As anyone who watches Mythbusters can tell you, you really can buff a turd. Why, GOP pollster and messaging strategist Frank Luntz does it on a regular basis! And this time, he's targeted financial regulatory reform.

I wonder what this amoral hack sees when he looks in the mirror - besides the bad wig, I mean:

In addition to tying regulatory reform to a massive government takeover, Luntz's memo includes several other data points and messaging suggestions as a blue print for the legislation's defeat. Opponents, he writes, would be well served to link the package to the financial industry bailout (which, it should be noted, is fundamentally not part of the legislation). According to accompanying polling data, 52 percent of voters said they would be "much less likely" to vote for their member of Congress if they voted for a financial reform bill that contained a fund to bail out banks and Wall Street.

"Public outrage about the bailout of banks and Wall Street is a simmering time bomb set to go off on Election Day," Luntz wrote. "Frankly, the single best way to kill any legislation is to link it to the Big Bank Bailout."

Another effective strategy to kill the bill, according to Luntz, is to make the case that it was written in secret by lobbyists.

"The American people are tired of add-ons, earmarks, and backroom deals - but they are mad as hell at 'lobbyist loopholes,'" Luntz wrote. "You must put proponents of the legislation on the defense, forcing them to attempt to justify the 'lobbyist loopholes' and exemptions placed in the bill... Highlight the exemptions. Broadcast them. Remind them, 'The legislation is filled with lobbyist loopholes that exclude certain wealthy, powerful industries from regulations.'"

On the specific issue of a Consumer Financial Protection Agency, Luntz argued that opponents should stress the high-cost of creating an additional regulatory body in addition to the damaging effects it will supposedly have on "small business owners" (as opposed to, merely, small businesses).

"Owning a small business is part of the American Dream and Congress should make it easier to be an entrepreneur," wrote Luntz. "But the Financial Reform bill and the creation of the CFPA makes it harder to be a small business owner because it will choke off credit options to small business owners."

These lines or arguments are similar to the ones used by regulatory reform opponents in the past, often with some success. What's telling is that they are being trotted out again in this type of economic environment.

But hey, look over there! Ben Bernanke's the Man of the Year!

WASHINGTON — The value of loans held by the biggest beneficiaries of the government's bank bailout fell for the ninth consecutive month in October, the Treasury Department reported Tuesday, a day after President Barack Obama criticized top bankers for not doing enough to boost lending.

The department's monthly report, which monitors the top 22 recipients of support from the government's $700 billion rescue fund, showed that their average loan balances dropped in October by $36.8 billion, or 0.9 percent. That followed a decline of 1.1 percent, or $45.9 billion, in September.

Obama on Monday urged the nation's big banks to make "extraordinary" efforts to increase lending to help consumers and businesses who have been staggered by the worst recession since the 1930s.

It sounds like a really good idea. But really, this is bribery. And it wouldn't have been necessary to give them everything they want if Geithner and pals put reasonable conditions on the bank bailout in the first place:

The Obama administration is developing a major initiative to tackle the economic and political problem of unemployment by getting federal bailout funds into the hands of small businesses.

The proposal involves spinning off a new entity from the Troubled Assets Relief Program that could give banks access to the government money without restrictions, such as limits on executive pay, as long as they use it to make loans to small businesses. But officials are not yet certain whether carving the program out of TARP would be the best way to lure banks to participate in small-business lending, said sources familiar with the matter who spoke on the condition of anonymity because the plans were not final.

As an alternative, officials are prepared to ask Congress to modify TARP itself, easing the pay limits and other restrictions that would be imposed on small-business lenders taking the money, the sources said.

Since the summer, the administration has been facing an uncomfortable dynamic in the economy. The ranks of the jobless have been growing, while big financial firms that got taxpayer bailout money have been thriving. In response, officials have been trying to recast TARP as aid for Main Street rather than Wall Street.

Treasury Secretary Timothy F. Geithner told a congressional oversight panel Thursday that TARP would focus on aiding small-business lending, community banks and homeowners struggling to keep up with their mortgage payments, and he hinted at the new program.

Banks are "very reluctant to come and do business with the government and they're concerned that, if they come, they will be stigmatized and they will be subject to the risk of conditions in the future that might make it harder for them to run their businesses," Geithner told the TARP oversight panel. Solving that problem, he added, is "going to be something we cannot do on our own. It's going to require some help from Congress to help deal with those basic concerns."

