by Frank James

It's a safe bet that the legislative proposal by Treasury Secretary Henry Paulson Jr. to buy up bad Wall Street assets is going to undergo some fundamental revision.

Troubling to many critics is the breathtaking extraconstitutionality of the proposal which would give the Treasury secretary unusual powers that couldn't be countermanded by Congress or the courts.

That appears on its face to violate the Constitution's assertion of a balance of powers where no one branch is unchecked by the others.

On the Diane Rheem Show on public radio this morning, Alan Blinder, former Federal Reserve vice chair and normally a mild-mannered, live-and-let-live Princeton University economics professor, said Paulson should be fired for his proposal.

Here's Blinder from the program:

"I'm speaking now as one of the earliest advocates of creating an institution like this, many, many months ago. And it's a crying shame to see the way the Treasury has written this. I think the secretary of the Treasury should be dismissed, frankly. ... Asking for the authority to buy anything, with no review, with no court review, with no limits practically as to quantity or scope, with almost no congressional oversight. We have something more precious at stake than our precious financial system and that's our precious Constitution. And frankly, if I were a member of Congress, having advocated for this for nine or ten months, I would vote against this unless it's changed, dramatically..."

The administration should know its proposal is in deep trouble when both Paul Krugman and William Kristol agree the plan goes too far.

by Frank James

The not-so-invisible-hand of Washington reached out on Sunday and snatched the last two remaining big Wall Street investment banking firms into the world of increased federal regulation with the announcement that Morgan Stanley and Goldman Sachs have decided to become commercial banks.

This is how the Federal Reserve announced it last night:

The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.

To provide increased liquidity support to these firms as they transition to managing their funding within a bank holding company structure, the Federal Reserve Board authorized the Federal Reserve Bank of New York to extend credit to the U.S. broker-dealer subsidiaries of Goldman Sachs and Morgan Stanley against all types of collateral that may be pledged at the Federal Reserve's primary credit facility for depository institutions or at the existing Primary Dealer Credit Facility (PDCF); the Federal Reserve has also made these collateral arrangements available to the broker-dealer subsidiary of Merrill Lynch. In addition, the Board also authorized the Federal Reserve Bank of New York to extend credit to the London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill Lynch against collateral that would be eligible to be pledged at the PDCF.

Now they'll be able to go out and get deposits from people like you and me which will help to stabilize their capital base.

Those deposits will be federally insured by the Federal Deposit Insurance Corp. which will give the companies the kind of insulation from capital flight they've lacked until now.

We'll be keeping our eyes open for those new Morgan Stanley and Goldman Sachs bank branches.

by Frank James

It's not easy being a federal judge.

They're typically accomplished lawyers who could make much more money in private practice.

Now comes word that the group of federal judges who oversee the federal judiciary's administration known as the Judicial Conference of the U.S. have decided that, to save money, semi-retired judges or "senior trial judges" will share courtrooms.
(The conference had earlier decided to cut space for judges' chambers and clerks and the like.)

But because these are lawyers we're talking about, they made sure to stick in an important qualifier. The new policy will only apply to senior judges working in brand new courthouses.

Other changes the judges made today probably won't please many court employees. The judges moved forward on rejiggering the organizational chart for court employees and how those workers will be evaluated, all in order to reduce overall compensation costs.

This presumably will apply to workers in both new and older courthouses.

by Frank James

There are apparently a lot of deadbeat businesses out there when it comes to paying their payroll taxes.

The General Accountability Office, Congress's investigative arm, estimates that the federal treasury is short $58 billion in unpaid payroll taxes.

Part of the problem is that there are a lot of payroll-tax scofflaws out there, the GAO determined following an audit of the Internal Revenue Service database.

As of September 30, 2007, IRS's records showed that over 1.6 million businesses owed over $58 billion in unpaid payroll taxes, including interest and penalties. Of that amount, 70 percent of all unpaid payroll taxes are owed by businesses with more than a year (4 tax quarters) of unpaid federal payroll taxes, and over a quarter of unpaid payroll taxes were owed by businesses that accumulated tax debt for more than 3 years (12 tax quarters).

