an injunction and upheld the Los Angeles Clean Truck Program in its entirety. The coast-to-coast coalition of more than 125 organizations has advocated for L.A.'s award-winning model, and has led the fight to protect and replicate it nationwide for several years.

Supporters of clean port programs, which are credited with cutting diesel pollution by 70 percent, say congressional action is needed to protect them from future legal challenges. Environmentalists and others would like to expand the L.A. model to clean up other ports around the country.

The Los Angeles Clean Truck Program took 2,000 of the most polluting trucks out of service at the Port of Los Angeles, replacing them with nearly 6,000 new, clean vehicles operating at the port. The Port of Los Angeles is the nation's busiest.

However, the American Trucking Associations, the Washington trucking lobby, obtained an injunction 16 months ago, unraveling much of the nation's most successful program to slash heavy-duty diesel truck emissions by shifting the financial burden of cleaner commerce off the capitalized companies and onto low-wage workers they contract with. The industry special interest group has already announced it will file an appeal to continue its legal assault.

Judge Christina Snyder of the U.S. District Court for the Central District of California earlier this year ruled key parts the program illegally regulate interstate commerce, citing provisions within the Federal Aviation Administration Authorization Act (FAAAA).

Snyder this week reversed that injunction, allowing the clean trucks program to move forward.

"Judge Snyder's ruling affirms that the Los Angeles Harbor Commission, City Council, and Mayor Antonio Villaraigosa got it right from the beginning in enacting an economically sound, environmentally sustainable program to reduce deadly diesel truck pollution and create good green jobs in our communities," says Tom Politeo, a San Pedro resident and representative of the Sierra Club, also party to the case along with the Coalition for Clean Air.

The U.S. Environmental Protection Agency estimates 87 million Americans now live and work in port regions that violate federal air quality standards where diesel soot-induced asthma, cancer and respiratory illnesses rates are disproportionately high. In 2008, Los Angeles officials sought a local solution to the market failure that has earned U.S. seaports the notorious reputation as "the place where old trucks go to die."

Lax oversight allows some 5,500 port trucking companies nationwide to skirt tax laws and push all the costs of doing business onto their drivers by misclassifying them as independent contractors. Accordingly, academics put average driver take-home pay at $10 to $11 an hour making it no surprise that this workforce can only afford to haul in the oldest, most decrepit clunkers. Ninety-five percent of the nation's 110,000 port trucks fail to meet current EPA emission standards.

Los Angeles' attractive financial incentives leveraged $600 million in private investment from both small and large trucking companies to put 6,600 clean diesel and alternative fuel vehicles in service until the trucking association blocked the program in court.

The industry's vigorous opposition compelled Rep. Jerrold Nadler (D-N.Y.) and more than 65 House co-sponsors to back HR 5957 to clarify federal transportation law so local governments can fully implement market-based solutions that will protect public health, spur green job creation, and pave the way for vital port infrastructure projects.

Nadler called the ruling a "very welcome development" in the "longstanding efforts to modernize the nation's truck fleets and reduce diesel pollution. Judge Snyder's decision is good for the environment and good for labor, and paves the way for the implementation of other clean truck programs around the country. Now we must pass my legislation, the Clean Ports Act, in order to bring federal law up to date with the current realities of our ports and the needs of U.S. truck drivers, and to ensure that future legal challenges do not impede environmental progress."

A Long Beach, Calif., mother of a child who suffers from respiratory illness due to pollution agreed.

"This victory inspires us to keep fighting for a permanent fix at the federal level. Ports around the country should not have to waste so much time and money to fight industry bullies that want to continue evading responsibility," says Silvia Martinez. "Our fight will continue until Congress passes the Clean Ports Act of 2010, because mothers like me shouldn't have to show our 3 year olds how to use an inhaler."



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Core Values Unite Americans, Despite Divisions

Americans are united when it comes to many core values, according to a University of Michigan survey. But the nation is deeply divided about certain issues, including gay marriage, immigration, and universal healthcare.

