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Government responds to foreclosure crisis as details of its origin emerge. Plus: U.S. facilitates talks with Taliban.

Congress: Prayer Breakfast Group Investigated

• "The faith-based organization behind the National Prayer Breakfast is vigorously denying new allegations from an Ohio clergy group that foreign trips and other activities with Members of Congress may have been funded with money from a terrorist organization," Roll Call (subscription) reports. "The International Foundation, also known as the Fellowship Foundation, has extensive ties to Capitol Hill."

• "The Treasury Department has relied extensively on outside contractors in its execution of the financial bailout, an oversight committee said in a new report, shielding much of the work of the massive government effort from public view," the Washington Post reports. The report, released this morning, said "the Treasury has taken 'significant steps' to ensure that private contractors were used appropriately and that some experts have praised the department for going 'above and beyond' the usual standards for government contracting."


White House: DOJ Expected to Appeal 'Don't Ask' Ruling

• The Justice Department will likely challenge a federal judge's ruling that the "don't ask, don't tell" policy is unconstitutional, even though the administration "is seeking a repeal of the law," the Washington Post reports. "The administration is also expected to seek a stay of the judge's injunction Tuesday ordering the military to immediately stop enforcing the ban worldwide."

• "Defense Secretary Robert Gates said he would strongly prefer legislative action by Congress to repeal the policy... rather than seeing the ban repealed immediately by court order," the Wall Street Journal reports. "Gates said extensive training and regulatory changes were needed to ensure that the 'don't ask, don't tell' policy is repealed in an orderly way to minimize the impact on U.S. forces."

• "The White House on Wednesday released details of the success of a temporary tax credit for college tuition as a part of a push to make the credit permanent," CongressDaily (subscription) reports. "The American Opportunity Tax Credit, which was passed into law as a part of the American Recovery and Reinvestment Act in 2009, provides up to $2,500 in tax credits per student for someone enrolled in any capacity in higher education."


• "While campaigning for Sen. Russ Feingold (D-Wis.), who's trailing his GOP opponent in recent polls," first lady Michelle Obama "worked hard to put a friendly face on her husband's policies," The Hill reports. "'I know that for a lot of folks, change hasn't come fast enough,' Obama said. 'It hasn't come fast enough for Barack or for Russ either.'"

Politics: Crossroads Increases Fundraising Goal

• "American Crossroads and Crossroads GPS, the affiliated outside organizations that have already spent millions of dollars on the midterm elections on behalf of Republican candidates and drawn the ire of Pres. Obama in the process, are blowing through their fundraising goals and planning new assaults on Democratic candidates in coming weeks," Hotline On Call reports. A spokesman said "the groups have raised $56M to this point" and "are aiming to raise and spend $65M on the election."

• "Voters in 10 battleground congressional districts strongly back a plan to extend the George W. Bush-era tax cuts only for families earning less than $250,000 a year," The Hill reports based on its polling. "The survey of likely voters in 10 states found rare bipartisan support for the position of President Obama and Democratic Party leaders, who oppose extending the tax cuts for the top income brackets."

Economy: Government Responds to Foreclosure Crisis With New Rules

• "Federal officials offered their first major response Wednesday to new problems arising from foreclosures," The Hill reports. "The Federal Housing Finance Agency... provided a four-step plan that banks must follow as they look into paperwork problems such as flawed court papers and missing documents in homeowners' foreclosure files."


• "Beyond sloppy documents, the foreclosure debacle has exposed one of Wall Street's little-known practices: For more than a decade, big lenders sold millions of mortgages around the globe at lightning speed without properly transferring the physical documents that prove who legally owned the loans," the Washington Post reports. "Now, some of the pension systems, hedge funds and other investors that took big losses on the loans are seeking to use this flaw to force banks to compensate them or even invalidate the mortgage trades themselves."

• "Interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials," the New York Times reports. "At JPMorgan Chase & Company, they were derided as 'Burger King kids' -- walk-in hires who were so inexperienced they barely knew what a mortgage was."

• "Steven Rattner, who oversaw the Obama administration's overhaul of the auto industry, for months resisted a settlement with regulators over his role in New York pension fund kickbacks because he did not want to be banned from the securities industry," the New York Times reports. "But this week, Mr. Rattner relented. He has agreed to accept a ban for a few years, according to three people briefed on the negotiations but not authorized to discuss them."

Health Care: Rules Revised on Insurance for Sick Children

• "Health and Human Services Secretary Kathleen Sebelius" on Wednesday "laid out new stipulations for child-only health insurance policies, in response to recent instances of insurance companies across the country dropping such policies because they felt coverage for children with pre-existing conditions was too expensive," National Journal reports.

