Sitting quiet and grave before the committee, Holder listened as Sen. Arlen Specter, R-Pa., one of the leading windbags of our time, held forth on how dreadful Rich is and how awful the pardon was. The fugitive trader, who still lives in Switzerland, had “a reprehensible record,” Specter said — alluding to reports that Rich did business in Iraq and Iran. The Pennsylvania Republican demanded to know how Holder could possibly have recommended a pardon for such an odious figure.

No doubt Holder was advised by the president-elect’s transition team not to argue with Specter or anyone else about Rich. He must have been told not to talk about the foreign-policy issues that heavily influenced his view of the Rich decision. So he offered a meek mea culpa, took his lumps from Specter, and promised that his mistakes had made him a better man. Considering that his objective is to get through the hearings without undue stress, that was probably the wisest course. Telling the truth would only have inflamed the Republicans and the press, while creating unwanted drama for Obama.

Still, it would have been a refreshing change from the usual confirmation minuet if instead of humbly apologizing, Holder had tartly instructed the buffoonish Specter, his fellow senators, the press, and the public about the actual circumstances of the Rich affair. He might have started with the fact that continuous lobbying on Rich’s behalf from the highest Israeli leaders and their American friends — among whom Specter no doubt counts himself — became even more intense in the days before Clinton left office. He could have noted that such pressures coincided with Clinton’s efforts to conclude a peace agreement between the Israelis and Palestinians. And he could have explained to Specter that Rich’s deals in Iran and Iraq were often related to his other role — as an asset of the Mossad who gathered intelligence and helped to rescue endangered Jews from those regimes.

It is clear that Holder and his colleagues in the Justice Department had ample reason for concern over the proposed pardon, in part because pardoning a fugitive violated precedent. But for the Post to call him “the pardoner” in a front-page headline directing readers to the editorial was grossly unfair. Clinton had sole constitutional discretion to grant the pardon, and he would have done so whether Holder liked it or not.

But Holder understood that there were deeper reasons why the pardon was likely to be approved, which had nothing to do with the political and charitable contributions of Rich’s ex-wife, the Manhattan socialite Denise Rich. The New York Times offered just a hint in a front-page story that appeared shortly after the Holder nomination was announced. Only at the very end did the Times mention the pressure from “the Israelis” that had persuaded Holder not to oppose the pardon — as he told Beth Nolan, then the White House counsel.

Placed in its international context, that remark puts an entirely different coloration on Clinton’s decision and on Holder’s forbearance.

As the president mulled Rich’s application, he was preoccupied with his final and most ambitious efforts to revive the Mideast peace talks that had imploded at Camp David during the summer of 2000. He was talking virtually every day with Ehud Barak, then Israel’s prime minister, trying to persuade the Jewish state’s leader to approve concessions to the Palestinians. That was only weeks before national elections were to take place in Israel, with Barak trailing in polls and heading toward defeat.

Echoing Barak’s pleas on behalf of Rich were Clinton’s old friend Shimon Peres, former Mossad director general Shabtai Shavit, and a host of other important figures in Israel and the American Jewish community. Winning the pardon was a top priority for Israeli officials because Rich had long been a financial and intelligence asset of the Jewish state, carrying out missions in many hostile countries where he did business. Although commentators in the mainstream and right-wing media have discounted this aspect of the controversy, they often seem as unfamiliar with critical facts as the average senator.

Following weeks of preparation by Clinton, the last round of serious peace talks opened in Taba, Egypt, on Jan. 21, 2001, the day after he signed the Rich pardon. Those negotiations eventually failed, yet they came closer to achieving a workable settlement than any before or since.

Meanwhile the fugitive financier, as he is still known, has never returned from his lair in Zug, Switzerland, to the United States. (The mainstream press never mentions that, either.) In other words, he has never used the pardon — perhaps because he would first have to pay up tens of millions of dollars he owes in back taxes, a condition set by Clinton.

Clinton’s decision is subject to harsh criticism in both substance and appearance, even by smart people who know the truth. But the pardon power exists so that presidents will be free to make such hard choices for reasons of state. As a lame duck, Clinton had no other means to induce his Israeli partner to take any risk for peace. All of this has been ignored ever since by the likes of Arlen Specter and the Washington Post — and was obscured once more because Holder didn’t want to start an argument with the Washington establishment, which forgets nothing and, even more reliably, learns nothing.

