Many of you probably remember last week when Senator Arlen Specter voiced his opposing arguments to Eric Holder’s confirmation as Attorney General in the Obama administration.  Sen. Specter was very critical of Mr. Holder for his role in the Marc Rich pardon among other things. The senior senator of Pennsylvania was a bit of a lone wolf in his opposition because the majority of his GOP colleagues voiced their support for Holder.  In this writer’s opinion, to attempt to use a single lapse in oversight during an otherwise stellar career in public service as a reason to disqualify the most qualified candidate to ever seek the AG post stretches the bounds of credulity.  President Obama could not have chosen a better candidate for Attorney General.  Yesterday, Sen. Specter announced his change of heart and that he has decided to vote for Holder’s confirmation after all.  In announcing his decision, Sen. Specter cited Mr. Holder’s excellent overall record as well as his excellent resume, professional qualifications, and educational background.  I could go into all the other reasons Sen. Specter cited for his change of heart but it really boils down to partisan politics.  Mr. Holder is the most qualified person who has ever been sought for or held the Attorney General post.  So why it took Sen. Specter a month to figure that out is beyond this writer.  Sen. Specter astutely pointed out the absurdity of his hesitation to support Holder’s confirmation when he initially supported Timothy Geithner’s in spite of Geithner’s tax and bailout woes.  Specter did vote against Timothy Geithner’s confirmation for Treasury Secretary on Monday though Geithner was confirmed with a 60-34 vote and sworn in on Monday evening.  The Judiciary Committee is scheduled to vote on Mr. Holder’s confirmation today and the vote should go to the full Senate by the end of the week.

The Obama administration will do a sweeping overhaul of our financial regulatory system.   The industry should expect increased regulation and stricter rules for the various spokes in the wheel.

WASHINGTON — The Obama administration plans to move quickly to tighten the nation’s financial regulatory system.

Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.

Broad new outlines of the administration’s agenda have begun to emerge in recent interviews with officials, in confirmation proceedings of senior appointees and in a recent report by an international committee led by Paul A. Volcker, a senior member of President Obama’s economic team.

A theme of that report, that many major companies and financial instruments now mostly unsupervised must be swept back under a larger regulatory umbrella, has been embraced as a guiding principle by the administration, officials said.

Some of these actions will require legislation, while others should be achievable through regulations adopted by several federal agencies.

Officials said they want rules to eliminate conflicts of interest at credit rating agencies that gave top investment grades to the exotic and ultimately shaky financial instruments that have been a source of market turmoil. The core problem, they said, is that the agencies are paid by companies to help them structure financial instruments, which the agencies then grade.

“Until we deal with the compensation model, we’re not going to deal with the conflict of interest, and people are not going to have confidence that the ratings are worth relying on, worth the paper they’re printed on,” Mary L. Schapiro said in testimony earlier this month before being confirmed by the Senate to head the Securities and Exchange Commission.

Timothy F. Geithner, the nominee for Treasury secretary, made similar comments in written and oral testimony before the Senate Finance Committee.

Aides said they would propose new federal standards for mortgage brokers who issued many unsuitable loans and are largely regulated by state officials. They are considering proposals to have the S.E.C. become more involved in supervising the underwriting standards of securities that are backed by mortgages.

The administration is also preparing to require that derivatives like credit default swaps, a type of insurance against loan defaults that were at the center of the financial meltdown last year, be traded through a central clearinghouse and possibly on one or more exchanges. That would make it significantly easier for regulators to supervise their use.  Read the remainder of story here.

Eric Holder will appear before the Senate Judiciary Committee today as part of his confirmation to be the Attorney General for the Obama administration.  The Senate was very collegial to Sen. Hillary Clinton during her confirmation hearing.  However, if Sen. Arlen Specter has anything to say about it, Mr. Holder will not receive the same treatment.  Specter has said publicly that he plans to question Holder about the pardon of fugitive financier Marc Rich as well as other pardons that Holder oversaw during the Clinton administration.  The rest of the GOP have not rallied around Specter and have gone so far as to write letters of endorsements for the former deputy Attorney General.   James Comey, the deputy Attorney General for the Bush Administration said that the Rich pardon error  ”may actually make him a better steward of the Department of Justice because he has learned a hard lesson about protecting the integrity of that great institution from political fixers.”  Paul McNulty and Larry Thompson, two other Bush deputy Attorney Generals also endorsed Holder.   Mr. Holder is a superb attorney as well as an excellent public servant who is expected to be confirmed.

Mary L. Schapiro, Pres-elect Obama’s, choice to head the Securities and Exchange Commission will face the Senate Banking Committee today. Schapiro is currently the head Financial Industry Regulatory Authority (Finra).   Designate Schapiro is expected to face tough questions about her role in the consolidation of the National Association of Security Dealers and the New York Stock Exchange.  Although Schapiro is held out to have done a good job overseeing a smooth transition and coordinating the consolidation of the two regulatory entities.  Schapiro is also likely to face awkward questions regarding Bernie Madoff and Finra and it’s inability to uncover the massive fraud being perpetrated on Madoff investors even after Finra examined the Madoff firm.  Ms. Schapiro has a reputation as a top financial regulator with very strong credentials and is expected to be confirmed.

