But yesterday the Obama administration was pulled more deeply into the scandal as well, after newly unveiled BoA documents suggested that both incoming Treasury Secretary Tim Geithner and incoming senior economic adviser Larry Summers had endorsed the merger as well. From The Washington Post:

Bank of America chief executive Kenneth D. Lewis told the company’s board that Federal Reserve Chairman Ben Bernanke told him “that Geithner and, in addition, Larry Summers, were both on board with the transaction,” according to Dec. 22 talking points prepared for a conference call.

Both the White House and the Treasury Department have denied that Geithner and Summers were influential in pushing the merger, even if they knew about it, the Post reported. But their involvement at any level might explain why the Obama administration’s Securities Exchange Commission was so light in penalizing BoA for a failure to tell its shareholders about $3.6 billion in bonuses Merrill was poised to pay its employees around the time of the merger. The $33 million SEC fine — which effectively charged company shareholders for the alleged crimes of company executives — was thrown out by a federal judge last month.  According to U.S. District Judge Jed Rakoff, “The notion that Bank of America shareholders, having been lied to blatantly in connection with the multibillion-dollar purchase of a huge, nearly bankrupt company, need to lose another $33 million of their money . . . is absurd.” Rakoff has ordered a trial to be held in February.

The saga hasn’t been lost on some lawmakers. The House Oversight and Government Reform Committee has undertaken an extensive investigation into the details of the dubious merger — including those surrounding the decision to hide Merrill’s bonus payments from BoA shareholders. The committee will hold its fourth hearing on the episode this Thursday. Witnesses will include SEC Chairman Mary Schapiro, former SEC Chairman Christopher Cox, and Sheila Bair, head of the Federal Deposit Insurance Corporation.

Among the most vociferous opponents of the measure was Rep. Darrell Issa (R-Calif.), who offered a failed amendment that would have gutted the new benefit by forcing new parents to “exhaust all annual and sick leave” before the paid parental leave would kick in.

“[T]here is no way Congress can justify granting a costly benefit government workers [sic] at the expense of a nation that is struggling to survive the affects of a deep recession resulting in the loss of more than two million new jobs since January,” Issa, the senior Republican on the House Committee on Oversight and Government Reform, said in a statement Thursday. “There is no way for Congress to tell nearly 14 million unemployed Americans that 2.7 million gainfully employed federal workers will receive additional benefits at a projected cost close to $1 billion.”

The cost claim is disingenuous, of course. The federal budget already includes full federal salaries, so paying for parental leave wouldn’t cost the government a dime more than it already intends to spend.

But, as Washington Post columnist Joe Davidson points out today, Issa didn’t let that little fact mitigate the ferocity of his opposition, which included release of a YouTube video suggesting that Maloney’s aim to join “other progressive family-friendly-oriented countries” would thrust the the United States into a category of nation’s including North Korea, Iran, Cuba and Venezuela.

Davidson wryly counters:

Perhaps Issa would feel more comfortable keeping the United States in the company of Lesotho, Liberia, Swaziland and Papua New Guinea, the only nations that do not guarantee some form of paid parental leave, according to a report by researchers at McGill and Harvard universities.

Or perhaps Issa, who’s wealth is estimated to be between $160 and $526 million, simply knows he’d never need the help.

Yesterday, the Wall Street Journal reported that BofA chief executive Ken Lewis told New York’s attorney general in February that Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson told Lewis to keep mum about Merrill’s steep losses at the end of 2008, as well as $4 billion in bonuses Merrill intended to pay employees, lest the news spook BofA shareholders and kill the acquisition deal.

Geithner, of course, was neck deep in crafting the bailout strategies under the Bush administration, and now Towns, who heads the House Oversight and Government Reform Committee, has joined forces with Rep. Dennis Kucinich (D-Ohio), who chairs the Domestic Policy subpanel, to ask what role Geithner played in the controversial BofA-Merrill deal.

From the lawmakers’ April 23 letter to Geithner:

If Mr. Lewis’s statement, as reported by the Journal, of discussions that occurred between Mr. Paulson, Mr. Bernanke and himself is accurate, then federal officials were potentially involved in knowingly denying BOA investors material information.

