Former Gov. Tim Pawlenty’s presidential campaign and political action committee has benefited from a large amount of money from top executives of Morgan Stanley, a global financial services corporation which has been implicated in the financial and mortgage meltdown that brought about the Great Recession. A report by the Center for Public Integrity released this week scrutinized Pawlenty’s ties to top executives at the company, finding that he’s raised more than $800,000 in the last month with its help.

According to the report, Pawlenty’s Freedom First PAC got $79,500 from Morgan Stanley executives last year. Only Federated Insurance gave more to Pawlenty. Pawlenty has also tapped Morgan Stanley executive Bill Strong to co-chair his presidential campaign, and under Strong’s leadership, Pawlenty raised $800,000 in two events — one in Chicago and another in Texas.

Morgan Stanley has been the target of numerous probes involving the mortgage and investment crisis. Last month, the company, along with Bank of America, settled after it was alleged that it wrongfully foreclosed on nearly 200 military personnel. In 2009, it settled with consumers who alleged Morgan Stanley misrepresented investment information. New York state launched an investigation last month into Morgan Stanley’s role — in addition to several other large financial services companies — in the mortgage-backed securities crisis that eventually led to the nationwide economic recession.

Massachusetts won a settlement in March from Morgan Stanley for its role in the mortgage crisis. Another settlement was reached with Colorado in March as well.

Morgan Stanley was also a recipient of bailout funds. When Pawlenty announced his presidential bid, he promised to end bailouts.

“Pawlenty’s aggressive pro-business stance as governor coupled with government scrutiny of Morgan Stanley could create image problems with some voters still angry about the Wall Street bailout,” wrote the Center for Public Inquiry in their reports.

Bachmann, Kline, Paulsen

The Democratic Congressional Campaign Committee went after Reps. Michele Bachmann, John Kline and Erik Paulsen on Wednesday for their votes last year against taxing bonuses of bank executives who received TARP funds from the federal government. The DCCC jumped on news today that AIG leaders will be getting $100 million in bonuses this year.

The bill the Republican trio opposed would have taxed TARP employee bonuses at 90 percent. While the bill passed the House last spring, it has yet to become law.

The DCCC released three statements today that were identical, except for specific references to Bachmann, Kline and Paulsen.

“This morning, Americans heard that AIG executives are getting $100 million in bonuses despite still owing taxpayers more than $100 billion,” said Ryan Rudominer, National Press Secretary of the DCCC. “While Representative Paulsen protects these outrageous Wall Street bonuses paid for by President Bush’s bailout, Paulsen does nothing to help hardworking families. Clearly, Representative Paulsen is more concerned about Wall Street, than Main Street.”

Rep. Michele Bachmann explained her opposition to the bill last year:

“Folks, two wrongs don’t make a right. Without the wrong-headed $700-billion bailout, the taxpayers would never have been put in the position of their dollars being doled out for executive bonuses in the first place… The bill on the House floor today, while not mentioning AIG by name, is clearly meant to punish a specific group of individuals in response to public outrage over the bonuses. The author of the bill, Rep. Rangel, explains his motivation for the bill by saying that he “had an obligation to respond to the fears and anger of the people.” Given this motivation, a legislative action aimed at punishing individuals, no matter how loathed or despised they may be, is explicitly prohibited by the Constitution in Article I, Section 9, Clause 3.”

Photo: abc30.com

By rank, U.S. Reps. Erik Paulsen, R-Minn., and Leonard Lance, R-N.J., are among the lowliest members of the House Financial Services Committee, which this morning holds an AIG-related hearing. Yet some politically astute casting Tuesday elevated the freshmen to point men in the House Republicans’ response to the AIG bonus scandal. The pair are among the rarest of species in Congress: newly elected Republicans from districts that favored Barack Obama for president.

Of the 34 Republicans House members — three freshmen and the rest veterans — from districts in which Obama beat Sen. John McCain last November, Paulsen is one of only seven who received a lower percentage of district votes (48 percent) than did Obama in his race (52 percent). (Lance, for example, polled evenly with Obama at 50 percent.)

But it happens that both Paulsen and Lance serve on the House finance committee, where they hold down the bottom of the seniority list. But perhaps no other Republicans in Congress could make better electoral use of some high-profile surfing on what their committee colleague Rep. Gary Ackerman, D-N.Y., today called the nation’s “tidal wave of rage” over AIG.

At House GOP leaders’ direction, Paulsen’s and Lance’s will be the leading names on a bill that demands Treasury Secretary Timothy Geithner recover the AIG bonuses — a “rehash of what President Obama is already doing to address the issue,” in ThinkProgress’ estimation.