Those are the some of the findings from a series of nationally representative surveys of approximately 500 Americans, conducted by the Michigan Institute for Social Research (ISR) at three times over the past year. The surveys, funded by ISR and by the Carnegie Foundation, were conducted as part of the monthly University of Michigan/Thomson Reuters Surveys of Consumers in June and December 2009, and in March 2010. A fourth survey will be conducted in September.

"More than 90 percent of those surveyed agreed that all people deserve equal opportunities in life," says sociologist Wayne Baker, the project's principal investigator. "Just about everyone also agreed that respect for people from different racial and ethnic groups, and for people of different faiths, is also important to them."

In fact, these values are so widely held that they can be said to be American universals , according to Baker, who is a faculty associate at ISR and a professor at the Michigan Ross School of Business.

Baker is discussing the survey findings in his daily blog on American values and ethics at www.ourvalues.org.

Almost 60 percent of Americans polled in March said they support U.S. policies simply because they are the policies of this country. Just under half agreed that U.S. policies are morally correct.

Nine of 10 Americans said that, if they oppose U.S. policies, it's because they want to improve the country. Over three of four Americans said that if they criticize the United States, they do so out of love of country.

While most Americans said they valued freedom, Baker wanted to learn more about just what "freedom" meant to them, so he asked "To what extent do you agree or disagree with each of these statements:"

"Freedom is being left alone to do what I want;" and

"Freedom is being able to express unpopular ideas without fearing for my safety."

Only about a third of Americans agreed that freedom is being left along to do what they want. But over 90 percent of Americans agreed that freedom meant being able to express unpopular ideas without fearing for their safety. "There was no difference between liberals and conservatives. The vast majority on both sides agreed," Baker says.

Two-thirds of Americans in all three surveys agreed that "Providing healthcare to everyone would be a sign that people in this country value other people's lives." The poor, not surprisingly, were more likely to agree with this statement than the rich. And conservatives and liberals roundly disagreed about this statement. Almost all liberals (95 percent) agreed while fewer than half of conservatives (48 percent) said the same.

Generally, Americans were opposed to same-sex marriage. In all the surveys, fully two-thirds said that "marriage should be defined solely as between one man and one woman." But there was considerable variation in opinion. Older Americans were much more likely to support the traditional definition of marriage than younger Americans were, and so were those with less formal education, conservative Christians, and Americans living in the South.

Attitudes about immigration also revealed some sharp divisions. A large majority (69 percent) of those polled in March said that immigrants – wherever they come from – should adopt American values. But older Americans were much more likely to say this than younger Americans. Formal education mattered as well, with over 80 percent of Americans with a high school education agreeing that immigrants should adopt our values, compared with only 50 percent of those with a graduate education. Eight of 10 conservatives agreed that immigrants should adopt American values, but only four in 10 liberals said the same.


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'The Party Of No Has A Limited Shelf Life'

The fervent anti-government populism of the so-called tea party movement way well provide Republicans with short-term gains in the 2010 midterm elections, but it isn't enough to establish the GOP as a majority party in the long run, according to a left-leaning political analyst.

Ongoing shifts in demographics, such growth in minority voters, young voters, and even white college graduates, all point to trouble ahead for a staunchly right-wing Republican Party, says Ruy Texeira, senior fellow at the Century Foundation and the Center for American Progress, and author of the study, "Demographic Change and the Future of the Parties."

Texeira is scheduled next week to participate in a panel discussion in Washington on the question, "Can conservatism survive mass immigration?" That event is set for Sept. 1, at 9:30 a.m. at the National Press Club.

Immigration has become a heated issue as lawmakers consider comprehensive reform at the federal level, and at the state level given the controversy over the Arizona immigration statute that was partially struck down by a judge.

Meanwhile, tea-party-backed candidates including Sharron Angle of Nevada, Ken Buck of Colorado and Rand Paul, of Kentucky, continue to fill the ranks of Republican candidates for the November midterm elections in which Democrats must defend their majorities in the House and Senate.

Heavily Democratic minority voters, who went 80 percent for President Obama his election, increased their share of votes in U.S. presidential elections by 11 percentage points between 1988 and 2008, Texeira notes in his study.

