The Congressional Oversight Panel, the TARP watchdog program formerly chaired by Elizabeth Warren and now helmed by former Senator Ted Kaufman, has released a report detailing the failures in the mortgage servicing industry, and the threats to the overall housing market, financial sector and greater economy. The report is chilling.

The freak show has come to staid, pedestrian Delaware, in the form of Christine O’Donnell and her litany of crazy. But while the national media and late-night comics focus on condoms, masturbation and witchcraft, the man who is likely to become the next Senator from the state has quietly gone about his business. I had the opportunity to talk with Coons about the race, the O’Donnell madness, and his specific positions on issues he could face shortly in the Senate.

Rule of law means that people responsible for crimes lose their liberty. That’s what it means for most people, anyway. Not so on Wall Street. Sen. Ted Kaufman name-checks Jamie Galbraith, but Galbraith would like to see people who break the law go to prison. That would be an effective deterrent, not a slap on the wrist.

According to Politico’s Carrie Budoff Brown, Russ Feingold’s defiance on the so-called financial reform bill irks liberals. She even finds one liberal to say how irked he his. That’s right, one (1) and he doesn’t claim to speaks for all liberals.

Barney Frank announced his conferees for the Wall Street reform bill Wednesday, and he made the important point that the focus on the specific names is a little misplaced. The views of the leadership, and the White House, and what can garner the requisite votes, will factor into the ultimate decisions as much as the specific conferees involved. Frank called his conferees “the agents of collective decision-making than autonomous deciders.”

Maneuvers late in the day resulted in the Senate passing a financial regulation bill.

Good for Ron Paul for telling Rahm and his little pro-bank whip operation to get stuffed. He’s seizing a moment of transpartisan anger at the banks and he’s pointing it straight at the Wall Street apologists. It will be interesting to see how far he can take it.

Sen. Ted Kaufman asked David Viniar what Goldman Sach’s obligations were to its clients, and whether they should  have stopped selling mortgage-backed CDO’s to them when Goldman itself was shorting them.  Viniar didn’t see any apparent conflict of interest.

The bill would place a cap on any financial institution, limiting their total assets to 3% of GDP (that would lower to 2% for banks, as opposed to 3% for non-bank institutions). Currently, the 6 largest banks have holdings that equal 63% of GDP. The Safe Banking Act would also impose a 10% cap on any bank holding company’s share of insured deposits. Bank holding companies and “selected nonbank financial institutions” would have a leverage limit of 6%, meaning that they would not be able to lend out more than around sixteen dollars for every dollar of capital in house.

The headline story in the Washington Post today states that Republicans, worried about being seen as too close to the big banks, especially in the wake of the Goldman Sachs scandal, are returning to the bargaining table and supportive of a bipartisan deal. This was how Democrats hoped this would turn out, that they could play a game of chicken and win, and that appears to be the case right now.

However, there’s nothing specific about any deal being discussed, just the notion that there is one in the works.