Indeed, Paulsen professed to be all about working with Obama in comments last month after the president spoke before Congress: “The President issued a bipartisan call for cooperation,” Paulsen said, “and I stand ready to work with him on solutions to solve the big problems facing our Country.”

But with the country in an uproar, House Minority Leader Rep.  Boehner said:

I applaud the legislation unveiled today by Reps. Erik Paulsen, Leonard Lance, and all of our House Republican freshmen to increase accountability in bailout funds and to recover the AIG executive bonuses. … It is time for the Administration to provide Congress and American taxpayers an exit strategy that will get the federal government out of the private sector and out of the bailout business.

Paulsen followed suit at the press conference he and Lance held Tuesday: ”This is clearly another example of not only how Congress is broken, but how the administration has dropped the ball.“

Marcus (left) said retailers who don't donate to Coleman "should be shot."

Did bailout money end up boosting Norm Coleman’s senatorial campaign? Hard to say, but damning new evidence unearthed by Huffington Post suggests that the former U.S. senator was heavily promoted by corporate opponents of the Employee Free Choice Act, including bailout recipient Bank of America Corp. On Oct. 17, three days after the financial institution received $25 billion in bailout funds, Bank of America hosted a conference call with conservative activists who charged that the proposed legislation would turn America “into France” and spell “the demise of a civilization,” according to leaked audio of the call. Former Sen. Coleman campaigned against the measure (erroneously at times) and was supported by a series of TV commercials made by the anti-labor Coalition for a Democratic Workplace — and his name came up on the call.

Home Depot co-founder Bernie Marcus said: “If a retailer has not gotten involved in this, if he has not spent money on this election, if he has not sent money to Norm Coleman and all these other guys, they should be shot. They should be thrown out their goddamn jobs.”

During the call, a man, presumed to be an employee of Marcus’ foundation, suggested that listeners could influence the election without violating campaign finance laws by giving to the foundation. “Some organizations have written checks for $250,000, $500,000, some $2 million for this.”

“I strongly believe that those financial institutions receiving federal aid through the TARP must quickly provide a full accounting for their funds received, and I sincerely hope that the Department of the Treasury will move quickly to address this massive transparency gap,” said Klobuchar. “The Treasury Department’s failure to collect information on how companies are using TARP funds is, quite simply, unacceptable.”

Klobuchar said, “[R]eports of questionable uses of TARP funds, still-frozen credit markets and the continued slowing of the economy … called into question whether the funds were being used appropriately.”

The full letter after the jump.

The Honorable Henry M. Paulson, Jr.
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220

Dear Secretary Paulson:

I am writing to you today regarding my concerns about the Troubled Asset Relief Program (TARP). I strongly believe that those financial institutions receiving federal aid through the TARP must quickly provide a full accounting for their funds received, and I sincerely hope that the Department of the Treasury will move quickly to address this massive transparency gap.

In the nearly three months since the Emergency Economic Stabilization Act was signed into law, American families have anxiously waited for its benefits to reach Main Street. But recent economic statistics show that these benefits are not helping those who are the most in need. Credit is not loosening up. Sales of existing homes dropped by 8.6 percent in November, and we have lost at least 1.9 million jobs this year. It is not surprising that the Conference Board’s consumer confidence index fell to an all-time low of 38 last week.

The Treasury Department’s failure to collect information on how companies are using TARP funds is, quite simply, unacceptable. Therefore, I hope that you will work with the Office of Financial Stability to determine a path forward that will enable us to once and for all answer the growing number of questions regarding appropriate expenditure of TARP funds.

Thank you for your consideration of my request. I look forward to your prompt reply.

Sincerely,

Amy Klobuchar

Now MSNBC presents a GOP memo, reportedly circulated to Senate Republicans Wednesday morning, that shows there might be a political motive behind the votes: Entitled “Action Alert – Auto Bailout,” it characterized the defeat of the industry bailout — which is what the sub-60-vote Senate tally delivered — the “first shot against organized labor.” The memo went out to GOP senators, but perhaps Rep. Bachmann got a copy too. The same day the email was sent, she released a statement on her opposition to the bailout: “Unfortunately,  the Democrat-led Congress has chosen to blindly oblige Big Labor at every  turn, regardless of whether it’s in the best interest of taxpayers.”

From the Michigan Messenger: Big Three bailout spotlight reveals Detroit’s decay

Democratic Reps. Betty McCollum and James Oberstar joined with Republican Rep. Jim Ramstad in supporting the bill, while Democratic Reps. Tim Walz and Collin Peterson joined Republican Reps. John Kline and Michele Bachmann in opposing the measure. Rep. Keith Ellison did not vote.

