Krebs Daily Briefing 24 August 2015


Investors Race to Escape Risk in Once-Booming Emerging-Market Bonds

The large mutual funds that helped fuel rapid growth in developing countries have begun hastily retreating from those investments, contributing to the recent sharp decline in global markets. In the last week alone, investors pulled $2.5 billion from emerging-market bond funds, the largest withdrawal since January 2014. The world’s fastest-growing economies — led by China — have been propelled by soaring commodity prices, robust currencies and access to cheap loans, primarily through the sale of high-yield, high-risk bonds. But China’s decision to devalue its currency has set off a chain reaction of panicked selling around the world that contributed to the biggest one-week loss on Wall Street since 2011, sending the Dow Jones industrial average into correction territory (10 percent below its recent peak). The index was down 531 points on Friday and nearly 6 percent for the week. The currency devaluation increased concerns that growth in China was slowing and that other countries might follow with their own devaluations. The notion unnerved bond investors, who began to retreat out of fear they would not be repaid. General uneasiness about a global economic slowdown spread to stocks, which many have believed to be overvalued and due for a decline.  “The growth rates for many of these countries were vastly overstated,” said Dani Rodrik, a professor at the Harvard Kennedy School of Government who has studied the impact of foreign capital flows in developing economies. “It was all very unsustainable.”

Islamic State’s No. 2 Leader Killed in Airstrike, U.S. Says

The second-in-command of Islamic State was killed in a U.S. airstrike Aug. 18 while traveling in a vehicle near Mosul, Iraq, according to a White House statement. Fadhil Ahmad al-Hayali, the senior deputy to Islamic State leader Abu Bakr al-Baghdadi, “was a primary coordinator for moving large amounts of weapons, explosives, vehicles and people between Iraq and Syria,” National Security Council spokesman Ned Price said in the statement Friday. Al-Hayali supported Islamic State operations in both Syria and Iraq and was in charge of the group’s operations in Iraq, where he was instrumental in planning operations over the past two years, including the radical group’s June 2014 takeover of Mosul, according to Price. Also reported killed in the strike was an Islamic State media operative known as Abu Abdullah. Al-Hayali’s death “will adversely impact” Islamic State actions given that his influence “spanned its finance, media, operations, and logistics,” Price said. With few exceptions, though, leaders in terrorist organizations such as Islamic State are quickly replaced from within the group’s own ranks. Previously, there have been unconfirmed reports that Islamic State leader al-Baghdadi was seriously wounded during airstrikes in March.

US forces on ‘enhanced’ alert in South Korea

The Pentagon said Friday that U.S. forces in South Korea are on a heightened state of alert known as “enhanced status,” amid rising tensions between that country and North Korea. “With regard to the situation on the Korean peninsula, the United States is very concerned by the [North Korean] August 4 violation of the armistice agreement and we are monitoring the situation very closely,” said Ambassador David Shear, the assistant secretary of Defense for the Asia-Pacific. “We are in close touch with our commanders and with our [South Korean] ally, and the United States remains steadfast in its commitments to the defense of its allies and will continue to coordinate closely with the Republic of Korea,” he said. South Korea, also known as the Republic of Korea [ROK] is a U.S. ally and 28,000 American troops are stationed in the country. Tensions on the Korean peninsula have worsened after two South Korean troops were seriously wounded earlier this month by North Korean mines placed in the demilitarized zone (DMZ) between the two countries. In response, South Korea began blasting propaganda on loudspeakers across the border into North Korea, also known as the Democratic People’s Republic of Korea [DPRK]. North Korea responded by firing artillery into South Korea on Thursday, and South Korea fired back. On Friday morning, North Korean leader Kim Jong Un ordered his troops to prepare for war. The tensions come as the U.S. and South Korea are conducting annual joint military exercises known as Ulchi Freedom Guardian 2015. The exercises were briefly suspended on Thursday, after the firing of artillery, but have since resumed, said Shear. He said U.S. forces were on enhanced status due to the exercises, and not the shelling. “U.S. forces went on an enhanced status as part of the exercise. They are remaining in an enhanced status as part of the exercise, and of course to ensure adequate deterrence on the peninsula,” he said. “The DPRK’s provocative actions heightened tensions, and we call on Pyongyang to refrain from actions and rhetoric that threaten regional peace and stability, and we are at one with our ROK ally on this,” he said. Shear said the exercise was suspended briefly in order to allow the U.S. to “coordinate” with South Korea on the exchange of artillery fire across the DMZ. “When events like this take place, we talk to the ROK about — to get that facts straight of what happened and to — to discuss what —how we are going to respond,” he said. State Department press secretary retired Rear Navy Adm. John Kirby said Secretary of State John Kerry is “monitoring this very, very closely.” “We’re all taking this threat seriously. As we have to. When you hear rhetoric like that, you can’t ignore it,” he said on MSNBC’s “Andrea Mitchell Reports.” Kirby said U.S. troops on the peninsula “are ready for action.”

