You can see why the elite hate her -- and why we don't:

Sen. Elizabeth Warren unloaded on bank regulators Thursday about the fact that British bank HSBC is still doing business in the U.S., with no criminal charges filed against it, despite confessing to what one regulator called "egregious" money laundering violations.

Her comments came just a day after the attorney general of the United States confessed that some banks are so big and important that they are essentially above the law. His Justice Department's failure to bring any criminal charges against HSBC or its employees is Exhibit A of that problem.

During a Senate Banking Committee hearing about money laundering, Warren (D-Mass.) grilled officials from the Treasury Department, Federal Reserve and Office of the Comptroller of the Currency about why HSBC, which recently paid $1.9 billion to settle money laundering charges, wasn't criminally prosecuted and shut down in the U.S. Nor were any individuals from HSBC charged with any crimes, despite the bank confessing to laundering billions of dollars for Mexican drug cartels and rogue regimes like Iran and Libya over several years.

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This is good news. The longer they can stretch this out, the less leverage the Republicans will have:

Treasury Department officials said Monday that they will begin to take extraordinary actions Friday to manage the government's finances so the U.S. won't default after hitting its borrowing limit on May 16.

The moves come amid divisions among congressional leaders over how to raise the $14.29 trillion debt limit and avoid a default that Treasury officials say could cause another financial crisis.

Treasury Secretary Tim Geithner told lawmakers last month that the U.S. would hit the debt ceiling by May 16 and could default as soon as July 8. Officials now estimate that the actions announced Monday, combined with stronger-than-expected tax receipts, will enable the government to postpone a possible default until Aug. 2. But the longer Congress delays raising the debt ceiling, the greater the risk that markets will fall due to fears that the government won't meet its financial obligations.

In the first emergency step, Treasury on Friday will stop issuing state and local government series securities, commonly known as SLGS. That could make it harder for states and cities to issue debt, because they will have to seek issuers in the private market.

If the debt limit hasn't been raised by May 16, the government will begin delaying payments into two government pension funds and redeeming Treasury securities in those funds. It also will suspend its daily investment of Treasury securities into another government employees' retirement plan.

In addition, Treasury officials are prepared to suspend their daily reinvestment of Treasury securities held as investments in the Exchange Stabilization Fund, a fund held by the government to guard against exchange-rate fluctuations.

The problem with this is, there have been instances of storefront check cashing agencies and payday lenders taking loan payments and fees out of a recipient's Social Security checks -- even though it's illegal. Good idea to get some solid oversight in place to protect the poorest and most vulnerable from illegal practices:

Several consumer groups are urging the Treasury Department to revise plans to eliminate paper Social Security checks, saying the changes are needed to prevent potential abuses by creditors.

In April, the Treasury said it would stop issuing paper checks in 2013 and make all payments electronically. More than two million people who receive Social Security checks in the mail would have their benefits deposited directly into bank accounts or onto prepaid debit cards.

The proposal to eliminate paper checks is intended to save taxpayers money and make benefits more secure. Currently, 80% of Social Security recipients choose to have their benefits deposited directly in banks.

Last week, consumer groups including the Consumer Federation of America and Consumers Union asked the Treasury to provide more safeguards to prevent potential abuses from "payday lenders" and banks getting access to Social Security and disability benefits before beneficiaries receive them.

The requests come after congressional hearings about high-interest lenders, which provide small, short-term loans that are secured by coming pay or benefits checks, having access to Social Security funds of customers who owe them money.

"We're working to implement strong consumer protections against abusive or deceptive practices," said Dick Gregg, a fiscal assistant secretary at the Treasury.

The smell of victory:

A federal judge ruled Wednesday that government investigators illegally wiretapped the phone conversations of an Islamic charity and two American lawyers without a search warrant.

U.S. District Court Judge Vaughn Walker said the plaintiffs have provided enough evidence to show "they were subjected to warrantless electronic surveillance."

The judge ordered more legal arguments before deciding damages. Lawyers were seeking $1 million for each plaintiff plus attorney fees. The ruling also stands as repudiation of the now-defunct Bush administration's Terrorist Surveillance Program.

