Democratic Congressman Sounds Like President -- Of Barack Obama's Fan Club

A longtime Philadelphia House Democrat has decided to ring in the new year with glad tidings for President Obama.

Rep. Chaka Fattah could be accused of a bit of congressional hyperbole for a statement he released Thursday which not only praises Obama's White House tenure, but declares that the 44th president has achieved "unparalleled success" with the historic scope and breadth of his legislative agenda that "has no precedent among the 43 American Presidents who preceded him."

"While the ranks of the American Presidency include many impressive individuals of significant accomplishment, President Obama ranks at the top for the broad sweep of his historic legislative accomplishments and the unparalleled success he has achieved across a diverse agenda," says Fattah, re-elected in November to a ninth term.

As Obama approaches the two-year anniversary of his inauguration, Fattah's statement says no previous American president can claim the scope of accomplishments for "shoring up the American Dream and reshaping the aspirations of middle class and working families."

The statement adds that the president's 2009 stimulus and recovery programs have created nearly 1 million private sector jobs in 2010 alone, and saved an additional 2 million-plus jobs in the effort to turn around the sagging national economy.

Fattah also cites additional achievements including healthcare reform, repeal of the "Don't Ask Don't Tell" policy which bans gays from serving openly in the U.S. military, equal pay for women, "far-reaching" financial services reform, the swearing in of the third and fourth women justices in Supreme Court history, landmark food safety and nutrition legislation, middle class and small business tax cuts, ratification of the New START nuclear-reduction treaty with Russia, and the auto industry rescue.

Fattah's very accurate -- up to a point.

But, then, love letters almost never mention the failings of those for whom they are written, so perhaps the member of the House Appropriations Committee could be forgiven for omitting any areas where Obama could be seen as having fallen short.

The president, for instance, has yet to sign legislation to reform immigration policy, or a bill to regulate the carbon emissions that cause global climate change. Further, the nation's unemployment rate continues to hover dangerously close to double digits, despite the stimulus program Fattah so lavishly praised.

Fattah also is silent on the recent tax-deal legislation negotiated by Obama and congressional Republicans -- which was strongly opposed by many in Obama's own party for extending deficit-financed tax cuts for the wealthy that Obama himself had campaigned against.

Moreover, the prison at Guantanamo Bay, Cuba, continues to hold detainees nearly two years after Obama made it his first act in office to sign an executive order to close the controversial Bush-era facility.

Just from Fattah's statement, one might think Obama's also the most popular of the American presidents. That would not be so. The president continues to struggle with approval ratings under the 50-percent mark -- and by his own admission, received an historic "shellacking" in the November 2010 midterm elections.


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9/11 Attorneys Slam NY Post Over Story

A false New York Post story published Wednesday caused "panic" among responders hoping to receive funds from legislation aimed at paying those who developed illnesses as a result of their service at Ground Zero, according to attorneys for for more than 10,000 such responders.

The lawyers say the story by reporter Susan Edelman falsely claims that anyone who signs their settlement paperwork after President Obama signs the newly passed James Zadroga 9/11 Health and Compensation Act will be ineligible for Zadroga benefits and that the papers are not completed on time due to an alleged "screw up" by the attorneys.

"That is utter nonsense," says attorney Paul Napoli, "and it is just the sort of yellow journalism we have come to expect from the New York Post and Ms. Edelman, who don't stop to learn or consider the facts -- something they consider insignificant -- before they rush to press."

In a statement, Napoli continues, "you have to wonder why the New York Post is so determined to continually hurt, harass and cause panic for these brave heroes who put their lives and their health in danger when their city and their country needed them. Maybe they think no one would waste their money to read the Post if they actually reported the truth and the news."

The Zadroga bill, which Obama is expected to sign next week, was one of the final votes of the 111th Congress before it adjourned right before Christmas. The new law will provide compensation for thousands who developed respitory and other ailments after exposure to the toxins released by the collapse of the World Trade Center towers on Sept. 11, 2001.

Some 13,956 Ground Zero responders are sick and receiving treatment just this year, and 53,352 responders are enrolled in medical monitoring. More than 71,000 individuals are enrolled in the WTC Health Registry, indicating that they were exposed to toxins released due to collapse of the World Trade Center. While the majority live in the New York/New Jersey area, at least 10,497 responders who came from around the country were identified as exposed, of which at least 4,185 are being monitored or are receiving treatment, according to an estimate from Sen. Kirsten Gillibrand's office.

Napoli explains that the Zadroga bill's language states that anyone with a pending litigation must have "tendered" release of all their claims in settlement by the time the bill is enacted. Under the law, one can "tender" a release of claims in many ways, and what the Post and its reporter did not report is that the actual release document signed by the plaintiffs is not the only way to meet this requirement. In fact, the Zadroga bill does not state that plaintiffs have to have given their individual signed release documents to the defendants prior to Obama signing the bill, the attorney adds in his statement. The release of litigation claims can be tendered by a letter, a stipulation or a settlement agreement, or by the plaintiff's attorney, among other things, he says.

"We can't expect a reporter who is not an attorney to fully understand these concepts, although we would hope that a responsible attorney and publisher would at least try to get it right," says Napoli's law partner, Marc Bern. "That is why clients should not turn to the New York Post or any other newspaper for legal advice. They should call their attorneys if they have questions."


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Regulation and Disclosure of Fracking at the Center of Gas Drilling Debate

by Nicholas Kusnetz, ProPublica

The risks and benefits of drilling for natural gas have been so widely discussed over the past year that even if you haven't been following gas drilling closely, you might now be familiar with the word "frack."

For those who aren't, the term is short for hydraulic fracturing, a practice where gas drillers shoot pressurized water mixed with sand and chemicals into a well to release natural gas from the earth. The practice has been around for decades, but it's gained new prominence in the past few years with the growth of horizontal drilling, where drillers mine the earth laterally deep underground. The technique has allowed the expansion of drilling into gas-bearing shales across the country, but it also requires large quantities of fracking fluids, sometimes millions of gallons per well. And it's this mix of water and chemicals that has generated the bulk of the controversy and a series of studies, orders and regulations in 2010 from the federal government and a number of states.

Of particular concern to regulators and public health advocates are the specific chemicals that go into that chemical mixture. The industry has fought disclosure for years and had largely been able to keep well-to-well specifics secret, but that began to change this year. Wyoming updated its oil and gas regulations and, in an effort to fend off potential federal oversight, started requiring drillers to list the name and concentration of each of the chemicals used in each well. In Pennsylvania, where drilling in the region's Marcellus Shale continues to expand, regulators have written similar rules that await final approval by the legislature. In both [6] cases [7], however, drillers may be able to find exceptions.

Disclosure has been a center of debate on the federal level as well. Both the EPA and the House Energy and Commerce Committee initiated investigations, seeking details from oil-services companies. In November, Halliburton broke from its peers and refused to give the EPA a full list of the chemicals in its fracking fluids. The agency has since subpoenaed the information and continued to design its study, which is set to begin early next year and last into 2012.

