Gray Lady Bangs the Drum on Institutional Racism/Police Accountability

On the one hand, we have The New York Times daily laying the foundation of the New Cold War; while on the other, the "newspaper of record" nearly as often shines a light on institutional racism, the criminal justice system and the lack of police accountability. It is a strange age we live in. A Cold War is being resuscitated sans the specter of international communism at the the same time one of the main tenets of the 1960s New Left -- black liberation -- is making a comeback.

Make no mistake, the Gray Lady is advocating for black justice. She didn't need to run a story (Carol Cole-Frowe and Richard Fausset, "Jarring Image of Police’s Use of Force at Texas Pool Party") about the police storming a pool party in a Dallas suburb, but she did. And it is decent story to boot, drawing attention to the racial divide in the city where the incident took place:

McKinney, with around 150,000 people, is a fast-growing, mostly middle-class suburb with deep racial and economic divisions. In 2009, according to an article in The Atlantic, the city settled a lawsuit in which it was accused of hindering the construction of affordable housing in the western part of the city, which is more white and more affluent.

The pool party took place on the west side, in a neighborhood that residents said is usually marked by friendly relations among black, white, Hispanic and Asian residents.

Of course the video speaks for itself. You would be hard pressed to find a better depiction of domination: an armed cracker in a dark uniform manhandling a black girl in a colorful bathing suit. It as if white fascistic America's pornographic daydream was caught on a cell-phone camera.

And the McKinney pool party story is not even the best black justice report featured in today's paper. Michael Schmidt and Matt Apuzzo have an excellent piece, "Cleveland Leaders Bypass Prosecutors to Seek Charge in Tamir Rice Case," on how an obscure Ohio law is being used to attempt a bypass of the grand-jury system so that the murder of Tamir Rice might receive a public trial:

Ohio is one of a handful of states that allow residents to request an arrest without approval from the police or prosecutors. It is difficult to know how the case will play out because there is little precedent for a citizen to request an arrest in such a contentious, high-profile case. 

Mr. Madison [lawyer for the Tamir Rice family] said that he knew of no instance in which an Ohio judge had ordered the arrest of a police officer based on a citizen complaint, but that most previous complaints had been frivolous. 

Shooting deaths by officers over the past year have prompted the most significant national discussion on policing since the 1991 beating of Rodney King in Los Angeles. The debate has highlighted, among other things, the differences in how prosecutors handle cases involving investigations of police officers. 

In a typical murder case, prosecutors often present only their best evidence to a grand jury in order to get an indictment. Arguments that a shooting was justified are typically not made until much later, at trial. 

In cases involving police officers, prosecutors are more likely to let grand jurors hear conflicting testimony or see evidence favorable to the officer. Critics say that has established two standards for bringing charges: a high one for police officers, and a much lower one for everyone else. 

A task force appointed by President Obama recommended in March that all cases involving the use of force by police officers be handled by independent prosecutors to “demonstrate the transparency to the public that can lead to mutual trust between community and law enforcement.” In the Cleveland case, however, Cuyahoga County prosecutors will decide whether to bring charges. Those prosecutors work regularly with Cleveland police officers, a closeness that activists have said is a conflict of interest.

By going directly to a judge, community leaders are trying to circumvent that process. Ohio law allows anyone with “knowledge of the facts” to file a court affidavit and ask a judge to issue an arrest warrant. If approved, the arrest would be followed by a public hearing, and community members said that was preferable to allowing prosecutors to make the decision in secret.

“Here we are taking some control of the process as citizens,” Mr. Madison said. “We are going to participate without even changing the law.”

Tamir was fatally shot in November while he played in a park. A 911 caller had reported that the boy was waving a gun that was “probably fake.” When officers arrived, they pulled their car into the park, next to the boy. Within two seconds, an officer, Timothy Loehmann, shot Tamir in the abdomen. The boy’s gun, it turned out, was a toy replica of a Colt pistol and fired plastic pellets.

The shooting raised questions about whether the officers followed procedures and whether they had time to warn Tamir three times to put down the gun, as they said they had done. Lawyers for the city have defended the shooting, saying the officers mistook the toy for a real gun. 

The Rev. Jawanza K. Colvin, who signed affidavits seeking charges of murder and manslaughter, said: “We have the video, and having witnessed it, you can see that it took two seconds for the officers to shoot a 12-year-old boy who showed no malicious intent or aggressive behavior. There is certainly reasonable suspicion that a crime was committed.” 

The planned filing comes as Cleveland tries to move past what the Justice Department recently said was a pattern of police abuse and unconstitutional behavior. The city agreed to put in place new training and civilian oversight to head off a civil rights lawsuit.

It is hard for me to imagine a Cleveland judge issuing an arrest warrant for Timothy Loehmann. The judicial system exists to protect the status quo, and the status quo allows law enforcement to operate with impunity. This impunity embraces the regular murder of black people.

