So much for Bush’s promise that whoever leaked Valerie Plame’s name would be found and punished. According to a secret FBI report leaked to investigative reporter Murray Waas, Dick Cheney admitted to FBI investigators he deliberately rewrote briefing notes for the press to ensure the name of Plame, a CIA agent, would be revealed, to punish her husband Joe Wilson for doubting the existence of Saddam’s WMD program. “That Cheney, by his own admission, had revised the talking points in an effort to have the reporters examine who sent Wilson on the very same day that his chief of staff was disclosing to Miller Plame’s identity as a CIA officer may be the most compelling evidence to date that Cheney himself might have directed Libby to disclose Plame’s identity to Miller and other reporters,” Waas concludes. Libby’s deliberate obfuscation, even though it ensured his conviction for hindering a federal investigation, will ensure that it will never be known whether Cheney ordered Plame’s name leaked, Waas reports.

The Obama team has given itself a clean bill of health over dealings with Blagojevich. Although Obama had no direct contact with the governor accused of trying to sell his Senate seat, he expressed to close aides, who were in contact with the governor or his staff, names he would like to see succeed him. These were relayed to the governor and later with his chief of staff, John Harris, by Rahm Emanuel, Obama’s chief of staff. Later Obama made clear he did not want to influence the decision. The exact number of conversations Emanuel had – widely reported as 21 – was not revealed. According to the report, “There was no mention of efforts by the governor or his staff to extract a personal benefit in return for filling the Senate vacancy.” The report has two surprises: Dr Eric Whitaker, an Obama family friend, fielded calls from the deputy governor, Louanner Peters, about the seat; and Obama did not answer inquiries about Blago links because Fitzgerald had yet to interview Obama and the others.

An internal review prepared for Barack Obama found his incoming chief of staff, Rahm Emanuel, had multiple conversations with Illinois Governor Rod Blagojevich’s office on the subject of who would replace Obama in the Senate, none of which involved any deals or bribes. Emanuel spoke with Blagojevich once or twice, and four times with his top aide, John Harris. The report also said that the president-elect authorized Emanuel, who was the only Obama aide to speak with Blagojevich, to pass on the names of four potential replacements: Illinois Comptroller Dan Hynes, Illinois Veterans’ Affairs Director Tammy Duckworth, Rep. Jan Schakowsky, and Rep. Jesse Jackson Jr. Emanuel apparently recommended Obama aide Valerie Jarrett (before she accepted a job as senior White House advisor) without Obama’s knowledge. The review, which was conducted by incoming White House attorney Greg Craig, was dated Tuesday, but an initial copy was given to Obama on December 15. A transition official also revealed that Obama, Emanuel, and Jarrett have been interviewed in connection with the federal investigation into Blagojevich.

How bad was November’s 13.2 percent plunge in home prices? It was, says ABC News, “the largest amount on record.” The median price now sits at $181,300, down from $208,000 one year ago. Existing home sales also fell 8.6 percent in November. The largest drop came in the northeast, where sales fell 12 percent. Yesterday, Paul Krugman observed “it’s striking that the worst of the crisis is hitting states that largely didn’t experience a housing bubble.”

It seemed like only a matter of time: One of Bernard Madoff's clients has reportedly committed suicide. Rene-Thierry Magon de la Villehuchet, manager of the hedge fund Access International Advisers, was found dead early today in his Manhattan office. De la Villehuchet lost $1.4 billion to Madoff, and a source close to him has told the French business daily La Tribune that it was a suicide.

As a gesture of clemency for the holidays, the president has announced a list of 19 pardons, though those expecting to see the name of Cheney’s chief of staff Scooter Libby, who lied to an investigation into the leaking of CIA agent Valerie Plame’s name, or Conrad Black, the newspaper magnate and fraudster who asked for a pardon, or junk bond dealer and fraudster Michael Milken are in for a disappointment. Among the small fry Bush has cleared include a smuggler of illegal immigrants, a clutch of drug dealers, and some mail fraudsters and embezzlers. But he granted, too, a posthumous pardon to Charles Winter, a Jewish hero, who sent military aircraft to the nascent state of Israel contrary to the 1939 Neutrality Act and served 18 months in prison for his pains. The president has until January 20, his last day in office, to pardon Libby and the others.

Getting to know Caroline Kennedy is proving harder than we would have imagined. After being criticized for avoiding press interviews, Kennedy “is declining to provide a variety of basic data, including companies she has a stake in and whether she has ever been charged with a crime,” reports The New York Times. Kennedy’s spokesman said that, should she be appointed, she’ll make all necessary disclosures, but some, like the director of a nonpartisan watchdog group, argue that “Precisely because there is no campaign or election, she should be more willing to disclose and subject herself to a greater level of public scrutiny than is required.” A professor from NYU adds, “To the extent she can be more transparent, she dispels the notion that it’s all about her name.”