Senator Clinton did her homework before appearing before her Senate colleagues on Tuesday.  Secretary designate Clinton said that the Obama administration would be using “smart Power.”  Meaning that it would be use all the tools at their disposal and would not be bound by rigid ideology.  What this means in practice is a possible future dialogue with Iran, engaged diplomacy on Gaza, and a determined withdrawal from Iraq.  Secretary designate Clinton is expected to be confirmed by Inauguration Day.  See full story below.

WASHINGTON (AFP) — Secretary of state designate Hillary Clinton promised a “smart” blend of US military and diplomatic power projection under Barack Obama, and said America must never give up on Middle East peace.

In the latest twist to her trail-blazing political career, Clinton got a warm embrace from the Senate Foreign Relations committee in her confirmation hearing Tuesday, and laid out the first building blocks of the new US foreign policy.

As Israel’s war on Hamas in Gaza rages, she ruled out talks with the Islamist militant group but expressed disquiet over civilian casualties on both sides.

She also previewed an “aggressive” bid to halt North Korea’s alleged proliferation activities and promised the United States would belatedly throw itself into the fight against global climate change.

“I believe American leadership has been wanting, but is still wanted,” said Clinton, who narrowly lost her campaign against Obama for the Democratic nomination last year, ending her bid to be the first woman president.

“We must use what has been called ‘smart power,’ the full range of tools at our disposal,” Clinton said, advocating a mix of diplomatic, economic, military, political legal and cultural strategies.

In a dig at the Bush administration, Clinton said she and Obama believed in foreign policy which married “principles and pragmatism, not rigid ideology.”

But, Clinton, who is expected to cruise towards confirmation, warned that military power “will sometimes be necessary … as a last resort.”  see remainder of article here.

Bernard Madoff, former chairman of NASDAQ, was arrested last week on charges of securities fraud.  Madoff made off with billions of unwitting investors money.  Basically, Madoff was running a giant Ponzi scheme where he cheated investors out of 50 billion dollars.  By the way, he was only caught because of the flailing stock market and not due to any due diligence of the Securities and Exchange Administration.  

President-elect just announced Tom Daschel as his Secretary of Health and Human Services and head of the new White House Office of Health Reform.  However, the main interest was the Pres.-elect’s response to Governor Rod A. Blagojevich arrest and developments. 

Obama initial statement on Blago situation: “I am as appalled and disappointed as  anyone and I have never spoken to the governor on this subject[senate seat]. I am confident that no representative of mine would have any part of any deals related to this seat.”   Obama also stated that he has asked his team to gather more facts as to who from his team has contacted the Governor’s office so that we can share them with the public over the next couple of days.

UPDATE: Questions included what kind of communications took place between Obama’s staff and Blagojevich;  was the Pres. elect or any of his staff contacted by the federal athorities;  when where they contacted; who from your team talked to Blagojevich.

Pres. elect said that we need to reclaim a tradition of politics for public service that is about people and their lives, instead of what’s in it for me.  Reiterated that Blago should resign.  Pres. elect Obama emphatically stated that he is certain that he “did not speak to the Governor about these issues [senate seat].”  He also emphatically stated that “no rep had anything to do with any dealmaking around my senate seat.”  Such an act ”would be a violation of everything that this campaign has been about.”   Pres. elect also said that he has not been contacted by the federal authorities, nor has he or any of his staff been interviewed by such atthorities. The President- elect also restated his committment to transparency in government and more specifically within his administration.

President-Elect Barack Obama just announced the names of his senior economic advisers.  The group brings a broad range of experience and expertise and are more centrist then left.  Most importantly, they are not cronies but individuals who are business leaders and leading scholars of economics.  The mere mention of Timothy Geithner as Treasury Secretary sent the stock market soaring 500 points on Friday. President Elect Obama made some policy pronouncements and his team in the last few days.  The President-elect will very soon after he takes office, if not done by the Bush administration, pass a massive stimulus plan to confront the current economic crisis.  Pres-Elect Obama announced that we need a big stimulus package “to jolt the economy back into shape.” No tax increase for the wealthy in the January package but will ask Congress to prepare tax-cuts for the low and middle income taxpayers.  The President-elect and his administration plans to hit the ground running on January 20th.  As Rep. Steny Hoyer of Maryland said:

“We expect to have during the first couple of weeks of January a package for the president’s consideration when he takes office.”

The key members of the Obama Economic Dream Team are:

Treasury Secretary – Timothy Geithner
National Economic Council Director – Larry Summers 
Chair Council of Economic Advisers – Christina Romer                                                                                                                                                                         Director of the Domestic Policy Council – Melody Barnes    (Executive Vice President for policy at the Center for American Progress, chief counsel Sen. Ted Kennedy on the Senate Judiciary Committee.  Melody will essentially be the czar of domestic policy in the Obama Administration.

In Pres. Elect Obama’s choice of nominees for his economic team it is clear that he intends to strike a balance between experience and fresh  thinking.  Both Christina Romer and Melody Barnes both represent a fresh, outside-the-beltway, way of thinking in Washington.  While Larry Summers and Timothy Geithner represent experience in the ways of Washington.