Morning Must Reads -- Rotten regulation 

Wall Street Journal -- The SEC's Impeccable Timing

Examiner colleague Susan Ferrechio tells us that two things have opened the door to a bipartisan compromise on financial regulatory reform. First, the White House has agreed to accede to some Republican demands. Second, Democrats have been pushing hard on the narrative that the party is really getting tough on its friends on Wall Street. The party is heralding as evidence of its new convictions the SEC’s decision to sue Goldman Sachs for allegedly failing to disclose hedge funder John Paulson’s role in designing a new mortgage-backed security that he was betting against.

It becomes clear that the case is going to be a hard one to make, since Paulson denies any role and the disclosure rules tend to be lavishly loopholed.

But the Journal’s editorial board looks at the other reason for the suit: an effort to rebuild the SEC’s reputation after a series of huge errors in the boom and bust years.

The same day that the Goldman suit – a rather small effort in light of the size of the Panic of 2008 – the agency also did a turkey drop of the inspector general’s report on the agency’s handling of alleged mega-swindler Allen Stanford – a politically connected investment guru with lots of friends on both sides of the political aisle.

It’s an appalling litany of cowardice and bureaucratic sloth that casts even greater doubt on the motivations of the case against Goldman.

“In other words, the SEC is a dreadful failure in fulfilling its core mission of protecting individual investors, as the Stanford and Madoff cases show. But the SEC is very good at nailing politically correct targets like Goldman years after the fact on charges that have little or nothing to do with the investing public. On the Goldman case, by the way, the news broke yesterday that the SEC commissioners split 3-2 on whether to bring the lawsuit—a rare partisan split on such a prominent case and further evidence of its thin legal basis.

In the cases of Stanford and Madoff, thousands of small investors lost their life savings. In the case of Goldman, some masters of the financial universe lost money on what they knew was a calculated gamble. Which did more societal harm?”

 

Wall Street Journal -- Paulson Gave to Both Parties

The hedge fund boss who the SEC says was behind the Goldman non-disclosure, John Paulson, nicely illustrates the way Wall Street looks at Washington.

Indispensable reporter Brody Mullins and colleague Jean Spencer look at the records and find that Paulson has held fundraisers in recent weeks for Democratic Sen. Chuck Schumer and for the GOP that aims to put Schumer in the minority.

Paulson got together with presidential hopeful Mitt Romney and his ally Michael Steele for a fundraiser for the RNC and then turned around to raise money for would-be Senate Majority Leader Schumer.

No matter who loses, Paulson wins.

Across the country, Goldman cash has turned rancid in the campaign accounts of candidates and pressure is mounting on Obama to return the $1 million he got from Goldman – his greatest corporate benefactor.

“So far during the 2010 congressional elections, Democrats dominate the list of top recipients of donations from Goldman's PAC and employees. The top recipient is New York Democratic Rep. Michael McMahon, who has collected $51,000 from the company and its employees. Mr. McMahon, a first-term member, could face a difficult re-election fight. A spokesman for Mr. McMahon declined to comment.

Other leading recipients include Alabama Sen. Richard Shelby ($35,000), top Republican on the Senate Banking Committee; New York Democratic Sen. Kirsten Gillibrand ($24,000); and New York Democratic Rep. Scott Murphy ($23,000). The lawmakers' offices didn't respond to requests for comment.”

 

USA Today -- Payday lenders lobby for loophole in regulation

One can argue banks ought not be subject to a new consumer lending regulatory board on the grounds that it will make credit more scarce and opportunity more limited. But if there is going to be such an agency, but there’s no argument to be made that the payday lending business, which acts as legal loan shark to the most desperate Americans, should be exempt.

Writer Fredreka Schouten has been doing an admirable job of tracking the efforts of the industry to get itself exempted. As the government makes it harder to get legitimate loans, the payday lenders are looking for a chance to wriggle out, giving them an even better market position in Chris Dodd’s brave new financial world.

“Payday lenders offer short-term, high-interest loans. The borrower agrees to pay a finance fee — generally $15 or $20 for every $100 borrowed — and writes a postdated check that the lender pledges not to cash until the borrower's next payday. Lenders say they provide convenient access to money, particularly as more Americans find themselves shut out of traditional credit during the recession. Their critics, such as the Center for Responsible Lending, decry annual interest rates, which can exceed 400%, as too high.

The number of payday lending stores has doubled to more than 22,000 in the past decade. At the same time, the industry has increased its donations — giving more than $964,000 in 2008 federal races, up from $54,000 in 1998, according to the non-partisan Center for Responsive Politics. So far, the industry has contributed nearly $750,000 toward this year's congressional races.”

 

Henry Allen -- The death of the American Century

Allen, the great Washington Post culture critic who did his duty in Vietnam as a Marine and made headlines recently for being the only 70-year-old in an American newsroom to take a poke at a nasty colleague, has something important to say in his latest piece.

It’s about the American obsession with being the savior of the world. And while I’m prone to think that America can offer some degree of salvation through our example and the just use of arms in our own defense, Allen’s argument that the time for some more humility in our foreign policy is hard to argue against. The argument against the second Obama surge and the corresponding nation building strategy in Afghanistan is even more potent.

It really is must reading. But it takes a strong stomach.

“As in Afghanistan's Korengal Valley, which American soldiers abandoned last Wednesday, five years after invading it to bring truth, justice and the American way to Afghans who responded by hating us.

We gave them money, all kinds of goodies. They hated us.

We begged them to let us build a road that would link them with the outside world. They hated the road. And when we didn't get the point, they blew away six members of the road-building crew.

They hated us so much that we had to bribe them to let us leave -- 6,000 gallons of fuel and a crane -- without killing us for the sheer joy of it.”

 

Washington Post -- FDA plans to limit amount of salt allowed in processed foods for health reasons

 

What in the hell?

The FDA has the power to limit sodium content in food? When did that happen?

As a bacon enthusiast with a handsome systolic score, Lindsay Layton’s story was enough to get my blood pressure up.

We had seen the stories that the big snackzillas like Frito Lay were already working to lower sodium content, but I assumed that it was because they wanted to compete for health-conscious consumers, not because they were one step ahead of the salt sheriff.

Layton tells us that the FDA is moving ahead on a plan to set legal salt limits in food and then ratchet down those allowable levels over the coming decade in an effort to “save thousands of lives.”

Manufacturers are already required to label a bag of pretzels as if they were formaldehyde-dipped cigarettes -- and it’s been a good thing. Smart consumers read labels and make good choices. Stupid consumers ignore the information and suffer the consequences. As fat as America is, there’s good evidence that the informed consumer model is working.

But in the post-American America, those who fail to heed the warnings are a cost to all of us mandatorily insured workers of the world. A government that has a fiduciary interest in your blood pressure is a government that will run your life.

What a prissy country this has become.

“Officials have not determined the salt limits. In a complicated undertaking, the FDA would analyze the salt in spaghetti sauces, breads and thousands of other products that make up the $600 billion food and beverage market, sources said. Working with food manufacturers, the government would set limits for salt in these categories, designed to gradually ratchet down sodium consumption. The changes would be calibrated so that consumers barely notice the modification.

The legal limits would be open to public comment, but administration officials do not think they need additional authority from Congress.

‘This is a 10-year program,’ one source said. ‘This is not rolling off a log. We're talking about a comprehensive phase-down of a widely used ingredient. We're talking about embedded tastes in a whole generation of people.’”

 

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About The Author

Chris Stirewalt

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

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