The Dylan Ratigan does a pretty good job of explaining the 2200 page report that exposes the Lehman scandal. It shines a bright light on why we need financial regulations and serious reforms.

The NY Times:

The bankruptcy examiner’s report filed by Anton R. Valukas on the 2008 demise of Lehman Brothers discusses some accounting gimmicks that are eerily reminiscent of how Enron tried to prop up its balance sheet back in 2001 before it collapsed. Both companies appear to have played right along the edge of properly accounting for transactions designed to make them appear much stronger than they turned out to be, becoming steadily more aggressive as they teetered on the brink of ruin.
The examiner’s report discusses potential claims that the bankruptcy trustee can bring against Lehman’s former officers and outside advisers and does not mention potential government law enforcement action.

Reading his report, however, gives strong indications that at a minimum the Securities and Exchange Commission is likely to pursue civil charges for securities fraud, and that criminal charges are certainly possible against Lehman’s former top executives. The examiner’s report gives us a new term for hiding problems on a corporate balance sheet that may become common parlance: “Repo 105.” Starting in 2001, Lehman Brothers engaged in repurchase agreements, called “repos,” which were described by DealBook as “what amounts to a short-term loan, exchanging collateral for cash up front, and then unwinding the trade as soon as overnight.”

Read here for more of the story.

Market Watch:

The report, which runs to 2,200 pages, said former top officers including ex-CEO Dick Fuld and Chief Financial Officers Chris O'Meara, Erin Callan and Ian Lowitt could face legal claims for negligence of breach of duty.

Auditor Ernst & Young could also potentially face a professional malpractice claim for not challenging Lehman's non-disclosure of the off-balance sheet transactions, the report said. See full story on the Lehman report.

Lehman's collapse in 2008 really got things going.

Lehman Brothers, the fourth-largest US investment bank, has filed for bankruptcy protection, dealing a blow to the fragile global financial system.

The news led to sharp falls in share prices around the world, and officials took measures to reassure markets. Lehman had incurred losses of billions of dollars in the US mortgage market.
--

US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses".

But he added: "The American people can remain confident in the soundness and resilience of our financial system."

However he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead before the market was corrected.

Turmoil would continue in financial markets until the housing correction was completed, he added.

Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".

But he gave no details of what such steps might mean.

And remember these magical words by President George Bush?

Earlier in the day President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments."

This BBC article brings back really bad memories, but I hope they remind the Congress to get financial reform done, now.

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Isn't it interesting that Cokie Roberts spends her Monday morning segment on NPR talking about two admittedly disgraced Democrats who will not be holding their positions come Election Day.

Charlie Rangel and David Patterson are an admitted embarrassment to the Democrats. Rangel, like much of Congress, is long overdue for retirement, and Patterson's made such a mess of his career the sooner gone the better.

But why other than pure partisan hackery would Cokie Roberts spend her Monday morning spot talking about them and not mention that Ensign, Vitter, and Sanford still have jobs? Ensign paid off his mistress's family, Vitter was involved with a prostitute, and Sanford was MIA from his job for days on end. These guys still have the backing of their party? Family values much?

Cokie can always be counted on to live up to the old joke by Driftglass:

Dick Cheney is caught setting kittens on fire and throwing them at homeless veterans. What are the first three words out of Cokie Robert's mouth?

"But the Democrats..."

Next she'll be explaining how much Republican scandals help Mitt Romney. Sigh.

As time goes by, more and more scandals will be exposed while George Bush was president.

Bloomberg:

At least four U.S. investigations into unintended acceleration by Toyota Motor Corp. vehicles were ended with the help of former regulators hired by the automaker, warding off possible recalls, court and government records show.

Christopher Tinto, vice president of regulatory affairs in Toyota’s Washington office, and Christopher Santucci, who works for Tinto, helped persuade the National Highway Traffic Safety Administration to end probes including those of 2002-2003 Toyota Camrys and Solaras, court documents show. Both men joined Toyota directly from NHTSA, Tinto in 1994 and Santucci in 2003.