For some reason, the NYT has taken up the cause of the #Black Lives Matter movement, an amazingly progressive thing to do and something that doesn't square with the paper's crude, backward parroting of USG propaganda when it comes to foreign affairs. But why?

Are the editors privy to some secret government study that foretells of a crackdown by the police state and they're, in the finest tradition of public service, trying to get out front and build a movement of civic resistance? Doubtful to impossible. Something is happening here, some form of mass awakening that is broader and simultaneously more cynical than what happened in the 1960s/early 1970s and the Gray Lady is just trying to keep up.

Menendez is Going to Jail, Unless Hillary Rides to the Rescue

Sometimes it is hard to find a silver lining in the morning's Gray Lady. Not today. Right out on the front page is Matt Apuzzo's wonderful "Senator Robert Menendez Indicted on Corruption Charges." One can almost hear the assholes collectively puckering in Washington D.C.:

The charges revolve around Mr. Menendez’s relationship with Dr. Salomon E. Melgen, a wealthy Florida eye surgeon and political benefactor. Dr. Melgen resisted entreaties by the Justice Department to testify against Mr. Menendez and was ultimately charged alongside him.

Prosecutors described Mr. Menendez’s offices on Capitol Hill as a hub of corrupt dealings, a place where the senator used his chief of staff to solicit gifts from Dr. Melgen, find out what he wanted in return and make sure it got done.

The indictment also reveals how the rise of super PACs, unleashed by the Supreme Court’s Citizens United decision and subsequent legal changes, have opened a new channel for the wealthy to trade campaign cash for official favors.

Through his company, Vitreo-Retinal Consultants, Mr. Melgen directed $700,000 in corporate contributions to Majority PAC, a super PAC intended to help Democrats retain control of the Senate. Mr. Melgen instructed the group to use those contributions to aid Mr. Menendez’s 2012 re-election campaign.

Among the favors for Dr. Melgen, the department said, Mr. Menendez encouraged the Obama administration to change the Medicare reimbursement policy in a way that would make millions for the doctor. Prosecutors said he also tried to push a port security deal that Dr. Melgen was involved in, and helped the surgeon’s foreign girlfriends obtain travel visas to the United States.

A bribery charge is among the most serious accusations of corruption the federal government can make. Prosecutors often opt to file a lesser charge of accepting a gratuity, which is easier to prove. A bribe amounts to the purchase of an official act, while a gratuity is seen as a way to curry favor with powerful officials.

Mr. Menendez is the first senator to face federal bribery charges since another New Jersey Democrat, Harrison A. Williams Jr., was indicted in 1980 as part of the federal corruption investigation known as Abscam [played by Jeremy Renner in David O. Russell's American Hustle; maybe Menendez can look forward to his moment on the silver screen]. In 2002, an ethics scandal deterred Senator Robert G. Torricelli, Democrat of New Jersey, from a re-election bid.

To prove their case, prosecutors must show that Mr. Menendez’s actions and Dr. Melgen’s gifts were explicitly traded. The two men argue that they were longtime friends and that they exchanged gifts as part of that friendship.

“Prosecutors at the Justice Department don’t know the difference between friendship and corruption,” Mr. Menendez said on Wednesday.

The senator’s involvement in Dr. Melgen’s dispute with Medicare is the most damning element of the department’s indictment. Prosecutors cite emails showing that Mr. Menendez’s office was deeply involved in the dispute.

The DOJ indictment raises the possibility of putting the whole sordid, venal system on display. It is a pay-to-play scheme, and Menendez is a skilled, extroverted practitioner. He basically advertised his senate office as a fee-for-service enterprise, soliciting foreigners to bring him their visa difficulties. I have assumed that Menendez has been under investigation for years, if not decades -- but possibly Menendez and Torricelli morphed together in my understanding.

Now that the other shoe has dropped one wonders how long Zionist groups will continue to run their full-page ads extolling the courage and friendship of Senator Menendez.

Unless Menendez pleads out, he is going to jail. His "friendship" defense is ridiculous. Government business is not supposed to be guided by personal like or dislike. Public opinion towards the U.S. political class is at a historic nadir; the same thing goes for the ostentatiously wealthy. If the Menendez case goes to trial, a lot of bombshells are in the offing. That is why puckering beltway assholes are well-nigh audible.

During the Obama years we have seen the creation of a new system of politics. Citizens United was a knee-jerk response to Obama's successful crowdfunding during the 2008 campaign. The rich realized that their overwhelming advantage in a democratic system -- their wealth -- could be neutralized by millions of small donations made via the Internet. The plutocrats dreamed nightmares of Che Guevara riding to power on the World Wide Web.