What’s Going on Between North and South Korea

Tensions are rising again on the Korean peninsula after North and South Korea briefly exchanged heavy-arms fire in an escalation of confrontation. Here’s what to know about what’s going on this time around:

A Bank for People Who Hate Banks

On a sweltering afternoon in July, Tom Blomfield emerges from Bank of England offices in the heart of the City of London and promptly sheds his suit jacket. Blomfield, the 29-year-old, bearded CEO of Mondo, a startup smartphone bank that’s applying to operate in the U.K., isn’t the suit-wearing type. He’s eager to get back to his Clerkenwell workspace for a beer to celebrate Mondo’s surmounting a big hurdle in its quest for a banking license. Blomfield and his team have just spent two hours getting grilled by eight regulators from the Bank of England and the Financial Conduct Authority, Bloomberg Markets magazine reports in its October issue. The officials quizzed them on how Mondo will attract customers and remain financially viable. After poring over Mondo’s 250-page submission, which included details of its capital and liquidity plans, the group pressed Blomfield on why he wanted to run a bank. “They said he didn’t look like a typical banker,” recalls Mondo Chairman Denise Kingsmill, who, as a member of the House of Lords and a former deputy chairman of the U.K.’s Competition Commission, added a touch of gravitas to the presentation. Blomfield had a ready retort: “I said I want to run a new type of bank.” When he’s not trying to charm regulators, Blomfield shows the kind of passion—and irritation—it takes to build a bank from scratch. His catalog of complaints about big lenders is familiar to most consumers: hours of paperwork to open an account or apply for a loan, exorbitant fees for using your credit card abroad, onerous overdraft charges, and clunky mobile apps. “I wake up and say: ‘My bank is so bad. These guys are dinosaurs!’” Blomfield says. “It impacts me, my family, all my friends. We all have to use banking, and it’s broken.” Blomfield wants to make Mondo the Google or Facebook of banking with accounts that are as easy to use as e-mail. “We are targeting a demographic that values being able to do everything over a mobile phone in five seconds,” he says. If Blomfield and Kingsmill get their way, Mondo won’t be just another snazzy app using the license of an existing bank. That’s been done in the U.S. by, which piggybacks onto Bancorp Bank, and in Germany by Number26, which is bolted to Wirecard Bank. Unlike most other startups, Mondo has built proprietary software. If Mondo gets a license from the BOE’s Prudential Regulation Authority, it could—as early as next year—begin taking deposits and lending money.