And some of these business owners are pretty shameless, as the GAO found:

Our analysis of those businesses showed some owners/officers abuse the tax system, willfully diverting amounts withheld from their employees' salaries to fund their business operations or their own personal lifestyle. For example, the owner of one of our case study businesses that owed almost $2.5 million was under-reporting their personal income and was involved in possible check kiting and money laundering. Another had accumulated almost $2.5 million in unpaid payroll taxes and made large cash withdrawals prior to filing bankruptcy multiple times. A third had accumulated over $500,000 in unpaid payroll taxes over a 10-year period as well as another $500,000 in personal taxes. The owner had put property in a spouse's name and sold property to children for less than market value to avoid IRS collection action.

by Mark Silva

In the realm of the $3-trillion-a-year federal government, here's a noteworthy figure:

The cost of confidentiality: $9.9 billion last year.

And that's not counting the part they can't talk about, such as the costs of containing information at the Central Intelligence Agency and National Security Agency.

The biggest share of the reported cost resides in the government agencies that classify and declassify information and protect it along the way: $8.65 billion last year, according to the new annual report of the National Archives office that monitors all of this activity, the Information Security Oversight Office.

It climbed by $450 million last year..

Add to that the $1.26 billion cost to industry of protecting information handled under government contract.

The total came to $9.9 billion in Fiscal 2007, up $439 million, or 4.6 percent, over the previous year. The biggest cause of the increase: Physical security, which ran $1.4 billion.

However, there is a silver lining in the rising cost of confidentiality.

"After an extensive surge to bolster government-wide security measures in the post-9/11 era, the annual rate of growth for total security costs is declining,'' the ISOO reports. "The annual rate of growth of total security costs for FY 2006 (3.3 percent) and FY 2007 (4.6 percent) are lower than those reported for any other year since FY 2001.''

There wasn't a lot more information being classified last year - with the ISOO's annual survey of executive agencies finding a 1 percent increase in the number of original classifications of documents, 233,639 such actions in 2007.

This tally, of course, does not include the Office of the Vice President, which, as the Tribune first reported a couple years back, does not report its activities to the National Archives because it considers itself apart from the Executive Branch. Vice President Dick Cheney's paycheck is signed by the Senate, where he presides. And that's no secret.

Defense Department Press Secretary Geoff Morell. (Pentagon photo.)

by Frank James

At today's Pentagon briefing, Defense Department press secretary Geoff Morrell, was asked about the preparations his agency is making to continue operating in the event Congress doesn't pass the war-spending bill.

He answered by saying that officials within the department were working now to figure out who the "essential" employees are who would have to work even if the department shutdown:

...And so we are, as you know, I think, taking some prudent planning measures just in case that money doesn't come through. Deputy Secretary Gordon England sent a memo throughout the department earlier this week asking for all the departments to begin planning for a possible shutdown, and all the departments are due to report back to him by June 30th with a plan as to what they would do to shut things down. And he's additionally, I think, asked that we figure out who sort of the essential civilian personnel is that would have to remain working even without pay in the event of a shutdown.

Morrell's use of the word "essential" would likely send shivers through some at the Pentagon and cause painful flashbacks for federal employees who lived through the government shutdowns of 1995 and 1996.

That's because all federal workers like to be regarded as essential. Otherwise, maybe federal managers will get it in their heads to start downsizing their agencies.

A large crane lies in this intersection on Manhattan's Upper East Side after it collapsed Friday, May 30, 2008 in New York City just before first responders arrived. (AP Photo/Seth Holladay)

by Frank James

It's still too early to know what caused today's deadly construction crane collapse in New York City, the second this year.

But it's safe to say this--the accident is likely to increase calls for the federal Occupational Safety and Health Administration to play a more active role in helping to prevent such accidents.

That's what happened following this year's earlier collapse of a crane in Manhattan which killed seven people.

A May 2, 2008 editorial in the Baltimore Sun noted that the deadly accident in March spurred state and local officials into action to retrain their construction inspectors. That wasn't enough, however, said the newspaper which added this:

... The federal Occupational Safety and Health Administration should really take the lead in this area to ensure that training for crane operators coincides with changes in the industry. About 80 workers each year die from crane-related incidents, according to OSHA.