While all automakers have employees who handle NHTSA issues, Toyota may be alone among the major companies in employing former agency staffers to do so. Spokesmen for General Motors Co., Ford Motor Co., Chrysler Group LLC and Honda Motor Co. all say their companies have no ex-NHTSA people who deal with the agency on defects.

Possible links between Toyota and NHTSA may fuel mounting criticism of their handling of defects in Toyota and Lexus models tied to 19 deaths from 2004 to 2009. Three congressional committees have scheduled hearings on the recalls.

“Toyota bamboozled NHTSA or NHTSA was bamboozled by itself,” said Joan Claybrook, an auto safety advocate and former NHTSA administrator in the Jimmy Carter administration. “I think there is going to be a lot of heat on NHTSA over this...read on

Toyota has only lost almost 28 billion in market capitalization. The influence of former employees from government agencies directly tied to their new jobs is a disgrace.
Southern Beale writes:

It’s that revolving door between government agencies and those major corporations in the industries they are meant to regulate. Throw in a few lobbyists and a few million dollars in K Street money and you’ve got a very cozy scenario, indeed. It's all just so "Club For Growth," isn't it?

No wonder our government is broken: it’s a wholly-owned subsidiary of Corporate America. And Corporate America doesn’t care about real Americans, just their money.

Hey Toyota: dead Americans don’t buy cars.

I'm sure Grover Norquist is happy that Tinto and Santucci did their best to stop the government from doing their job, because those government probes are just so bad for corporate America. I mean, the free markets will magically help raise the people that died because of Toyota's problems from the dead--probably on Halloween. That's always a good day for resurrections.

Hey conservatives: How's that "small government" thing working out for ya?

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(Quiz Show Scandals of 1959 - chipping away at our great National Naivety)

Coming to the end of the 1950s. 1959, just fifty years ago, the world was starting to come unglued. The eternal Cold War was slogging along with the extra added bonus of the Space Race being solidly in the Soviet Unions corner by the end of the decade. Berlin and U2 just around the corner. Scandals took a bite out of our collective innocence with rigged Quiz shows and teary-eyed confessions of wrong doing plastered across most newspaper headlines.

All in all, it was a year of transition - a preview of coming attractions for the 1960s. The decade when all social mores were kicked to the side and independence was rife throughout the world. But that was to come.

1959 was a curious look back with an apprehensive look ahead. This look back came from CBS News, narrated by Walter Cronkite.

You heard the one about Senator Ensign's affair involving hush money, right? And you're surprised he's still got a job, right? Well, this Senator Ensign story may finally mean the end for him.

The NY Times has a long piece about it.

Early last year, Senator John Ensign contacted a small circle of political and corporate supporters back home in Nevada — a casino designer, an airline executive, the head of a utility and several political consultants — seeking work for a close friend and top Washington aide, Douglas Hampton.

He’s a competent guy, and he’s looking to come back to Nevada. Do you know of anything?” one patron recalled Mr. Ensign asking.

The job pitch left out one salient fact: the senator was having an affair with Mr. Hampton’s wife, Cynthia, a campaign aide. The tumult that the liaison was causing both families prompted Mr. Ensign, a two-term Republican, to try to contain the damage and find a landing spot for Mr. Hampton.In the coming months, the senator arranged for Mr. Hampton to join a political consulting firm and lined up several donors as his lobbying clients, according to interviews, e-mail messages and other records. Mr. Ensign and his staff then repeatedly intervened on the companies’ behalf with federal agencies, often after urging from Mr. Hampton.

While the affair made national news in June, the role that Mr. Ensign played in assisting Mr. Hampton and helping his clients has not been previously disclosed. Several experts say those activities may have violated an ethics law that bars senior aides from lobbying the Senate for a year after leaving their posts...read on

Oh, no.., What will the Dinosaurs think? The pro-birth anti-evolution Christian evangelism movement just suffered a horrible blow.

