Politics Plus

One area that the Finance Reform bill does not yet cover is the fraudulent rating of securities.

The chairman and chief executive of Moody’s Corp. said Friday that he didn’t know that his company continued to give investment-grade ratings to complex financial instruments backed by shaky subprime mortgages even after it downgraded billions of dollars worth of such deals in the summer of 2007.

His admission came during a daylong hearing by the Senate Permanent Subcommittee on Investigations, which is looking into the origins of the nation’s worst financial crisis since the Great Depression.

Moody’s chief Ray McDaniel, under questioning, said that he didn’t think his company had continued to rate complex deals backed by U.S. mortgages after it and competitor Standard & Poor’s jolted the markets in July 2007 with massive downgrades of earlier deals.

"I apologize, I do not recall that," McDaniel said.

The panel’s chairman, Sen. Carl Levin, D-Mich., then presented him with documentation that both Moody’s and S&P gave investment-grade ratings to a Citigroup deal in December 2007, worth almost $400 million, backed by shaky subprime loans that by then clearly were toxic.

The point Levin was making — and made repeatedly — is that credit-rating agencies did whatever was needed to get lucrative fees, some as high as $1.4 million, for rating complex deals.

Later, McDaniel stressed that preserving market share "is not as important as ratings quality."

While other Wall Street executives have expressed contrition when they appeared before Congress, McDaniel and former S&P President Kathleen Corbet were unapologetic on Friday.

Throughout the day in earlier testimony and in e-mails released by Levin, however, former Moody’s and S&P officials told how they were pushed out or quit in frustration because managers badgered them to "massage" complex deals until they could land the business.

A McClatchy investigation in October documented how top managers from the structured finance division, which rated the complex deals, were moved into the top executive suites at Moody’s and effectively took over the company.

McDaniel and Corbet said they were unaware that their analysts felt pressured to sacrifice the quality of investment-grade ratings to maintain market share and earn the huge accompanying fees.

Investment-grade ratings gave investors the illusion of safe bets, allowing big Wall Street firms such as Goldman Sachs to peddle the securities across the globe. Moody’s and its chief competitors were key players in the prelude to a near meltdown of global finance in September 2008.

Called to appear before the panel, Richard Michalek, a former Moody’s vice president and senior credit officer, described the ratings process for deals that could bring more than $1 million in fees as a "must say yes" atmosphere.

Frank Raiter, a former managing director at S&P and the head of the group that rated pools of residential mortgages, told the panel that analysts routinely sought direction from top management about the shaky deals they were being asked to rate.

"The guidance was not forthcoming from the top," he said, later adding, "I retired because I got tired of the frustration."

Levin read e-mail after e-mail from inside the ratings agencies about deals that never should have been rated, much less received investment-grade ratings.

"These e-mails are just devastating to the kind of culture that is going on here," he said.

Most striking was testimony from Eric Kolchinsky, a Moody’s managing director who in 2007 was in charge of the division that rated the complex deals called collateralized debt obligations. CDOs are securities backed by pools of U.S. mortgages that have been packaged together into bonds and sold to investors.

Kolchinsky recounted how in the first two quarters of 2007, his group generated more than $200 million in revenue for Moody’s by giving complex deals investment-grade ratings _ which told investors that they were safe bets. In the late summer of 2007, however, Kolchinsky was informed by superiors that bonds issued a year earlier were about to be severely downgraded.

That should have required a new methodology for ratings on deals that were still pending, but when he tried to do that, he was told not to. It amounted to securities fraud, in his opinion.

"My manager declined to do anything about the potential fraud, so I raised the issue to a more senior manager," he testified. He said that the complaint resulted in a change to methodology. "I believe this action saved Moody’s from committing securities fraud. Because of the culture, I knew what I did would possibly jeopardize my role at Moody’s."

He was right. A month later, he was sent a nasty e-mail asking why his market share slipped from 98 percent to 94 percent in the third quarter. The e-mail came, he said, just days after Moody’s had downgraded more than $33 billion in bonds backed by subprime mortgage loans. Less than two months after challenging the integrity of the ratings, Kolchinsky was removed from his post and given a lower-paying job elsewhere in the company with far less responsibility. He eventually left…

Inserted from <McClatchy DC>

As you know, I’m a Broncos fan.  As such, I propose the following.  The Denver Broncos will get to hire the officials for all their games.  Any time they lose a game, they will get to fire the officials for the rest of the season, hire new officials, and replay the game.  Sound absurd?  Those are the exact rules under which Banksters get to play.

Is it any wonder that instruments designed to fail were rated just as safe as T-Bills?

The passage of health care reform is a step in the right direction, but the job is clearly not done.

Shortly after they were diagnosed with breast cancer, each of the women learned that her health insurance had been canceled. There was Yenny Hsu, who lived and worked in Los Angeles. And there was Patricia Reilling, a successful art gallery owner and interior designer from Louisville, Kentucky.

