Bloomberg news reports that previous reports of Obama outraising Clinton were just plain silly:

Hillary Clinton may blunt one of rival Barack Obama's few advantages in the race for the Democratic presidential nomination: money.

Indeed, the 'money primary' is the only place where Obama has had a measurable advantage on Clinton and the rest of the field.  

A failure to out-raise Clinton would deprive Obama of the momentum he needs to overcome his rival's significant leads in national and key state polls. Obama raised $33 million to her $27 million in the second quarter and ended up with more cash on hand for the primary elections. His campaign had aimed to be able to outspend her significantly in the last part of 2007 and early next year.

This part strikes me as off.  I don't think anyone in Obamaland seriously thought they were going to be able to seriously outspend Clinton in this race.  No challenger to the Establishment Candidate has ever done that.

``The Clinton juggernaut is moving if she out-raises him this quarter,'' said Peter Fenn, a Democratic consultant who isn't affiliated with any candidate this year. ``It makes the argument for her winnability an easier one.''

A comparatively strong haul for Clinton would allow her to minimize Obama's argument that his larger list of donors reflects a broader appeal to voters. Obama's Web site says he has more than 340,000 contributors. Clinton said she had more than 100,000 in a Sept. 23 interview on NBC. She wouldn't comment further at a news conference the next day.

This does help Obama, but Clinton's lead in the national polls makes it harder to argue that the number of donors means much.

The Clinton 'machine' has been much hyped in its ability to raise this kind of money.  Indeed, it was a shock to everyone that the newbie Obama was able to outraise her for the first two quarters.

But, did the Clinton campaign place too much emphasis on aggressive fundraising, and inadvertently give her primary opponents the edge they were looking for?

Most everyone has heard about Norman Hsu.  Most know that he bundled $850,000 for the Clinton presidential campaign, which the Clinton campaign has said they would return (as of this diary, there has been no indication that refund checks had been mailed out).  Most also know that Hsu had been alleged to be involved in fraudulent business schemes.

But, the Hsu story has been a steady drip, drip, drip.  And each new detail is less flattering than the prior one.

First, the revelation that not only was Hsu a fraudster who was enriching himself using a Ponzi scheme, but that
his business fraud and campaign donations/bundling were part of a single corrupt enterprise.  In other words, Hsu was engaging in fraud to finance his campaign fundraising operation.  

Second, embarrassing ties to other major Democratic figures emerged.  Hsu was named to the New School Board of Trustees by Bob Kerrey.

It had been reported previously that a Clinton campaign official had been flatly denying rumors that Hsu was engaged in unethical activities.  Bob Kerrey found himself doing the same.

He was a mover and shaker who was recruited by Bob Kerrey, the university's president and a former senator from Nebraska, one of several people associated with the university who are prominent in Democratic politics or political fund-raising circles. Until last week Mr. Kerrey had been one of the few people speaking out in Mr. Hsu's defense, calling him a "terrific member" of the New School's board who was being unfairly pilloried

Query:  Does this Hsu connection have anything to do with Kerrey's recent decision to eschew another run for Senate?

Of course, a number of people on the New School board of trustees have donated major money to campaigns--donating money is how people get on these boards in the first place.  There are Republican fundraisers.  There is an Obama fundraiser.

The New School's Dean, Fred Hochberg, is a former Clinton administration official and is also a major Hillraiser.

If one compares Hochberg's donations, one finds a very strong correlation/coincidence with Hsu's bundling activities.

Hochberg, Fred (Open Secrets)

Norman Hsu bundled donations link roundup.

Neither Hsu's network nor Hochberg donated to Chuck Schumer between 2003 and 2007, which is curious given Chuck's fundraising prowess.

But, there were a number of coincidental donations to other New York state officials and out of state officials.  For Example:

On 10/24/05, Fred Hochberg contributed $2,000 to Ted Kennedy.

On the same day Hsu bundled several donations, including those from the Paw family (remember them?) totaling $9400 to Ted Kennedy.

On 5/3/07, Fred Hochberg donated $2300 to Mark Pryor (D-Arkansas), who has endorsed Hillary Clinton.

On 5/3/07, Hsu donated personally donated $2500 to Pryor.
On 5/4/07, Hsu bundled $6000 in donations to Pryor.

Okay, okay, one says.  Fundraising events happen all the time, so dates will line up.  And, considering the sheer volume of bundled donations from Hsu, there would be coincidences like this.  This may look like smoke, but there's no fire, right?

Wrong.

Disgraced fund-raiser Norman Hsu did a lot more than just pump $850,000 into Hillary Clinton's campaign bank account: He also raised hundreds of thousands of dollars for local, state, and federal candidates who have endorsed Clinton or whose support she courted.

In at least some cases, Clinton or her aides directly channeled contributions from Hsu and his network to other politicians supportive of her presidential campaign, according to interviews and campaign finance records. There is nothing illegal about one politician steering wealthy contributors to another, but the New York senator's close ties to Hsu have become an embarrassment for her and her campaign.

Among the officials to whom Clinton asked Hsu to funnel donations were:

Dina Titus, a Democratic party leader in early caucus state Nevada and Tom Vilsack, who endorsed Clinton and who received help from Clinton in retiring his campaign debt.

Others:

Campaign finance records show numerous contributions from Hsu and his associates to Clinton supporters.

In New Hampshire, Senate President Sylvia Larsen's Democratic Caucus committee received $5,000 from Hsu in September 2006; Senator Debbie Stabenow of Michigan collected more than $20,000 from Hsu and his associates; Senator Mark Pryor of Arkansas took in about $11,000; and Senator Dianne Feinstein of California received at least $17,000.

Hsu and his network also gave nearly $50,000 to Senator Tom Harkin of Iowa. Harkin has not endorsed anyone, but his wife, Ruth, is a major Clinton backer.

In addition, Hsu and his associates have contributed tens of thousands of dollars to state and local Democratic Party organizations and candidates around the country, including more than $100,000 to Governor Eliot Spitzer of New York and Attorney General Andrew Cuomo of New York, both of whom have endorsed Clinton. On Feb. 21, Hsu dipped into Chicago city politics, giving $3,500 to Alderman Danny Solis, the brother of Patti Solis Doyle, Clinton's campaign manager.

There's your fire, folks.  
And this comes at a time when Hillary has a major target on her back, as having been annointed as the presumptive nominee by the media.

And, guess what?  There's a Presidential debate tonight in New Hampshire.  

The Hill characterized the upcoming debate as Hillary in the Cross-Hairs.

It would be a tremendous shock if someone--especially Barack Obama or John Edwards--did not take a direct shot at Clinton over the Hsu story.

This is their chance to exploit a potential weakness in a candidate who has shown very few.  But, they had better hit their mark if they do, lest Clinton clobber them with a counterattack.  To paraphrase Machiavelli, do not (merely) wound the Queen, lest you find out why she is the Queen.

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