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Obama's New Road Rules May Fall Short

By Dan Froomkin
1:05 PM ET, 06/17/2009

Let's start with the basics: It's a good thing that President Obama is proposing new regulations for the financial industry.

After five months spent untangling a massive pile-up in the financial industry and patching up the wounded, it's entirely appropriate -- necessary, really -- that he establish some new rules of the road. There's a lot to be learned -- and fixed -- based on what we've experienced lately.

And Obama's avowed goals are admirable -- among them to make consumer-level decisions more transparent, to plug gaps in the regulatory structure that were exposed by this crisis, to update rules to reflect new financial products, and to provide closer government supervision of institutions that we now realize are simply too big too fail.

Indeed, Obama is appropriately perplexed by some of the squawking coming from the financial sector.

"You know, I think that Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected," Obama told Bloomberg's Al Hunt yesterday:

"When I hear some of the commentary that's been creeping up about, 'You know, it's time for government to get out of the economy' and 'What's the Obama administration doing?' I have to try to remind them — all we're doing is cleaning up after the mess that was made....

"[W]hat I do think everybody should understand is that we now need some sensible rules of the road so that people aren't taking exorbitant risks that pose system-wide risks to the financial system; that, when it comes to issues like executive compensation, shareholders should know what management is - is giving themselves so that, you know, their interests are properly aligned.

"We think that it makes sense for consumers to know what they're getting into when they sign up for a credit card or a subprime loan, that credit agencies aren't self-interested when they're rating securitized products.

"So there are just a bunch of commonsense reforms that I think we can make. And as soon as we get those in place, I am eager to make sure that we can refocus our attention on long-term challenges, like improving our school system or our health care system, that should be the subject of - of - of my administration's attention."

But despite the complaints emerging from the big-money crowd, the evidence suggests that Obama has undershot rather than overshot with his regulatory overhaul.

What we've learned in the past is that, when it comes to the world of finance, sometimes you get populist Obama and sometimes -- let's be real, more often -- you get pushover Obama.

Consider that, as Stephen Labaton writes in the New York Times:

President Obama’s plan to reshape financial regulation, which he will unveil on Wednesday, is the product of weeks of meetings among government officials, financial experts, lawmakers, industry executives and lobbyists, many of whom were invited to help the White House draft the proposal.

As a result, he writes:

Although it would strikingly reorganize the regulatory architecture, the president’s plan results from many compromises with industry executives and lawmakers, and is not as bold as some had hoped.

Or, as Obama said in an interview on CNBC with John Harwood yesterday:

Did, you know, any considerations of sort of politics play into it? We want to get this thing passed, and, you know, we think that speed is important. We want to do it right. We want to do it carefully. But we don't want to tilt at windmills, we want to make sure that we're getting the best possible regulatory framework in place so that we're not repeating the mistakes of the past.

(And don't miss the video of Obama killing a fly with his bare hands during the Harwood interview.)

Obama also sat down for an interview with Gerald F. Seib, who writes in the Wall Street Journal that the president wanted to make it clear that he aspires to a "light touch" -- not heavy-handed meddling.

Mr. Obama went to great pains to explain that there is a philosophy behind the changes he is about to propose to the nation's financial plumbing. Indeed, he says, it is the same philosophy that applies to his broader view of the government's role in the economy.

What would have the biggest impact on the average American? Kevin G. Hall and Tony Pugh write for McClatchy Newspapers:

Among the sweeping changes in government regulation that President Barack Obama will propose Wednesday is the creation of an independent and powerful Consumer Financial Product Safety Commission to regulate financial products such as mortgages and credit cards.

With an eye toward protecting consumers and ordinary investors, the Federal Reserve and other bank regulators would lose their oversight over mortgages, credit cards and other financial products that are sold to consumers. It's a radical shift in approach and a tacit acknowledgment of federal failure.

"Lets face it, the (Federal Reserve Board) has had the power to engage in aggressive consumer regulation at least since 1994," Harvard law professor Elizabeth Warren, who chairs the Congressional Oversight Panel, which oversees how Wall Street bailout money is being spent, told McClatchy in an interview. "They clearly had the power to stop the mortgage crisis before it started. And what did they do with that power? Nothing."