The United States will be a majority-minority nation by 2042, and by 2050, the country will be 54 percent minority as Latinos double from 15 percent to 30 percent of the population, Asian Americans increase from 5 percent to 9 percent, and African Americans move from 14 to 15 percent, his study says.

But immigration and ethnicity is but one shift that, over time, could well drive more voters to the Democrats unless Republicans adopt a radical course correction, he adds.

The Millennial generation (those born between 1978 and 2000) is adding 4 million eligible voters to the voting pool every year, and this group voted for Obama by a an overwhelming 66-32 margin in 2008, Texeira's study says. By 2020—the first presidential election in which all Millennials will have reached voting age—this generation will be 103 million strong, and about 90 million of them will be eligible voters. Those 90 million Millennial eligible voters will represent just under 40 percent of America’s total eligible voters, the study adds.

Even the GOP’s hold on the white working class is not secure, and if that slips, the party doesn’t have much to build on to form a successful new coalition, the study finds.

"That probably also means offering these voters something more than culture war nostrums and antitax jeremiads," it says.

What this means, Texeira says, is that the GOP must begin proposing new solutions to problems beyond mere promises of tax-cutting. "In short, the 'party of no' has a limited shelf life," he says, referring to the moniker Republicans have picked up as a result of sustained opposition and obstruction during the Obama administration.

Republican solutions "should use government to address problems but in ways that reflect conservative values and principles," Texeira's study says.

"For that, a conservatism must be built that is not allergic to government spending when needed and even to taxes when there is no responsible alternative," it says. "The party must paradoxically find a way to combine its standard antigovernment populism with pro-government conservatism."


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Right Makes Run For Young Voters

Conservatives have launched a new political action committee to make a play for support among young voters, who overwhelmingly supported President Obama in the last election.

Restore America's Legacy (RAL) lists "five core principles," which are stated conservative ideals including federalism, free markets, and "adherence to the Constitution."

The PAC's website lists as its chairman J. Wesley Fox IV, and has endorsed a number of candidates, including such favorites of the tea party movement as Florida Senate hopeful Marco Rubio and Nevada Senate candidate Sharron Angle.

The Millennial Generation, or those born after 1978, is a fast-growing voter bloc, adding 4 million eligible voters to the voting pool every year.

This group voted for Obama by a an overwhelming 66-32 margin in 2008, and by 2020—the first presidential election in which all Millennials will have reached voting age—this generation will be 103 million strong, and about 90 million of them will be eligible voters. Those 90 million Millennial eligible voters will represent just under 40 percent of America’s total eligible voters, the study adds.

Whether conservatives can make significant inroads with young voters likely will determine future political success.

In its announcement, RAL claims that, "As an underrepresented constituency, Young Americans are bearing the brunt of the current administration's policies that have created unprecedented unemployment and an enormous national debt.

Democrats believe otherwise, particularly noting earlier this year that the landmark healthcare law offers young Americans a "two-fer," because the law also reformed student loans.

"Young people are one of the most uninsured groups in America and this bill, if passed, would extend insurance to 10 million members of the millennial generation that are currently uninsured. And, of course, the younger people are also struggling with the costs of college, struggling with student debt and we have to do something to solve that problem," Pedro de la Torre with the Center for American Progress, a progressive Washington think tank, remarked earlier this year prior to the law's enactment.

The Obama administration also has supported legislation geared toward providing employment to younger Americans.

In its stated principles, the new PAC avoids explicit mention of social issues like gay marriage and abortion.

Ruy Texeira, a progressive expert on the matter of political demographics, has found that such "culture issues" are a turn-off to young voters.

"They generally lean heavily towards social tolerance," he says. "For an example, on an issue like gay marriage, they are actually for legalizing gay marriage where as other generations are not. Another change is the decline of the culturally conservative white working class and its replacement by minorities, particularly Hispanics, and relatively progressive white college graduates."


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W.H.: Stimulus Advances U.S. Science, Technology -- Especially In Clean Energy

Vice President Joe Biden on Tuesday unveiled a new report, "The Recovery Act: Transforming the American Economy through Innovation," which finds that $100 billion in last year's economic stimulus program designed to spur innovation is not only transforming the economy and creating new jobs, but helping accelerate significant advances in science and technology that cut costs for consumers, save lives and help keep America competitive in the 21st century economy.