But after Citizens United no longer is a politician with national aspirations guided primarily by the math of voting blocs. Now the most important math is found in the bottom line of donations made by the super-rich, what is publicly referred to as the "billionaire primary." Candidates trundle off to Palm Springs or Las Vegas and prostrate themselves at the feet of a David Koch or a Sheldon Adelson.

A long, contentious federal bribery trial puts this new system in the spotlight. Everyone knows it is corrupt, spotlighting it will generate calls for reform. The plutocrats would prefer not to have to deal with deflecting such calls. So this morning I am sure the conversation Menendez is having is whether to dig in and wait for a new chief executive in 2017 to spike the DOJ case -- I'm sure either Hillary or whomever the GOP nominates would be amenable -- or, after reaping as many pledges of financial consideration as he can muster, falling on his sword and pleading to a lesser charge, serving out his penalty time in a comfortable federal prison looking out on green hills.

A Few Rays of Possible Sunshine, Greece & Ferguson, in a Darkening Sky

A few rays of sunshine were evident last week. It became apparent that eurozone finance ministers led by Jeroen Dijsselbloem were not completely successful in vanquishing the Syriza-led Greek government. Greece's finance minister, Yanis Varoufakis, continues to insist he has not caved in on Syriza's campaign pledges to roll back troika-dictated austerity. Tomorrow, technical talks begin between Greece and the troika (James Kanter and Niki Kitsantonis, "Greece’s Tense Talks With Its Creditors Escalate to the Next Phase"). The troika says no money will be released until Greece makes good on implementing structural adjustment. Greece needs to makes payments on or refinance €6 billion this month. It is make or break time. Varoufakis got himself into some trouble when he suggested a referendum might be a possible way out of the impasse with the troika:

In an interview with the Italian newspaper Corriere della Sera on Saturday, Mr. Varoufakis said Greece could call elections or a referendum in the event that its proposed overhauls are rejected by international creditors. As the Greek news media feverishly speculated over the weekend about a possible referendum on the country’s membership in the eurozone, the government accused the newspaper of distorting the minister’s comments, saying he had not suggested Greece would hold a referendum on the euro but on the country’s economic program and fiscal policy. 

Panos Kammenos, Mr. Tsipras’s junior coalition partner and the defense minister, also suggested on Saturday that a referendum could be an option. 

Antonis Samaras, the former prime minister, on Sunday rejected a potential referendum as a “very bad development,” saying it would allow the government to shirk its responsibilities. The criticism continued on Monday with central members of Mr. Samaras’s conservative party describing Mr. Varoufakis as “dangerous” because of both the referendum idea and his proposal to employ Greeks and tourists as undercover agents to bolster a tax evasion crackdown. 

Some officials of the Syriza-led government also expressed reservations about a referendum, which the prominent legislator Alexis Mitropoulos described as “naïve and thoughtless.” 

At his news conference late on Monday, Mr. Varoufakis denounced the way his comments had been presented in Corriere della Serra as part of a “process of misinformation.” Mr. Varoufakis said any reference that he made to a referendum had been entirely “hypothetical” because he was referring to the improbable circumstance that European lenders rejected all of Greece’s proposed reforms. 

Opinion polls consistently indicate that most Greeks want the country to remain in the eurozone, but a majority continue to back the government’s tough stance against creditors.

Varoufakis likely floated the idea of a referendum to Corriere della Sera in the hopes of creating a little leverage in the upcoming negotiations with the troika. But when he backtracked it made him look unprepared and vacillating.

The outcome Jeroen Dijsselbloem wants to see is Syriza implementing all the austerity diktats -- pension cuts, privatization, tearing up labor agreements -- as the troika dribbles out the cash in small allotments. This Varoufakis will not do. I am still confident of this. So some sort of rupture is coming, hopefully, by the end of this week. The troika is certain it can break Syriza. I think a referendum is a fine idea.

The second ray of sunshine visible last week was the Department of Justice report on the Ferguson Police Department in the wake of the Mike Brown shooting last summer. The DOJ lays out how Jim Crow works nowadays. "Driving while black" is a chief income source that suburban municipalities like Ferguson rely on to balance their books.

The first scalp of that report was raised yesterday (Eli Yokley and John Eligon, "Missouri Court Assigns a State Judge to Handle Ferguson Cases") when it was announced by the Missouri Supreme Court that the Missouri Court of Appeals would take over Ferguson's municipal court and "current municipal judge, Ronald J. Brockmeyer, who was repeatedly cited in the Justice Department report for abusive practices, announced his resignation after holding the position for more than a decade."

The problem is that what happened to Ferguson needs to happen in municipalities throughout the United States, and there is no indication that this is in the offing.

In fact, there is every indication that we are at the "creative destruction" tipping point in the United States. In by far the best story I read this morning -- the best, but easily the most depressing -- is Monica Davey's "Unions Suffer Latest Defeat in Midwest With Signing of Wisconsin Measure."