Binyamin Appelbaum and David Cho write for The Washington Post:

Many of the specific proposals will require legislation, and today's announcement will drop the plan into an already heated debate on Capitol Hill about the eventual shape of reform. The financial crisis has forced broad consensus that changes are necessary, but there are wide disagreements about the details.

Here is the text of Obama's remarks as prepared for delivery, the White House's 85-page white paper, and a whole slew of "fact sheets".

From Obama's remarks:

"Millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and the failure of their government to provide adequate oversight. Our entire economy has been undermined by that failure.

"The question is, what do we do now? We did not choose how this crisis began. But we do have a choice in the legacy this crisis leaves behind. So today, my administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression."

With some early reactions, Felix Salmon blogs for Reuters:

If you thought this was going to make the current horribly-complicated system of financial regulation less complicated, think again.

But Justin Fox blogs for Time that the consumer-oriented commission is a good idea:

We already have lots of regulations that decide how people get to live financially. It's just that right now they're all administered and in some cases written by agencies also charged with making sure banks are profitable. Guess what—protecting consumers and keeping banks profitable don't always go together. There's a lot to be said for separating the two tasks.

Consolation Prize for Gays

By Dan Froomkin
12:05 PM ET, 06/17/2009

Tossing a bone to a gay community that is increasingly frustrated by his failure to keep his key campaign promises to them, President Obama today will sign a presidential memo extending some benefits to same-sex partners of federal employees.

The Los Angeles Times says that will include health benefits; the New York Times says it won't. But in either case, it's both an important milestone for the gay community -- and a transparent sop highly unlikely to satisfy the growing anger.

Mark Z. Barabak and Jessica Garrison write for the Los Angeles Times that Obama's action

comes days after the Obama administration sparked outrage by filing a legal brief defending the law forbidding federal recognition of same-sex marriage. Obama opposed the 1996 Defense of Marriage Act during his presidential campaign....

As a candidate for president, Obama was a staunch supporter of gay and lesbian rights. He called for repealing the federal Defense of Marriage Act and also the military's "don't ask, don't tell" policy, which forbids openly gay men and women from serving in the armed forces. He promised to help lead the fight.

Since taking office, however, Obama has disappointed many gay activists by not just keeping silent but, lately, by defending some of the policies he criticized.

Jeff Zeleny writes in the New York Times that

administration officials said the timing of the announcement was intended to help contain the growing furor among gay rights groups. Several gay donors withdrew their sponsorship of a Democratic National Committee fund-raising event next week, where Vice President Joseph R. Biden Jr. is scheduled to speak.

The Washington Post's Ed O'Keefe predicts the move "should ease some of the bad feelings from liberals and gay rights groups."

But prominent gay blogger John Aravosis writes otherwise:

[B]ecause of Obama's inaction on his main presidential campaign promises to our community...we have a scenario in which gays will get fewer benefits than their straight colleagues, and some gay federal employees will get benefits (civilians) while others (military) will not. See how complicated it gets to do anything when you fail to keep your basic promises?

Quick Takes

By Dan Froomkin
12:00 PM ET, 06/17/2009

Jeff Zeleny and Helene Cooper write in the New York Times: "President Obama said Tuesday that it would be counterproductive for the United States 'to be seen as meddling' in the disputed Iranian presidential election, dismissing criticism from several leading Republicans that he has failed to speak out forcefully enough on behalf of the Iranian opposition."

In his interview with CNBC's John Harwood yesterday, Obama said of Iran: "I think first of all, it's important to understand that although there is amazing ferment taking place in Iran, that the difference between Ahmadinejad and Mousavi in terms of their actual policies may not be as great as has been advertised....The second thing that I think's important to recognize is that the easiest way for reactionary forces inside Iran to crush reformers is to say it's the US that is encouraging those reformers."

Lori Montgomery, Shailagh Murray and Ceci Connolly write in The Washington Post: "President Obama's plan to expand health coverage to the uninsured is likely to dig the nation deeper into debt unless policymakers adopt politically painful controls on spending, such as sharp reductions in payments to doctors, hospitals and other providers, congressional budget analysts said yesterday."