But it could be up to Congress whether and to what degree the EPA and other federal agencies ultimately regulate the practice. After Interior Secretary Ken Salazar raised the prospect of requiring chemical disclosure from drillers on federal lands in November, Reps. Joe Barton, R-Texas, and Fred Upton, R-Mich., -- who is the incoming chair of the House Energy and Commerce Committee -- sent Salazar a pointed letter in which they said they feared that a "rush to regulate" fracking would "chill domestic oil and gas development." Although the letter suggests Upton may not continue the more aggressive oversight of his predecessor, a spokeswoman for current committee chair Henry Waxman, D-Calif., said the fracking study will continue after the House switches hands.

The elections brought change in the states as well. As we reported last summer, politicians and the gas industry in New Mexico and Colorado have been pushing to roll back some of the stricter regulations those states enacted in the past few years. Both states' governors-elect had said as candidates that they supported relaxing the rules. In New Mexico, soon-to-be Gov. Susana Martinez indicated she may seek to loosen a rule that requires drillers to use synthetic liners in their waste pits, saying that "unnecessary and burdensome regulations" have costs jobs and impeded growth.

Aside from disclosure, New York is still working out how and when it will allow drilling to begin in its share of the Marcellus Shale, the deep rock formation that has been a bonanza for gas drillers in Pennsylvania and West Virginia. After vetoing a legislative moratorium on fracking, Gov. David Paterson enacted his own limited moratorium this month. The measure bans new permits for drilling in the Marcellus until July 2011, when the state's Department of Environmental Conservation is expected to have drafted a final set of rules outlining how to handle Marcellus drilling.

In the new year, legislators and regulators across the country can look to a recent study that found that more than three out of four Americans support greater disclosure of fracking chemicals and more studies of the practice's environmental impact. The poll, released this month by the Civil Society Institute, found that three in five people had "at least some awareness of fracking as an issue." We'll let you decide how mainstream that really is, but we'll continue watching these developments around the country.

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Saving Without Slashing: How to Reduce Waste, Fraud, and Abuse While Preserving Vital Services

This article was published by the Center for American Progress.

By John Griffith

There was one exception to the deficit reduction commission’s call this month for across-the-board cuts in discretionary spending. The panel did not call for limits on so-called “program integrity efforts.”

And for good reason. These are programs designed to reduce mistaken and improper government payments to people and companies, a $125 billion problem in 2010. At a time of fiscal belt-tightening, they offer a way to reduce spending without cutting vital services more in demand now than ever.

One promising such initiative is the new Partnership Fund for Program Integrity Innovation, charged with cultivating creative approaches to a problem that has long vexed Washington. The $37.5 million, three-year fund establishes pilot programs to test new ideas for reducing improper payments and improving the delivery of services in federal programs.

Here’s how it works. Government workers and members of the public submit suggestions for improving payment accuracy through an online tool. After vetting by the relevant federal agency, the best ideas are passed on to a “collaborative forum” of nonfederal representatives, made up of state and local financial managers, program managers, technology experts, and beneficiary advocates. That forum assesses the costs, benefits, risks, and service implications of each idea and develops the most promising into concept proposals. Finally, the Office of Management and Budget, which administers the fund, works with a group of senior agency officials to decide which proposals to fund as state and local pilots.

The program flips the traditional reform model on its head by soliciting ideas from the very government workers who make the payments. Many of the programs most prone to payment mistakes—Medicaid, food stamps, unemployment insurance—are either partially or fully administered by state and local governments, and many others rely on services from nongovernmental community groups. Without input from these key stakeholders, the federal government’s ability to curb improper payments is limited.

Consider the Earned Income Tax Credit, one of the largest antipoverty programs in the country. The Treasury Department distributed $50 billion to low- and moderate-income families through the program last year, and the government estimates that about a quarter of those payments were deemed improper. According to the Treasury Department, most of the errors are caused by mistaken or fraudulent tax returns: excess claims, misreported income, or erroneous filing status.

During its inaugural meeting last month the fund’s forum previewed frontrunners for pilot funding. One of these was an initiative to reduce eligibility errors in the EITC program. The pilot would establish a network for sharing information between states and the federal government, allowing Treasury staff to better validate an individual’s EITC eligibility. The department expects this information will help identify erroneous and fraudulent EITC claims.

The forum also discussed a cross-program data system in Wisconsin that consolidates eligibility information for the state’s Temporary Assistance for Needy Families, food stamps, children’s health insurance, and Medicaid programs. The system allows intake staff from each program to pull up-to-date, verified information at the moment an individual seeks assistance, avoiding data errors that often result in services to ineligible recipients. The forum is considering piloting similar data systems elsewhere.

The forum discussed other promising ideas that take aim at ineffective auditing processes, out-of-date information systems, and inefficient methods for determining program eligibility. The fund plans to announce its first round of pilot programs by the end of the year.

The fund is part of the administration’s focus on payment errors as part of its Accountable Government Initiative, which has a goal of reducing improper payments by at least $50 billion by 2012. Since taking office, President Barack Obama has instructed agencies to identify high-priority programs, established a public website to track payment accuracy, instituted a federal Do Not Pay List to help avoid repeat errors, and called on agencies to intensify audits to identify and recover improper payments in entitlements and other programs.

To be sure, these initiatives alone are not likely to reach the president’s goal. That’s because none of these programs directly targets provider billing and other payment errors in Medicare and Medicaid, which accounted for roughly half of all improper payments last year. And in just the past six months the Government Accountability Office has uncovered extensive fraud and abuse in the Low-Income Home Energy Assistance Program, the Child Care and Development Fund, and the Head Start program.

Still, the Partnership Fund for Program Integrity Innovation can make a meaningful dent in our $125 billion improper payment problem. If it does, Congress and the White House should stand ready to invest more money in this and other program integrity efforts.

John Griffith is a Research Associate at the Center for American Progress

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Conservative Gerson's Social Security Pitch To Obama 'Loaded With Inaccuracies,' Democrat Says

Conservative Washington Post columnist Michael Gerson's piece published Tuesday, in which the former Bush White House speechwriter advises President Obama to take on Social Security reform is laden with factual errors, according to a Democratic strategist who once served as the top staffer on the House Aging Committee.

In his piece, "Face Social Security," Gerson recommends taking on reform of Social Security as a political tool to outmaneuver ascendant Republicans.

However, Robert Weiner, former House Aging Committee chief of staff and later a Clinton White House staffer, takes issue with a number of Gerson's assertions which Weiner labels as erroneous.

"Michael Gerson's column was loaded with inaccuracies," Weiner says in a statement. "The Social Security Trust Fund is NOT 'filled with debt issued by the government itself.' It is 100% filled with the 'match' payroll tax payments by employers and employees as a fully funded insurance program—as designed by Franklin Roosevelt 76 years ago, and strengthened by [then-House Select Committee on Aging Chairman] Claude Pepper [D-Fla.], [then-House Speaker] Tip O'Neill, and [President] Ronald Reagan in 1983.

"What has happened is that the government has borrowed from the solvent Social Security fund for many other purposes from Iraq and Afghanistan to tax breaks," Weiner adds. "When a bank uses a customer's money for other reasons, does that usage count against the customer who deposited the money? Of course not. The bank still owes the customer the money. In this case, the Bank is the U.S. Government."