[T]he time has come for a new beginning — a new dawn of American leadership to overcome the challenges of the 21st century, and to seize the opportunities embedded in those challenges. We will strengthen our capacity to defeat our enemies and support our friends. We will renew old alliances and forge new and enduring partnerships. We will show the world once more that America is relentless in defense of our people, steady in advancing our interests, and committed to the ideals that shine as a beacon to the world: democracy and justice; opportunity and unyielding hope – because American values are America’s greatest export to the world.

To succeed, we must pursue a new strategy that skillfully uses, balances, and integrates all elements of American power: our military and diplomacy; our intelligence and law enforcement; our economy and the power of our moral example. The team that we have assembled here today is uniquely suited to do just that.

Despite these pronouncements about the future, the press conference provided reminders that — despite his frequent press conferences and the unusual pace of the roll-out of his administration — Obama is not the president yet. Asked during a question-and-answer session with the press about the terror attacks in Mumbai, the president-elect offered his condolences, but said, “This is one of those times where I have to reiterate — there is one president at a time. We’re going to be engaged in some very delicate diplomacy in the next several days and weeks, so I think it would be inappropriate for me to comment.”

There were no surprises in the announcements Obama made during the press conference; all of the nominations he announced, from Hillary Clinton at State to Susan Rice at the U.N., had been leaked to the press beforehand. But there was a slight surprise in that all of the people on stage Monday took the podium to speak briefly, something that had not happened during the press conferences that featured the economic team.

With Clinton on stage, as well as Bush Defense Secretary Robert Gates, there was bound to be a question about the much-discussed “team of rivals” concept and whether it would really work in practice. Obama dismissed the idea that there would be tension, saying the people on stage “would not have agreed to join my administration, and I would not have asked them to be part of this administration, unless we shared a core vision… I assembled this team because I am a strong believer in strong personalities and strong opinions. I think that’s how the best decisions are made. One of the dangers in the White House, based on my reading of history, is that you get wrapped up in groupthink.”

Obama also specifically addressed Clinton’s presence, saying, “This is fun for the press to try to stir up whatever quotes were generated in the course of the campaign — no, I understand — and you’re having fun, and there’s nothing wrong with that,” and adding that he and Clinton share a basic vision about the country’s security.

“Holder, who served as deputy attorney general during the Clinton administration, still has to undergo a formal ‘vetting’ review by the Obama transition team before the selection is final and is publicly announced,” Isikoff says. “But in the discussions over the past few days, Obama offered Holder the job and he accepted… The announcement is not likely until after Obama announces his choices to lead the Treasury and State departments.”

One possible hurdle, noted by Isikoff, is that Holder was involved in the controversial pardon of Marc Rich. Isikoff says that Holder “himself had reservations about going through a confirmation process that was likely to revive questions about his role in signing off” on the pardon, but that “after reviewing the evidence in the case, and checking with staffers on the Senate Judiciary Committee, Obama aides and Holder both decided the issue was highly unlikely to prove an obstacle to his confirmation.”

Isikoff based his report on “two legal sources close to the presidential transition.”

Update: NBC says it has sources who are confirming Isikoff’s story, but other outlets aren’t quite ready to go that far. The Washington Post’s Carrie Johnson and Chris Cillizza report that Holder “is almost certain to be selected as U.S. attorney general.” The New York Times’ Eric Lichtblau and David Johnston write, “Obama’s transition team has given strong signals to Eric H. Holder Jr., a senior official in the Clinton administration, that he will be chosen as attorney general, but no final decision has been made.” And the Associated Press calls Holder Obama’s “top choice” and says, “aides have gone so far as to ask senators whether he would be confirmed… [but] the decision has not been finalized.”

As for the Obama camp itself, spokeswoman Stephanie Cutter says, “No one has been offered the job as Attorney General.”

Shaheen’s appointment was recommended by Starr, but the former Justice Department internal watchdog will report to a panel of retired judges instead of Starr or Attorney General Janet Reno, the sources said.

The panel includes Charles Renfrew, a former federal judge and deputy attorney general during the Carter administration, and Arlin Adams, a former independent counsel who investigated corruption at the Department of Housing and Urban Development during the Reagan administration. Renfrew will select a third former judge to serve on the panel.