Neither of these women knew about the other. But besides their similar narratives, they had something else in common: Their health insurance carriers were subsidiaries of WellPoint, which has 33.7 million policyholders — more than any other health insurance company in the United States.

The women paid their premiums on time. Before they fell ill, neither had any problems with their insurance. Initially, they believed their policies had been canceled by mistake.

They had no idea that WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators.

Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information. WellPoint declined to comment on the women’s specific cases without a signed waiver from them, citing privacy laws.

That tens of thousands of Americans lost their health insurance shortly after being diagnosed with life-threatening, expensive medical conditions has been well documented by law enforcement agencies, state regulators and a congressional committee. Insurance companies have used the practice, known as "rescission," for years. And a congressional committee last year said WellPoint was one of the worst offenders.

But WellPoint also has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies, federal investigators told Reuters. The revelation is especially striking for a company whose CEO and president, Angela Braly, has earned plaudits for how her company improved the medical care and treatment of other policyholders with breast cancer.

The disclosures come to light after a recent investigation by Reuters showed that another health insurance company, Assurant Health, similarly targeted HIV-positive policyholders for rescission. That company was ordered by courts to pay millions of dollars in settlements.

In his push for the health care bill, President Barack Obama said the legislation would end such industry practices.

But many critics worry the new law will not lead to an end of these practices. Some state and federal regulators — as well as investigators, congressional staffers and academic experts — say the health care legislation lacks teeth, at least in terms of enforcement or regulatory powers to either stop or even substantially reduce rescission.

"People have this idea that someone is going to flip a switch and rescission and other bad insurance practices are going to end," says Peter Harbage, a former health care adviser to the Clinton administration. "Insurers will find ways to undermine the protections in the new law, just as they did with the old law. Enforcement is the key."… [emphasis added]

Inserted from <Reuters>

Here’s the problem.  HCR makes rescission illegal.  However the minimum fine is $100 per patient per day.  $100 per day is so much less expensive than the cost of treating a cancer patient, that you know that Big Insurance Profit Pigs will jump in line to pay the fines.  HCR is still being interpreted from the law to the specific regulations through which the law will be implemented.  Obama can put teeth into those regulations by executive order.

But even that is only a stop gap measure.  Just one Republican in the White House puts Big Insurance in the driver’s seat again.  Under Bush, the GOP simply refused to enforce any existing laws that interfered with corporate greed.  That cannot be allowed to happen.  The solution is single payer health care., because your health is too important to leave the decisions to corporations who care nothing for healt and everything for profit.

Like so many Bush/GOP regime goose steppers, Scott Bloch was doing the exact opposite of what his post required.

Former U.S. Special Counsel Scott Bloch was charged today with criminal contempt of Congress in connection with his notorious use of Geeks On Call to scrub his computer while under investigation for misusing his office, according to a court filing in federal court in Washington.

The "information" filed today alleges that, responding to a request from the House oversight committee, Bloch failed to "state fully and completely the nature and extent of his instructions that Geeks On Call perform ‘seven level wipes’ on his [Office of Special Counsel]-issued computers" and the computers of two other appointees in the office. That was in late 2006.

From 2004 through 2008, Bloch led the Office of Special Counsel, which is charged with protecting federal whistleblowers and making sure that federal employees do not engage in partisan political activity.

He was under investigation for allegedly retaliating against employees and dismissing legitimate whistleblower cases when the Geeks on Call incident occurred. The FBI raided his home and office in 2008.

Bloch has maintained he called the tech service to try to kill a computer virus. He did not immediately respond to a request for comment.

Jenny Thalheimer Rosenberg, a spokeswoman for the House Oversight and Government Reform Committee, said: "The Committee vigorously defends its constitutional role to conduct investigations. We applaud the Justice Department for pursuing this case."… [emphasis added]

Inserted from <TPM>

For those of you who may be technically challenged, a seven level wipe does absolutely nothing to cure a computer virus as this GOP criminal claims.  It has one function only: to destroy the traces of data on a hard drive so thoroughly that even the NSA can’t recover it.

My only beef here is that DOJ is going after such a low-level lawbreaker, when the GOP has so many more in desperate need of justice.

Today is Earth Day.  I’d wish you a happy Earth Day, but I do not feel that would be right, because it is not a happy time for our planet.  Here are some options.