This year, for the first time, by the tax compromise between Obama and congressional Republicans that was just enacted this month, will the government, for one year, reduce the payroll tax which funds Social Security and supply the difference to the trust fund, Weiner notes.

A number of left-leaning opponents of the tax compromise, notably Sen. Bernie Sanders (I-Vt.), have criticized the payroll tax cut for the potential damage it could do to the future of Social Security.
"Breaking the 'wall' down is a dangerous trend that should be stopped next year as scheduled, regardless of the difficulty of ending a tax 'cut,'" Weiner says.

Weiner complains that there was no biographical note identifying Gerson as George W. Bush's chief speechwriter from 2001-2006 while Bush pushed unsuccessfully to privatize Social Security, a move which helped cost Republicans the Congress.

"In 2005, [former Republican] Speaker Newt Gingrich said he'd 'never seen an issue handled worse by the White House' and Republicans 'could lose the Congress' over it," Weiner says. "Given that he was right, I'm not quite sure President Obama should take Gerson's advice as an action plan.

Gerson says cutting Social Security's looming (in 2037) shortfall is "a relatively small contributor to future deficits" but would be a "large symbol" and "logical place to begin."

"What he means is it would be a symbol of success for launching what the Post's David Broder explained years ago: conservative Republicans actually want to dismantle the entire social safety net begun by Roosevelt's New Deal," Weiner says.

Weiner says that outgoing House Majority Leader Steny Hoyer (D-Md.) was right when he said on December 13, "Social Security ought not to be looked at as a way to reduce the deficit."

"Then-and-again House Minority Leader Nancy Pelosi proudly said in 2005, 'We stopped them and won' when Democrats blocked the Republicans' Social Security privatization and cuts," Weiner says. "She'll have to lead an even stronger effort this round, because some Democrats have defected."


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The BP Oil Spill Saga: Where Things Stand Now

by Marian Wang, ProPublica

The BP oil spill in the Gulf killed 11 workers in April, released nearly 5 million barrels of oil into the Gulf of Mexico and triggered multiple government investigations and an overhaul of the nation's offshore drilling regulatory agency.

Federal scientists estimated in August that between 53,000 and 62,000 barrels spilled into the Gulf each day until the well was temporarily plugged in July. BP has contested those numbers, arguing that the figures are flawed [PDF]. If the company prevails, it could reduce the size of its per-barrel pollution fines by billions of dollars, as well as what it may eventually have to pay to the government in lost royalties if the spill is found to be a result of BP's negligence.

For its role in the worst environmental disaster in U.S. history, BP currently faces a civil lawsuit by the Department of Justice. BP's well partners Anadarko and MOEX, rig operator Transocean and Transocean's insurer have also been named as defendants in the lawsuit, which seeks to recover the government's removal costs, economic losses, and environmental damages resulting from the spilled oil.

A criminal investigation is ongoing and could result in additional financial penalties. As the Blog of LegalTimes pointed out in a blog post, Attorney General Eric Holder has acknowledged that conducting parallel civil and criminal proceedings can be "a little tricky." If criminal charges are filed, those per-barrel fines for Clean Water Act violations could come into play in addition to fines under the Refuse Act and the Migratory Bird Treaty Act.

BP has stated repeatedly that it will disregard a $75-million cap on its liability for economic damages -- a limit set forth in the 1990 Oil Pollution Act. Although the Government Accountability Office has for years said that such liability limits are too low, Republican lawmakers repeatedly blocked attempts this summer to raise or lift the current limit.

We've reported that even before the deadly incident in the Gulf, officials at the Environmental Protection Agency had long considered debarring BP for recurrent misconduct and environmental crimes. It's an option that is still on the table for regulators now -- especially if the government's investigations find that the company had a culture of carelessness and non-compliance.

If BP is convicted of Clean Water Act violations, the company would automatically face a lesser form of debarment that affects only the facility involved in the spill. In this case, it's unclear whether this would mean the sunken Deepwater Horizon rig, a broader set of BP's Gulf platforms, or whether it would include the company's command center in Houston. In its most serious form, debarment would end the entire company's business with the government and cancel BP's billions' worth of leases to drill on federal land -- though as the New York Times has noted, contractors like BP often end up protected from such sanctions because of their size and the extent of the government's dependence on them.

Tony Hayward, BP's chief executive at the time of the spill, gained notoriety for saying, "I would like my life back," predicting that the disaster's environmental impact would be "very, very modest," and asserting that his company was releasing a "tiny" amount of oil and dispersant relative to the size of the Gulf of Mexico. Hayward has since been reassigned and replaced by Robert Dudley, the British company's first American CEO. BP's public relations department has also seen a shakeup, with its chief press spokesman during the spill making his exit last month.

The spill also put a spotlight on an offshore drilling regulatory agency that for years had been riddled with scandals over ethical problems, improper handling of royalties and lax oversight of an industry with which it kept too-friendly ties. The offshore drilling agency was renamed the Bureau of Ocean Energy, given new leadership, and split into three separate divisions. However, the President's own oil spill commission, a panel tasked with investigating the circumstances of the spill, has said that the changes do not sufficiently address the agency's conflicts of interest. It remains to be seen whether additional changes will be implemented to address these concerns.

Politically, the Obama administration's position on offshore drilling has undergone a sea change. It recently announced that it would be rescinding an earlier plan to open up the eastern Gulf and the Atlantic coast to new offshore drilling. Those areas will remain off limits for at least another seven years.

Though the administration in October lifted a controversial temporary moratorium on new offshore drilling, pro-drilling Gulf lawmakers and the offshore oil and gas industry have criticized the revamped regulatory agency for slowing down the approval process for drilling permits. They've complained that the heightened review is burdensome and serves as a de facto moratorium.

Many questions remain unanswered about the long-term health and environmental effects of the crude oil and the unprecedented amount of dispersant, chemicals BP used to break down the thick crude. Both BP and the government have committed funding for continued study of these issues.

Study of the oil's fate and its impact on the marine environment will likely continue for months and years to come, but many independent scientists have produced preliminary research seemingly at odds with a rosy government report and official statements in August that said that at least half of the oil released was "completely gone from the system" and the rest was being quickly degraded.

Eight months after the spill, the safety of Gulf seafood is still being debated among toxicologists [25], some of whom allege that the Food and Drug Administration's seafood testing process is flawed, according to the New Orleans Times-Picayune. The FDA's process does not certify that the products tested are free from contamination, but screens for contamination that reaches "levels of concern." Cancer-causing chemicals found in crude oil have been detected in Gulf seafood, but according to the FDA have been found at levels that the agency considers to be safe.

Several agencies are still investigating the cause of the oil spill. The National Oil Spill Commission, is due to issue a complete report of its findings to the President in January. The U.S. Coast Guard and the Interior Department have been conducting a joint investigation, and the U.S. Chemical Safety Board, a small federal agency that investigated BP's Texas City refinery explosion years prior, continues to investigate the spill at the request of lawmakers on the House Energy and Commerce Committee.