Ashley Madison Faces $578 Million Class Action Lawsuit

Two Canadian law firms filed a $578 million class-action lawsuit against the companies that run extramarital-affairs website Ashley Madison over a recent hack that exposed the personal information of about 39 million users. Charney Lawyers and Sutts, Strosberg LLP—two Canadian law firms—filed the suit on Thursday on behalf of Canadians whose personal information was breached in a company hack. The Toronto-based Avid Dating Life and Avid Life Media, which run the company, are named in the suit. The lawsuit’s class-action status remains to be certified by the court. “Numerous former users of have approached the law firms to inquire about their privacy rights under Canadian law,” the firms said in a statement. “They are outraged that failed to protect its users’ information. In many cases, the users paid an additional fee for the website to remove all of their user data, only to discover that the information was left intact and exposed.” The statement went on to say that the class action lawsuit will not seek damages from the hackers who leaked the information. Ashley Madison has said in previous statements that its members cannot be proven to have had extramarital relationships based on membership with the site alone. The plaintiff is Eliot Shore, who said he briefly joined Ashley Madison following the death of his wife to breast cancer. Shore said his membership did not result in any meetings with members of the site and that he never cheated on his wife. The suit joins a $5 million class-action lawsuit filed in Missouri in July. The anonymous female plaintiff in that case claimed she’d paid $19 to Ashley Madison to run a “paid-delete” of her personal information, which was unsuccessful.

Americans become French knights

BRUSSELS — One of the Americans who prevented a bloodbath on a high-speed European train serves in the Air Force. Another is in the Oregon National Guard. On Monday, the enlisted men became knights, along with two others who took part in the rescue, as French President François Hollande made them Chevaliers of the Legion of Honor, awarding them France’s highest decoration. In a solemn ceremony held in France’s glittering Elysée Palace, the seat of the presidency, Hollande said the four men had averted a catastrophe when they tackled and trussed a heavily armed man who had opened fire on the train. The men have resisted being labeled as heroes, saying that they gave little thought to their actions until after the heat of the moment. At the ceremony, the trio of Americans, friends since childhood, dressed modestly in polo shirts and khakis. But Hollande said their coolness under fire was a lesson to all of France — and the world. “You have shown that in the face of terror, you can resist,” Hollande said before he pinned the ribbons on the men’s chests. “So you have given us a lesson of courage, of determination and therefore of hope.” “There were over 500 passengers on that train. Ayoub el-Khazzani possessed over 300 bullets. And we realize now how close we were to a tragedy and a massacre,” Hollande said, formally identifying the suspect in the shooting for the first time, a Moroccan man just short of his 26th birthday. The men who were awarded the medals were Airman 1st Class Spencer Stone, of California; Specialist Alek Skarlatos, just returned from a deployment to Afghanistan; their childhood friend Anthony Sadler, and British businessman Chris Norman. Hollande said he also intended to award the honor to Mark Moogalian, a dual French-American citizen who also took part in the rescue and was severely wounded, and a French citizen who was the first to try to disarm the shooter and has asked to remain anonymous. Hollande pinned the red ribbons and five-pointed medal on each man’s chest, then kissed each on one cheek, then the other. The two servicemen plan to proceed with their families to Germany for further medical treatment, while Sadler plans to return home to California to start his senior year of college, they said Sunday.


Here’s What Usually Happens to Markets After the S&P 500 Drops Five Percent in a Week

Last week was a brutal one for the S&P 500, with stocks tumbling more than five percent for the first time since 2011. The bloodbath is continuing today. As Bespoke Investment Group points out, a weekly drop of more than five percent has only happened 28 other times since 1980. If you’re trying to decide what to do this week, maybe Bespoke’s chart will help. It gives you a look at what happened in the S&P 500 in the weeks following a five percent decline. On average, the market is relatively flat the next week, up 1.65 percent over the next 4 weeks, and up close to 5 percent over the next 12 weeks. Also important to note is that 60 percent of the time, the index moves higher the following week.  See chart.  Some of the standout years include huge drawdowns of more than 20 percent over the next 12 weeks in 1987 and 2008. On the opposite side of the spectrum, there were massive turnarounds in 1998 and 2009.

Power producer Southern Co to buy AGL Resources for $8 billion

U.S. power producer Southern Co (SO.N) said it will buy AGL Resources (GAS.N) for about $8 billion in cash, creating the second-largest utility company in the country by customers. AGL shareholders will get $66 for every share held, a 38 percent premium to the stock’s Friday close.

