Claire McCaskill has suggested that she will oppose the Fed audit admendment. This represents a flip-flop, as the Senator from Missouri voted for the Fed audit back in April.

One possible explanation for the shift: one of McCaskill’s top donors is Steven H Lipstein, chair of the St Louis Federal Reserve. Lipstein has given McCaskill and her committees $16,000 since she first ran for the Senate in 2006, including $11,200 for that campaign, the sort of outrageous sum that illustrates the complete meaninglessness of campaign finance limits. In February 2010, he gave her $4800, maxing out to both her primary and general accounts. His wife, Susan Lipstein, donated $2100 to McCaskill during her 2006 campaign.

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When Sen. Chris Dodd (D-Connecticut) announced last January that he would not seek reelection, some media outlets declared that Dodd’s retirement would actually increase the chances that robust financial regulatory reform would be enacted (for example, see articles by The Washington Post and BusinessWeek). Such analyses demonstrate a near total ignorance of the processes of lobbying and campaign financing that dominate Congress. In reality, Dodd’s announcement likely signaled that the aggressive reform of the finance industry widely called for at the height of the crisis will not become law; at least not while Dodd remains Chairman of the Senate Banking Committee.

The notion that the decision to retire “freed” Dodd from political pressure, allowing him to concentrate on drafting legislation that would become his legacy, greatly underestimates the strength of the ties between Wall Street and Senators like Dodd.  During his many years in the Senate, Dodd cultivated his ties to Wall Street and the industry’s K Street lobbyists to the extent that he essentially has two constituencies: the citizens of Connecticut, and the finance industry. Having freed himself from accountability to the former, he can now focus on serving the latter.

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In an editorial today, the New York Times calls for an investigation of Goldman Sachs and other financial firms for placing large bets against securities that they bundled and sold to clients. Titled “Betting against all of us,” the editorial was prompted by an article by Gretchen Morgenson and Louise Story that appeared in the Times on Christmas eve. That article is well worth a read (and deserved a bigger news day).

A key excerpt:

But Goldman and other firms eventually used the C.D.O.’s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients’ interests.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

The article also highlights the role of Treasury official Lee Sachs in this market. His firm prior to joining the Obama administration, Tricadia Investments, packaged many of these types of CDOs and won big on bets against them. The Times editorial notes that an investigation “would have to reach into the Obama Treasury Department.”

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Last week LittleSis reported that Rep. Melissa Bean receives significant support from the Wall Street interests who helped weaken new financial reform legislation. One such supporter is the Securities Industry and Financial Markets Association (SIFMA), Wall Street’s primary lobbying organization. SIFMA funds many of the New Democrats who helped pass the Bean amendment, as well as several key leaders in both the House and the Senate.

SIFMA was formed in 2007 through the merger of two separate lobbying groups, the Securities Industry Association and the Bond Market Association. Following the merger, the new organization took steps to revamp its lobbying operation to better influence the Democratic Congress, hiring Scott DeFife (a former senior policy advisor to House Majority Leader Steny Hoyer), Michael Paese (a former staffer for Barney Frank), and Ken Bensten (a Democratic insider and former Representative).

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The Chamber of Commerce has led the fight against the financial reform bill making its way through Congress.  The business lobby opposes the creation of the Consumer Financial Protection Agency, enhanced oversight of derivatives, and other key parts of the reform package, and it won many concessions on the bill recently passed by the House of Representatives.

Though the White House and the Chamber have been at loggerheads, recently, at least two members of President Obama’s inside circle teamed up with the Chamber in its efforts to fight financial reform.

Mellody Hobson, president of the mutual fund company Ariel Investments, and JP Morgan executive William Daley are both affiliated with the Chamber of Commerce’s Center for Capital Markets Competitiveness.  Both Daley and Hobson served on the Center’s predecessor committee and signed a letter from the Center urging the Obama administration to adopt Wall Street-friendly regulatory reform.  Hobson and Daley were two of the only Democrats to sign the letter, judging from campaign finance data; it’s an overwhelmingly Republican bunch.

As I noted in my previous post about Representative Melissa Bean’s ties to the Obama fundraisers, Daley and Hobson are both very close to the president.  Hobson has been raising money for him since 1995, is business partners with one of the first family’s closest friends, and campaigned side-by-side with Michelle Obama.  Daley was an adviser to the Obama transition and co-chair of the Obama inauguration.

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A group of “New Democrats” led by Representative Melissa Bean has reportedly won major concessions in the financial reform fight:

The compromise reached late Wednesday between pro-reform House Democrats and the banker-friendly wing of the party could significantly weaken consumer protection in states where lawmakers support tougher rules against tactics such as predatory lending and excessive ATM fees than historically submissive federal regulators.

Barney Frank chalked up Bean’s intransigence to the lobbying of a generic group of “big banks,” without providing much in the way of details. The Huffington Post has pointed to the amount of campaign cash flowing from Wall Street, and Public Citizen released a report on the subject on Tuesday.

But “big banks” have a human side, after all; Bean draws her support from real, live, human beings.  And a closer look at who these people are suggests that the Representative’s efforts are backed by financial elites tightly linked to President Obama.

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Senator Dodd chose an interesting time to release his financial reform bill. Ten years ago this week, Republicans and Democrats joined hands to gut the Depression-era banking reforms known as “Glass-Steagall.” This helped pave the way for the Wall Street-induced economic disaster we are currently experiencing.

At the time, the reformers were quite pleased with themselves, and celebrated by eating a cake bearing the epitaph of Glass Steagall (!!!) and joking about how average Americans knew nothing about financial reform.

Not kidding. From the November 8, 1999 American Banker:

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