The lawmakers are asking Geithner for “all documents prepared for internal use related to discussions with Bank of America and/or Treasury about compensation packages, bonuses, annual losses at Merrill Lynch, and federal guarantees against losses on Merrill Lynch assets, for the period August I, 2008 through January 19,2009,” as well as “discussions relating to public disclosure of information about compensation packages, bonuses, and annual losses at Merrill Lynch.”

A similar version of the letter went to Bernanke. And unlike the first inquiry over executive compensation limits — which Geithner still hasn’t responded to, even eight days after the requested deadline –  Towns and Kucinich are threatening to subpoena the officials for the information if they don’t get it otherwise.

The implications of Mr. Lewis’ testimony, if accurate, are extremely serious. Under these circumstances failure to comply with the Subcommittee’s request raises the prospect that we will be forced to consider compulsory means to achieve compliance with our request. However, we would prefer your voluntary compliance.

Guess the Obama honeymoon is officially over.

“In a crisis, transparency, accountability and a coherent plan with clear goals are essential to maintain the confidence of the public and capital markets,” he told the panel.

Funny, then, that Geithner is ignoring a congressional inquiry into Treasury’s plan to circumvent congressionally imposed restrictions on bailout recipients by creating a middleman through which to channel bailout funds. That strategy — first reported April 4  by The Washington Post — would allow the bailed out firms to claim that they haven’t received help directly from the government because the money would be funneled through these “special purpose vehicles” — a technicality allowing firms to ignore certain behavioral conditions, including executive pay limits.

The plan drew fire from Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, who fired off a series of questions to Geithner about why the Treasury thinks it has the authority to ignore Washington’s legislative branch.

Towns requested answers by last Thursday, but Towns spokeswoman Jenny Rosenberg said today that Treasury has yet to respond.

How’s that for maintaining the confidence of the public?

As The Washington Post reported earlier this month, Treasury’s strategy is to create virtual middlemen through which the bailout funds will pass, thereby side-stepping certain behavioral restrictions on the banks, like limits on executive pay.

The plan caught the eye of House Oversight and Government Reform Chairman Edolphus Towns (D-N.Y.), who last week sent a letter to Geithner requesting responses to six questions, most challenging the administration’s authority to ignore Congress as it pertains to regulating bailout spending.

Geithner was asked to respond by 4 p.m. today. No word yet if that’s happened, but you’ll know when we do.

1. Is it your position that the executive compensation limits and federal ownership requirements imposed by Congress on bailout funding do not apply to the ultimate recipients of that funding if it is passed through special entities or special-purpose vehicles? If so, please explain the basis for this position.

2. Has the Treasury Department conducted or obtained from another federal agency or other entity an analysis of the limits on the executive compensation restrictions and other conditions Congress placed on the use of bail out funds? If so, please describe and provide copies of any such analysis.

3. Has the Treasury Department considered establishing or established any special entities or special-purpose vehicles through which it has funneled or plans to funnel bailout funds to banks or other companies? If so, please identify and describe in detail all such special entities or special-purpose vehicles.

4. American International Group, Inc. (AIG) has now received more than $180 billion in bailout funding, of which at least $40 billion was apparently funneled directly to the largest counterparties to AIG transactions. It is still unclear as to why these payments were made at 100 cents on the dollar, far more than these counterparties would likely have received had AIG filed for bankruptcy. Was AIG a “special entity” or “special-purpose vehicle” that permitted these payments to be made without imposition of the executive pay restrictions and federal ownership requirements required by law?

5. Has the Treasury Department received from the Department of Justice any advice or opinion to the effect that the executive pay limits and other conditions Congress placed on the use of bailout funds do not apply to payments funneled through special entities or special-purpose vehicles? If so, please provide copies of all records of such advice or opinions.

6. Has the Treasury Department advised or directed the Federal Reserve that the executive pay limits and other conditions Congress placed on the use of bailout funds do not apply to payments made to special entities or special-purpose vehicles? If so, please explain and provide copies of all records of such advice or direction.

Towns asks Geithner to respond by 4 p.m. April 16. Don’t hold your breath.

The Treasury’s strategy, first reported by The Washington Post over the weekend, is a clever one: Bailout money shuffled to banks through these “special purpose vehicles” won’t technically have come from the government — at least not directly — and therefore conditions like executive pay limits won’t apply to the eventual recipients. (Those familiar with the Enron scandal will remember the dubious role of special purpose vehicles.)

