In it, but not of it. TPM DC

I wondered last week why the $825 billion House stimulus bill gave the short end of the stick to mass transit, despite vows from President Obama and other Dems to wean the country off its obsession with gas-guzzling car travel. After all, the House bill contains only $10 billion for transit compared with $30 billion for road-building -- a $20 billion-plus cut from the infrastructure stimulus proposal put forth last month by Rep. Jim Oberstar (D-MN), chairman of the House transportation panel.

It looks like Oberstar himself shed some more light on the question two days ago, while Washington was in the thick of inauguration fever. In a speech to the U.S. Conference of Mayors, Oberstar explained why ground-breaking infrastructure projects got sliced: to make room for tax cuts. Here's how he put it:

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Oral arguments ended a short while ago on Al Franken's motion to dismiss Norm Coleman's lawsuit contesting the Minnesota Senate race, with Franken lawyer David Burman arguing to the special three-judge panel that they do not have the constitutional authority to deal with most of Coleman's claims -- they instead would belong to the Senate -- while Coleman's lawyer James Langdon predictably said the court does have the authority.

Burman lambasted the Coleman team for the general non-specificity of their arguments, saying it created too many openings. "If you allow them to go off on this fishing expedition will they find something? Probably," Burman said, explaining that an election involving 2.9 million ballots is bound to contain a few new quirks somewhere, even after the long process we've already seen. "At some point, Minnesota has to say it has done the best job human beings can reasonably do."

The most fascinating part, though, was Langdon's statement the Coleman campaign has examined the remaining 11,000 rejected absentee ballot envelopes, and they now believe 4,500-5,000 should be included -- up from their previous number of 654.

"No one knows what's in them," said Langdon. "No one's opened them."

At this point, though, we should really treat with great skepticism any claim that a selective sample of ballots, no matter how large or small, is unknown in terms of the content. As we've learned, the campaigns have had many opportunities to either know for certain what is in a ballot, or at least get an idea of the probabilities, without ever having to open a single envelope.

Sen. John Cornyn's (R-TX) decision today to force a week-long delay in Eric Holder's Judiciary Committee confirmation vote has opened an unexpected fissure in the GOP. On the one side are Republicans who want Holder to echo President Obama's promise to "move forward" -- widely interpreted as a hint that Bush-era officials and operatives would not be prosecuted for the torture of detainees -- and on the other side is, well, Sen. Lindsey Graham (R-SC).

During today's Senate vote to confirm Secretary of State Hillary Clinton, I talked to both senators. And Graham, a former attorney in the JAG Corps, has a more even-handed view of the torture-prosecutions dilemma than Cornyn's. When we spoke this afternoon, Graham echoed Judiciary panel chairman Sen. Patrick Leahy's (D-VT) judgment that Holder should not be expected to unilaterally rule out all prosecutions related to torturous interrogations.

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I stopped by the Google Ball last night. Wanted to be able to say I went to one of them. It was at the Mellon Auditorium which sounds like a classroom but is one of the more grand facilities in Washington. They filled the place and, of course, had high-tech tickets with barcodes. The company, as I told one reporter last night, has remarkable clout in D.C. It's stock may be down from its peak but it has the kind of cache that few other companies do both because of its enormous market capitalization and the fact that everyone uses it. It's probably telling that today is also the day that Toyota passed GM in worldwide sales. Lots of economic despair in the room after yesterday's market drop and very good buzz on the speech. A former Democratic White House speechwriter who was there had a very positive reaction and was taken by how Obama stuck it to Bush while he was sitting there. The speechwriter liked that and I must say, although some readers yesterday thought I was dissing that part of the speech, I thought it bracing in a good way. Favorite aspect of party: A game room complete with Wiis.

Just wanted to highlight something I wrote yesterday about Chief Justice John Roberts and his inauguration flub. President Obama (!) was gracious enough to exonerate him and even credit Roberts for helping him out. But it sure seemed like Roberts flubbed it and had no notes at hand to help him out. Vice President Joe Biden was not so forgiving. Yesterday I noted in a TPMDC world exclusive--theme music, please--that I had talked with someone who works with Roberts. This person noted to me about ten days ago that Roberts was studying hard for the inaugural and was taking his preparation very seriously. At the time I didn't give it much thought. But I should have asked myself why he'd need to study at all. The oath is short enough that one might easily memorize it and you could always bring notes if you didn't but it doesn't seem like the latter occurred to the chief justice.

Barack Obama just publicly announced a far-reaching set of ethics rules and other changes from prior practices for his White House staff:

• Over a hundred senior staffers making over $100,000 per year will have their pay frozen at current levels.

• There will be a two-year waiting period for any former lobbyists to work on issues for which they had previously done lobbying work.

• Extra openness will be practiced with any information that the Administration might want to keep secret.

This was perhaps the most striking quote: "Information will not be withheld just because I say so. It will be withheld because a separate authority believes my request is well grounded in the Constitution. Let me say it as simply as I can, transparency and the rule of law will be the touchstones of this presidency."

Harry Reid's office just announced that he'll be meeting with Al Franken later today, and will be holding a photo opportunity prior to the meeting itself.

Reid's office informs TPMDC that the two of them will be discussing the upcoming legislative agenda -- essentially a recognition by Reid of Franken as the legitimate Senator-in-waiting from Minnesota, and an apparent desire to make sure Franken is ready to get to work once he eventually takes the seat.

Of course, Franken might otherwise just be a plain old freshman Senator were it not for a unique quirk of Minnesota election law, which has thus far allowed Norm Coleman to bottle up Franken's 225-vote win in the Minnesota Senate race and prevent Franken from being issued a certificate of election.