A federal judge has cleared the way for the government's seizure of a creationism theme park in Pensacola owned by a couple convicted of tax fraud.

A ruling by U.S. District Judge Casey Rodgers states that the nine properties that make up Dinosaur Adventure Land as well as two bank accounts associated with the park will be used to satisfy $430,400 owed to the federal government.

Kent Hovind, who founded the park and a ministry, Creation Science Evangelism, is serving 10 years in federal prison for failing to pay the Internal Revenue Service more than $470,000 in employee taxes.

He was found guilty in November 2006 on 58 counts, including failure to pay employee taxes and making threats against investigators.

The conviction culminated 17 years of Hovind sparring with the IRS. Saying he was employed by God and his ministers were not subject to payroll taxes, he claimed no income or property. Hovind is incarcerated at the Edgefield Federal Correction Institution in South Carolina.

They lie about their dirty dealings and now DrDino.com is in trouble. Hang on, it's time to call in the Flying Spaghetti Monster. It can help us!

The citizens of Alaska must grow more embarrassed by the day:

ANCHORAGE, Alaska — Another ethics complaint was filed against Alaska Gov. Sarah Palin on Monday – less than a week before her resignation – alleging she failed to submit complete gift disclosure forms in a timely manner.

The complaint filed with the attorney general is the 19th ethics grievance against Palin, who responded via Twitter postings that the filings came from a "serial complainer" intent on abusing the political process.

And now an independent investigator finds Palin may have broken ethics laws by taking big bucks from her GOP buddies to pay for legal bills:

The report obtained by The Associated Press says Palin is securing unwarranted benefits and receiving improper gifts through the Alaska Fund Trust, set up by supporters.

An investigator for the state Personnel Board says in his July 14 report that there is probable cause to believe Palin used or attempted to use her official position for personal gain because she authorized the creation of the trust as the "official" legal defense fund. Read on...

Continuing her bid to be the biggest political joke in U.S. history, soon-to-be ex-Alaska Governor Sarah Palin chose to whine about the charges on Twitter, accusing her accuser of violating ethics laws:

"In violation of Ethics Act more allegations were filed today by serial complainer; gave to press be4 we could respond; ridiculous, wasteful..." Palin wrote in the first of a string of postings on the social networking site Twitter. Read on...

As our Jon Perr notes, Palin could have raised a lot more money and gotten a lot more help from the GOP faithful had she adopted the Scooter Libby 3-step defense method.

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Chris Matthews highlighted this nutcase birther at a town hall with Rep. Mike Castle (R-DE), questioning Obama's citizenship and forcing a recitation of the Pledge of Allegiance. It's unfiltered crazy in action. In the 1990s, the media took these fringe scandals regarding Bill Clinton and gave them a platform and some credibility, seeping them into the mainstream. You can draw a through-line from the out-there lies of the extreme right like the alleged murder of Vince Foster and the Clinton impeachment. Some in the media, like Lou Dobbs, continue to do that today, legitimizing the birther movement. And several far-right Congressmen have co-sponsored a bill to require Presidential candidates to provide proof of US citizenship. Today on Hardball, Rep. John Campbell, who thinks Atlas Shrugged is non-fiction, tried to dodge the issue by claiming that this is merely a technical bill to ensure Presidents meet the requirements of office in some official capacity, but Matthews was having none of it. He called it a "crazy proposal" and tried to peg down Campbell on whether or not he believed Obama was an American citizen. It took him all of 10 minutes to finally say he believed Obama was.

MATTHEWS: Congressman, nice try. But what you're doing, it's a nice try, and I'm laughing with you only to this extent, because I know it's a nice try. What you're doing is appeasing the nutcases. As you've just pointed out, this won't prove or disprove whether Barack Obama's a citizen. By the way, let me show you his birth certificate. That's the way to deal with this. Mail this birth certificate to the whacko wing of your party, so they see it and say, "I agree with this, it's over." [...] you're verifying the paranoia out there. You're saying to the people, "That's right, it's a reasonable question whether he's a citizen or not."