Arab leaders didn’t wait until the holidays before they showered Condi Rice with jewels. Her haul from her Arab admirers was valued at $316,000 by the State Department’s Office of Protocol. King Abdullah II and Queen Rania of Jordan gave her an emerald and diamond necklace, a ring, a bracelet and earrings and a jewelry box to keep them in valued at $147,000 all in. In July, King Abdullah of Saudi Arabia pressed on the secretary of her a ruby and diamond necklace with matching earrings, bracelet and ring worth $165,000 to go with a $170,000 flower petal motif necklace he gave her in 2005, but which was not previously declared. Laura Bush did less well from the Saudi king, making do with an $85,000 sapphire and diamond jewelry set and a tent made of gold. George W.’s gifts from Arab leaders amounted to $100,000 last year. More practical, the Swedish premier gave him a $570 “brush cutter” with “comfort grip handles.” The prime minister of Singapore gave the president $450 worth of gym kit, including a "uSurf Wave Action Exerciser" and an "iGallop Core and Abs Exerciser." Most unlikely gifts? Two machine guns given to General Peter Pace, former chairman of the Joint Chiefs, from his Colombian and Russian counterparts. Most touching gift? Nuts and dried fruit from the Dalai Lama to the first lady. Value? Just $6. Under federal law, none of the gifts can be kept.

What’s next for Madoff’s clients? “Right now there are Madoff winners and Madoff losers,” a professor of bankruptcy law at Harvard told Bloomberg. “Before this is over there will be nothing but Madoff losers.” Those who withdrew money from Madoff’s scheme as long as six years ago may be sued on behalf of other investors who are trying to recover their own funds. It will be up to Irving Picard, the trustee appointed to liquidate Madoff’s brokerage. According to Bloomberg, “Only investors who acted in ‘good faith’--a legal standard that makes investors prove they didn’t have knowledge or suspicion of fraud--could protect their initial stake, Hardin ruled [in a similar case]. He said investors could show they had good faith if they didn’t see any ‘red flags’ when they withdrew the funds.”

As if there weren’t ample evidence already, today brings another sign that, during this whole financial-crisis thing, government regulators weren’t really doing their jobs: A treasury department official, Darrel Dochow, let banks like IndyMac, which collapsed over the summer, exaggerate their finances in order to avoid regulation according to a report by the Treasury Department's Inspector General. Dochow previously had been in trouble for lackadaisical regulation during the Savings and Loan scandal of the early 1990s. He was removed from his job yesterday.

The shirtless photographs of Barack Obama in Hawaii have, by now, made the rounds. Gawker notes that the president-elect is in visibly better shape than he was in August. The exercise, however, apparently hasn't helped his golf game. The New York Daily News recruited a golf coach to analyze Barack’s swing. “This Democrat hits it left when he aims down the middle,” he says. Obama is reportedly a 16 handicap. And his abs may not stay hard for long if he keeps eating meals like the one Ben Smith reports him ordering during his round: “As for Mr. Obama and his group, a snack bar clerk later confirmed that he purchased two hot dogs, two spam musubi, two passion orange sodas, one Powerade and one coke, for a tab of $17.75.” Musubi is sushi made with Spam.

Barack Obama isn’t the only one hoping to hit the ground running: His Secretary of State, Hillary Clinton, is looking to build “a more powerful State Department,” reports The New York Times, by growing its budget, appointing high-profile special envoys to trouble spots, and increasing its role in global economic issues. She is now recruiting Jacob L. Lew, her husband’s former budget director, to serve alongside James B. Steinberg, her husband’s former deputy national security adviser, as her top deputies. The goal is to win back power for the government’s main diplomatic arm after Bush handed so much of it over to the Pentagon, vice president, and intelligence services. “There’s no question that there is a reinvention of the wheel here,” said one public policy analyst. “But it’s geared not so much as a reaction to Bush as to a fairly astute analysis of what’s going to work in foreign policy.”

Obama’s promise to close the terrorist prison camp at Guantanamo Bay, Cuba, will be a little easier to keep now that Portugal and Germany have offered to take in prisoners who do not wish to return to their own countries for fear of torture, prosecution, or execution. The Germany press of both left and right is behind its government’s decision to take prisoners if there are no legal inhibitions. “Germany has a special responsibility for taking these people in. At least 275 flights taking prisoners to Guantanamo, black sites or torture centers either took off, landed or flew through German airspace since the terror attacks of Sept. 11, writes Die Tageszeitung. “These prisoners should be considered innocent until proven guilty, and that's why we should consider helping the Americans remove the moral burden of the prison camp,” writes Frankfurter Allgemeine Zeitung.

Well, at least Barack Obama hasn't invited him to speak at inauguration: In his year-end address to senior Vatican staff, the Pope called homosexuality “a destruction of God’s work” and said that humanity needed “saving” from it in the same way that the rainforests need saving. The church’s duty, he said, was to “protect man from the destruction of himself”—the Catholic Church maintains that homosexuality is not a sin, but homosexual acts are. LGBT groups immediately denounced the Pope’s comments.