The stimulus, formally known as the American Recovery and Reinvestment Act, particularly is helping make renewable energy technologies more affordable, according to the new report.

Developing a U.S. manufacturing base based on clean-energy technologies, and mitigating global climate change, have been priorities for the Obama administration.

Congress approved the $787 billion Recovery Act at President Obama's urging, shortly after Obama was sworn into office in 2009. The stimulus was designed to help lift the U.S. economy out of its worst downturn since the Great Depression of the 1930s.

The Obama administration has taken great pains to highlight successes of the Recovery Act, as the stimulus has become a frequent political target for Republican critics.

"From the beginning, we have been a nation of discovery and innovation—and today we continue in that tradition as Recovery Act investments pave the way for game-changing breakthroughs in transportation, energy, and medical research," Biden says. "We’re planting the seeds of innovation, but private companies and the nation’s top researchers are helping them grow, launching entire new industries, transforming our economy, and creating hundreds of thousands of new jobs in the process."

According to this new White House analysis, the United States is now on track to achieve four major innovation breakthroughs thanks to Recovery Act investments:

•Cutting the cost of solar power in half by 2015, putting it on par with the cost of retail electricity from the grid.
•Cutting the cost of batteries for electric vehicles by 70 percent between 2009 and 2015, putting the lifetime cost of an electric vehicle on-par with that of its non-electric counterpart.
•Doubling U.S. renewable energy generation capacity and U.S. renewable manufacturing capacity by 2012, a breakthrough that would not be possible without the Recovery Act.
•Bringing the cost of a personal human genome map to under $1,000 in five years, allowing researchers to sequence 50 human genomes for the same cost as sequencing just one today.

Vice President Biden was joined at the unveiling of the report by Secretary of Energy Steven Chu and representatives from more than two dozen companies and research institutions that are leveraging Recovery Act investments to help make America a global leader in high-growth industries like electric vehicles and solar power.

Recovery Act recipients like Cree, Inc., Navistar, and Pacific Biosciences are using Recovery funds to make advances that will help put money-saving, energy-saving, and, in some cases, even life-saving technology within reach for average Americans, the White House says in a statement.

"The Recovery Act funding is not only producing thousands of jobs in the biomedical research community, it is also helping speed important medical discoveries that will benefit the health of Americans nationwide," says Dr. Francis Collins, director of the National Institutes of Health, the key health research agency within the federal government.

Overall, the Recovery Act is investing $100 billion in science, technology and innovation projects across the country ranging from building a nationwide smart energy grid and health information technology infrastructure to growing the emerging electric vehicle industry, expanding broadband access and laying the groundwork for a nationwide high speed rail system.

More information on investments the administration is making in innovation through the Recovery Act and other means can be viewed at a new Innovation page launched on WhiteHouse.gov on Tuesday.


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For Mosques, ‘Anywhere But There’ Echoes Far Beyond Ground Zero

by Marian Wang, ProPublica

Last week, we noted that the Islamic community center planned near ground zero is safe on legal grounds. Political outcry, nonetheless, has not subsided. (Note to our readers: The Park51 plan is indeed for a community center, which will house, among many other things, a mosque.)

While many opponents of the plan acknowledge a legal right to build two blocks away from the site of the 9/11 attacks in Lower Manhattan, they have argued instead about the need for sensitivity concerning the area around ground zero.

Op-eds and editorials from across the country have called for the mosque to be built “anywhere but there.” And the former House speaker Newt Gingrich, for one, has said he would be “quite happy” if Muslims wanted to build a community center near Central Park or Columbia University in New York.

Despite such rhetoric, mosques elsewhere in New York City—and across the country—often aren’t welcomed by local communities.

In recent months, New Yorkers have also opposed two mosques planned in Brooklyn and on Staten Island. Opposition to both those plans have cited practical reasons—such as parking and traffic—in addition to heated accusations that the planners have connections to terrorists. According to the New York Post, one opponent of the Brooklyn mosque even threatened to blow it up if it was built.