Late Update: The Huffington Post reports that Coleman is also making his way around Capitol Hill, in order to speak with Washington reporters.

Let's step back from the last 48 hours worth of insanity in banking stocks. (Bank of America and others plunged on Monday and seem to be recovering today.) Let's step back further, beyond the immediate problems of how to bail out or repair the banks. What are banks likely to look like in a few years? After all, Wall Street, as we once knew it, is now gone with all the investment houses having either disappeared or turned themselves into bank holding companies. The idea of nationalization has been out there but that, I think, is a loaded word and not quite right. We've already lost our virginity by partially nationalizing the banks when we put taxpayers money into them and we're likely to do much more before it's over. With it's connotations of South American guerrillas in fatigues, nationalization carries a lot of dire implications. It's also a misnomer since no one really thinks Citigroup or Wachovia are about to become wholle federally owned and run.

The better metaphor may be the idea that banks will become utilities, like ConEd in New York or Duke Energy in the south and midwest. Electricity in the United States is mostly provided by private utility companies that are heavily regulated even more than banks. For instance, they usually need regulators to sign off on rate increases while no bank has to check in with the FDIC before raising fees for say, an overdrawn check. Still, utilities are not nationalized in any sense. They trade on public exchanges like the NYSE/Euronext and NASDAQ . You can invest in them and put your money at some risk but because their business is so stable their prices don't fluctuate too widely, relative to the rest of the market, and so they tend to pay large dividends.

Nassim Nicholas Taleb, the author of The Black Swan: The Impact of the Highly Improbable, an investment adviser, philosopher academic, trader and prescient gloom and doomer about the current economy has used this metaphor. On Charlie Rose, late last year he said:

It will be very different. Number one, banks will be utility companies, because we no longer will tolerate privatizing the gains and socializing the losses anymore. If you and I are going to bear the losses of bankers, we don't want to pay them bonuses for five or six or seven years, and then bail them out. No more of that. Banks are going to converge with utility companies, because if you go to Detroit or LA you want to be able to get cash from a cash machine. It's a utility.


People will still be able to take risks but there will be no government bailout. As he told TIME:

I think that we've got to progressively become a society where banks are deemed to be too precious for us, for our currency, to take too much risk. We need to have a banker who is just as responsible as someone working for the water company. Banks are going to become a utility. And banks probably will not have a lot on their balance sheet, and the risks taken will be borne by individuals like myself who have capital, and who know the risks, with their own money. Otherwise you're going to keep having a cycle that's deeper every time.


Getting to this place will take some time. We're nowhere near the levels of regulation needed to make banks as reliable and safe as the water or gas companies. And it doesn't mean there won't be casinos open. In the future, you will have, say, hedge funds or private equity firms taking risks, but not banks themselves. Everyone's heard of Jamie Dimon or Ken Lewis or other bigshot bankers. I couldn't name a utility executive.

Will this happen soon, this year? No. I've asked around with Democrats involved in the financial crisis and I don't think there's anything like this level of regulation coming even given the sensible ideas under consideration such as the ones my colleague, Elana Schor, unearthed from Barney Frank. It would require a reinforcement of Glass-Steagall which kept banks out of the business of being stockbrokers until it was repealed in the 90s. But things are moving quickly and I wouldn't be shocked if Taleb, who saw the current crash--and has urged clients, by the way, to keep 90% of their money in cash and safe assets--turns out to be right yet again.

The incoming president has demonstrably warm relationships with Democrats in Congress. I wonder, then, which side will back down first now that one thing is clear: Many Dems want the upcoming stimulus bill to include a provision allowing bankruptcy judges to modify the terms of primary mortgages for Americans facing bankruptcy (a policy known as 'cramdown'); Obama thinks it's a good idea, but doesn't want it on the stimulus.

The latest affirmation of the Obama team's stance came during this morning's Senate confirmation hearing for Treasury Secretary-designate Tim Geithner.

What remains unclear is why the new administration believes the "cramdown" change would be better tackled in a separate housing bill. When Citigroup is already on board, and no less a Wall Street ally than Sen. Chuck Schumer (D-NY) tells the Journal that "we think it would be great to put this on the stimulus," what's the trouble here?

Late Update: To answer the commenters who cite the Obama team's interest in locking down Republican votes for the stimulus bill ... The notion that Democrats should delay one of their longtime priorities -- one that would help millions of mortgage-holders avoid economic ruin, one that just won a major financial industry endorsement -- to woo the GOP is fairly bizarre. And as we can see today, House Republican leaders aren't likely to vote for the stimulus as it is.

The White House has now released President Obama's schedule for his first full day in office:

• 1:15-2:15 p.m. ET: Obama attends a swearing-in ceremony for White House staff, and addresses the staff and cabinet officers. There will be pooled press.

• 2:30 p.m. ET: Obama attends a White House open house.

• 3:15-3:45 p.m. ET: Obama holds a closed-door meeting with a group of his economic advisers: National Economic Director Lawrence Summers; Office of Management and Budget Director Peter Orszag; White House Policy Council Director Melody Barnes; and White House coordinator of energy and climate policy Carol Browner.

• 4:15-5:15 p.m. ET: Obama holds a closed-door meeting with Joe Biden, Rahm Emanuel and key defense officials on the subject of Iraq: Sec. of Defense Robert Gates; National Security Advisor Gen. James Jones; Chairman of the Joint Chiefs of Staff Adm. Mullen,; Gen. David Petraeus; U.S. Ambassador to Iraq Ryan Crocker; and Gen. Ray Odierno.

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