• "An Armenian-American crime ring defrauded Medicare of more than $35 million by using stolen doctor and patient identities and setting up dozens of phony clinics coast-to-coast, according to federal indictments unsealed Wednesday," the Wall Street Journal reports. "Members of the group, based in New York and Los Angeles, were taken into custody as part of a nationwide Medicare fraud sweep that resulted in charges in California, Ohio, New Mexico and Georgia."

• "A Kaiser Family Foundation study released Tuesday ties the disproportionately high cost of caring for Medicare seniors in long-term care facilities to frequent trips to the hospital," CongressDaily (subscription) reports. "And if such hospitalizations were reduced by 25 percent, Medicare savings could top $2.1 billion."

Energy & Environment: Ethanol Mix Increased for Fuel

• "In a controversial decision just weeks before the midterm elections, the Obama administration" on Wednesday "increased the amount of ethanol that can be blended with gasoline," CongressDaily (subscription) reports. "The announcement triggered frustration from ethanol proponents and opponents alike because of the piecemeal way the Environmental Protection Agency rendered its decision, and for punting a key portion until after the midterm elections."

• "The European Union backed away from imposing a moratorium on deepwater oil drilling in European waters Wednesday, instead recommending new legislation to enforce tough new EU-wide safety standards for the offshore oil and gas industry," the Wall Street Journal (subscription) reports.

• "As a three-week-long Chinese suspension in exports of crucial" rare earth minerals "to Japan continues, American and Japanese trade officials have been considering whether to file cases against China at the World Trade Organization," the New York Times reports.

• "Republicans don't even have the House majority yet, but Rep. Joe Barton is already making a play for a chairmanship his leadership is highly unlikely to give him," Politico reports. "In his quest to lead the Energy and Commerce Committee, the Texas Republican is petitioning the Steering Committee that awards chairmanships to 'clarify' whether the party's six-year term limits for the position apply to time served in the minority."

Technology: AOL Considers Bid for Yahoo

• "AOL Inc. and several private-equity firms are exploring making an offer to buy Yahoo Inc., according to people familiar with the matter, devising a bold plan to marry two big Internet brands facing steep challenges," the Wall Street Journal (subscription) reports.

• "There is no enthusiasm for Internet regulation among the tea party and its key affiliates," CongressDaily (subscription) reports. "However, their aversion to the Federal Communications Commission reclassifying broadband from an information service to a public utility is so strong that it leaves open the distinct possibility of tea party support for tailored regulation."

• "As part of a new consumer empowerment agenda, the FCC will propose new rules" today "to tamp down on mobile phone companies' confusing billing practices that result in unexpected charges for consumers, the agency announced on Wednesday," Tech Daily Dose reports. "The commission's 'bill shock' proposal would require mobile companies to send customers alerts before and when they exceed their plan limits resulting in increased charges. The FCC also is exploring the idea of whether all carriers should have to offer the option of capping usage based on limits set by the customer."

National Security: U.S. Aids Negotiations With Taliban

• "U.S.-led forces in Afghanistan have facilitated the passage of senior Taliban leaders to Kabul for talks with President Hamid Karzai's government, signaling a shift by the U.S. to more active support of Afghan reconciliation efforts," the Wall Street Journal (subscription) reports. "The U.S. military has said in the past that Mr. Karzai's efforts to broker peace with the Taliban were premature."

• "Iranian President Mahmoud Ahmadinejad emphasized his support for the Lebanese state Tuesday during a controversial visit that is underscoring the strength of Iran's alliance with the militant Shiite group Hezbollah, Lebanon's leading opposition movement," the Washington Post reports. "Although some of Hezbollah's opponents in Lebanon and abroad interpreted his visit as a partisan gesture, Ahmadinejad struck a reassuring tone. In a news conference with his Lebanese counterpart, Michel Suleiman, he said he sought a 'unified' Lebanon."

• "House Financial Services Chairman Barney Frank, D-Mass., and more than 50 other lawmakers sent a letter to the Commission on Fiscal Responsibility and Reform... describing the 'urgent need' to cut excess defense spending," CongressDaily (subscription) reports. "Frank and other members of the Sustainable Defense Task Force, which issued a report in June outlining possible steps to cut $1 trillion out of the defense budget in 10 years, said today that excessive spending is a result of America's overextension in defense."

• "A group of retired Communist Party officials and intellectuals issued an unusually blunt demand on Tuesday for total press freedom in China, stating that the current climate of censorship and government control of the press violated China's Constitution and debased the government's claim to represent its citizens," the New York Times reports. "The document's 23 signers, including academics and former executives of China's state-controlled media, have no public influence on the nation's ruling coalition of Communist leaders."

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