In describing Scott Walker's "shot heard 'round the world" declaration for a 2016 White House run, the Wisconsin governor presiding over the creation of a new right-to-work law in his state, Davey lines out the the present political history of the United States, the death of its unions, and the projected path forward for American-style neoliberalism -- full on cannibalization.

Key to Davey's synopsis of present political history is the GOP landslide of 2010 (At that time a national party that just two years earlier was thoroughly disgraced and in free fall successfully recreated itself by lurching hard to the right with its Tea Party re-branding, the core of which is white supremacy):

Central to the new momentum behind the laws were sweeping Republican victories in state elections in 2010, when the party got full control — in the chambers and the governor’s office — of states that included Wisconsin, Michigan and Indiana. Republicans made more gains in 2014, now controlling 68 of the 98 chambers around the country and the most state legislative seats since 1920. But it was the victories in 2010 that set off a new flood of right-to-work legislation in the Midwest, which had rarely seen it.

Soon after taking office, Mr. Walker pressed for a bill that cut collective bargaining for most public sector workers and removed requirements that they pay fees if they chose not to join unions that represented them. Republicans elsewhere followed suit, but not all of those measures flew through. Ohio, where Republicans had taken sole control of state government, passed a measure limiting collective bargaining, but it was rejected months later in a statewide ballot measure. 

Then, for right-to-work advocates, there came an even more memorable turning point: In November 2012, voters in Indiana (where a law was repealed in the 1960s) re-elected Republican legislative majorities even after labor leaders pledged to defeat them for passing a right-to-work law earlier in the year. On the same election night, voters in Michigan rejected a labor-backed ballot measure to enshrine collective bargaining rights in the State Constitution. 

“The combination sent a clear message to elected officials in the region: You can end forced dues by passing right-to-work, and voters will reward you for it,” said Patrick Semmens, a spokesman for the National Right to Work Committee, who keeps a copy of The Indianapolis Star outside his office from the day after the law passed there.

A month after the 2012 election, the Republican-held Legislature in Michigan, a cradle of the American labor movement, passed a right-to-work measure, which was promptly signed by Gov. Rick Snyder, a Republican who had said the matter was not on his agenda. 

Lee Saunders, the president of the American Federation of State, County and Municipal Employees, called it “a concerted effort by the folks who have a lot of wealth and power to get more wealth and power.” 

“They’ve had these plans a long time, and now they’ve come to fruition,” he said.

Now the path forward is quite clear: Right to work anywhere and everywhere. If you don't control the state legislature or the governor's office, pass it at the county level:

Battles over union fees are also emerging in other states. Republican legislators in Missouri and New Mexico are weighing similar measures. In Kentucky, where a split Legislature and a Democratic governor pose obstacles to a statewide bill, leaders in more than a dozen counties have approved or are weighing measures, officials there said on Saturday, and efforts in six other counties are awaiting final approval.

And in Illinois, a long-held Democratic territory with Democratic supermajorities in the legislature, the new Republican governor, Bruce Rauner, announced an executive order barring state workers who opt out of unions from being forced to pay fees based on a constitutional argument, offering a new model for states where split partisan politics have slowed right-to-work policies. 

Federal law already permits workers not to join unions. But these laws go further, permitting workers to not pay fees to them. Unions argue that the fees are fair for nonunion members who still benefit from the contracts they negotiate, and that without a requirement, their membership, financial support and very existence are threatened.

And where is the leadership of the international unions? Holed up in executive suites in Washington D.C. living well-remunerated lives of great privilege. Where is the plan to fight back? Don't hold your breath. There isn't one.

Personal Encounters with New York City Policing

I lived in New York City for five years beginning in the late 1980s. This was when the city had yet to undergo its surge in gentrification that really got rolling under Giuliani; for instance, Times Square was still a squalid strip of peep shows, adult bookstores and rundown steak houses. 

I had my run-ins with the police. One time, when I was living in a neighborhood of Dominicans and Hasids tucked up against the eastern entrance to the George Washington Bridge a white undercover cop accosted me as I was crossing 181st Street on my way back to my apartment. He demanded to see some identification; he wanted to know what I was doing. He puts his hands on me and went through my pockets. I told him I lived in the neighborhood and was on my way home.

The cop was incredulous. He couldn't imagine a white rock'n'roller young man living willingly among blacks and orthodox Jews. The neighborhood was notorious for being the preferred destination for suburbanites to acquire street drugs. It is a narrow part of northern Manhattan conveniently bisected by Interstate 95.

Finally, I defused the situation by inviting him up to my apartment. I told him something like, "If you don't believe me, come on up. I'll show you where I live."

He dismissed me with the imperative to stay out of trouble, warning me that he would be watching.

I wasn't really upset by the encounter, more dumbfounded than anything else. It seemed ludicrous, comical that undercover police could bodily search and interrogate a person in broad daylight on a busy thoroughfare with zero cause besides falling within the parameters of an overly broad profile. Nonetheless I can vividly recall the encounter more than twenty-years on.

