Morning Must Reads -- Realizing the importance of the case, my men are rounding up twice the usual number of suspects. 

New York Times -- Top Goldman Leaders Said to Have Overseen Mortgage Unit

The Obama administration is getting tough with Goldman Sachs… kind of.

The investment firm that provided more campaign contribution to Obama than any other group in 2008 had become something of an embarrassment for Democrats – Goldman alumni and friends of the firm populate the financial regulatory world.

And as the push for a Wall Street overhaul enters its home stretch, the White House is looking to put a little daylight between the party and the firm.

The SEC’s lawsuit against Goldman Sachs is based on the creation of a new kind of investment to allow a hedge fund manager who wanted to bet on the collapse of the real estate bubble to do so. The allegation of fraud comes from the claim that Goldman didn’t tell the other side (the investment arms of other big banks) that the hedger, John Paulson, had been allowed to devise the rules of the game.

It’s a very small slice of the plundering that went on during the subprime boom and bust, but the opportunities for criminal or even civil litigation are limited. Goldman and others were trying to exploit complex rules, not violate them.

When the firm pays a hefty, but quite affordable settlement in 18 months and laments the bad actions of one of its traders, the current debate will be long forgotten.

But the civil litigation against the firm provides the White House some political cover to push through a financial regulatory overhaul that stands to help Goldman quite considerably. It will decrease competition and reduce risk in the market, always good news for the industry leader.

The legislation is likely to pass not because of the political cover, but because of the large Democratic majorities in both houses of Congress. The three New England Republicans are under intense pressure to sign on to the bill and at least one of the 41 Republicans will join up.

The suit and the new talking points are about maximizing political benefit from doing so.

(My column about Chris Dodd’s unlikely role as the sheriff of Wall Street is here.)

Writer Louise Story gives us a great insight on how the Goldman mortgage operation worked with her sketch of the two guys who built the investment that now has the firm in hot water with the SEC.

In the firm’s huge mortgage operation, Fabrice Tourre, 31, and Jonathan Egol, 40, were going against the prevailing wisdom by preaching mortgage gloom. But once the bubble started bursting, they made it big by offering a way to profit.

It’s a captivating portrait of two hot shots that shows the two were hardly rogue agents.

“Mr. Tourre was the only person named in the S.E.C. suit. But according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman, viewed as the most powerful bank on Wall Street.

According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline.”


New York Times -- Reduction Is Theme Of President’s Next Act

Writer John Harwood really makes you work for it, but he has some news.

The Obama administration is chalking up a 5 percent VAT tax as a deficit reduction measure to be imposed along with some Social Security cuts. We know that by the time all of the exemptions are in place, the 5 percent would probably look more like 15 percent. But in the imaginarium of the White House policy offices, adding 5 percent to the cost of everything will reduce the deficit to 3 percent of GDP in 10 years. Unless it kills the GDP.

Harwood also tells us that the goal of the current chapter of the Obama administration is to “reduce consumption across the economy” as part of a national drive to live more modestly through energy taxes, etc.

Good luck selling that one.

“The deficit-reduction panel, led by Erskine B. Bowles, who was chief of staff in the Clinton White House, and Alan K. Simpson, the retired Republican senator from Wyoming, is scheduled to report on Dec. 1. The strength of its recommendations will influence the debate.

If the White House ultimately chooses a tepid stance, Mr. Obama would use 2011 to prove his commitment to paring spending — deferring tax increases until after 2012.”


Wall Street Journal -- FedEx, Teamsters Battle Over Bill

In the House, the legislation to fund the FAA is actually the legislation to unionize FedEx. The Senate bill does not do so much or spend so much.

And is often the case in Congress, the two plans are on a collision course. Time is running out and a deal will have to be brokered soon.

Whatever happens, you can expect that one of the best examples of the success of American entrepreneurship will be a little less successful when it’s all over.

Writer Josh Mitchell explains.

“The House bill would place some of FedEx's drivers and other employees under the National Labor Relations Act, allowing employees to organize locally. UPS drivers are governed by that law. The Teamsters says the bill would ensure fairness across the industry.

‘Their drivers, their loaders, their unloaders, they have the same training, they perform the same duties as all the other employees within the industry, who are rightfully covered’ by the act, says Ken Hall, Teamsters vice president and package division director.

FedEx argues that it is properly covered under the Railway Labor Act because of the history and arrangement of its air and ground networks.


New York Times -- Gates Pushes Back on Report of Memo About Iran Policy

Writers Thom Shanker and David Sanger got ahold of a memo for Defense Secretary Robert Gates that pointed out what is pretty obvious to outside observers – the U.S. lacks a coherent policy to deter Iran from going nuclear and then menacing the rest of the region.

The real news was that Gates, a careerist who is always careful to appear to be going with the flow, wrote it.

The problem is that while we don’t want Iran to get the bomb, we don’t have a plan for preventing that if weak Russian-engineered sanctions don’t work. Worse, we don’t have a plan for what to do if Iran actually goes nuclear.

For saying something so obvious, Gates had to do a whole passel of butt covering.

“In a statement issued on Sunday, Mr. Gates said he wished to correct what he described as mischaracterizations about the memo’s content and purpose, and to dispel any perception among allies that the administration had failed to adequately think through how to deal with Iran.

‘With the administration’s pivot to a pressure track on Iran earlier this year, the memo identified next steps in our defense planning process where further interagency discussion and policy decisions would be needed in the months and weeks ahead,’ Mr. Gates said.

‘The memo was not intended as a ‘wake-up call’ or received as such by the president’s national security team,’ he added. ‘Rather, it presented a number of questions and proposals intended to contribute to an orderly and timely decision-making process.’”


Washington Post -- Militia movement will be packing heat at rally on the Potomac

In what can only be described as a dream come true for MSNBC and The Washington Post, gun people are gathering in a national park across the river from Washington to exercise in a very public fashion their right to carry unconcealed weapons.

In a city that tries to forbid its residents from even having a bird gun in the closet, this is going to be a real culture clash.

“April 19 is the anniversary of the bombing of the federal building in Oklahoma City in 1995 and the government's final confrontation in 1993 with the Branch Davidian cult members in Waco, Tex. But Almond said he chose the date to honor the anniversary of the 1775 battles at Lexington and Concord that began the Revolutionary War, "and that is the only reason."

So-called open-carry rallies have been sprouting across the country. Hundreds gathered in Michigan, New Mexico and Ohio last week, and rallies also are taking place Monday in Arizona.”


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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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