NPR is reporting this morning that the Justice Department plans to drop what once looked like an open-and-shut case against the case against the longest-serving Republican senator in history.

Things looked bleak for Stevens when a federal indictment dropped in July. Prosecutors alleged that Stevens had failed to disclose $250,000 worth of gifts from a campaign contributor, Veco Corp., on his Senate disclosure forms. The case was straightforward: witnesses (including Stevens himself) said that Veco, an oil services firm with no background in home remodeling, had overseen an overhaul of the senator’s private residence in Girdwood, Alaska. Stevens claimed he paid all the bills Veco sent him. The jury didn’t buy it.

Stevens’ attorneys appealed the case on a number of grounds, including prosecutorial misconduct. Attorney General Eric Holder is supposedly livid at what appears to be, at least, clear-cut mismanagement by prosecutors. For example, in February, five months after Stevens’ conviction, Judge Emmett Sullivan held prosecutors in contempt when he discovered they had not handed over important information to the defense. The Justice Department replaced its legal team after the accusations surfaced.

There were other twists and turns in the trial, including allegations that an FBI agent on the case had an affair with a witness. Though an embarrassing story for the Justice Department, withholding evidence from the defense was technically worse, apparently.

NPR reports that Holder has taken into consideration Stevens’ age (he’s 85-years-old), and the fact that he’s no longer in office. We’ll be waiting for further announcements from the Justice Department.

Update: TPMMuckraker has Holder’s statement on the decision here.

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The Federal Housing Administration — which was relegated to the sidelines for the last eight years — has now been tasked with taking on 50 percent of the mortgage sector. Long neglected by the Bush administration, much of its top staff departed, leaving behind a demoralized, fraud-ridden agency. If the FHA is expected swoop in as the savior of homeowners, Mary reports that it has a tall order to fill:

Overall, the FHA needs to increase its staff, increase training for its staff, increase the the oversight of its appraisals and underwriting, and improve the way it vets lenders taking part in its programs, [HUD Assistant Inspector General James] Heist said. The number of FHA lenders approved for its programs jumped by 330 percent over the last year, as credit tightened. But the agency still has problems with continuing to allow lenders with past predatory abuses into its programs, he said.

Mary’s story helps explain the hurdles that the federal government must clear to minimize the damage from the mortgage fall-out — even if a program seems promising.

The piece is an example the kind of work we will be doing at TWI through the first 100 days of the Obama administration and beyond: What does change look like, and what forces stand in the way?

An FBI whistleblower claims that the lead FBI agent on the Stevens case, Mary Beth Kepner, was having an affair with the prosecution’s star witness, Bill Allen, who admitted under oath to giving the longest-serving Republican senator some $250,000 in gifts that Stevens never disclosed on his Senate disclosure forms.

Stevens’ case is winding through the appeals process at the moment, on grounds of prosecutorial misconduct — separate from today’s revelations. If it’s true that Stevens’ conviction hinged on a sexual relationship between an FBI agent and an oil services company CEO, well, maybe it won’t matter that President Bush passed him over in the end.

We’re hearing that the crowds are large, but the spirit is generous.

Just in via text from Aaron Wiener:

After an hour in line at L’enfant Metro Station, I’m in the cheap seats by the Washington Monument. [There is an] upbeat crowd sharing hand warmers.

And Spencer Ackerman, via Twitter:

Nearly an hour out and now the Mall is PACKED. Pleasantly warm as a result

Once the ceremony kicks off, the staff, some of us here at TWI HQ and others on site, will live blog here on The Streak, offering our thoughts as our next president takes office.

Stevens, who maintains his innocence, has reportedly not asked for a pardon himself.

It isn’t too shocking that Murkowski — who inherited her Senate seat from her father, Frank Murkowski, when he became governor of Alaska — would ask for a pardon for Stevens. She is part of the state Republican elite that mingles with many of the same mega-donors and special interests, like local rainmaker Bob Penney, who landed Murkowski in the middle of a Senate ethics investigation just a few years ago when news broke that she failed to mention having purchased some choice riverfront property from Penney on her Senate disclosure forms.

Stevens has powerful friends outside of Alaska pushing for him, too. Senate Majority Leader Harry Reid (D-Nev.) said last week that he hopes Stevens is not forced to serve jail time, even though Stevens himself was caught on an FBI wiretap predicting he would be jailed for his behavior.

So far, Bush has been rather frugal in granting pardons. With just 24 hours remaining in his presidency, it will be interesting if he makes an exception for Stevens.

At a hearing this summer, House Financial Services Committee Chairman Barney Frank attacked private industry for putting such requirements in place. Housing advocates say they will bring this issue to Frank’s attention.

Great work, Mary!