At issue was a 2006 lawsuit filed by the Ashland, Ore., branch of the Saudi-based Al-Haramain Islamic Foundation and two American lawyers Wendell Belew and Asim Ghafoor.

Belew and Ghafoor claimed their 2004 phone conversations with foundation official Soliman al-Buthi were wiretapped without warrants soon after the Treasury Department had declared the Oregon branch a supporter of terrorism. They argued that wiretaps installed without a judge's authorization are illegal.

Jon Eisenberg, lead lawyer for the plaintiffs, said the complicated 45-page ruling holds the Bush administration program was unconstitutional.

mcjoan has a little more.

It's about time. These are the same aggressive tactics liberal economists recommended all along, and it could have saved a lot of pain and suffering if we'd done it sooner:

The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

The new push, which the White House is scheduled to announce Friday, takes direct aim at the major cause of the current wave of foreclosures: the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country's economic downturn and the inability of jobless borrowers to keep paying.

The administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.

The problem of "underwater" borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged.

This marriage between government and the private sector is destroying America. There needs to be a bill that forbids this behavior.

Digby has a great post up detailing the debauchery.

Ryan Grim and Shahien Nasiripour at HuffPo have the whole sordid story:

Just as Congress enters the final stretch of the financial regulatory reform effort, one of the Treasury Department's leading liaisons to the Hill, Damon Munchus, is bailing out to go work for a financial services lobbying and consulting firm.

Munchus was one of Treasury's chief negotiators with the House Financial Services Committee.

[...]

Cypress is a five-year-old firm that specializes in telling banks and other investors what Treasury is up to and how they can best use that information to cash in. At the same time, a Cypress division is registered as a lobbyist on bank issues -- a kind of dual role that leaves it simultaneously telling clients how to exploit Treasury regulations and market-interventions, while lobbying for or against those regulations and interventions. It also does its own investing.

Munchus worked in the Office of Legislative Affairs, which deals directly with the Hill. His position as Deputy Assistant Secretary for Banking and Finance gave him intimate knowledge not just of the process but of key lawmakers -- what they privately support what they secretly need; what they detest; and what makes them tick.

That's invaluable information to investors. Munchus couldn't be reached for comment.

In case you still wonder why the government is always so flat-footted and outmaneuvered on important reform legislation, this should clue you in:

The ability of Wall Street to lure staffers into high-paying lobbying and consulting jobs has a corrosive effect on the legislative process, as staffers start doing the banks' bidding even before a payday, in the hopes of getting one someday. Moves like Munchus's only increase that incentive.

"You've got to wonder how much of a fight administration lobbyists are putting up against people they see as their future employers," Miller said.[...]

With the acquisition of Munchus, Cypress can now boast to employ high-level officials from four straight Treasury Secretaries.

There are a lot of factors that led to our dysfunctional system but this is the central one that touches all the others. The Village is a company town, and I don't mean the government, I mean Big Business and Wall Street. It's incestuous, corrupt and perhaps worst of all, completely inefficient and ineffectual, even for The Company. After all, Uncle Alan Greenspan eventually had to admit that these Mini Galts are incapable of even properly acting in their own self-interest by keeping American businesses competitive and the financial system working.

Instead they are operating like a tank full of piranhas rushing about furiously gobbling up everything in sight with no thought to whether or not there will be anything left tomorrow. That's fine for fish, but humans are supposed to be a little bit more evolved.

And this is only part of her post. It's not only Democrats that indulge in this behavior, It's whoever is in power. They are thick as thieves. And yet, health care for Americans has awakened the Village deficit hawks.

This is very, very interesting news. Is the White House serious, or is this a pro-consumer doggie biscuit to keep the left wing off their back? Here's hoping it's the real thing:

WASHINGTON (AP) -- The Obama administration waded into negotiations over Wall Street regulations Wednesday, calling for limits on the size of financial institutions and insisting that consumer protections remain a central objective of legislative attempts to rein in the industry.

In the Senate, talks continued on how to create a consumer protection entity. Republicans pressing for a watered-down consumer agency even as they voiced optimism that they could reach a deal with Senate Banking Committee Chairman Chris Dodd, a Connecticut Democrat, within a week.