Vague Disclosures by Highflying Mutual Funds May Put Investors in Peril


Desperate for richer yields on their portfolios, individual investors have thronged in recent years to mutual funds promising higher-than-usual income. The question is: Do these investors understand the higher-than-usual risks involved? The answer is probably no. That’s because in the riskier funds, not all the perils are disclosed. Moreover, even when risks are formally discussed, many investors may still not realize how the funds really work. Trading on nonpublic information, for example, is a common practice in some of the instruments these funds hold. Inspecting high-yielding mutual funds for potential pitfalls is always worthwhile. It is even more so now, with the Federal Reserve Board poised to make its first interest rate increase in over nine years. Given the exotic investments that some income funds hold, understanding their risks is especially crucial. I’m talking about so-called leveraged loans or bank loans found in floating-rate income funds. Leveraged loans are obligations taken on by heavily indebted companies, typically to finance a buyout or recapitalization. These loans carry a wide array of risks. They don’t trade frequently and are difficult to value. They may not be backed by solid collateral and are subject to faster prepayment schedules than other obligations. Nevertheless, mutual funds are regular buyers of these loans. More than 35 fund companies offer portfolios that invest in them. Among the bigger sellers are BlackRockEaton Vance, Fidelity and Pimco. These portfolios can be large. At the end of July, the Fidelity Floating Rate High Income Fund had $11.6 billion in assets, while the Eaton Vance Floating-Rate Fund had $9.6 billion. Until recently, the market for leveraged loans was red-hot. Assets under management at mutual funds and exchange-traded funds specializing in these instruments ballooned to $116 billion this month from $20 billion in 2009, according to Lipper. But outflows are ramping up. Assets under management declined $2.1 billion in the first three weeks of August. Mutual fund companies offering such funds detail many of the risks associated with these loans. But not all.

Pension Advisers Learn the Folly of Trying to Beat the Market

CARSON CITY, Nev. — The Carson Nugget casino takes up the better part of a downtown block in this state capital, and a sign on the side beckons bettors with a promise of “Extremely Loose Slots.” You won’t find the state’s chief investment officer, Steve Edmundson, anywhere near there. Instead, he manages its pension funds on the outskirts of town, in a sparsely furnished office next to a bank branch. Less than half a shelf of books sit on display, including “The Hedge Fund Mirage.” One binder is labeled “Terminated Managers.” Those items offer hints of the surprising professional journey that Mr. Edmundson and his predecessor, Ken Lambert, who still serves as a consultant to the state, have recently completed. Since the beginning of 2014, they have moved the last of the state pension funds’ stock and bond investments entirely into securities that track market indexes exactly. So here, in the state that brought us gambling as an everyday activity, the two professionals who gauge investment odds have taken their money off one particularly large table, deciding that it no longer makes sense to bet on Wall Street wizards to beat the market. Few if any managers of large pension funds have ever done such a thing.

Extortion begins for Ashley Madison hack victims

Security companies are already started to see digital extortionists try to take advantage of people exposed by the recent Ashley Madison leak. Email provider VF IT Services showed security journalist Brian Krebs an email the company said it had blocked. The firm has been working on a spam filter to stop nefarious users of its email service from sending out extortion attempts in the wake of the data dump of over 30 million people’s profiles from the affair-oriented dating site. Here’s part of the email:  Hello, Unfortunately, your data was leaked in the recent hacking of Ashley Madison and I now have your information. If you would like to prevent me from finding and sharing this information with your significant other send exactly 1.0000001 Bitcoins (approx. value $225 USD) to the following address: B8eH7HR87vbVbMzX4gk9nYyus3KnXs4Ez Sending the wrong amount means I won’t know it’s you who paid. You have 7 days from receipt of this email to send the BTC [bitcoins]. If you need help locating a place to purchase BTC, you can start here…..Krebs tracked down the individual who received the email. “If I put myself in [the extortionist’s] shoes, the likelihood of them disclosing stuff doesn’t increase their chance of getting money,” said the man, who went by Mac. “I just not going to respond.” Like many users of the site, Mac tried to take steps to preserve his anonymity. He used a prepaid card to pay for his membership to the site. The card’s billing address is linked to his house. Others tried to use dummy email accounts to further distance themselves. But Internet connection details logged when making payments have linked users to particular computer networks. For instance, hundreds of government workers maintained subscriptions to the site through various emails but were all tracked down because they made payments using federal Internet connections. Security experts had predicted these type of extortion attempts would follow the Ashley Madison data leak. “You probably have thousands of men who are establishing webmoney and bitcoin accounts to prepare themselves to pay off the ransom,” Tom Kellermann, chief cybersecurity officer at security firm Trend Micro, told The Hill. Some are concerned about the effect the extortion could have on government officials. Foreign adversaries are likely “digging through” the Ashley Madison data to see how they can leverage it, Kellermann said. “This is going to have a very long tail,” he said.