Elizabeth Warren, who heads the oversight panel, chided Geithner for taking so long in setting up several other small-business lending initiatives, two of which were announced last spring.

"It's not news to anyone that small-business lending is important," she said. "Small businesses are closing every day. But Treasury has now announced three plans and clearly has not gotten the job done."

You know, between the crooks, the politicians and the payoffs, this issue shouldn't be a third rail anymore. Democrats need to decide which we can afford: Shoveling trillions of dollars into the military-industrial-congressional complex (and the pockets of defense donors), or rebuilding this country's economic and social infrastructure. David Sirota:

In 2000, the Pentagon admitted it has lost -- yes, lost -- $2.3 trillion. In 2003, the San Francisco Chronicle reported that a subsequent Department of Defense study said it was only $1 trillion. To put such numbers in perspective, contemplate what those sums could finance. $1 trillion, for instance, could pay the total cost of universal healthcare for the long haul. $2.3 trillion would cover universal healthcare plus the bank bailout plus the stimulus package.

Obviously -- obviously! -- these points are no cause for alarm and certainly no cause for defense spending reductions, right? All they must prove is that the archconservative Cato Institute, William Randolph Hearst's newspaper chain, National Journal employees and Pentagon officials are secretly America-hating liberals. And -- obviously! -- so are two of the most aggressive neoconservative hawks ever to hold government office, Sen. John McCain and Defense Secretary Donald Rumsfeld. After all, they’re the ones who issued those scathing statements about wasteful defense spending in the pop quiz above. That means they’re actually terrorist-appeasing lefties, right?

Really, how could anyone other than traitorous communists see the data and then consider backing the mildest Pentagon spending cuts? I mean, come on -- in a country whose paranoid conservative movement now makes a dead-serious ideology out of Stephen Colbert wisecracks, how dare any red-blooded American even think of pondering basic budgetary facts?

Of course here's a typical conservative reaction:

Lost in all the typical liberal hyperventilating over increased defense spending during the wars in Iraq and Afghanistan, is just how low current defense spending compared to the last 45 years.

Oh, well then! Quit yer griping!

ConsumerAffairs.com:

Under heavy fire from critics for the bank's losses in the economic meltdown, former Bank of America chairman Kenneth Lewis will step down as chairman, to be succeeded by Dr. Walter E. Massey. Lewis will remain as President and CEO.

All 18 board members were said to "comfortably" resist votes to remove them from the board, but the vote to split the duties of chairman into different posts was successful. Massey, an accomplished scientist and a member of many corporate governing boards, most recently served as president of his alma mater, Morehouse College in Atlanta, Georgia.

The announcement came after a raucous shareholder meeting in Charlotte, North Carolina today, where investors and activists grilled him for pushing the acquisition of debt-riddled Countrywide Financial and Merrill Lynch, as well as for accepting billions in taxpayer money during the first round of bailouts of the financial market last year.

Countrywide, formerly the world's largest mortgage lender, was acquired last year by Bank of America for $4 billion amid rumors that it would seek bankruptcy protection due to mounting losses from the collapsing housing market. The additional acquisition of Merrill Lynch saddled the banking giant with an estimated $70 billion in capital losses, while shareholders saw their investments drop by an average of 76 percent.[..]

The Service Employees' International Union (SEIU) launched a campaign to remove Lewis as chairman, after it was revealed that Bank of America used $25 billion in taxpayer money it received for executive compensation and buyouts of competitors, while squeezing the credit lines of its customers.

SEIU actually liveblogged the shareholder's meeting and deserves all sorts of credit for really holding Lewis's feet to the fire.

I think Lewis should just be grateful that the shareholders didn't opt to treat him the way that Icelanders have treated the bankers that caused their financial crisis. Just sayin'...

Remember a couple of decades ago, when they told us if we all re-trained for IT jobs, we'd always have work? [insert ironic laugh here...] And just to add insult to injury, exactly how much of our bailout money are they using to make our jobs go away?

BANGALORE: The second-biggest bank of the US, JP Morgan Chase, which acquired Washington Mutual and Bear Stearns recently, will increase its outsourcing to India by 25% this year to nearly $400 million. It will also manage the integration of the acquired companies from India to bring down the cost of integrating different information technology (IT) systems.

Right now, JP Morgan outsources $250-300 million worth of IT and back-office projects every year to Cognizant, TCS and Accenture, apart from to its own captive centre in Mumbai.