The Treasury Department circulated proposed legislation that would prevent commercial banks from carrying out high-risk trades and that would restrict the size of financial firms to holdings no greater than 10 percent of the entire financial industry's liabilities. That restriction would apply only to firms that grow through a merger or an acquisition.

Consumer protections and doing away with financial firms deemed too big to fail are two of the key elements of the legislative efforts to overhaul the rules that govern Wall Street and prevent a recurrence of the 2008 financial crisis. In reiterating its points, the administration was making certain its views were being heard in the Senate at a sensitive time in negotiations between Dodd and Sen. Bob Corker, R-Tenn.

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This whole thing is depressing as hell. Wall Street's Masters of the Universe devastate the entire world economy, and all the House of Lords (aka the Senate) can think about is not making the bankers mad at them. Imagine how bad it is that their attempts at reform are only making the problem worse. Krugman spells it all out:

So here’s the situation. We’ve been through the second-worst financial crisis in the history of the world, and we’ve barely begun to recover: 29 million Americans either can’t find jobs or can’t find full-time work. Yet all momentum for serious banking reform has been lost. The question now seems to be whether we’ll get a watered-down bill or no bill at all. And I hate to say this, but the second option is starting to look preferable.

[...] There’s no question that consumers need much better protection. The late Edward Gramlich — a Federal Reserve official who tried in vain to get Alan Greenspan to act against predatory lending — summarized the case perfectly back in 2007: “Why are the most risky loan products sold to the least sophisticated borrowers? The question answers itself — the least sophisticated borrowers are probably duped into taking these products.”

Is it important that this protection be provided by an independent agency? It must be, or lobbyists wouldn’t be campaigning so hard to prevent that agency’s creation.

And it’s not hard to see why. Some have argued that the job of protecting consumers can and should be done either by the Fed or — as in one compromise that at this point seems unlikely — by a unit within the Treasury Department. But remember, not that long ago Mr. Greenspan was Fed chairman and John Snow was Treasury secretary. Case closed. The only way consumers will be protected under future antiregulation administrations — and believe me, given the power of the financial lobby, there will be such administrations — is if there’s an agency whose whole reason for being is to police bank abuses.

In summary, then, it’s time to draw a line in the sand. No reform, coupled with a campaign to name and shame the people responsible, is better than a cosmetic reform that just covers up failure to act.

The acid test for me will be: What does Elizabeth Warren think? It's probably a good idea because the story quotes a "senior administration" as expressing "concern" about reducing the Fed’s powers any further and said it was "really critical" that the Fed maintain direct supervision of the large financial firms.

Which could be Rahm, Summers or Geithner, and if they told me the sky was blue, I'd have to double check:

WASHINGTON — The Senate and the Obama administration are nearing agreement on forming a council of regulators, led by the Treasury secretary, to identify systemic risk to the nation’s financial system, officials said Wednesday.

The issue is one of the most fundamental in the contentious effort to overhaul regulation after the financial crisis, and addresses one of the primary lessons of the near debacle: that no one had been assigned to ensure the stability of the system as a whole and detect the kinds of excessive risk-taking and imbalances that could rock an entire economy.

Assigning the Treasury Department the job of spotting incipient trouble and addressing it quickly has support among senators from both parties, though several important provisions, including whether the council would have the ability to bypass existing banking regulators and impose its own rules on huge financial firms, remain to be worked out.

The effect would be to diminish the authority of the Federal Reserve, whose regulation of banks has been criticized for failing to head off the problems.

Talk about understatment. Considering that the boys at the Fed were in on the con game, you can see why Rahm, Larry and Timmy might be concerned about them losing control. Matt Taibbi:

Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.

That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."

More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.

So we continue to prop up the housing market, probably because it provides the only positive economic news lately. Is this good for the long-term economy? I dunno, I guess it depends on how talented you are at pretending:

The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac's chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.

The administration faced a congressionally mandated deadline of Dec. 31 to increase the amount of aid it could provide to Fannie Mae and Freddie Mac, which together have already received $111 billion in assistance.

Treasury said Thursday that its decision did not mean the firms would need $200 billion or more apiece, but that it instead was seeking to assure markets that the government would stand behind the companies. In a statement, Treasury said the move "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."