The GOP’s Birthright Citizenship Flip-Flop

Birthright citizenship has split the GOP presidential field. Following Donald Trump’s call for an end to birthright citizenship for the U.S.-born children of undocumented immigrants, fellow Republican presidential hopefuls Bobby Jindal, Rand Paul, Rick Santorum, Ben Carson and even longtime immigration reform advocate Lindsey Graham have said they support ending the practice. Marco Rubio and Jeb Bush have been the most vocally opposed. This didn’t used to be such a difficult issue for Republicans. After all, it was the GOP that wrote birthright citizenship into America’s constitution. The leaders of the 1866 Republican Party—the Party of Lincoln—were staunch supporters of the idea. Indeed, birthright citizenship was central to the Republican vision for post-Civil War America, and a key dividing line between the supporters of President Andrew Johnson and those of the Republican leadership in Congress. Birthright citizenship had long been the traditional rule in the United States—one rooted in the English common law and adopted by many colonies and early states. Citizenship was acquired by soil rather than bloodline—subject to a few well-established exceptions, such as for the children of foreign diplomats or invading armies. But various Southern courts in antebellum America chose to diverge from this tradition in certain cases, allowing their states to deny birthright citizenship to those they deemed unworthy, such as African Americans. This Southern “tradition”—fueled by white supremacy—was reinforced by the opinions of certain pro-slavery Attorneys General and ultimately codified in the Supreme Court’s infamous Dred Scott decision, authored by Chief Justice Roger Brooke Taney, himself a former pro-slavery Attorney General under President Andrew Jackson. In Dred Scott, Taney concluded that African Americans could not be U.S. citizens even if they were born free on American soil.

Alabama tried a Donald Trump-style immigration law. It failed in a big way.

ROBERTSDALE, Ala. — Kim and Renee Byrd had wanted to see Donald Trump’s speech in Mobile, but there were vegetables to sell. The Byrds are third-generation farmers, and the traffic along Route 90, toward the Gulf of Mexico, brings in travelers who want fresh honey, fresh peaches, fresh okra. Driving 45 minutes to Mobile was asking a little much, even if the next president of the United States was calling. “He runs an empire,” Renee Byrd, 44, said of Trump. “That’s what the country needs, someone who runs an empire.” The Byrds say they think the nation needs someone who is realistic about immigration, too. Officially, less than 10 percent of Robertsdale residents are Hispanic. According to Kim Byrd, 45, that does not account for the trailer parks “saturated with Mexicans” or for “all the convenience stores” bought by immigrants with mysterious tax breaks. “They all work under the table and make [loads] of money,” said Renee Byrd. “The poor white people who work around here are all screwed.” A mile down the road, a lunchtime crowd was arriving at a Mexican restaurant called El Rodeo. The Latino wait staff took orders in English and Spanish from customers who would not care to see Trump even if he were speaking in their living rooms. “He’s no good,” carpenter Miguel Chabac, 27, said through an interpreter. “I think he’s a person who doesn’t value our work.” Chabac and his friends had plenty of experience with people like that. Alabama, which hosted the largest rally of Trump’s presidential campaign Friday night, had been a test kitchen for Trump-style crackdowns on undocumented workers — and it had not gone well. In 2011, a new Republican legislature and governor enacted HB 56, the Alabama Taxpayer and Citizen Protection Act. Chief sponsor Micky Hammon warned the undocumented population that he would “make it difficult for them to live here, so they will deport themselves.” Renting a house or giving a job to an “illegal” became a crime. Police were empowered to demand proof of citizenship from anyone who looked as if he or she might lack it. School administrators were instructed to do the same to children. The backlash was massive — a legal assault that chipped away at the law, and a political campaign that made Republicans own its consequences. Business groups blamed the tough measures for scaring away capital and for an exodus of workers that hurt the state’s agriculture industry. After Mitt Romney lost the 2012 presidential election, strategists in his own party blamed his support for the Alabama attrition policy. Those critics included Donald Trump. “He had a crazy policy of self-deportation, which was maniacal,” Trump told reporter Ronald Kessler after the election. “It sounded as bad as it was.” Asked about the law, Alabama voters rarely say that it worked. Large farms spent millions training new workers. The Byrds conceded that the agriculture sector suffered after some immigrants fled the state. “Most of them left and didn’t come back,” said Terry Darring-Rogers, who works at a Mobile law firm specializing in immigration. The debate seemed to be over — nice try, lesson learned — until the summer of Trump.