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Pressure Mounts For Filibuster Reform

The Senate may be dark and empty until the new Congress opens in January, but that hasn't stopped a group of progressive Democrats from building grassroots support for an anticipated try at filibuster reform on the first day of the 112th Congress.

Progressive Democrats of America (PDA) on Tuesday emailed supporters asking them to push their senators to support the so-called "constitutional option" aimed at making it more difficult for minority Republicans from wielding the filibuster as a tool of obstruction.

"The Senate has become the place where legislation passed in the House—even legislation with bipartisan support—goes to die," says the email, from PDA National Director Tim Carpenter. "On January 5, the first day of the new term, we may witness the most important Senate vote of this century. Senators will decide if party loyalty is more important than doing the work of the people when they vote on changing the filibuster rule, which currently allows for this kind of abuse."

Carpenter's email includes a graph that charts the dramatic increase in the use of the filibuster by the Senate GOP in recent years to block, even if temporarily, much of the Democrats' agenda.

Carpenter also cites polls from this year which find Americans support filibuster reform.

"Changing this rule could change the public’s view of Congress, which is at an all-time low," Carpenter says. "The American people want action and they’re not getting it because of the political posturing that the current filibuster rule encourages."

Republicans have used the filibuster, which requires a 60-vote supermajority to overcome, to obstruct almost all of the legislation put forward by Majority Leader Harry Reid (D-Nev.) and his fellow Democrats.

Democratic Sens. Jeff Merkley of Oregon and Tom Udall of Colorado are leading a charge to make it more difficult to filibuster legislation supported by a majority of senators. The first step in that reform will be allowing the Senate to change its rules on the opening day of the 112th Congress by a simple majority, rather than a two-thirds margin. Supporters refer to this change as the "constitutional option."

"Senate rules are supposed to allow for substantive debate and to protect the views of the minority - as our founders intended. Instead, they are abused to prevent the Senate from ever voting on critical legislation. The Senate must adopt rules that allow the institution to work for the middle class," Udall says in a statement on his website, noting that he intends to make a motion on the floor of the Senate at the start of the new term to take up and adopt its rules by a simple majority vote.

Republicans used the filibuster to delay such legislation as the repeal of the ban on gays serving openly in the U.S. military and food-safety reform, although Democrats ultimately won approval for those initiatives. GOP senators used the filibuster to effectively kill other bills, such as climate change regulation, immigration reform, and bills to force more accountability on BP for its Gulf Coast oil spill earlier this year.

Anticipating opposition from Republicans, supporters of filibuster reform and the constitutional option have amassed research including quotes from prominent Republicans going back as far as Richard Nixon who voiced past support for Senate rules to be changed by a simple majority of senators.

Reform supporters also cite the late Sen. Robert Byrd (D-W.Va.), a Senate scholar and fierce defender of Senate prerogatives, as supportive of the type of change they seek.

Byrd, they say, once argued on the Senate floor: “There is no higher law, insofar as our Government is concerned, than the Constitution. The Senate rules are subordinate to the Constitution of the United States. The Constitution in Article I, Section 5, says that each House shall determine the rules of its proceedings. Now we are at the beginning of Congress. This Congress is not obliged to be bound by the dead hand of the past. The first Senate, which met in in 1789, approved 19 rules by a majority vote. Those rules have been changed from time to time . . time . . . . [T]he Members of the Senate who met in 1789 . . . did not for one moment think, or believe, or pretend, that all succeeding Senates would be bound by that Senate.”

Vice presidents of both parties, sitting as president of the Senate, have made advisory rulings that at the beginning of a Congress the Senate is not bound by the rules of its predecessors and has the constitutional right to adopt its rules of procedure by a simple majority vote, reform supporters say.

Therefore, the Senate of the 112th Congress is not bound by the provision in Rule XXII that requires two-thirds of senators to end a filibuster on a rules change, they say. The next Senate can limit debate and reform the rules by a simple majority, they contend.


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Politics Most Blatant: Conservatives Can’t Escape Blame for the Financial Crisis

This article was published by the Center for American Progress.

By David M. Abromowitz, David Min

The onset of the recent financial crisis in late 2007 created an intellectual crisis for conservatives, who had been touting for decades the benefits of a hands-off approach to financial market regulation. As the crisis quickly spiraled out of control, it quickly became apparent that the massive credit bubble of the mid-2000s, followed by the inevitable bust that culminated with the financial markets freeze in the fall of 2008, occurred predominantly among those parts of the financial system that were least regulated, or where regulations existed but were largely unenforced.

Predictably, many conservatives sought to blame the bogeymen they always blamed. In March of 2008, Sen. Jon Kyl (R-AZ) blamed loans “to the minorities, to the poor, to the young” as causing foreclosures. Not long after, conservative commentator Michele Malkin went so far as to claim that illegal immigration caused the crisis.

This tendency to shift blame to minorities and poor people for the financial crisis soon developed into a well-honed narrative on the right. Swiftly and repeatedly many conservatives blamed affordable housing policies—particularly the affordable housing goals in place for the two government sponsored mortgage finance giants Fannie Mae and Freddie Mac and the 1977 Community Reinvestment Act that applies to regulated lenders such as banks and thrifts—for the massive financial crisis that occurred. This despite the fact that as recently as 2006 prominent conservatives, including FCIC Republican member and American Enterprise Institute Senior Fellow Peter Wallison, were arguing that Fannie and Freddie needed to do more lending to low-income communities and minorities.

Last week, the Republican minority on the congressionally created Financial Crisis Inquiry Commission continued this tradition of willful blindness, issuing their own self-described nine-page "primer" on the financial crisis—one that attempts to lay the blame once again on Fannie Mae, Freddie Mac, and the Community Reinvestment Act. The picture they paint is reflective of a mindset they displayed last week when all four Republican members tried to ban the phrases "Wall Street," "shadow banking," "interconnection," and "deregulation" from the final report.

These terms are important to understanding what happened in the 2000s. But equally damning is this—the minority members of the FCIC got their facts wrong, their time frames jumbled, and their selection of relevant facts skewed to reflect their libertarian biases. The ideological imperative to blame the government, and more importantly to avoid the culpability of laissez faire economics, have overridden all other considerations, including those of actually looking at the facts.

As the FCIC staff reports released so far in the run up to the final report have demonstrated, the primary fuel of the financial crisis was a hands-off approach to regulation. This ideologically driven lack of regulatory oversight allowed tremendous growth of the "shadow banking system," a largely unregulated web of complex financial transactions that essentially served the same functions as the existing banking system—attracting short-term funds from those seeking safe, liquid investments and using these to finance long-term loans, particularly residential mortgages—but without government oversight to ensure that these activities were being done safely and soundly.

As the FCIC staff reports demonstrate fairly conclusively, it was the shadow banking system’s unregulated private securitization of mortgages that caused the financial crisis, not affordable housing policies. The FCIC staff has done an excellent job of compiling the facts, and we encourage you to check out the FCIC’s comprehensive reports to date. In our view, below are their most persuasive arguments,

Look at the market share

The market activities of the relevant parties clearly show the problem with the argument made by the minority FCIC members. The market shares of Fannie Mae, Freddie Mac, and CRA-regulated lending institutions dropped tremendously during the housing bubble. Meanwhile, the market share of private mortgage securitization, which the FCIC majority largely blames for the crisis, and which the FCIC minority completely ignores, grew in lockstep with the rise of the housing bubble.