It just so happens that OSHA has been working on an update of federal crane safety rules which apparently haven't been revised in more than 30 years despite numerous advances in crane technology--the equipment being more hydraulic and computerized now than they were decades ago, according to this piece from this Seton Alerts for Safety newsletter.

by Frank James

Does paper money discriminate against the blind and visually impaired? Common sense would suggest as much. Then does that mean that the U.S. will have to change its paper currency in order to end that discrimination?

Yes, according to the U.S. Appeals Court for the District of Columbia.

The court's decision was handed down in a case called American Council for the Blind et al v. Henry M. Paulson Jr., Secretary of the Treasury . The U.S. Mint which prints the nation's currency is part of the Treasury Department.

Unless the Treasury Department is able to get the Supreme Court to overturn the decision, it looks like U.S. currency is going to have to be redesigned with raised, tactile features or other elements so the blind can tell the difference between denominations.

by Mark Silva

A mug-shot and a set of finger-prints won't be enough at the booking desk anymore.

The government is demanding DNA as well.

"The attorney general is directing all agencies of the United States that arrest or detain individuals or supervise individuals facing charges to collect DNA samples from
individuals who are arrested, facing charges, or convicted, and from non-United States persons who are detained under the authority of the United States...''

So goes the notice in the Federal Register.

It stems from the requirements of the DNA Fingerprint Act of 2005 and the Adam Walsh Child Protection and Safety Act of 2006.

Agencies that collect DNA will have to submit it to the FBI.

Now, DNA has served to absolve some people - including Death Row convicts - of the crimes they were accused of committing.

But this is an intriguing new data base for the government to control.

And, so long as you don't get arrested, the government won't have your DNA.

by Frank James

As we view the images of the aftermath of the earthquake in China's Sichuan Province and the reports of an estimated 12,000 dead, it's impossible to escape the sense that not only could it happen here but it will.

And it's not just California that we should be concerned about. While the Golden State obviously has had the most experience with earthquakes because of the very active San Andreas Fault, which is overdue for the Big One, the Midwest is at risk too.

That's largely because of the New Madrid Fault, although that quake zone isn't the only one in the central part of the country to worry about. It was the Wabash Valley Fault, after all, that caused an earthquake measuring 5.2 on the Richter Scale in Southern Illinois.

The combination of April's Midwest earthquake and this week's calamity in Sichuan Province should remind federal, state and local officials, as well as individuals themselves, to do more to prepare for and respond to the inevitable earth shaking that most scientists say is only a matter of time.

(AP Photo/Themba Hadebe)

by Frank James

False positives in any kind of warning system are a bad thing, whether they're produced by an overly sensitive screening procedure for dangerous, blood-borne viruses or al Qaeda terrorists.

Any screening approach that gives off a lot of bad hits adds to overall costs, and wastes time and attention needed to deal with the actual threat.

If you're getting a lot of false positives, you've got a problem that needs fixing and quickly.

Unless, that is, you're the federal government which appears to be stuck with a terrorism watch list that gives off many false positives and yet seems unable to do much about it.

The latest example of this is found in a USA Today story by Mimi Hall who writes that the U.S. terrorism watch list contains the name of Nelson Mandela, the 89-year old Nobel Peace Prize laureate and former president of South Africa, one of the most beloved and respected human beings on the planet.

Mandela and other South African officials are on the terrorist list because they're members of the African National Congress, South Africa's dominant political party.

Before it came to power in 1994 however, the ANC used violence to overthrow the racist apartheid regime in South Africa, a government which labeled it a terrorist group. And it is still evidently listed that way for U.S. terror watch list purposes.

by Frank James

It doesn't seem to happen too often that FEMA gets to tell a good-news story about itself but the agency believes it has one now.

Apparently, half of the agency's employees think the disaster-management agency's officials are managing the agency's employees well. The other half? Well, draw your own conclusions from this snippet from a FEMA press release:

• 49 percent of FEMA employees responded positively to questions related to Leadership & Knowledge Management
• 50 percent of FEMA employees believed the agency fostered a Results-Oriented Performance Culture
• 51 percent of FEMA employees gave positive responses to questions relating to the agency's Talent Management

At a lot of places, having half the employees fail to respond positively about their managers would be seen as quite the failure.