Alabama redistricting battle back in federal court

Three federal judges will hear arguments Tuesday over this question: Did the Alabama Legislature try to reduce the voice of minority voters with a new district map? Attorneys for black legislators say yes and want to have the districts thrown out completely. “We’re hoping that the court will declare all of the majority black districts to be unconstitutional,” said James Blacksher, an attorney for the plaintiffs, in a phone interview Friday. “And then give the legislature a deadline for producing new plans. We hope in time for elections to be held under new plans in 2016.” The state says the plaintiffs have no proof that race was the predominant factor in the maps’ creation. “As the case comes back home to Montgomery, we continue to work hard to defend the constitutionality of Alabama’s legislative districts and look forward to Tuesday’s oral arguments,” Mike Lewis, a spokesman for Alabama Attorney General Luther Strange, said in a statement. The hearing will be the latest battle in a three-year war over the map — a struggle that has gone up to the U.S. Supreme Court. The Republican-controlled Legislature in 2012 approved House and Senate district maps that increased the percentage of black voters in majority-minority districts. The cartographers used a strict standard that gave little leeway in changing the districts’ minority population percentages. That led to increased numbers of black voters in those districts. Republicans in other Southern states used a similarly strict standard.

Marsh won’t propose lottery bill in second session

Alabama Senate President Pro Tem Del Marsh won’t propose his bill to allow a statewide vote on a lottery and casinos during the second special session. Another Republican senator, Paul Sanford of Huntsville, said he will introduce a different lottery proposal for the first time. According to, the bill Marsh introduced during the regular session and first special session was a proposed constitutional amendment to allow a lottery and casinos at the state’s four greyhound tracks. Gov. Robert Bentley has called the gambling issue a distraction to legislators trying to resolve a shortfall in the General Fund budget. Marsh’s office commissioned a report from AUM that said his gambling plan would raise $400 million a year, about $330 million of that from a lottery, and that the casinos would create 11,000 jobs.