The relative market share of Fannie Mae and Freddie Mac dropped fairly dramatically during the 2000s bubble, from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent at the height of the bubble in 2005 and 2006. Notably, this decline occurred contemporaneously with the unsupported rise in housing prices and the deterioration in underwriting standards that virtually all observers blame for the collapse of the housing markets.

Similarly, the market share of financial institutions for which CRA applied has been steadily declining since 1977, when CRA was passed. CRA-regulated institutions, primarily banks and thrifts, accounted for only 28 percent of all mortgages originated in 2006 (the height of the bubble), a significant decline from their share in the late 1990s and early 2000s. As with Fannie and Freddie, this market share drop occurred in lockstep with the rise of the housing bubble.

In contrast, the market share of private mortgage securitization, a pillar of the “shadow banking system” that was not backed by the federal government and not regulated for safety and soundness in the way that Fannie, Freddie, and regulated banks and thrifts were, rose sharply and contemporaneously with the rise of the housing bubble. In 2002, the share of mortgages originated by private securitization was just over 10 percent of the total market. Over the next four years, this share grew rapidly, accounting for nearly 40 percent of all mortgage originations by 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006.

Look at the default rates

Equally conclusive are the default rates of mortgages originated for these various lending channels. If the conservative view was correct, one would expect to see mortgages originated for Fannie and Freddie securitization, as well as those originated for purposes of CRA, to default at higher rates, since these were the loans directly subject to affordable housing policies. In fact, we see quite the opposite, as these loans have performed exponentially better than those originated for private securitization, which the FCIC Republicans ignore.

Mortgages originated for private securitization defaulted at much higher rates than those originated for Fannie and Freddie securitization, even when controlling for all other factors (such as the fact that Fannie and Freddie securitized virtually no subprime loans). Overall, private securitization mortgages defaulted at more than six times the rate of those originated for Fannie and Freddie securitization.

Similarly, mortgages originated for CRA purposes have performed at much higher rates than loans originated for private securitization, going into foreclosure 60 percent less often than loans originated by independent mortgage companies that were key to providing the mortgages needed to supply private securitization.

But even if these facts didn’t exist, the FCIC Republican narrative fails miserably in explaining the financial crisis. To illustrate why it fails, let's perform a simple thought experiment our colleague Matthew Yglesias has suggested: Let us suppose that the GOP's argument is correct, and that government affordable housing policies were 100 percent responsible for the housing bubble and the flood of unsustainable mortgages that were originated during the 2000s.

How could the FCIC Republican argument possibly explain the analogous housing and financial bubbles that occurred contemporaneously in other countries such as Iceland, Ireland, the United Kingdom, and Denmark, which did not have Fannie or Freddie Mac or CRA? The FCIC majority argument has a plausible and compelling explanation for the global credit bubble—that an unregulated and overleveraged shadow banking system systematically underpriced credit risk. The FCIC Republican minority has no explanation for these contemporaneous bubble-bust cycles that occurred in other countries.

Or consider that a virtually identical bubble occurred in the U.S. commercial real estate mortgage market. There is no government policy FCIC Republicans can point to that encouraged lenders to loosen underwriting standards for malls or office buildings. (see graph)

What’s more, this commercial real estate had a large exposure to private securitization, as did credit card debt, student loans, and auto loans, all of which experienced bubble-bust cycles that were similar to that which happened in residential real estate. (see graph)

Moreover, the FCIC minority narrative fails to explain the huge private-sector demand for subprime and Alt-A mortgages, or the mortgage-backed securities created out of these mortgages. The crux of the FCIC Republican argument is the affordable housing goals and CRA created the demand for risky subprime and Alt-A mortgages, which in turn created the huge demand for the private mortgage-backed securities that led to the 2000s housing bubble.

But this ignores the huge existing demand for private mortgage-backed securities. Even after Fannie and Freddie plunged into the market for these mortgage-backed securities, they never accounted for more than a fraction of the demand for these securities. (see graph)

Instead, the common thread was under-regulation at every level of the financial system leading to a general real estate bubble. The bursting of the bubble first in the subprime home mortgage market was a symptom of just how little consumer protection was left, as federal regulators told state authorities who tried to stop more abusive mortgage companies to stand down due to federal preemption doctrines.

David Abromowitz is a Senior Fellow at the Center for American Progress. David Min is Associate Director for Financial Markets Policy at the Center.

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Where Things Stand: Foreclosure Paperwork Scandal

by Marian Wang, ProPublica

Some struggling homeowners are currently getting a temporary reprieve from foreclosure sales and evictions during the holiday season, but that doesn't mean all foreclosure cases have stopped moving through the courts -- and it doesn't mean we're done covering the developments in the foreclosure scandal either. Here's where things stand:

Earlier this year, the discovery of sloppy documentation practices across the mortgage servicing industry caused many banks -- first GMAC, then Bank of America, JPMorgan Chase and others -- to temporarily freeze foreclosure sales as they conducted reviews of their document processing procedures. Mortgage servicers -- often divisions within large banks -- handle the day-to-day collection of mortgage payments. They're also supposed to provide loan assistance to struggling homeowners. Banks cast the problems as procedural mistakes but asserted that the underlying information in key foreclosure documents was accurate and did not result in any wrongful foreclosures. (As we've noted, banks and foreclosure defense attorneys disagree on what constitutes a wrongful foreclosure.)

One by one, they resumed some or all foreclosures and are re-filing the questionable documents, but attorneys for homeowners have said that the fixes have been inadequate and the result has been "more of the same." Last week, the Daily Business Review reported that new rules in Florida to remedy the problem of robo-signers -- bank employees who had signed foreclosure documents without verifying their accuracy -- had given rise to "robo-verifiers" who simply go through the motions of double-checking the documents.

Iowa's Attorney General Tom Miller, the point man on a 50-state joint investigation of the foreclosure scandal and mortgage servicing industry, has said that a quick settlement with banks and loan servicers is unlikely and that settlements would be worked out "one bank at a time." He's also said that criminal charges are a possibility. "We will put people in jail," Miller told homeowners and advocates in Des Moines earlier this month. The states' joint investigation remains ongoing, and some states have separately sued banks for deceiving homeowners fighting foreclosure.

On the federal level, the status of the investigation by the Office of the Comptroller of the Currency and other banking regulators is less clear. The OCC, the Federal Reserve and the FDIC are currently divided over new rules proposed by the FDIC that would rein in the bank abuses that may be causing improper foreclosures, according to the Huffington Post.

Last week, a group of more than 50 economists, analysts and academics wrote a letter to these federal regulators, urging them to establish national standards for servicing. In the letter, they said that servicing fraud presents problems for investors, homeowners and the U.S. economy. They also urged regulators to compel servicers to grant loan modifications and principal reductions -- or reducing the amount owed by homeowners -- when economically possible.

