Morning Must Reads -- A weak suit by the SEC points to strong ties between Obama and Goldman 

Sebastian Mallaby -- In SEC vs. Goldman, who's really at fault?

The Obama administration would have a better argument to make that the SEC suit against Goldman Sachs was not a political stunt aimed providing some cover for the president’s own relationship with the firm (As Examiner colleague J.P. Freire points out, the firm put 10 times more into the Obama administration as Enron gave to George W. Bush) if the case were better.

Goldman is pretty clearly the most easily hated Wall Street firm. They made fat profits from taking huge risks and then letting the taxpayers take all the losses when the feds paid off the $22 billion in insane investment insurance Goldman had convinced the dummkopfs at AIG to issue.

But the SEC’s case against Goldman relates to a tiny portion of the money siphoned from taxpayers and it looks to be very thin at that – something whipped up on short order. That’s why Republicans are pushing for the emails between the White House and the agency.

As Goldman is now finding out, the problem of being in business with the government is that sometimes they cheat for you, but when the political climate demands it, they start cheating against you. Not to worry, though. A modest settlement following a complex legal battle followed by fat checks to the Hope and Change revival tour in 2012 should put everything right again.

Mallaby does a great job in explaining the abstruse financial product at the heart of the suit. It wasn’t a mortgage bond, but a bet on how mortgage bonds would perform. Goldman acted as the house, arranging the terms of the wager between John Paulson, the hedge funder who wanted to bet that mortgages would go bust, and Euro banks that were gobbling up anything that looked like a mortgage investment.

“Next, the SEC complains that Paulson had a hand in designing the securities, maximizing the chances that they would blow up. He did the equivalent of building a timber house with a large fireplace and a blocked chimney, then buying fire insurance on the structure. Shocking though this may sound, it is another non-scandal. An investor who wants to bet against a bundle of mortgages is entitled to suggest what should go into the bundle. The buyer is equally entitled to make counter-suggestions. As the SEC's complaint states clearly, the lead buyer in this deal, a boutique called ACA that specialized in mortgage securities, did precisely that.”


New York Times -- Financial Debate Renews Scrutiny on Banks’ Size

Writer Sewell Chan shows that bigger is hardly better when it comes to banking.

One area when conservatives and liberals can agree is that the idea of having an overclass of federally supported mega-banks is bad for the republic.

Liberals want the government to break up the big banks now. Conservatives want the big banks to lose any special regulatory status and be allowed to go bankrupt if they fail.

The Dodd-Obama bank bill does neither and in fact ensconces a handful of the biggest banks in what amounts to a VIP airport lounge for regulation and support. There are more rules, but the level of comfort is much greater than the rest of the terminal.

While President Obama promises to limit risk by controlling salaries for executives and imposing other restrictions, the best protection against risk – an inability to find investors – would actually be diluted by the special status for these elite bankers.

Andy Jackson wouldn’t recognize his party.

“What is not in doubt is that the crisis increased the size and importance of the six largest banks: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley.

During the crisis, Bank of America swallowed Merrill Lynch, JPMorgan Chase bought Bear Stearns and Wells Fargo acquired Wachovia. Goldman and Morgan converted to bank holding companies to gain access to lending from the Fed’s discount window.

In 1995, the assets of the six largest banks totaled 17 percent of the nation’s gross domestic product. Now they have assets amounting to 63 percent of G.D.P. Measured another way, the share of all banking industry assets held by the top 10 banks rose to 58 percent last year, from 44 percent in 2000 and 24 percent in 1990.”


Wall Street Journal -- Immigration Legislation Gains Traction

Sen. Scott Brown revealed that when President Obama called him Tuesday to lobby for the Dodd bank bill, Obama also told him to expect immigration legislation to crop up in about a month.

Why would Obama want to take on such an unpopular, politically divisive issue so soon after pushing through his national health program in an election year?

Even if he doesn’t get the bill passed, Obama hopes to fire up Hispanic voters in places like Nevada and California and label the GOP as xenophobic. It’s base politics and an effort to shrink the enthusiasm gap.

But its also poison with independent voters, blue-collar Democrats and states that still have manufacturing.

Writer Laura Meckler explains that the Republican position, forged in 2008’s primaries, is still “Fence first. Amnesty later.”

“‘I believe that we can convince our Republican colleagues that we have to secure the border first,’ Mr. McCain said during an appearance on KFYI radio in Arizona, according to The Hill. ‘There's no point of having immigration reform unless you can have the borders secure first.’

This week, Mr. McCain and Sen. Jon Kyl (R., Ariz.) proposed a 10-point plan for boosting border security.”


New York Times -- Senate Bill Sets a Plan to Regulate Premiums

It’s a tacit admission that the president’s national health program will keep pushing insurance premiums upward, but Democrats are bringing forward legislation to impose price controls on the insurance business.

Part of this is pure politics. When the premiums keep going up and up and up, even if the measure can’t pass, it allows lawmakers to point to a proposed solution and again lament Republican obstructionism.

Part of this is also the realization that Democrats are not likely to hold so many seats next year. Liberals are trotting out some of their favorite ideas, including federal price controls on insurance rates, while there is some hope that they might catch on. The measure was excluded from Obamacare because it could not be fit into the budget reconciliation approach used to circumvent a Republican filibuster.

Writer Robert Pear looks at what Tom Harkin, Diane Feinstein and others are cooking up.

“Senator Lamar Alexander of Tennessee, the No. 3 Republican in the Senate, said: ‘Health insurance companies’ profits for one year equal about two days of health care spending in the United States. So even if we were to take away all the profits of the so-called greedy insurance companies, that would still leave 363 days a year when health care costs are expanding at a rate our country cannot afford.’”


Washington Post -- Both national party committees spend big chunks on fancy meals, hotels, travel

Writer Jeffrey Smith seems surprised that political parties spend so much money sucking up to donors.

Both national parties treat big political donors the same way companies treat big investors: by spending a little of the money they pony up on pampering them.

The concept of the charity gala has morphed into a word of NFL skyboxes, Wall Street-sized tabs at nightclubs and restaurants and goodie bags.

Most political donors, though, are really either concerned about ideology or access. Democratic whales want face time with President Obama or key committee chairmen. It’s tougher for Republicans who have less to offer in the way of paid access and have tried to compensate with a more lavish VIP experience for donors.

Michael Steele’s $340,000 Hawaiian winter meeting and Lear jet travel are about showing off.

The question, though, is which part of the money goes to actually sucking up to donors – a pricier version of the PBS tote bag – and which part is wasted by staffers.

While Democrats save money by using the White House as the ultimate perk, it seems like Republicans aren’t getting much bang for the buck.

“The nonprofit Center for Responsive Politics, in an analysis done at the request of The Post, calculated, however, that administrative and fundraising expenses consumed about $60 million of Democratic revenue in this cycle through the end of February, or 59 percent of total revenue that exceeded $100 million. For Republicans, the amount exceeded $74 million, or 68 percent of $109 million in revenue.”


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About The Author

Chris Stirewalt


Washington Examiner Political Editor Chris Stirewalt, who coordinates political coverage for the newspaper and in addition to writing a twice-weekly column and
regular blog posts.

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