Donald Trump Fails to Fill Alabama Stadium, but Fans’ Zeal Is Undiminished

MOBILE, Ala. — Before Donald J. Trump arrived at a college football stadium here on Friday evening, the colorful guessing games that often accompany his campaign were very much in the air. Would Mr. Trump actually fill all of the tens of thousands of seats at Ladd-Peebles Stadium, the home field for the University of South Alabama Jaguars? How would one of the largest cities in one of the country’s most conservative states respond to a candidate whose bombast and brashness can sometimes seem limitless? Would Mr. Trump wear a “Make America Great Again” baseball hat, perhaps to conceal the effects of the wilting Gulf Coast heat and humidity on his much-remarked-upon mane? As usual, the answers — no, loudly and yes — came amid the trademark gusto of both Mr. Trump’s personality and his evolving campaign for the presidency. “Now I know how the great Billy Graham felt, because this is the same feeling,” Mr. Trump, referring to the celebrated evangelist, thundered from a stage built for the night’s rally, where the vast stretches of empty seats indicated that attendance had fallen short of the more than 30,000 people he had predicted. Mr. Trump’s errant forecast appeared to do little to diminish the zeal of those who did gather for an event that occasionally sounded more like a concert — there was a playlist that included Elton John’s “Rocket Man,” as well as a five-man band — than a political rally. But the night was punctuated with plenty of forceful reminders, including roaring chants of “U.S.A.! U.S.A.!” that Mobile had become an unexpected stop on the presidential campaign trail. “Please focus your attention to the eastern sky,” a man’s voice announced on the loudspeakers at one point, “for the arrival in Mobile, Ala., of the next president of the United States, Donald J. Trump.” As advertised, Mr. Trump’s jet soon passed over the stadium. By the time of the flyover, some Trump fans had been at the stadium for about 12 hours, attracted to an event whose potential for scale and boisterousness surged as the week went on. Mr. Trump’s campaign at first intended to hold the rally at a far smaller site. But as word spread that he would bring his red, white and blue road show to Mobile — an easy drive from New Orleans, Birmingham, Ala., and Jackson, Miss. — his aides said that interest was outpacing their plans. And so Mr. Trump turned to one of the state’s largest venues for a rally of such a profile that Mobile’s mayor issued a news release filled with details about parking, shuttles and the weather. Before the gate opened at 5 p.m., two hours before Mr. Trump’s scheduled appearance, hundreds of people stood in a line snaking well into a parking lot. Although Mr. Trump has drawn criticism for unveiling few detailed policy proposals, many of his supporters said they were unbothered. “When he gets in there, he’ll figure it out,” said Amanda Mancini, who said she had traveled from California to see Mr. Trump. “So we do have to trust him, but he has something that we can trust in. We can look at the Trump brand, we can look at what he’s done, and we can say that’s how he’s done everything.” Still, others said they had plenty of advice for the man they regularly identified in conversation as “Mr. Trump.” “Hopefully, he’s going to sit there and say, ‘When I become elected president, what we’re going to do is we’re going to make the border a vacation spot, it’s going to cost you $25 for a permit, and then you get $50 for every confirmed kill,’ ” said Jim Sherota, 53, who works for a landscaping company. “That’d be one nice thing.”

Trump Thinks Alabama Is Key to Winning the GOP Nomination

Donald Trump’s surprise decision to hold a massive rally in Mobile, Alabama, tonight completely puzzled political insiders and journalists. Alabama, unlike Iowa or New Hampshire, is not a critical early state in the Republican presidential primaries, nor is it a general-election swing state that would benefit from early cultivation. So to put it in terms Trump might use: What’s the deal? It turns out, according to two Trump associates I spoke with, that Trump views Alabama, and the other Southern states that hold March 1st primaries, as the key to locking down the Republican nomination. The stadium rally is also a way to deepen his identification with Alabama Republican Sen. Jeff Sessions, who lives in Mobile and whose view on immigrants and immigration—he’s mainly against both—Trump shares. As Sessions told me, he and Trump appeal to the same type of voters, “a lot of middle-class working people, who don’t trust establishment messaging. I call it ‘honest populism.’” Here is the Trump political logic: “Alabama is extremely critical,” a close associate of Trump’s told me (actually, we agreed I’d call him “a close associate of Mr. Trump”). “You have Iowa’s caucus on February 1st, New Hampshire on the 9th, and South Carolina on the 20th.” The race, this associate explained, would not be wrapped up by then. According to this political calculus, the crucial moment arrives three days later, on March 1st, with the “SEC primary”—the belt of Southern states that encompass the Southeastern Athletic Conference—when Alabama, Texas, Georgia, Arkansas and several others hold their primaries.