We've noted, however, that for about half of the country's mortgages, the chances for principal reductions are slim. That's because the Federal Housing Finance Agency, the regulatory agency for government-controlled Fannie Mae and Freddie Mac, does not permit them to grant principal reductions, even though doing so could save the mortgage giants money in the long term and help homeowners whose mortgage debts have come to exceed what their home is currently worth. (Read our primer for more on how Fannie and Freddie -- together with their approved foreclosure law firms -- contributed to the foreclosure mess.)

Reuters also reported that the Senate adjourned last week without confirming a new head for Fannie and Freddie's regulator. Republican Sen. Richard Shelby put a hold on President Obama's nominee, Joseph Smith, voicing concerns that Smith would support changing the rules to allow Fannie and Freddie to grant principal reductions.

The Senate also adjourned last week without appropriating $35 million that had been authorized by the Dodd-Frank financial reform bill for funding legal aid for homeowners fighting foreclosure. That means the money -- which legal experts including Miller had said was desperately needed -- wasn't actually set aside for use.

Though foreclosures continue to speed through courts in some states ($), in recent months some judges have increasingly questioned banks bringing foreclosure cases in court, forcing them to prove their legal standing to foreclose.

New Jersey's Supreme Court Justice Stuart J. Rabner last week issued an order calling on six major mortgage lenders and loan servicers to appear before the court next month and demonstrate why the state should not suspend their foreclosure actions, the Associated Press reported. And earlier this month, a justice on New York's supreme court testified before House lawmakers that he's seen problems in foreclosure cases "on a recurrent basis" and that questions of legal standing have become "a pervasive issue."

But it's also worth mentioning that foreclosures work differently depending on the state. Most states are "non-judicial foreclosure" states, meaning they don't even require foreclosure actions to go before a judge. Bloomberg noted that in these states, banks can more easily and quickly process foreclosures, and homeowners have less recourse to fight back.


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Senate Still Lags On Many of President Obama's Judicial Appointments

Lost amid the flurry of last-minute legislating last week, the Senate confirmed two of President Obama's nominees to the federal bench. Despite that progress, however, the Senate ended its session without acting on two dozen of the president's judicial appointments, according to the chairman of the Senate Judiciary Committee.

The Senate's pace of approving federal judges under Obama lags that which it made in a comparable timeframe under President George W. Bush, says Sen. Patrick Leahy (D-Vt.), who leads the judiciary panel.

Prior to leaving town right before Christmas, the Senate confirmed the nominations of Benita Pearson to the District Court for the Northern District of Ohio, and of William Martinez to fill a judicial emergency for the District Court of Colorado.

Pearson’s nomination was approved by the Judiciary Committee in February, and Martinez’s nomination was OK'd by the committee in April. Senate Democrats had sought time agreements to consider the nominations, but Republicans did not consent until just before the Senate recess, when an agreement was reached to schedule votes on the long-stalled nominations, according to a statement released by Leahy's office.

“The obstruction of these district court nominations is unprecedented, a sign that a different standard is being applied to President Obama’s nominees that has never before been applied to the nominees of any President, Democratic or Republican,” says Leahy (D-Vt.).

Leahy has complained for much of this year about Republicans needlessly slowing the confirmations of Obama's nominations of federal judges.

There remain 24 judicial nominations pending before the full Senate awaiting final votes. Eighteen of the nominations were reported by the Judiciary Committee with unanimous support. Two additional nominations received the support from a majority of Republican Senators on the Judiciary Committee. Of the 24 nominations pending, 14 of them are to fill vacancies designated as judicial emergencies by the nonpartisan Administrative Office of the U.S. Courts, Leahy says in his statement.

Despite the delays, Leahy notes that many of Obama's judicial nominations were given unanimous approvals by the Judiciary Committee, receiving votes from both Democrats and Republicans.

As of December 21, 55 circuit and district court nominations were confirmed by the Senate in the 111th Congress. During the first Congress of the Bush administration, the Senate, controlled by Democrats, proceeded to confirm 100 judicial nominations, Leahy says. Every nomination pending on the Senate’s Executive Calendar received an up-or-down vote by the Senate before Congress adjourned, he adds.

Of the 24 nominations pending on the Senate floor, 18 received unanimous support from the 19 Democratic and Republican senators on the Judiciary Committee, Leahy says. Another two nominations were reported with the support of a majority of Judiciary Committee Republicans, he adds.


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Pentagon Told Congress It’s Studying Brain-Damage Therapy

by T. Christian Miller, ProPublica, and Daniel Zwerdling, NPR

Last month, the Pentagon sent a soothing letter to members of Congress worried about the treatment of soldiers who suffered brain injuries in Iraq and Afghanistan.

The letter, previously unreported, told House and Senate members that the military was studying the efficacy of a treatment known as cognitive rehabilitation therapy. Cognitive rehabilitation is a lengthy, often expensive program designed to retrain troops with brain injuries to do everyday tasks from remembering grocery lists to recalling words and names.

Did you or a loved one suffer a mild traumatic brain injury (concussion) while serving? ProPublica and NPR want to hear your story. Tell us about your experiences with TBI.

The letter includes contradictions of previous Pentagon statements. Notably, it makes no promise that brain-damaged soldiers will receive cognitive rehabilitation any time soon.

In the letter, George Peach Taylor Jr., the acting assistant defense secretary for health, acknowledged that the military health care's plan for troops and many veterans, called Tricare, does not cover cognitive rehabilitation therapy. One of the main reasons? A contractor hired by Tricare found limited evidence it works.

But as NPR and ProPublica reported Monday, Tricare's review came under fire in a series of confidential reviews by leading brain specialists. Scientists criticized the study as "deeply flawed" and "unacceptable." One even called it a "misuse" of science designed to hold down costs by depriving soldiers of care.

Cognitive rehabilitation has been used for decades to help civilians with brain injuries. Some major insurance companies, including Aetna and Humana, cover the treatment. Several major peer-reviewed studies support its efficacy. The Pentagon's own specialists and a panel convened more than a decade ago by the Institutes for Medicine have recommended its use.

Taylor's letter, which was written before the NPR and ProPublica stories appeared, did not mention the critiques of the Tricare study. But Taylor did make passing reference to another issue: money.

Comprehensive cognitive rehabilitation therapy can cost more than $50,000 per patient -- potentially adding enormous bills to the military's medical system at a time when hundreds of thousands of soldiers have suffered traumatic brain injuries on the battlefield. Tricare officials told us that money played no part in their considerations to deny coverage for the treatment. But Taylor told Congress that cost was a factor in figuring out which therapies to provide.

"Establishing the effectiveness of cognitive rehabilitation is an important issue for reimbursement of clinical services within the healthcare industry," he wrote to the chairs of the House and Senate Armed Services and Appropriations committees.

Taylor's letter also discussed a second set of studies, funded by $10 million set aside by the congressional committees in last year's defense bill. He wrote that the Pentagon's Defense and Veterans Brain Injury Center, known as DVBIC, had launched its own studies on how to treat mild traumatic brain injury. One of the signature wounds of the wars, mild traumatic brain injuries are often a result of blast waves from roadside bombs. Most soldiers recover quickly, but studies suggest as many as 15 percent go on to suffer lingering cognitive problems.