Here’s a round-up of Earth Day-inspired resources, events, and celebrations taking place nationwide:

• Too busy to get out and do something? No worries! If you’ve got 5 minutes to spare, then you’re set! Thanks to the AARP, you now have an online resource for going green even if you just have 5 minutes! Head to their "Five Minute Ways to Go Green" online listing at www.createthegood.org/gogreen. There, you’ll find topics like: donate your cell phone to a non-profit; reduce post-consumer carpets in landfills; set up a book exchange at work; tell a friend that is appliance shopping that they can research energy-efficient models here; and much more;
• The National Organization for Women, California chapter (CANOW) celebrates Earth Day 2010 by announcing  NoDryClean.com. The free website and mobile application allows you to enter a zip code and find a listing of the closest nontoxic cleaners nearby;
• "Billion Acts of Green" for the iPhone or Facebook: Make a pledge to improve the environment with Earth Day Network and Future Friendly’s "Billion Acts of Green" global grassroots campaign, which seeks to inspire conservation through an interactive Website and other social media tools that enable consumers to make a pledge to improve their environmental impact and promote other environmentally-beneficial habits to friends and family via social media channels. Their goal is to collect one billion pledges. For more information, visit: http://apps.facebook.com/earthdaynetwork/;
• In recognition of the 40th anniversary of Earth Day, the U.S. Chamber’s BCLC is featuring 70 examples of business partners engaging in environmental stewardship, not just today, but every day.  Companies from all industries — from Abbott, Allstate, and ARAMARK to Siemens, Shell, and Southwest — are minimizing their environmental footprint and advancing sustainability;
• In honor of Earth Day, Bing hosted a photo contest that will benefit education, especially environmental education, through DonorsChoose.org (which you may have read about here last month!). If you aren’t too familiar, DonorsChoose.org allows teachers to post classroom projects that aren’t able to be funded by school districts. Donors can contribute as little or as much as they’d like to the classroom project of their choice to help provide the tools to give children a good education. Each day, Bing gave the first 20,000 people, who voted in ehe Earth Day Photo Contest, a $5 donation coupon to redeem on DonorsChoose.org. Unfortunately, contest voting ended on April 19th, but you can still help DonorsChoose.org year-round by making a donation here or you can check to see who won the Earth Day Photo Contest here: www.earthdayphotocontest.com; 
• Earth Day freebie and recycling project: Disney Store will give away free Friends for Change and OCEANS branded "eco-friendly hats" to guests who bring in six plastic bottles or aluminum cans on Earth Day, April 22 (while supplies last). Made from six recycled plastic bottles, the hats are an example of how everyday materials can be reused for entirely different purposes;
• FREE conservation activity for kids: Parents can also bring kids to the Disney Store to pick up OCEANS themed activity sheets that teach children about our lakes, oceans, rivers, and streams and how we can reduce the amount of trash and waste in our waterways. OCEANS offers an unprecedented look beneath the sea, and can be a great viewing experience together for families and children;
• Nature Conservancy donation: Disneynature’s OCEANS will also contribute to The Nature Conservancy’s "Adopt a Coral Reef," through the Disney Worldwide Conservation Fund, on behalf of every person who sees the film in theaters April 22- April 28;
• Disney’s new Friends for Change apparel: Disney Channel stars including Jonas Brothers, Miley Cyrus, Selena Gomez, Demi Lovato, and many more have come together as Disney’s Friends for Change, teaching kids about activities that can help the planet. A new collection of Disney’s Friends for Change 100% organic Tees in four unique styles are available exclusively at Disney Store. The stand-out "Make a Wave" T-shirt design is inspired by the latest Disney’s Friends for Change anthem of the same name by Joe Jonas and Demi Lovato, currently available on iTunes with all proceeds benefiting the planet through Disney Worldwide Conservation Fund;
• New eco-friendly products and apparel: Disney Store’s exclusive "Save Planet Earth" eco-friendly product assortment with the lovable three-eyed green alien from Disney-Pixar Toy Story will be available through Earth Day and includes: "fashionable totes", made from seven recycled bottles that have been cleaned, smashed, melted and reused; children and adult sized "T-shirts made from 100% organic cotton" with the messages "Save Planet Earth" and "Love" and for each tote sold Disney Store will contribute $1 through the Disney Worldwide Conservation Fund to help save our oceans by protecting vital coral reefs; green reusable "aluminum bottles"; "journals" made from recycled paper and organic cotton; and a new exclusive "Toy Story plush alien" to commemorate this special occasion;
• Exclusive Web videos featuring Joe Jonas and Demi Lovato: An exclusive new Earth Day video message about the program featuring Disney Channel stars Joe Jonas and Demi Lovato can be viewed in select Disney Store locations. You can see this here;
• Samsung’s March to a Million in-school education and recycling program, which runs April 1 – June 1, will teach students across the U.S. about the importance of mobile phone recycling and the impact that it can have, both environmentally and socially, and participate in activities that will allow them to educate their peers, parents and local communities. Each participating school has the opportunity to enter a sweepstakes to win either a VIP concert from the pop/rock band, Hey Monday, or one of fifty $1,000 "Green Grants" to put towards making their school more environmentally friendly. For additional information, anyone who is interested in recycling their mobile phone can visit Samsung Mobile’s Facebook page – www.facebook.com/SamsungMobile – and click on the Recycle tab. Here, you can print out a pre-paid postage label to send the phone to Samsung Mobile for recycling… [emphasis original]

Inserted from <USA Today>

Considering the importance of the day, I’m sorry I do not have a more original piece for you.