Officials said it was the first time in history that an outside investigator has been named to examine any aspect of an independent counsel’s probe.

It could not be learned last night whether Shaheen will be able to expand his investigation should he uncover wrongdoing by Hale or conservative political activists other than the alleged payments.

In an interview with Salon, Tona M. DeMers, an Arkansas attorney representing Hale, denied that her client had received payments from Clinton opponents and said that the federal investigation would clear her client. She suggested that the allegations were the result of efforts by supporters of the president to discredit Hale.

Hale’s testimony proved critical to Starr in obtaining convictions against Arkansas Gov. Jim Guy Tucker and James and Susan McDougal, the Clintons’ former partners in the failed Whitewater land deal. Tucker and the McDougals were found guilty of defrauding the Small Business Administration and a savings and loan.

Hale also alleged that President Clinton had pressured him to obtain a fraudulent loan from the SBA, and that Clinton had lied under oath about this. But Starr has found little evidence to substantiate Hale’s allegations. And there have been serious questions about the credibility of Hale, who pled guilty to two felonies in the Whitewater case.

DeMers also criticized Starr for being more harsh on her client than on other Whitewater defendants. She noted that Hale spent more time in prison than Tucker or James McDougal.

“Compared to other players in this thing, his (Hale’s) role was relatively minor,” said DeMers. “He has the least number of felony indictments and felony convictions of anybody else who has played a part in this thing. Yet he’s the one who suffered the most and served the most time. That’s inherently unfair in my book.”

Salon first disclosed the alleged payments to Hale by Parker Dozhier, a Hot Springs bait shop owner who has admitted to being paid $48,000 to be the “eyes and ears” in Arkansas for the conservative American Spectator magazine. Dozhier has denied making payments to Hale, but has said that he did provide Hale with the free use of a car and a fishing cabin.

Shortly after Salon’s March 17 report, the FBI interviewed Caryn Mann, Dozhier’s former live-in girlfriend, and her 17-year-old son, Joshua Rand, who have said they have firsthand knowledge of the payments.

“This is good news,” Mann said yesterday about the Hale probe. “Something might finally be done now.”

The investigation of the alleged Hale payments was delayed by a dispute between Starr’s office and the Justice Department.

On April 9, Deputy Attorney General Eric Holder wrote Starr that the FBI had uncovered evidence that Hale might have been paid off by “individuals seeking to discredit the president during a period when Hale was cooperating with your office.” Holder also related that the preliminary inquiry had uncovered evidence of potential “obstruction and witness tampering matters.”

While urging Starr to investigate, Holder also pointedly stated that “there have been suggestions that your office would have a conflict of interest … in looking into this matter.”

Holder was referring to the fact that the alleged payments to Hale might have originated with the Arkansas Project, an anti-Clinton effort funded by Pittsburgh billionaire Richard Mellon Scaife through the American Spectator. At the time, Starr was slated to become dean of Pepperdine University’s schools of public policy and law. Scaife had provided more than $1.35 million in funds to start up the public policy school.

“Should you believe that this matter would be better investigated by the Department of Justice, we would be prepared to accept a referral from you,” Holder wrote Starr.

Sources close to Starr say the independent counsel and some of his top aides were surprised and angered by the public release of Holder’s letter by the Justice Department. Relations between Starr and the Justice Department were already beginning to strain because the department was supporting the Secret Service in its efforts to avoid providing testimony regarding the Monica Lewinsky matter.

A week later, Starr replied to the Justice Department, saying that he would have “at most the appearance of a conflict of interest.” In contrast, Starr charged, the Justice Department “may have not only an appearance problem but multiple actual conflicts of interest in connection to any investigation of Mr. Hale.”

Starr proposed that an outside investigator be named to examine the charges against Hale. A senior advisor to Starr said the investigator would have “total and complete autonomy” but would still report his findings to Starr, who would decide how to proceed.

Justice Department officials rejected that position, sources said, seeking a more independent investigator. For a while, there seemed to be no resolution to the impasse in negotiations between the department and Starr.

Starr finally agreed that the Hale probe should be conducted entirely autonomous of his Whitewater investigation after Shaheen privately counseled him that an independent inquiry would have more credibility with the public, sources said.