Campbell squirmed and shuffled, first saying that Obama was an American citizen "as far as I know," (Matthews responded: "As far as you know? I'm showing you his birth certificate!") and then eventually saying "I believe he is."

Now, I don't remember Matthews being so insistent about "appeasing the nutcases" back in the 1990s, when he had Paula Jones on his shows, and Dan Burton, and the Arkansas State troopers, and every other two-bit huckster peddling juicy gossip about "Slick Willie." But clearly the atmosphere has changed, at least for Tweety. The birther movement has become a bridge too far.

Never mind that the Senate went so far as passing a unanimous resolution that John McCain, born in the Canal Zone in Panama, was a natural-born citizen. Democrats resolved the issue quickly; Republicans will raise questions and put out clarifying legislation and just put it "out there."

It just shows you how diverged the conversations have become in this country. Democrats are debating how to tackle health care and whether a public option works best and how best to get costs under control, and the right has become fixated on the idea that Barack Obama's family faked his birth certificate 47 years ago, knowing he would run for President eventually and need a cover story.

If you didn't see John McCain's weasel defense of Sarah Palin quitting her position as Governor after he vouched for her character when he chose her to be his VP, you should. David Gregory even listed his own political history, which included scandals, personal attacks and being tortured to list a sort of character building for not quitting, and asked again, "How could she just quit?" His responses were very weird. Palin threw in the towel when it got rough and walked away from the voters of Alaska to make a fortune of doubloons.

If anybody should quit a governorship, it should be Arnold because he's led the great state of California into financial ruin in tandem with the legislature. Is California worse off than Alaska? You betcha. Did Arnold quit? No...I kinda wish he would.

(image courtesy of bjkeefe)

The right is collectively imploding over Sarah Palin's resignation, and as with any sort of passing there comes a period of grieving. Two major stages in that process are denial and anger, and the always-classy Erick Erickson of RedState is already showing signs of both:

1. Sarah Palin resigned, I think, to spare her family from more attacks. I don’t think it is a coincidence that Sarah Palin is doing this just days after a very nasty Vanity Fair article where folks like Nicolle Wallace and, according to Bill Kristol, McCain campaign manager Steve Schmidt (though I’m told Schmidt is not involved), savaged her.

2. Unfortunately, by resigning, I think the left and national media will be emboldened to ritualistically engage in the metaphorical gang raping of conservative politicians, particularly those who are female and have children. They’ll decide savaging Palin’s family drove her from office, so the sky’s the limit on the next conservative with kids.

Finally, Erickson goes flat out delusional, comparing Palin's resignation to Obi Wan Kenobi taking one for the team and sacrificing it all to fight the dark side:

4. I’ve had this running thought all day, perhaps because I was watching it on TV in HD for the first time, that this is kind of like Ben Kenobi letting Darth Vader strike him down. Palin is not going to run in 2012, but by doing this she can now become Barack Obama’s worst nightmare, and help rebuild the opposition to Obama. How? Because were she to remain a 2012 contender, she’d keep having stories by anonymous McCain campaign staffers and other 2012 contenders going after her and her family. Take that ambition off the table and it neutralizes a lot of that. So she can focus on candidates and ideas without an ulterior motive focused on 2012.
Read on...

Really? Erick, you know this wasn't about her children. She used them as political props all through the '08 campaign and continued to do it till the bitter end. And in the end, it was her ineptitude and ethical shortcomings that did her in. Perhaps the enduring lesson from this tragic political tale with be that going forward, politicians of all stripes should think twice about exploiting their children for political gain.

Is there an indictment coming for Palin? That remains to be seen, but one thing seems certain -- Sarah Palin is now toxic. She walked away from the people of her state when the going got tough and has shed any remaining crumbs of credibility she may have had left.

