TPM News

Today’s New York Times editorial picks up on an unreported feature of the meltdown in the mortgage market. The bankruptcy laws that are generally available to help people (and businesses) cope with unpayable debts are useless to deal with home mortgages. As a result, the specific tool that might avert a collapse in housing prices isn’t in the toolbox.

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Another Council of Republicans for Environmental Advocacy employee has pleaded guilty to tax evasion as part of the Jack Abramoff corruption scandal.

Environmental and energy policy news site Greenwire has the story (sub required):

Jared Carpenter, CREA's vice president since 2000, admitted July 6 he failed to pay taxes for three years on about $238,000 worth of salary between 2001 and 2003 -- when the group was funded primarily by Abramoff's Indian tribal clients.

Last month, CREA co-founder Italia Federici pleaded guilty to a similar tax evasion count and for lying to the Senate Indian Affairs Committee about her role as an intermediary between Abramoff and former Interior Deputy Secretary J. Steven Griles (Greenwire, June 8).

Chairman of the House Judiciary Committee John Conyers (D-MI) warned Harriet Miers' attorney today that the former White House counsel will risk contempt proceedings unless she complies with a committee-issued subpoena for testimony.

Miers was supposed to testify before a Judiciary subcommittee yesterday on the US attorney firings, but she did not appear after a White House attorney instructed her to stay home. The White House claims that executive privilege cloaks Miers from testifying.

Chair of the sub-committee, Rep. Linda Sanchez (D-CA) disagreed with that assertion, and ruled yesterday that the executive privilege claim wasn't properly asserted anyway.

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Yesterday's White House "benchmark" report on Iraq noted some backsliding on Iraqi troop readiness, in particular on the important question of whether Iraqi troops can operate independently.

At his press briefing this afternoon, the outgoing chairman of the joint chiefs of staff, Marine General Peter Pace, conceded the point, and clarified that the number of Iraqi Army battalions operating independently has declined from ten in January to six today. But he also cautioned against reading too much into the drop-off:

Let's concede Pace's point that as "units operate in the field" they incur casualties and equipment damage that impact readiness. That's military reality. But the broader question is why there aren't offsetting increases for those declines based upon improved capabilities among other battalions as they progress from being "in the lead" of operations to outright independence. Pace concedes the issue when he talks about wanting to see battalions progress through the overall readiness assessments. That, however, should probably make Pace more concerned about the backsliding than he emphasized this afternoon.

The Republican National Committee has been slapped with a subpoena from a House Judiciary subcommittee demanding e-mail messages that could shed some light on Karl Rove's involvement in the firing of nine US attorneys.

The subpoena is online here. The RNC's custodian of records has until Tuesday at 10 a.m. to give the subcommittee the e-mails it wants.

The House Judiciary Committee was more friendly with the RNC in April when it sent a letter asking for the e-mails. The White House jumped in and told the RNC not to hand them over until all the messages had been reviewed, citing an "executive branch interest."

Ever since a March report by the Justice Department's inspector general highlighted mistakes made by the FBI in obtaining e-mail and financial records without a court order -- through what's known as a National Security Letter -- Bureau and DOJ officials have pledged to establish institutional safeguards against further abuse.

Today Attorney General Alberto Gonzales and FBI Director Robert Mueller announced that attorneys will form an oversight office within DOJ's National Security Division to examine "all aspects of the FBI's national security program for compliance with laws, regulations, and guidelines," according to Assistant Attorney General Kenneth L. Wainstein. Additionally, FBI will create an integrity and compliance office for internal policing over all FBI activities, which a DOJ announcement terms a "substantial innovation."

Time and further scrutiny will tell how exactly this will all work -- to say nothing of how well -- but Wainstein termed the move "historic." One question: will there be an office in place to ensure that Gonzales reads reports he receives about FBI abuse?

Additionally, in a letter to Vice President Dick Cheney and congressional leaders, Mueller and Gonzales noted that the FBI has just completed a "historical audit of the FBI's use of NSLs in all 56 field offices." The two say that it largely confirms the inspector generals' findings. We'll bring you the report as soon as we have it.