This was not my only run-in with New York City's finest. I actually got into an altercation late one Friday night with a Transit Authority police. The location was 136th Street 1-line subway stop. The cop ended up calling for backup. A gang of undercovers arrived and frogmarched me at high velocity up a long flight of subway-station stairs and threw me in the back of their cruiser. Off I went at breakneck speeds with sirens wailing to a Harlem police station to spend the night locked up.

What had I done? I asked why the Transit Authority police was hassling my friend for having an unlit cigarette on his lips. Smoking is not allowed in the subway but he wasn't smoking. The Transit Authority police responded to my inquiries by telling me to "Shut the fuck up and put your hands above your head."

My retort? "Fuck you!"

And that's when the altercation began. The people on the platform -- all black and Latino -- formed a circle around me and the Transit Authority cop as we grappled and chanted, "Police brutality! Police brutality!"

I had forgotten about this incident until this week when the Garner grand jury refused to indict the undercover policeman, Pantaleo, for homicide.

Not all of Gotham's constabulary are Gestapo types. During my residence in the Big Apple I came across several, particularly the ones who were my age, in their 20s, who were approachable, more so than your typical big city West Coast police who affect sort of a sterile haughty professionalism.

The Garner murder has struck a chord. It is a stain on the credibility of the U.S. You'll be less likely in the immediate aftermath of the ongoing #BlackLivesMatter protests to witness John Kerry climbing up on his high horse to hector other nations about good government.

Something has shifted from business-as-usual patterns. Even Hillary, who anticipates success by roping crackers into the Democratic Party at the same time keeping the "Obama coalition" loyal, is sounding off about racial justice. According to Peter Baker and Amy Chozick's "Some Conservatives Say Deadly Force Used to Subdue Garner Didn’t Fit the Crime":

. . . Mrs. Clinton drew broader conclusions. “Each of us has to grapple with some hard truths about race and justice in America,” she said, speaking at a conference in Boston. “Because despite of all the progress we’ve made together, African-Americans, most particularly African-American men, are still more likely to be stopped and searched by police, charged with crimes and sentenced to longer prison terms.” 

Mrs. Clinton endorsed Mr. Obama’s decision to form a task force to review police tactics and praised the Justice Department’s decision to investigate Mr. Garner’s death. She called for changing police tactics, overhauling the prison system and demilitarizing police departments. At times, she struck the personal tone some had expected of Mr. Obama. 

“The most important thing each of us can do is to try even harder to see the world through our neighbors’ eyes,” she said. “To imagine what it is like to walk in their shoes, to share their pain and their hopes and their dreams.”

For Hillary to take this stand you know it has been vetted by campaign operatives and focus-group tested. The politics of outrage over racial injustice have gone mainstream.

The Gray Lady's editorial board bears this out. Over the last two days some of the best items written on the Garner homicide can be found in the unsigned editorials. Two things stand out in "It Wasn’t Just the Chokehold: Eric Garner, Daniel Pantaleo and Lethal Police Tactics." First:

But among the many needed reforms, there is one simple area that risks being overlooked. Besides the banned chokehold used by Officer Daniel Pantaleo, who brought Mr. Garner down, throwing a beefy arm around his neck, there was lethal danger in the way Mr. Garner was subdued — on his stomach, with a pile of cops on his back. 

This breaks a basic rule of safe arrests, especially for people who, like Mr. Garner, are overweight and have medical problems like asthma. When the New York medical examiner’s office ruled Mr. Garner’s death a homicide, it cited “compression of neck (choke hold), compression of chest and prone positioning during physical restraint by police.” 

As early as 1995, a Department of Justice bulletin on “positional asphyxia” quoted the New York Police Department’s guidelines on preventing deaths in custody. “As soon as the subject is handcuffed, get him off his stomach.Turn him on his side or place him in a seated position.” 

As Michael Baden, a former chief medical examiner of New York City, told The Times: “Obese people especially, lying face down, prone, are unable to breathe when enough pressure is put on their back. The pressure prevents the diaphragm from going up and down, and he can’t inhale and exhale.” 

Which is exactly what Mr. Garner was trying to tell the officers who were on top of him.

 Next:

The Garner killing must lead to major changes in policy, particularly in the use of “broken windows” policing — a strategy in which Officer Pantaleo specialized, according to a report in September by WNYC, which found that he had made hundreds of arrests since joining the force in 2007, leading to at least 259 criminal cases, all but a fraction of those involving petty offenses. The department must find a better way to keep communities safe than aggressively hounding the sellers of loose cigarettes. 

And while defenders of the police like to point to thousands of nonfatal misdemeanor arrests as evidence that officers are acting in a way that is reasonable and safe, there can never be a justification for any lethal assault on an unarmed man, no justification for brutality.