I do like Chris Cillizza's The FIX column for the WaPo on most days and he's been very helpful via e-mails, but what was up with his man-crush on Lindsey Graham after watching him on MTP? Graham is a constant figure on the talk-show circuit and has been for a long time, so I really find it surprising that Chris would almost call him " A New Republican Leader?"

Dispirited Republicans looking for national leaders amid a wash of scandals that have dominated national news over the last fortnight got a bit of good news on Sunday with an inspired performance on "Meet the Press" by South Carolina Sen. Lindsey Graham (R).

Graham, who spent the 2008 election cycle as Sen. John McCain's loyal sidekick, appeared alongside former Massachusetts governor Mitt Romney, the GOP frontrunner in advance of 2012, and managed to stand out.

Why? Because unlike other Republicans who seem to be so fixated on scoring political points on President Obama, Graham was willing to point out where his own party had strayed while also making a reasonable argument for GOP ideals...read on

All he's every been is a yes man for John McCain ever since I can remember who seems jacked up on Red Bull most days when he's in front of the cameras. I'd like Chris to answer the question I posed on Sunday: Why was he on NBC at all when he clearly is compromised when talking about Gov. Mark Sanford -- because he's Godfather to several of his kids? Maybe that was the reason Chris thought that he seemed a bit more humble than usual? Huckleberry was really close to Sanford and had to be torn up inside over Sanford's affair, but it really didn't stop him from taking shots at President Obama even when he tried to compliment him.

Continue reading »

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(Thalidomide - when wonder drugs went awful)

One of the bigger scandals to hit the pharmaceutical industry came in the form of Thalidomide, a drug marketed throughout Europe in the late 1950's as sedative, pain killer and a morning sickness preventative for pregnant women.

Only it wasn't. By 1960 the drug was widely available throughout the world (even as an over-the-counter item in Germany) and the horrible side effects came to light. Children born with an alarming number of birth defects, most in the area of gross deformities.

By 1961, the FDA instituted a recall of Thalidomide and banned its use. But the question was, why did the FDA take so long to make these horrific discoveries and why did they wait almost a year to get them off the market?

As a result, the FDA utilized more stringent testing - although judging from the amount of drug recalls and related scandals the past several years, it would give pause to the idea that the system is foolproof.

Oddly enough, Thalidomide has made something of a comeback in recent years, not as a antidote for morning sickness but as a treatment for skin lesions and multiple Myeloma and other cancer forms.

This interview, from the ABC Sunday series "From The Capitol" from August 12, 1962 features George P. Larrick, Commissioner of the FDA talking about the Thalidomide scandal and the FDA's role in public safety.

It would be nice if we were out of the woods over future Thalidomide scandals. But that's not likely.

South Carolina Gov. Mark Sanford's disappearing act makes no sense. All his hopes to run for President in 2012 as Mr. Conservative are shot to hell. First we're told he was out hiking on the Appalachian Trail. Now it turns out he was on a "pleasure" trip to Argentina:

Sanford flew to Atlanta early on Wednesday and told reporters for The State, South Carolina's biggest newspaper, he had decided at the last minute to go to Argentina and drive along its coastline.

"I wanted to do something exotic ... to get out of the bubble I am in," he told the paper, adding he had traveled alone.

How can he be trusted when his wife hasn't even heard from him in almost a week?

A CNN reporter tracked down Jenny Stanford at her Sullivan Island vacation home. Sounding less like the wife of a 2012 presidential contender and more like America's favorite reality TV star announcing her separation from her husband, she said: "I am being a mom today. I have not heard from my husband. I am taking care of my children."

Jenny Stanford had helped stoke the story yesterday when she told the AP she didn't know where her husband was.

Notice how Sanford's wife doesn't say "our" children. She says "I am taking care of my children." That's powerful stuff. And he was gone for Father's Day.