George Bailey, the generous hero of It's a Wonderful Life, is one of Hollywood’s favorite characters, but in light of the recent financial crisis, Condé Nast Portfolio asks a pertinent question: “Was George Bailey a reckless subprime lender?” Bailey runs Bailey Savings & Loan and “is a generous lender and lenient collector.” His rival, Henry Potter, is a supposedly villainous businessman who argues for tighter lending standards.” Today’s subprime lenders weren’t bighearted do-gooders like Bailey, but “perhaps Mr. Potter wasn't just a heartless Scrooge. Perhaps Mr. Potter, in the absence of sufficient regulatory oversight, was the one voice of sanity keeping the good people of Bedford Falls from over-leveraging themselves.”

According to his press rep, not only is Michael Jackson in fine health, but the pop star is preparing a world tour. The rep said that unauthorized biographer Ian Halperin’s "wild allegations concerning Mr. Jackson's health are a total fabrication. … Mr. Jackson is in fine health, and finalizing negotiations with a major entertainment company and television network for both a world tour and a series of specials and appearances.”

Moviegoers will have a choice between two of Hollywood’s leading men over the holidays: Brad Pitt in The Curious Case of Benjamin Button and Tom Cruise in Valkyrie. Which A-lister is better worth your money? The Associated Press clearly favors Pitt. Button is, according to reviewer Christy Lemire, “a grand, old-fashioned epic that takes mind-boggling advantage of the most modern moviemaking technology.” Lemire is less kind toward Cruise: “He's distractingly bad in this, the iconography of his celebrity so strongly overshadowing his performance. He's just too powerfully contemporary. With his hard, flat American accent, he stands out in every single scene. And he's not a good enough actor to immerse himself in this kind of period piece, or allow us to do the same.”

Madonna is wasting no time commiserating her failed marriage to Guy Ritchie, which officially ended last month. The 50-year-old singer has reportedly been wooing a young model named Jesus Luz, whom she met at a photo shoot in Rio de Janerio. She even invited him to follow her "Sticky & Sweet" tour to its next stop, Sao Paulo. "She was very interested in him," a source told Page Six. The singer's longtime flack Liz Rosenberg responded to the report: "I'm still waiting to hear about Jesus."

During the election, Sarah Palin embarrassed herself by accepting a prank call from “Nicolas Sarkozy,” but it turns out she’s not the only one who can’t spot a French impostor: The New York Times printed yesterday a letter supposedly from Bertrand Delanoe, the mayor of Paris, but it turns out that it was a hoax. "We French can only see a dynastic move of the vanishing Kennedy clan in the very country of the Bill of Rights. It is both surprising and appalling," the letter read. The Times has since published an apology on its website. “This letter was a fake. It should not have been published. Doing so violated both our standards and our procedures in publishing signed letters from our readers.”

Someone ready a bailout: California’s chief financial officer warned yesterday that the state will go broke in two months. His comment came after talks between Governor Arnold Schwarzenegger and Democratic leaders failed to make any progress toward closing the state’s $42 billion budget shortfall that is projected through June 2010. Democrats sent Schwarzenegger an $18 billion package last week that both cut spending and raised taxes, but Republicans in the legislature are opposing it because Democrats passed it with a simple majority, rather than the normal two-thirds vote that is needed to raise taxes. Democrats are blaming Schwarzenegger, while Schwarzenegger is casting a pox on both party’s houses. “The Democrats want to block cuts to state government spending, and the Republicans want to block revenue increases because they have signed pledges to protect special interests," Schwarzenegger’s spokesman said in a statement. "Legislators were sent to Sacramento to fix problems, but now what they're doing is making the situation worse."

After the much-lauded success of a similar program in the Anbar Province of Iraq, the United States will begin funding the Afghan government’s recruitment of local militias in its fight against the Taliban. The program will begin in Wardak Province in eastern Afghanistan, and will spread to other provinces if successful. “The militia push,” reports The Wall Street Journal, “is part of a growing American effort to bypass the struggling Afghan central government and funnel resources to Afghan villages and provinces.” Afghan President Hamid Karzai vetoed an earlier attempt by the United States to bolster regional militias.

Good news for Barack Obama: It’s looking like Iranian President Mahmoud Ahmadinejad faces a tough reelection campaign. Presidential rivals are already emerging, with Tehran mayor Mohammad Bagher Ghalibaf a top contender. Ghalibaf has fashioned himself the “candidate of gradual change” and favors closer ties with the West. A weak economy is providing an opening to attack Ahmadinejad, and Ghalibaf is considered a potential consensus candidate that conservatives and reformers can both support.

A New York Times article about President Bush’s hand in creating the financial crisis sure seems to have riled his administration: First, Dana Perino denounced the article, and now a former Bush speechwriter is attacking it in the New York Post. “To The New York Times,” writes Noam Neuser, “the entire world is filled with grievances, and President Bush is almost always the cause.” President Bush may have accepted donations from subprime lenders, but Democrats accepted huge amounts of money from Fannie Mae and Freddie Mac. Chris Dodd and Barney Frank appear nowhere in the article and, though Bush may given speeches extolling home ownership, he also advocated the reform of housing finance.“ What's perhaps most disappointing,” Neuser writes, “is that, thanks to its one-sided reporting, the Times missed the opportunity to explain how our government had become, by choice, an active co-investor in America's home real-estate market, carrying a lot of risk and very little opportunity for reward.”