The outrage in New York, echoed by anguished protesters in Ferguson, Mo., and in Cleveland, where the Justice Department has found a pattern of excessive force by the police, is based on a genuine fear of aggressive, abusive cops.

Obama Hamstrung

There is a tendency to overreact to the daily news, to presume that things will turn out worse than they actually do. But today I think it is a fair assessment to say that Obama, from this point forward for the remainder of his presidency, is hamstrung. Republican slaps and scratches will continue with regards to last year's Benghazi attacks; a series of news-hogging investigations on the Internal Revenue Service's targeting of Tea Party organizations will commence, with a possible silver lining being that light will be shed on the abuse of 501(c)(4) tax-exempt status by overtly partisan, political groups; and as Michael Shear and Jonathan Weisman report today,

Four months into his second term, the president was under increasing assault from Republicans who accused the administration of political bullying and a lack of transparency. Kathleen Sebelius, Mr. Obama’s secretary of health and human services, has drawn criticism in recent days for soliciting corporate donations to pay for the rollout next year of the new health care law.

And on Monday evening, The Associated Press reported that the Justice Department had secretly obtained two months of telephone records of its reporters. The company’s editors called it a “massive and unprecedented intrusion” into its news gathering, and Republicans quickly seized on the report.

What has the potential to be the most damaging for Obama is the DOJ investigation of AP. It was paranoia over leaks that brought Nixon down. And what seems to be the case based on a reading of "Phone Records of Journalists Seized by U.S.," by Charlie Savage and Leslie Kaufman, is that Attorney General Eric Holder was goaded into action by Congressional complaints about national security leaks:

Mr. Holder announced the two special leak investigations in June amid calls in Congress for a crackdown on leaks after a spate of disclosures about the bomb plot, cyberwarfare against Iran, Mr. Obama’s procedures for putting terrorism suspects on a “kill list,” and the raid that killed Osama bin Laden. The revelations had been published by The New York Times, The A.P. and in several books. 

Republicans accused the administration of deliberately leaking classified information, jeopardizing national security in an effort to make Mr. Obama look tough in an election year — a charge the White House rejected. But some Democrats, too, said the leaking of sensitive information had gotten out of control. 

Mr. Holder’s move at the time was sharply criticized by Republicans as not going far enough. They wanted him to appoint an outside special counsel, and a Senate resolution calling for a special counsel was co-sponsored by 29 Republican senators. 

On Monday, however, after The A.P. disclosed the seizure of the records, some Republican leaders criticized the administration as going too far. Michael Steel, a spokesman for House Speaker John A. Boehner, said: “The First Amendment is first for a reason. If the Obama Administration is going after reporters’ phone records, they better have a damned good explanation.”And Doug Heye, a spokesman for Representative Eric Cantor of Virginia, the majority leader, linked the revelation to a brewing controversy over the targeting of Tea Party groups for greater scrutiny by the Internal Revenue Service, saying “these new revelations suggest a pattern of intimidation by the Obama administration.” 

The A.P. said Monday that it first learned of the seizure of the records last Friday afternoon when its general counsel, Laura Malone, received a letter from Mr. Machen, the United States attorney. The letter to Mr. Holder said the seizure included “all such records for, among other phone lines, an A.P. general phone number in New York City as well as A.P. bureaus in New York City, Washington, D.C., Hartford, Connecticut, and at the House of Representatives.” 

The Associated Press is a nonprofit global news cooperative owned by its American newspaper and broadcast members.

A legitimate worry about a hamstrung president, based on recent history -- think post-impeachment Clinton and Kosovo, is he tends to indulge in war-making powers (powers Constitutionally residing with Congress but since the creation of the national security state a de facto part of the executive branch). We'll see what Obama is made of. Many a politician in his position would counter the sudden surge of opposition by whipping up a war scare. Syria is ready at hand, even if Libya is proving more failure than success at this point. All in all things are not looking good.

DOJ's Shift to Guilty Pleas Over Fines, Substance or PR?

Now that Presidents' Day is done the long march to Memorial Day begins. Five-day week after five-day week through the remainder of February, March, April and almost all of May before the arrival of another three-day-weekend holiday oasis. Stamina is required, and some sort of goal-orientation that lifts one's eyes from the dizzying repetition of the rat race.

The first day of the long march does not begin encouragingly. I'm thinking of the top-of-the-fold business page story by Ben Protess titled "Prosecutors, Shifting Strategy, Build New Wall Street Cases." The gist of the article is that Justice Department prosecutors are now going to seek guilty pleas from the big banks rather than the business-as-usual fines and nominal reforms. But as Protess points out this new strategy is likely another DOJ attempt to save face:

But critics question whether the new strategy amounts to a symbolic reprimand rather than a sweeping rebuke. So far, the Justice Department has extracted guilty pleas only from remote subsidiaries of big foreign banks, a move that has inflicted reputational damage but little else. 