But it’s a strategy that might also be illegal, and Rep. Edolphus Towns (D-N.Y.), who just happens to chair the House Oversight and Government Reform Committee, is looking into the matter. In a letter sent Monday to Treasury Secretary Tim Geithner, according to The Post, Towns didn’t mince words about his displeasure with the end-around Congress:

“It would be unconscionable and irresponsible for the Treasury Department to permit excessive pay practices to continue at companies that have been rescued by the taxpayers,” Towns wrote in the letter. “I will strongly oppose any attempt to weaken or bypass these restrictions, or to violate the spirit, if not the intent, of these laws.”

The sharp tone of the letter marks a rare instance of a powerful Democrat calling the young Obama administration — still very much in its honeymoon phase, in the eyes of most Democrats — onto the carpet.

No response this morning from Towns’ office*, but this is an episode worth watching.

*Update: Towns’ spokeswoman Jenny Rosenberg said that the Treasury has yet to respond to the letter.

A report released today from Waxman’s office — a joint effort with the House Transportation and Infrastructure Committee, headed by Rep. James Oberstar (D-Minn.) — found that the Environmental Protection Agency has shown a lax interest in enforcing the Clean Water Act in recent years, leading to hundreds of instances when investigations have been neglected and waterways have been threatened. From Waxman’s statement:

Our investigation reveals that the clean water program has been decimated as hundreds of enforcement cases have been dropped, downgraded, delayed, or never brought in the first place. We need to work with the new Administration to restore the effectiveness and integrity to this vital program.

The controversy surrounds a 2006 Supreme Court ruling on the Clean Water Act (Rapanos v. United States), which restricted traditional interpretations of the law by requiring the EPA and other federal agencies to show that a waterway is a “significant nexus” to “traditional navigable waters” before officials can apply the environmental protections under the act. Following the Bush administration’s interpretation of that vague ruling, Waxman found, the EPA has whitewashed hundreds of potential violations.

The effects, according to the findings, are nationwide. The EPA branch in Dallas, for example, reported in January that it had 76 cases of confirmed oil spills, “but no follow-up for penalties or corrective action has been sought due to difficulties asserting jurisdiction post-Rapanos.”

That same month, officials in the EPA’s Denver office sent notice to the agency’s headquarters that, “We literally have hundreds of OPA [Oil Pollution Act] cases in our ‘no further action’ file due to the Rapanos decision, most of which are oil spill cases.”

Another example: Last February, an official in the EPA’s San Francisco office announced that the agency was abandoning a case against a potential Clean Water Act violator, explaining the reason thusly:

It is time to pull the plug on keeping this case on life support. With the march of time largely attributable to the impact on the case by Senor Rapanos and his merry band of supreme court justices we had lost many many violations due to statute of limitations . . . . So we will withdraw the referral, and save our ammo for another fight.

Also a subject of the Democrats’ consternation, the EPA redacted many of the documents it provided to the committees — or simply refused to provide them at all. From a summary of the report:

EPA refused to produce hundreds of documents to the Committees and redacted many of the documents it did produce. EPA concealed the identity of corporations and individuals accused of polluting waters and the specific waters that may have been affected.

Waxman and Oberstar also sent the findings to President-elect Barack Obama, complete with a request “to restore the effectiveness and integrity” of the enforcement program.

The first step in that process occurred yesterday, when Obama named Lisa Jackson — former head of New Jersey’s Dept. of Environmental Protection — to lead the EPA next year. In the wake of the mess left behind by current EPA Administrator Stephen Johnson, environmentalists are ecstatic over the thought of the imminent change.

Indeed, the Sierra Club issued a statement yesterday saying Jackson “brings a strong scientific background to an agency where for the past eight years science and knowledge have been systematically corrupted and disregarded.”

Ouch.

Towns had angered Pelosi a few years back for voting with Republicans on a controversial trade bill (it passed by two votes) and disappearing during an important vote on the GOP budget (it also passed by two votes). As retaliation, she’d threatened to remove Towns from his post on the energy and commerce panel. With yesterday’s appointment, it looks like the Speaker has tempered that grudge.