The Washington Post noted today that in Tennessee, plans for three Islamic centers—one of which has already been abandoned because of opposition—have also faced stiff resistance and organized protests from residents of suburban Nashville. (Read some of the local coverage.)

Time magazine noted over the weekend that a plan to build a mosque in Southern California has also split the community there. It, too, has sparked protests.

And USA Today, in a 2004 piece, reported that plans to build mosques had faced resistance in New Jersey, Illinois, Arizona and Georgia.

In one case in Illinois, a mosque in Morton Grove, a Chicago suburb, was permitted to be built after two years of dispute, a federal lawsuit, and a civil rights investigation by the Justice Department. Both the lawsuit and the investigation centered on the Religious Land Use and Institutionalized Persons Act, which, as we have noted, is a federal law passed by a Republican Congress in 2000 to protect against land use discrimination on the basis of religion. The agreement to allow the project to move forward was finally reached in 2004 with help from the Justice Department.

So perhaps USA Today is right to ask: Given the widespread opposition to such projects over the years, is anywhere far enough from ground zero to build a mosque?

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Rep. Boehner's Economics: Giveaways To Rich, Bad Eggs For All, Democrats Say

Struggling to regain political momentum in the face of harsh voter antipathy, Democrats struck back at a top Republican's economic proposals Tuesday, arguing that they amount to a return to the policies of George W. Bush.

Democrats, particularly, took aim at the deficit spending represented by the extension of Bush-era tax cuts for the wealthiest 2 percent of taxpayers.

Rep. John Boehner of Ohio slammed policies enacted over the last year-and-a-half by President Obama and congressional Democrats in remarks in Cleveland. Currently House GOP leader, Boehner likely would become speaker if Republicans are successful in recapturing House control in November's midterm elections.

Democrats this year must defend their congressional majorities in a treacherous political environment driven by deep voter anxiety over pernicious high unemployment and a generally dismal economic picture.

With his speech, Boehner sought to capitalize on disenchantment with Democrats. But Democrats struck back, arguing that the Republican's proposals don't mesh with the facts.

“Today, Minority Leader John Boehner did the public a favor by admitting the Republican plan to return to the failed Bush economic policies that produced a deep recession, record deficits, a loss of 8 million jobs and an unprecedented financial crisis. Democrats will not let that stand. America must continue to move forward in a New Direction, not back to the ‘exact same agenda’ of the Bush years,” House Speaker Nancy Pelosi says in a statement released after Boehner's remarks.

Boehner repeated the conservative call to extend tax cuts enacted during the Bush administration that are set to expire at the end of this year. Democrats oppose such an extension for those tax cuts for the top 2 percent of taxpayers. Boehner characterizes that opposition as being in favor of a "tax hike."

The Obama administration favors extending the tax cuts for middle-income Americans.

The Republican plan to provide for tax breaks to the wealthy would add $680 billion to the deficit, Democrats say in a fact sheet following the Boehner speech.

The Democratic Congressional Campaign Committee, the arm of the party charged with electing Democrats to the House, cites the independent Center for Budget and Policy Priorities, as saying, "Extending the high-income tax cuts would increase deficits by even larger amounts in subsequent decades. Thus, if Congress extends these tax cuts, the nation’s fiscal trajectory will be even worse, and the risks to future economic growth consequently will increase."

The DCCC also quotes from a recent television interview with Alan Greenspan in which the Republican former Federal Reserve chairman says that extending the Bush tax cuts without offsetting the costs elsewhere could end up being "disastrous" for the economy.

"I'm very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money," Greenspan says in the interview on the NBC program Meet The Press.

In his speech, Boehner denounces new federal regulations put forward by Democrats, but Pelosi notes that would include stronger food-safety rules needed in light of the massive recent recall of tainted eggs.

“Democrats will not allow the scare tactics and empty rhetoric of Leader Boehner and his Republican colleagues to go unanswered,” Pelosi says. “Republican policies created massive unemployment and recession, and they have refused to help dig us out of the hole their policies put us in. That isn’t leadership, and now they’re asking the American people to trust them again. We must keep moving America forward, not back to failed Bush economic policies, which is all Mr. Boehner proposed this morning.”


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