Earlier reports said this:

On Tuesday, sources told News 4's Nigel Robertson that a state vehicle is missing and was tracked down, not to the Appalachian Trail, but to the Hartsfield-Jackson Airport in Atlanta.Sources told Robertson that a federal agent spotted Sanford in the airport boarding a plane. Robertson was told that the governor was not accompanied by security detail.Sanford has been out of reach for more than four days, including Father's Day.

What's wild is that everyone in his state has turned on him:

"While I believe every person deserves a vacation, our constitution gives only one man authority to act in case of an emergency - the governor of South Carolina. Should the governor decide to vacation away from South Carolina again, it is my sincere hope that he will take his security detail and keep his cell phone on so that he can be reached in case of a large-scale emergency," the statement said.

"If he is not willing to do so, he should turn his gubernatorial authority over to the lieutenant governor,” it continued. Neither Sanford’s office nor the State Law Enforcement Division, which provides security for governors, had been able to reach Sanford since he left the mansion Thursday in a black Suburban SUV assigned to his security detail, said state Sen. Jake Knotts , R-Lexington, and three others familiar with the situation, but who declined to be identified.

Take the Mark Sanford Poll.

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(The Shoes of Billy Sol Estes - no doubt the Alligator had other plans.)

What had to be one of the biggest scandals of the 1960's centered around one Billy Sol Estes whose influence and fraud wandered through many high places in Washington, allegedly all the way up to the office of Lyndon Johnson. Estes was the subject of a Senate Sub-committee investigation on political corruption which led to a startling number of discoveries and an even more startling number of "suicides" in the process. Although Estes was convicted of fraud and corruption charges and sentenced to prison, his conviction was overturned by a Supreme Court decision that ruled the massive amount of publicity the investigation garnered made a fair trial impossible.

Still, the allegations were serious enough about LBJ to force Kennedy to consider dropping him as running mate in 1964. And he probably would have, had fate not intervened.

On July 2, 1962, at the height of the investigation, ABC's long-running Sunday talk show Issues and Answers featured a dialogue between Texas Attorney General Will Wilson and Senator Edmund Muskie, who was a member of the Senate Subcommittee investigating the Estes scandal.

(Sen. Sam Irvin (left) - Bill Sol Estes (right))

Dan Froomkin has a great post up about the newly released torture memos and he knows this is only the beginning.

The full extent of what was done in our name remains unclear, and there are still big gaps in our understanding of how it all came to pass. Just how many people were detained by the U.S. government in the so-called “war on terror”? How many of them should never have been held in the first place? How many of them were mistreated, and how badly? Did torture and abuse produce valuable information? How much did it embolden our enemies? How many people knew what was going on? Where in the chain of command does the responsibility lie? Why didn’t more people object? How direct was the link between what happened in the offices of the president and vice president and the cells of Guantanamo and Abu Ghraib? How willful was the administration’s corruption of the law?


And it’s not just torture and detention. When it comes to warrantless surveillance, for instance, what little we know about the program as it still exists today is still considerably more than we know about the program as it operated before the revolt in Bush’s own Justice Department. What were we doing from 2001 to 2004 such that even John Ashcroft couldn’t bring himself to approve it any longer? How many people have been wiretapped without a warrant? What happened to all the data?


The public overwhelmingly wants some sort of official inquiry. According to a recent USA Today/Gallup Poll, nearly two thirds of Americans support an investigation into the treatment of terror suspects during the Bush administration – although they are split on whether it should be conducted by an independent panel or by federal prosecutors.


Journalists have a special role here. Not only can we keep chipping away at the truth – but we can and should remind members of the public, over and over again, about all the facts that remain hidden from them, including information about acts committed in their name that had -- and continue to have -- profound moral and legal implications. We should also remind Americans that our moral stature on the globe has been -- and will remain -- seriously damaged until or unless there is some sort of process of reckoning and accountability. And while there’s no need for journalists to get involved in partisan battles, when the question at hand is whether the nation will avert its eyes or face up to the truth, it’s entirely appropriate for journalists to take a stand.

NiemanWatchDog is having a series devoted to these questions. Journalists, please do your jobs.