For careful readers of the military spending bills, this represents a significant change from what Congress had asked. The defense spending bill for 2010 asked the Pentagon to assess the value of cognitive rehabilitative in treating "traumatic brain injury in members and former members of the armed forces" (for those who want to read this passage in its full PDF context, you can check out the language on page 232 of the 1,236-page bill).

The difference is crucial. Why? Because cognitive rehabilitation therapy is actually a pretty well proven treatment for those suffering from moderate to severe brain injury. So by focusing only on mild traumatic brain injury, the Pentagon has avoided having to acknowledge the efficacy of the therapy for those with severe injuries, while tying up decisions on how to treat soldiers with mild traumatic brain injuries in a series of new studies.

In the letter, Taylor did say that cognitive therapy has proved promising: "Cognitive rehabilitation is a long-standing and significant component of comprehensive rehabilitation for individuals with moderate and severe TBI. There is an accelerating, but still small, body of scientific literature supporting cognitive rehabilitation in mTBI," he says, referring to mild traumatic brain injury.

Taylor said it will take years to complete the necessary studies. One should be finished in 2011, another in 2013. By then, many more troops will have suffered brain injuries. And many more who have already suffered blows to the head will have gone without cognitive rehabilitation therapy.

Why the delay? That's the question raised by soldiers, their families and brain injury advocates: if a treatment has some proof that it works, and no proof that it hurts, why not move faster to provide it?

"There should be a way to provide TRICARE coverage for cognitive therapy while further studies are ongoing," Sen. Mark Udall, D-Colo., who serves on the Senate Armed Services Committee, told us in a written statement. "We can't ignore the fact that many studies and experts have determined that cognitive therapy is effective for brain injured patients and the fact that the Department of Veterans Affairs already recognizes its value."

Rep. Bill Pascrell, D-N.J., co-chair of the Congressional Brain Injury Task Force, promised to send a letter to the Pentagon protesting its slow progress on cognitive rehabilitation therapy.

"It's unfortunate that this kind of foot-dragging has been what many have come to expect from the Pentagon when it comes to soldiers who have sustained traumatic brain injuries," Pascrell told us. "Brave Americans who risked everything for their country and sustained traumatic brain injuries -- the signature injury of the wars in Iraq and Afghanistan -- deserve cognitive rehabilitation therapy to help them secure the best futures possible. It is unacceptable that the United States has been at war for nearly a decade and there is still no plan to treat these soldiers."

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Think Again: The Missing “Least-We-Can-Do-No-Brainer Act of 2010”

This article was published by the Center for American Progress.

By Eric Alterman

As I was reading Wednesday’s “Playbook” by Politico’s Mike Allen, the unofficial scorecard of Beltway obsessives (and those who wanna be), the story that caught my eye was, naturally, the one Allen labeled “The Big Idea/Pundit Prep/If You Read Only One Story.” In it, Bloomberg’s Lisa Lerer and Laura Litvan reported that “The 111th Congress made more laws affecting more Americans since the ‘Great Society’ legislation of the 1960s.” It quotes the great liberal historian Alan Brinkley calling this Congress “probably the most productive session of Congress since at least the ’60s.’”

The authors note that it was also a historic year for the financial sector:

Wall Street firms such as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. are positioned to complete their best two years in revenue, General Motors Co. has emerged from bankruptcy with more than $23 billion repaid to the U.S. Treasury, and American International Group Inc. was able to sell $2 billion of bonds in its first offering since the company’s 2008 bailout. The S&P 500 Index has gained 38.9 percent since Congress convened in January 2009.

This is in addition, of course, to the spending spree these same folks will be enjoying as a result of the extension of the massive Bush tax cuts to those lucky Americans who enjoy incomes of over $250,000 per year. That’s well below the average salaries at Goldman Sachs, by the way, and that includes the meager amounts paid to janitorial and secretarial staff.

So while it was a rough year for millions of Americans, plenty of people did just fine. Not among them, however, were most of the people who, nearly 10 years ago, volunteered to risk their own health and well-being when their country was the victim of a horrific terrorist attack that not only killed roughly 3,000 people and injured many more, but also transformed the politics and culture of this country.

There was not a word in Wednesday’s “Playbook” about legislation that was at the time before the Senate and designed to help those people. The news has been overflowing with politics of late, from the tax “compromise” to the collapse of the spending bill to the passage of the repeal of “Don’t Ask, Don’t Tell” to the ratification of the START treaty and the rejection of the “DREAM” Act. But one piece of legislation that had a hard time getting much love was the bill to ensure that those heroes of 9/11 got the medical attention they needed as a result of the injuries suffered that day. (Readers may recall that George W. Bush’s Environmental Protection Agency falsely assured New Yorkers that the air near the site of the attack was safe to breathe. On the basis of that assurance, I foolishly took my then-three-year-old daughter down to see the site, making it the first and last time I ever believed any official statements issued by the Bush administration.)

Our politicians vowed over and over to remember and honor the victims of 9/11. But the truth is that the event has been far more exploited than respected. September 11th has provided any number of backdrops for speeches and political commercials, and even presidential fundraising appeals despite George W. Bush’s panicky performance that day.

The buildings destroyed have not been rebuilt, the perpetrators have not been caught, and an entire war was fought that exploited Americans’ feelings of anger and betrayal. It had literally nothing to do with bringing any of the attackers to justice though it may have inspired many more such attacks on our allies and assets around the world.

These are in some respects complicated issues—or appeared so at the time the necessary decisions were taken. One issue that remained as simple as can be, though, was the fact that the people who came to the aid of their country in those horrific hours needed that same country’s aid to deal with the health problems they experienced as a result.

Voice of America reports, “According to researchers at the Albert Einstein University's Montefiore Medical Center in New York, the dust at the World Trade Center site was ‘a combination of the most dense, intense particulate matter [fire fighters and EMS personnel were] ever exposed to in an urban environment.’" David Prezant, a specialist in respiratory medicine, explained to Voice of America that respiratory ailments arising from exposure to that dust results in "a persistent, real decline that requires long-term monitoring and aggressive treatment." A report by the AFL-CIO in September of this year revealed that 13,000 first responders were still being treated for health problems nine years after the attacks took place.

"They told us if we did our job, they'd take care of us. We did our job. Now we're sick and they don't remember who we are anymore," said Greg Staub, who retired from the New York City Fire Department in 2009 due to chronic lung problems.

As hard as it is to believe, not only did the issue prove controversial, but many of the very same conservatives who were so eager to go to war in Iraq to avenge the imaginary role that nation played in the attack apparently thought that its victims should fend for themselves.

“This legislation as written creates a huge $8.4 billion slush fund paid by taxpayers that is open to abuse, fraud, and waste,” said Republican Rep. Lamar Smith of Texas. Republican Sen. Tom Coburn of Oklahoma said he was blocking the legislation because it provided "overly generous funding."