The new strategy first materialized in recent settlements with UBS and the Royal Bank of Scotland, which were accused of manipulating interest rates to bolster profit. As part of a broader deal, the banks’ Japanese subsidiaries pleaded guilty to felony wire fraud.

A post this morning on naked capitalism, which includes the key portion of the Frontline transcript of Martin Smith's pummeling of a defensive Lanny Breuer, argues that the Department of Justice is engaged in a hollow public relations campaign:

The officialdom honestly seems to have persuaded themselves that indicting a foreign subsidiary and getting a guilty plea is a meaningful concession. Help me. That is what is so disheartening about dealing with an (at best) captured prosecutors. Their idea of what is reasonable is so distorted that is is painfully obvious that there is no reason to expect any change in behavior.

The problem for government prosecutors, as Protess points out, is "Too big to fail":

For one, banking regulators are likely to sound alarms about the economy. HSBC avoided charges in a money laundering case last year after concerns arose that an indictment could put the bank out of business. In the first interest rate-rigging case, prosecutors briefly considered criminal charges against an arm of Barclays, but they hesitated given the bank’s cooperation and its importance to the financial system, two people close to the case said.

Hovering in the background is what happened to Arthur Andersen after it was convicted in 2002; it went out of business. The job loss was numbered at 28,000. Thus, going after foreign subsidiaries is a compromise, a political expediency:

“Extracting a guilty plea from a wholly owned subsidiary finally enables the Justice Department to look tough on financial institutions while sparing them from the corporate death penalty,” said Evan T. Barr, a former federal prosecutor who now defends white-collar cases as a partner at Steptoe & Johnson.

After UBS and Royal Bank of Scotland what comes next? Deutsche Bank, apparently by the end of the year. Then, hopefully, it's on to Great Satan, Citigroup. But --

American regulators may warn that extending the campaign to Citigroup would threaten the company’s stock and prompt an exodus of clients. Japan’s regulators, some feeling upstaged by the recent actions, might raise similar concerns. Citigroup’s lawyers will also push back, people involved in the case said, citing the bank’s cooperation with investigators and emphasizing that wrongdoing never reached upper levels of management. The bank fired the trader recently charged by the Justice Department.

Yesterday, preparing for the approaching work week by ironing shirts, I listened to a Hayden song, "Did I Wake Up Beside You?" that I was unfamiliar with. There are some "Southern Man"-esque guitar parts toward the end of the song:

The Case Against Standard & Poor's

Peter Eavis in a story that appears on page A3 of today's paper explains that the heart of DOJ's case against Standard & Poor's has to do with the computer models the company used to analyze both collateralized debt obligations and the underlying mortgages. The models were cooked, bogus, jiggered with to produce the high credit rating that the issuer wanted. As Eavis explains,

As home prices soared and buyers clamored for properties, banks began to churn out more loans and bundle them into mortgage securities. To analyze mortgages, S.& P. used a program called Levels version 5.6 at the time. S.& P. used that data to come up with its credit ratings for mortgage-backed bonds.

As early as 2004, S.& P. considered broadening the pool of loans in the model. The upgrade was intended to create a more realistic model called Levels 6.0, and S.& P. announced it was forthcoming. But the model was never released, the lawsuit claims.

Instead, S.& P. introduced a more modest upgrade in 2006, Levels 5.7, according to the suit. But the Justice Department contends that model did not provide an accurate picture of the loans. The suit said that an executive made a change to the model that would keep ratings artificially high. 

Ms. Mathis, the S.& P. spokeswoman, said the description of the adjustment to Levels 5.7 was inaccurate. “We are not aware of any changes made to the 5.7 model that were not analytically justified, nor that any changes were made by an individual as opposed to a committee,” she said.

As to the inference by the S&P spokeswoman that model adjustments were kosher as long as they were made by committee, Mary Williams Walsh and Ron Nixon address it in their frontpage story about Attorney General Eric Holder's announcement of the lawsuit to the media yesterday:

Remarks that S.& P. employees made in internal memos and electronic communications show that as early as spring 2004, certain executives wanted to change the firm’s rating methodology, but only after polling “an appropriate number of issuers and investment bankers” as to the “rating implications.” 

The idea of asking bankers what they thought about a change in the firm’s methods shocked some S.& P. analysts and executives, including one who fired back, “What does ‘rating implication’ have to do with the search for truth? Are you implying that we might actually reject or stifle ‘superior analytics’ for market considerations?” 

In May 2004, an analyst warned that S.&. P. had just lost to its competitor Moody’s Investors Service the chance to rate a very large deal by being too hard-nosed about the amount of collateral that would be required to get a good rating. More collateral would mean less profit for Mizuho, the bank putting that deal together. 

“We must address this now,” she said — otherwise the firm would lose more deals. 