Walz (pictured) explained his vote in a statement Wednesday. “Nothing in this bill will prevent the auto manufacturers and their suppliers from continuing to move jobs overseas,” he said. “And we have no guarantee that spending $15 billion in taxpayers’ money will actually solve the Big Three’s problems. We must preserve and create jobs in America but this isn’t the way to do it.”

Bluestem Prairie, a blog that follows news about Walz, notes that the Star Tribune reprinted a New York Times article that incorrectly states that Walz and Peterson voted for the bill. In another area of the paper, they reprint an Associated Press article that got the votes correct.

House Minority Leader John Boehner, R-Ohio, said, “The speaker had to give a partisan voice that poisoned our conference, caused a number of members that we thought we could get to go south.”

Pelosi’s speech chastised the Bush administration for its part in the economic crisis, something Boehner said was responsible for them abandoning conviction and switching their vote.

But Bachmann flatly rejected Boehner’s rationale. “I want to assure you that was not the case. We are not babies who suck our thumbs. We have very principled reasons for voting no,” reported Roll Call Monday evening.

Her comments were almost identical to those of Democratic leaders. Rep. Barney Frank, D-Mass., said, “Here’s the story: There’s a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis. And because somebody hurt their feelings they decide to punish the country.”

The expansion was fueled by innovations–including the development of credit scoring–that made it easier for lenders to assess and price risks.  In addition, regulatory changes and the ongoing growth of the secondary mortgage market increased the ability of lenders, who once typically held mortgages on their books until the loans were repaid, to sell many mortgages to various intermediaries, or “securitizers.”… This “originate-to-distribute” model gave lenders (and, thus, mortgage borrowers) greater access to capital markets, lowered transaction costs, and allowed risk to be shared more widely.

The originate-to-distribute model seems to have contributed to the loosening of underwriting standards in 2005 and 2006.  When an originator sells a mortgage and its servicing rights, depending on the terms of the sale, much or all of the risks are passed on to the loan purchaser.  Thus, originators who sell loans may have less incentive to undertake careful underwriting than if they kept the loans.  Moreover, for some originators, fees tied to loan volume made loan sales a higher priority than loan quality.  This misalignment of incentives, together with strong investor demand for securities with high yields, contributed to the weakening of underwriting standards.

Yet barely anything was done to clean-up the subprime mess ruining neighborhoods nationwide, and  the investment firms continued to run unabated even after the August warning, often with debt far exceeding capital and with SEC exemptions allowing them to do so. And while the federal government stalled on creating any regulations for lenders, states began enacting their own anti-predatory lending laws to temper the feeding frenzy and fraud.

Then, in July of this year, nearly a year after the harbinger of doom that caused the crisis in August of 07, the Treasury Department discussed creating regulations that would be “slow and difficult.” When Barney Frank asked Bernanke and Treasury Secretary Henry Paulson, “I gather what you’re saying is, it is better, in this very complex and very important set of issues, that we do it right than that we do it very quickly?” both Bernanke and Paulson nodded in agreement.

Now today, just like the swift-vote resolution in 2002 that gave Bush the authority to invade Iraq, Bush, Bernanke, and Paulson are urging a lightening-fast resolution in order to avert serious financial “panic” and meltdown.

It begs these questions: Why did it take so long for Bernanke and Paulson to enact any sort of regulation given that they knew what was coming? And if they wanted to wait to create such a “thoughtful” resolution to the crisis, why are they moving so quickly to get a bailout passed that has little regulation and a handout to the investors who helped create the mess in the first place? And one more thing: Should Paulson and Bernanke still have jobs?

Why so low? According to Housing Wire, WaMu’s $231.1 billion loan portfolio included $52.9 billion in  ARMs and $62.5 billion in home-equity loans and lines of credit.  J.P. Morgan said it would write down WaMu’s loan portfolio by roughly $31 billion to account for losses.

Still, other questions remain: Some of the loans J.P. Morgan Chase now holds (via WaMu and Bear Stearns) will be eligible for sale to the U.S. government when a bailout package is finalized. So just how much will J.P. Morgan Chase make on the backs of taxpayers given that they snatched up these tenuous loans at next-to-nothing prices? The WSJ notes: “The deal will vault J.P. Morgan into first place in nationwide deposits and greatly expand its franchise.” In other words, J.P. Morgan Chase has billions to gain from a federal bailout while homewoners and consumers still have much to lose.