David Leonhardt writes in his New York Times business column that the specter of "rationing" has become "a rejoinder to anyone who says that this country must reduce its runaway health spending." But, he explains, "the case against rationing isn’t really a substantive argument. It’s a clever set of buzzwords that tries to hide the fact that societies must make choices."

Seth Borenstein writes for the Associated Press: "Rising sea levels, sweltering temperatures, deeper droughts, and heavier downpours — global warming's serious effects are already here and getting worse, the Obama administration warned on Tuesday in the grimmest, most urgent language on climate change ever to come out of any White House. But amid the warnings, scientists and government officials seemed to go out of their way to soften the message. It is still not too late to prevent some of the worst consequences, they said, by acting aggressively to reduce world emissions of heat-trapping gases, primarily carbon dioxide from the burning of fossil fuels."

Ed O'Keefe writes for The Washington Post: "The inspector general fired last week by President Obama appeared confused, disoriented and unable to answer questions at a late May board meeting of the Corporation for National and Community Service, according to a White House letter delivered to lawmakers last night. The letter came in response to several inquiries by lawmakers concerned about the president’s dismissal of Gerald Walpin, who was appointed in 2007 by President George W. Bush to serve as watchdog at the agency that operates the AmeriCorps and Senior Corps programs."

Jim Tankersley writes for Tribune: "As a candidate for the presidency, Barack Obama wooed environmentalists with a promise to 'support and defend' a plan to protect nearly 60 million acres of pristine national forest land. But five months after he entered the White House, Obama has done nothing to defend the so-called roadless protections in a court case that could soon decide their fate - tacitly maintaining the legal position staked out by the Bush administration, which tried to scrap the plan to curb construction of new roads in national forests."

At Salon, the ACLU's executive director joins with a military officer to ask for a special prosecutor for torture

Charlie Savage writes in the New York Times that Judge Sonia Sotomayor's record suggests she is a skeptic when it comes to executive power issues -- but not any more so that David Souter, the Supreme Court justice she would replace.

Christopher Beam writes in Slate about Obama's theory of interdependence: "Whether it's health care reform, closing Guantanamo, or cap-and-trade, he rarely sells a new policy just for its own sake. Instead, he presents it as part of a broader vision, in which each piece of the puzzle depends on the rest. The practice carries risks as well—but so far, at least, it is working for Obama."

Michael D. Shear writes in The Washington Post: "President Obama has embraced Bush administration justifications for denying public access to White House visitor logs even as advisers say they are reviewing the policy of keeping secret the official record of comings and goings."

Harwood asked Obama yesterday to respond to media critics who say he's gotten great press. "It's very hard for me to swallow that one. First of all, I've got one television station entirely devoted to attacking my administration. I mean, you know,...that's a pretty big megaphone. And you'd be hard-pressed, if you watched the entire day, to find a positive story about me on that front....And, you know, we welcome people who are asking us some, you know, tough questions. And I think that I've been probably as accessible as any president in the first six months—press conferences, taking questions from reporters, being held accountable, being transparent about what it is that we're trying to do. I think that, actually, the reason that people have been generally positive about what we've tried to do is they feel as if I'm available and willing to answer questions, and we haven't been trying to hide them all."

Salon blogger Glenn Greenwald offers up an Obama transparency timeline.

Push Back, Mr. President

By Dan Froomkin
9:09 AM ET, 06/17/2009

Give them an inch, they'll take a mile. Now that President Obama has shown that he can be rolled when it comes to his commitment to transparency, the defenders of torture are shamelessly pressuring him to keep their secrets even when court rulings and common sense say otherwise.

The latest attempt -- which finds complicit CIA officials pushing Obama to renege on his administration's pledge to release a highly critical 2004 CIA inspector general's report -- is so blatantly self-serving that even some former CIA officials are condemning it as unjustifiable.

Stop letting them play you for a sucker, Mr. President. Return to your principles. Let the sunshine disinfect this wound.

The CIA inspector general's report questioned the legality and the effectiveness of the CIA's interrogation program and set off a massive administration review -- and, ironically, reauthorization -- of torture techniques. Thus far, only a massively blacked-out version has been released to the public, in response to an ACLU lawsuit. After the ACLU appealed, however, the Justice Department promised a federal judge in May that it would review the report and produce by Friday any additional material that could be released.