“JP Morgan CIO Guy Chiarello said last week that he will increase outsourcing to India, and will drive several integration projects from there,” a New York-based expert, familiar with JP Morgan’s outsourcing plans, told ET last week, on conditions of anonymity. A spokeswoman for JP Morgan India could not reply to an email query sent by ET on Friday, and the bank’s spokesperson in the US too did not reply.

“JP Morgan is one of the first banks in the US to have fleshed out its outsourcing strategy ever since the banking meltdown happened. Many others are still undecided about their IT spend,” said a senior official at one of the technology firms, who did not wish to be quoted.

Citigroup CEO Vikram Pandit came to the House Financial Services committee yesterday to talk about their use of TARP money. While people have their eye on the bailout money, what the Federal Reserve is doing is actually much larger and more scary. The Federal Reserve has guaranteed over $200 billion of Citigroup's toxic assets, in return for $7 billion in warrants that are probably worthless. Bulldog Congressman Alan Grayson spent about five minutes questioning Pandit and taking this farcical deal apart. He forced Pandit to admit that this arrangement gives taxpayers the downside and Citigroup all the profits.

If this pile of crap has any value at all, well, you'd think they'd all be clamoring for a shot to buy it! And if they're not, it's probably because they know just how worthless it is. But don't worry - if you buy now, Uncle Sugar will step in at some point and pay for it even if it isn't worth a dime:

Wall Street helped produce the global financial and economic crisis. Now, as the Obama administration prepares to unveil a revised bailout plan for the banking system, policy makers hope Wall Street can be part of the solution.

Administration officials said the plan, to be announced Tuesday, was likely to depend in part on the willingness of private investors other than banks — like hedge funds, private equity funds and perhaps even insurance companies — to buy the contaminating assets that wiped out the capital of many banks.

The officials say they are counting on the profit motive to create a market for those assets. The government would guarantee a floor value, officials say, as a way to overcome investors’ reluctance to buy them.

Details of the new plan, which were still being worked out during the weekend, are sketchy. And they are likely to remain so even after Treasury Secretary Timothy F. Geithner announces the plan on Tuesday. But the aim is to reduce the need for immediate federal financing and relieve fears that taxpayers will pay excessive prices if the government takes over risky securities. The banks created those securities when credit and home prices were booming a few years ago.

Another Nobel Prize-winning economist checks in! Joseph Stiglitz echoes Krugman on the idea of establishing a so-called bad bank, in which the federal government would subsidize toxic assets:

Feb. 1 (Bloomberg) -- Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt.

Obama’s administration is moving closer to buying the illiquid assets currently clogging bank’s balance sheets and preventing them from boosting lending, people familiar with the matter said this week.

That amounts to swapping taxpayers’ “cash for trash,” Stiglitz said yesterday in a panel discussion at the World Economic Forum in Davos, Switzerland. “You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage.”

Stiglitz, a professor at Columbia University in New York and a former adviser to President Bill Clinton, says the plan would leave taxpayers paying for years of excess lending by banks. It would also deprive the government of money that would have been better spent shoring up Social Security, he said.

Via TPM, Theda Skocpol responds to Rep. Barney Frank's comments made in this video:

The idea that "elites" will "get serious about repairing the safety net" if they are FIRST given billions of dollars of payoffs to shareholders who made bad decisions is the height of naivete. There are no corporatist institutions in U.S. politics that can enforce this kind of bargain, that can corral all the interests and get them to carry through on mutual promises. That is why Obama and the Democrats will get for the people in general exactly what they push through right now and will squander opportunities if they give money and leverage to "elites" first!

This is what Ira Magaziner imagined with health care back in 1992 -- that he could get up front understandings with powerful interests by giving them concessions in the Health Security proposals, and they would let it get through Congress later. (I remember sitting in his office as I took notes for BOOMERANG and having him complain to me that he could not understand why the business roundtable types "lied" to him about what they would do!) Of course, they turned on him the moment Congress got ahold of things. Same thing will happen here.

The banking/Wall Street interests will sucker Obama and Barney Frank into giving them yet more (unpopular and ineffective and very expensive) handouts -- and, then, when the improvements to health care, college funding, etc. come up later they will suddenly be fiscally responsible with the public's money. And, of course, they will have plenty of blue dogs and small business lobbies and others to hide behind as they make this maneuver. Mark my words, this is my prediction.... U.S. institutions frustrate bargains and can only be moved by big pushes of popular leverage at key moments of crisis.