But this is FEMA we're talking about after all, the agency that became the butt of jokes and scorn following its mishandling of Hurricane Katrina.

by Mark Silva

Some time has passed since Halloween, and for that matter the report of House Democrats who say that then-acting Immigration and Customs Enforcement Chief Julie Myers showed "poor judgment" by giving an award at her agency's Halloween party to an employee wearing prison stripes, a wig of dreadlocks wig and face-darkening make-up.

The report of the Democrats on the House Homeland Security Committee, released Tuesday, criticized Myers (right) for ordering staff to delete digital photographs of Myers with the costumed man, saying her actions "appeared to be an attempt to conceal her actions from public disclosure." The report disclosed that ICE learned on Nov. 8 -- a week after the party -- that the deleted photographs could be electronically restored.

In February, six weeks after Myers was confirmed by the Senate as the official head of ICE, the agency released the restored photos in response to a CNN Freedom of Information request.
The report calls on the Department of Homeland Security, ICE's parent agency, to conduct a full investigation into "the concealment of this incident."

When the costumed ICE employee showed up at the afternoon party, "several employees were shocked and offended by the costume -- some even left immediately after seeing the disguise," the report concludes. The costume "caused grave concern and distress, especially for the African-Americans that were present.''

When the costumed employee arrived at the judge's table, he told the judges, which included Myers, "I'm a Jamaican detainee from Krome (a federal detention center outside Miami), obviously, I've escaped," the report says. "The response from the judges was laughter. Not one of the judges expressed concern over the costume or its racial overtones.''

by Frank James

Identity theft is, by all accounts, a vast and growing problem. Congress knows this full well since lawmakers have held any number of hearings on the subject and there's an uproar on Capitol Hill everytime it's discovered that a government laptop with personal information on thousands of Americans has gone missing or some other lapse occurs.

All of which makes it curious that Congress itself made public the sensitive personal information of of numerous legislative aides by not redacting beforehand the information on required financial-disclosure documents.

According to a story in the Hill newspaper:

Furious senior House aides are demanding committee action against a website that has posted their bank account numbers, signatures, home addresses and children’s names that are included in financial disclosure documents.

Some are demanding legal action against the website LegiStorm, which since February has been posting congressional documents online as a way to increase transparency in government. Aides have brought their complaints to the House Administration Committee and the clerk of the House

by Mike Dorning and Bay Fang

BECKLEY, W.Va.—The State Department's inspector general is investigating three contract employees -- two fired and one disciplined -- who improperly accessed Democratic presidential candidate Barack Obama’s private passport files, the department confirmed Thursday.

State Department spokesman Sean McCormack said two employees were fired and one disciplined for accessing the files on three separate occasions this year -- one as recently as last week.

The incident immediately stirred memories of a scandal in the 1992 campaign when pages were removed from the passport files of Bill Clinton, who at the time was challenging the re-election of then-President George H.W. Bush.

An Obama campaign spokesman immediately demanded a “complete investigation,” including the identities of the people who accessed the files and their possible motives. In a hastily scheduled conference call with reporters late Thursday night after news of the security breach broke, McCormack declined to identify the employees involved but said the improper access was uncovered through internal department controls.

“This is an outrageous breach of security and privacy, even from an administration that has shown little regard for either over the last eight years,” Obama campaign spokesman Bill Burton said in a statement e-mailed to reporters.

Initially, however, there could be one significant difference between the workers who looked at Obama's records and the passport search during Clinton's campaign:

The last time a Democratic presidential candidate’s passport records were rifled by a Republican administration – in 1992 – it led to a bigger investigation. Joseph diGenova, a former U.S. attorney in Washington, D.C., was appointed independent counsel in December 1992.

Then, it was a high-ranking State Department official, acting assistant secretary for legislative affairs Steven K. Berry, who had gone through Clinton’s passport files during the election campaign. State’s inspector general, Sherman Funk, said Berry had helped arrange a search in an effort to find politically damaging information about Clinton.