The complaint describes a debate in 2004 and 2005 about whether S.& P. should change its model for rating C.D.O.’s and what effect the proposed changes might have on its business. The change was scheduled for July 2005, but before it could happen, an analyst sent an e-mail saying that according to the investment bank Bear Stearns, the older model “had been the ‘best’ ” at rating weaker pools of mortgages, compared with Moody’s and Fitch.

DOJ's case looks solid and easy to understand. In order to make garbage look like gold S&P ran the garbage through a computer model; it popped out as gold. If the computer model popped out something different, say, lead or bronze, a new computer model was devised. People can understand that. It's called fraud.

Fraud at the Rating Agencies

Since the meltdown of the economy in 2008 a narrative has formed as to how we got there. At the center of that narrative are the rating agencies -- Standard & Poor's, Fitch, Moody's Investor Service -- because without their AAA ratings of collateralized debt obligations, CDO's, it's hard to see how the house of cards that collapsed five years ago gets erected in the first place. 

Finally, as revealed in a frontpage story today by Andrew Ross Sorkin and Mary Williams Walsh, the Department of Justice is charging one of the credit-rating agencies, S&P, with fraud: 

From September 2004 through October 2007, S.&P. “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors” in certain mortgage-related securities, according to the suit filed against the agency and its parent company, McGraw-Hill Companies. S.&P. also falsely represented that its ratings “were objective, independent, uninfluenced by any conflicts of interest,” the suit said.

S.& P., first contacted by federal enforcement officials three years ago, said in a statement Monday in anticipation of the suit that it had acted in good faith in issuing the ratings.

“A D.O.J. lawsuit would be entirely without factual or legal merit,” it said, adding that its competitors had given exactly the same ratings to all the securities it believed to be in question.

Settlement talks between S.& P. and the Justice Department broke down in the last two weeks after prosecutors sought a penalty in excess of $1 billion and insisted that the company admit wrongdoing, several people with knowledge of the talks said. That amount would wipe out the profits of McGraw-Hill for an entire year. S.& P. had proposed a settlement of around $100 million, the people said.

S.& P. also sought a deal that would allow it to neither admit nor deny guilt; the government pressed for an admission of guilt to at least one count of fraud, said the people. S.& P. told prosecutors it could not admit guilt without exposing itself to liability in a multitude of civil cases. 

It was unclear whether state and federal authorities were looking at the other two major ratings agencies, Moody’s Investors Service and Fitch.

This morning's naked capitalism blog points out that the previous dismal track record of investor suits against the rating agencies doesn't apply here because the DOJ is relying on a new legal theory. As Sorkin and Walsh explain in their DealBook story:

The federal action will be the first time a credit-rating agency has been charged under a 1989 law intended to protect taxpayers from frauds involving federally insured financial institutions, which since the financial crisis has been used against a number of federally insured banks, including Wells Fargo, Bank of America and Citigroup.

The government is taking a novel approach by accusing S.& P. of defrauding a federally insured institution and therefore injuring the taxpayer.

Among others, the compliant includes the demise of Wescorp, a federally insured credit union in Los Angeles that went bankrupt after investing in mortgage securities rated by S.& P. Wescorp is included as one example of the contended fraud, and as a way to bring the case in California. The suit was filed in Federal District Court for the Central District of California.

The naked capitalism post says that if successful this prosecution could be a watershed moment:

As indicated, the reason this suit might fly is that the causes of action rely on different statues than previously invoked, and the focus is on SPs misrepresentation of its own process: that it presented it as objective and unbiased, when it had significant conflicts of interests and its employees believed it was concerned only about profit, and that it may also have failed to adhere to its own procedures.

While getting a ratings agency scalp is small potatoes compared to getting the executives at one of the many financial institutions that helped bring about the crisis, Ill take my victories where I can get them. Winning a case against a public company that is really keen not to lose (tons of private litigation would follow) would break a long losing streak in the DoJ and SEC on the finance front. Although the agencies have been craven, they apparently really were demoralized after losing their misguided suit against Bear Stearns hedge fund managers, and theyve been gun shy. That does not mean they would not have lost in a fight against the Treasury if they had wanted to go after any targets, but lets not kid ourselves: these fights never occurred. Breuer in a significant role was also a big part of the problem, but people who know something about the DoJ say the agencys learned timidity was an even bigger impediment. They really lost their mojo after the Bear Stearns fiasco. You could have imagined a less cowardly DoJ filing suits against safe and obvious targets like WaMu.

Lets hope that the DoJs prosecutorial efforts live up to the caliber of their filing. Too often the Feds have proven to be great draftsmen but lousy prosecutors. Well see if they can up their game.

It would be amazing -- almost too grand a thought to think -- if Obama's second term turned out to be the opposite of the usual fecklessness and avariciousness (just think Bill Clinton) that define administrations headed out to pasture.