Almost as shocking was the lack of attention to this issue paid by most members of the mainstream media. It is especially appalling when one considers the obsessive coverage not only of the 9/11 attacks but of every single phony scare that resulted in its aftermath as well as the deliberately deceptive tactics employed by the Bush administration to fool the nation into invading Iraq.

It appeared as if the rescue workers with cancer and other life-threatening health issues would continue to go begging for money and media attention until Jon Stewart decided to devote his final show of 2010 to what he called "the Least-We-Can-Do-No-Brainer Act of 2010." But Stewart used the power and influence he has amassed as America’s most powerful comedian—ever—by forcing the issue back into the microscopic attention span of the nation’s political pundits and reporters. He noted how much more attention the phony threat of the inaccurately named “9/11 mosque” had received on cable compared with the plight of these people. He reported that the best coverage could actually be found on Al Jazeera.

Stewart also interviewed four rescue workers, including a fire fighter, a cop, a Department of Transportation employee, and an engineer. All of them were suffering from illnesses related to their heroism. Why no other media outlets thought to do this is a long and sad story, but at least a few of them took an interest after being shamed by Stewart.

The following day, Fox News’s Shepard Smith did a segment in which he asked “Are we going to leave these American heroes out there to twist in the wind?” He returned to this “shameful” issue the following day. On MSNBC, Rachel Maddow ran much of Stewart’s interview segment as well. John Feal, founder of the FealGood Foundation, who helped Stewart set up his interviews, credited the comedian because he “literally shamed conventional media and the U.S. government into doing the right thing.”

Or sort of the right thing. Wednesday evening, Congress approved a $4.3 billion aid package to sick workers, which is a reduction from the original $7.2 billion legislation approved by the House. That figure represents approximately 3.2 percent of the amount of money that will be pouring into the pockets of Americans who make more than $250,000 per year. All in all a fitting ending to a year when, despite the worst employment picture in America in roughly 80 years, it was a damn good time to healthy, wealthy, and conservative.

Eric Alterman is a Senior Fellow at the Center for American Progress and a Distinguished Professor of English at Brooklyn College. He is also a Nation columnist and a professor of journalism at the CUNY Graduate School of Journalism. His newest book, Kabuki Democracy: The System vs. Barack Obama, is available for preorder.

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States Scramble to Repay Feds for Unemployment Insurance Loans—Plus Interest

by Marian Wang, ProPublica

Thanks to the stimulus bill, the 31 states that have borrowed more than $41 billion from the feds to pay unemployment insurance to jobless workers have not had to pay interest on those loans so far, as we’ve reported. That will change, however, when the provision that waived interest payments expires in the new year. States with outstanding loans will have to begin paying interest on their loans in 2011 or else give back federal grant money used to administer state unemployment insurance programs, according to McClatchy Newspapers:

The federal government estimates the collective interest on the outstanding loans will total about $2 billion in 2011, while continued state borrowing is expected to stretch the outstanding loan amount to $65 billion by fiscal year 2013.In addition, employers in about 25 states could face additional federal tax penalties of $21 to $84 per employee if state loans aren't paid by November 2011. Unemployment insurance programs are run by the states, but financed by federal and state taxes on wages.

As we've noted, some states have had to borrow from the federal government because they've chronically underfunded their own insurance trust funds. States with little left in their own unemployment insurance trust fund reserves have a few options at their disposal to pay back these loans with the additional interest.

They could try to cover the payments with general revenue funds, which could be difficult given many states’ fiscal woes. As we’ve noted, states could raise taxes on employers or cut benefits to pay back their loans, and many already have.

Bloomberg reported last month that Texas borrowed more than a billion dollars from investors by issuing municipal bonds in order repay its unemployment debts and to save on impending interest payments. This may not be a realistic option for all states, however, as investors increasingly scrutinize the financial health of bond issuers, particularly those state governments already deepest in debt.

A number of business and trade associations, including the U.S. Chamber of Commerce, have urged Congress to extend the waiver on states’ interest payments.

For more on how deep in the red states’ insurance trust funds are, check out our Unemployment Insurance Tracker.


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Poll: Obama Ahead In 2012 Test Heats

President Obama would squeak by possible Republican rival Mitt Romney and crush former Alaska governor Sarah Palin, with potential independent Mike Bloomberg coming in third, according to a new Clarus poll.

OBAMA-ROMNEY-BLOOMBERG TRIAL HEAT: In a three-way presidential race with Mitt Romney as the GOP nominee, Obama posts a small 3-point lead over Romney, 39-36 percent. Running as an independent, New York mayor Michael Bloomberg captures 13 percent of the vote with 12 percent undecided.

"Twenty-percent of independents, 11 percent of Republicans and 8 percent of Democrats support Bloomberg, who does best in the Northeast where he gets 17 percent of the vote," says Ron Faucheux, president of Clarus Research Group.

OBAMA-PALIN-BLOOMBERG TRIAL HEAT: In a three-way presidential race with Sarah Palin as the GOP candidate, Obama has an 11-point lead over Palin, 42-31 percent. Running as an independent, Bloomberg captures 18 percent of the vote with 9 percent undecided.

"In a three-way race with Palin as the Republican nominee, the GOP loses major support to an independent alternative," says Faucheux. "Against Obama and Palin, Bloomberg gets 24 percent of Republicans, 10 percent of Democrats, and 22 percent of independents."

The best showing made by an independent candidate in modern times was in 1992, when businessman Ross Perot captured nearly 19 percent of the vote.

Romney, the former Massachusetts governor and failed 2008 contender for the GOP nominatation, appears to be getting ready to run again in 2012. Palin, the tea-party darling and 2008 GOP running mate, hasn't said if she will make the race against Obama, although she is inching closer to doing so.

Although there has been much buzz about a potential Bloomberg candidacy, the Democrat-turned-Republican-turned-independent has been shooting down such talk.

That Bloomberg doesn't show better in the horserace is surprising, given another finding in the Clarus poll: Nearly half of all voters -- 48 percent -- also say it would be a good idea to elect a "nonpartisan" president who is neither a Democrat nor a Republican.

"You'd expect independent voters to want an independent President. But more than two out of every five Democrats and Republicans also say electing a nonpartisan President is a good idea," says Faucheux. "There is clearly potential for an independent candidate to do quite well in 2012."

Among Republican voters surveyed, Romney, Palin, and former Arkansas Mike Huckabee are the leading presidential contenders.

In assessing the mood of the country and the next presidential election, a whopping 85 percent of voters say they agree with the statement, "In many ways America is in decline and we need strong, competent leadership to get us back on track."

The poll was conducted by Clarus Research Group, a nonpartisan firm based in Washington. It was not paid for or sponsored by any client, candidate or political party, the firm says.

"The public mood is bigger than the sum of its parts," Faucheux says. "Regardless of how voters feel about specific issues or personalities, there is a shared sense that the nation is in decline and needs strong, competent leadership to get it back on track. Large majorities of Republicans, Democrats and independents agree with this sentiment."

The survey was conducted by live telephone interviews December 10-16, with a sample of 1,000 self-identified registered voters. It has a margin of error of +/- 3.1 percent.


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