In his first public remarks since President Bush commuted Scooter Libby's prison term, Judge Reggie Walton said he was "perplexed" by the president's belief that Walton's sentence was "excessive."

Walton, a Bush appointee to the D.C. district court, wrote yesterday in a court filing that while he doesn't question Bush's constitutional authority to commute prison sentences, Libby's 30-month sentence was "consistent with the bottom end of the applicable sentencing range as properly calculated under the United States Sentencing Guidelines." Underscoring his displeasure with the commutation -- which calls his professionalism into question -- Walton referenced Alberto Gonzales's June 1 statement that sentencing guidelines should be considered "a minimum for judges, not merely a suggestion." By ordering the commutation, Walton wrote, Bush has "has effectively rewritten the statutory scheme" for sentencing "on an ad hoc basis." Perhaps appropriately for a Bush appointee, Walton is basically explaining that judicial restraint compelled him to follow the sentencing guidelines -- and that 30 months in jail is rather merciful, considering what the guidelines require.

Libby will have to report to the federal Probation Office with "all requisite haste." If he doesn't, he might actually spend a night in jail.

You can read Walton's statement here.

According to a U.S. Army investigation, the Iraqi Police assisted a brazen January assault on U.S. troops in the southern city of Karbala -- an attack that a U.S. military spokesman tied to Iranian operatives earlier this month.

USA Today obtained a copy of the Army's February 27 report. The report found that the Karbala policemen exploited "a level of trust" that U.S. commanders placed with them to provide security for a provincial headquarters where a contingent of soldiers were stationed. In the assault, one of the most sophisticated on U.S. troops to date, gunmen passed themselves off as part of a U.S. security team and entered the compound past police checkpoints, eventually killing five soldiers.

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Sharpen those number 2 pencils, Alaska lawmakers. In a move to combat the corruption scandals that launched the FBI's probe into the state's politics, a new state law requires legislators to undergo ethics training.

Gov. Sarah Palin signed the law earlier this week, right after former state Rep. Tom Anderson (R) was found guilty of seven counts of extortion, bribery, conspiracy and money laundering. Anderson was accused of taking bribes from the private prison industry in exchange for pushing for facilities across the state.

The legislature hopes the new law will help clean up its image.

House Bill 109 tightens up the definition of bribery, requires legislators to make financial disclosures when leaving office, puts new disclosure requirements on consulting fees and meals purchased by lobbyists for lawmakers and makes numerous other clarifications in laws applying to both the executive and legislative branches.

Unless Congress treads lightly on delicate private equity and buyout firms like The Blackstone Group, we could see an end to entrepreneurship as we know it, the Bush administration warned this week. But under current tax law it could take Blackstone a mere 15 years to get back all the taxes it paid -- plus pocketing an extra $200 million -- on the $4.75 billion it made from going public on June 22.

Call it triumph of the good will.

According to a story in New York Times, Blackstone will pay a tax bill of $553 million on its earnings from a going public, a nice deal in itself, but over time will get back $750 million.

Here's how Blackstone pulled off the feat:

Blackstone’s tax maneuver hinges on its use of good will, an accounting term for the value of the intangible assets, like a well-known brand name, that are built up by a company over time. That value is part of the reason a company is worth more than the sum of its physical parts, like buildings and equipment.

Individuals who create good will cannot deduct it. But when good will is sold the new owners can because its value is assumed to erode. The Blackstone partners sold the good will from their left pocket to their right.

In simplest terms, the Blackstone partners paid a 15 percent capital gains rate on the shares they sold last month in the initial stock offering to outside investors (those shares represented a stake in the Blackstone management company, not its funds).

Blackstone then arranged to get deductions for itself for the $3.7 billion worth of good will at a 35 percent rate. This is a twist on the “buy low, sell high” stock market adage; in this case it would be “tax low, deduct high.”

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