R. Jeffrey Smith and Joby Warrick write in The Washington Post:

The CIA is pushing the Obama administration to maintain the secrecy of significant portions of a comprehensive internal account of the agency's interrogation program, according to two intelligence officials.

The officials say the CIA is urging the suppression of passages describing in graphic detail how the agency handled its detainees, arguing that the material could damage ongoing counterterrorism operations by laying bare sensitive intelligence procedures and methods.

So are they actually saying we don't want our torture secrets revealed -- because we might want to do it again? It's an amazing show of gall. And, in fact, too much even for some CIA veterans to take quietly.

Some former agency officials said that CIA insiders are fighting a rear-guard action to prevent disclosures that could embarrass the agency and lead to new calls for a so-called "truth commission" investigating the Bush administration's policies.

Two former agency officials who read the 2004 report said most of its contents could be safely released and, if anything, would seem familiar....

"[CIA Director] Leon Panetta has been captured by the people who were the ideological drivers for the interrogation program in the first place," said a former senior officer who spoke on the condition of anonymity when discussing the still-classified report....

"In essence, [Inspector General John Helgerson] was arguing in 2004 that there were clear violations of international laws and domestic laws," [said a former agency official who read the report]....

Another former official who read the report said its full text laid bare "the good, the bad, and the ugly" and added that "I believe that some people would find offensive" what was done, because it was "not in keeping with American values."

Who's Reading Your E-Mail?

By Dan Froomkin
9:03 AM ET, 06/17/2009

Talk about unknown unknowns.

When it comes to torture, we have a pretty good idea of what it is we still don't know. But when it comes to that other massive abuse committed by the Bush administration in the name of counter-terrorism -- the warrantless surveillance of American citizens -- we still know very little about what was done, what was stopped, and, even worse, what's still going on.

A bitter reminder comes today in the form of a somewhat cryptic New York Times article alleging that e-mail messages in particular have been and are still being swept up into massive NSA databases in ways that even the notoriously obliging folks on the secret FISA court and in Congress are finding disturbing.

James Risen and Eric Lichtblau write:

The National Security Agency is facing renewed scrutiny over the extent of its domestic surveillance program, with critics in Congress saying its recent intercepts of the private telephone calls and e-mail messages of Americans are broader than previously acknowledged, current and former officials said.

Lichtblau and Risen wrote in April that the N.S.A. had been engaged in "overcollection" of domestic communications of Americans. Since then, they write today,

several Congressional committees have been investigating. Those inquiries have led to concerns in Congress about the agency’s ability to collect and read domestic e-mail messages of Americans on a widespread basis, officials said. Supporting that conclusion is the account of a former N.S.A. analyst who, in a series of interviews, described being trained in 2005 for a program in which the agency routinely examined large volumes of Americans’ e-mail messages without court warrants. Two intelligence officials confirmed that the program was still in operation.

Overcollection on a large scale

could lead to a significant number of privacy invasions of American citizens, officials acknowledge, setting off the concerns among lawmakers and on the secret FISA court.

And shedding some light on one of the greatest mysteries about the government's secret surveillance program, Risen and Lichtblau write:

Current and former officials now say that the tracing of vast amounts of American e-mail traffic was at the heart of a crisis in 2004 at the hospital bedside of John Ashcroft, then the attorney general, as top Justice Department aides staged a near revolt over what they viewed as possibly illegal aspects of the N.S.A.’s surveillance operations.

Finally, lest you think the NSA can simply be trusted not to abuse its access to a massive database of domestic e-mails, Lichtblau and Risen report that a former analyst told them that he had been informed that another analyst had at one point improperly accessed the personal e-mail of former President Bill Clinton.

Let's Talk White House

By Dan Froomkin
9:02 AM ET, 06/17/2009

I'm Live Online today at 1 p.m. ET. So much to talk about! So please come join the conversation.

Cartoon Watch

By Dan Froomkin
8:59 AM ET, 06/17/2009

Ann Telnaes on Obama's secret visitor logs, Walt Handelsman, David Horsey, Larry Wright, John R. Rose and Ed Gamble on Obama's health-care plan, and Ron Rogers on the new GOP attack plan.

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