Another Drama in Harper Lee’s Hometown

MONROEVILLE, Ala. — It’s been just over a month since the release of “Go Set a Watchman,” the long-awaited second novel from Harper Lee. The book has been the publishing sensation of the year, but the literary world has largely moved on now, focused on new releases for the fall and winter. But in Ms. Lee’s hometown here, the effects of publishing “Watchman” linger, like debris from a departing county fair. Even as life returns to its slow rhythms, many residents are adjusting to a new order of things when it comes to Ms. Lee, one firmly under the direction of Tonja B. Carter. Ms. Carter is Ms. Lee’s lawyer, and over the last several years she has consolidated an unusual amount of control over the author’s affairs. In recent months she has extended her reach, sometimes to the most minute of details. About seven weeks ago, for instance, on the day of a luncheon here to celebrate the imminent publication of “Watchman,” Ms. Carter learned about a recipe book, “To Fill a Mockingbird,” being sold by the small museum inside the old courthouse at the center of town. The courthouse had been the fictional setting for Ms. Lee’s 1960. Two years earlier, Ms. Lee had sued the museum for selling too many items that used her “Mockingbird” trademark. Ms. Carter thought the cookbook violated the settlement in that case.



Of course Donald Trump’s bigotry plays well in Alabama

Donald Trump is popular in Alabama. That should not come as a surprise to anyone. Nor should it be worth mentioning that Trump had to move his Friday visit to Mobile from a small arena to a large football stadium. Of course he is and of course he did. Trump is a loud-mouthed, egotistical bigot. And we are a state that has always been enamored by the loud-mouthed, egotistical bigot. They rank third on our Most Admired list, just behind Really Good Football Player and Average Football Player. But Trump is different from those other ordinary, political bigots. He’s not just a guy who insults an entire nationality with ignorant stereotypes and misinformation. He’s not just a guy who says insulting and degrading things to women. And he’s not just a guy who has based his plans for public office on a simple-minded view of the world that could best be summed up by the phrase, “Hey, other countries, go f*** yourself!” Trump is all of that and he’s rich. Filthy rich. Billionaire rich. He is the manifestation of every attribute that today’s GOP seems to hold dear: boorish, egomaniacal, unashamed, hypocritical, callous and wealthy. Trump is to today’s conservative voter what a Kardashian is to today’s 20-something. The dream. Just as a 20-something watches a Kardashian and dreams of being super rich, pampered and spoiled for no reason, today’s conservative looks at Trump and dreams of walking from the door of a plane with his name plastered on the side in 80,000-point type, a supermodel – his third wife – a quarter-century younger than him on his arm, wind whipping through that finely coiffed dead rabbit atop his head, saying whatever he wants about whomever he wants. Conservatives just got chills. The fact is Trump is a symbol of America’s greatest problem – it’s obsession with material wealth at the expense of other people. But he has also highlighted a number of problems with the American political system. Problems that many people likely didn’t know existed, or didn’t know existed to such a large degree, prior to his candidacy. The biggest is that the massive amounts of money present in American politics has squeezed out all individual thought. Candidates who aren’t scared of bucking the party, who express a point of view that diverges from the bland nothingness of political speak and who take bold stands and say bold things – no matter how offensive they might be in this case – are largely absent from today’s two-party system. Which is why that system continues to produce people with the same last names. Trump is the first viable candidate since Ross Perot (“Can I finish?”) to have no allegiance to corporate backers, super-wealthy donors or foreign interests. Trump also can’t be controlled by the Republican Party, which, like the Democratic Party, often keeps candidates walking a tight path and reciting the party line on major issues by controlling the donations doled out. Trump doesn’t need their money. And they have no idea what to do with a candidate who won’t take money or advice, and who keeps climbing in the polls with every outrageous comment. Bernie Sanders, to a lesser degree, is experiencing the same phenomenon on the Democratic side of things. Here’s a guy who openly tells you that he’s a socialist, who’s preaching against the big banks and corporate money, and who might somehow have worse hair than Trump. And he’s climbing in the polls. Voters are tired of scripted and molded candidates, walking like robots through the usual routine of gathering votes. They want something different. Unfortunately, in this state, that something different sounds a lot like the same, disgusting bigotry that has ruled here for years. It just has a New York accent.

Hubbard Will Lie About Ethics Laws: Opinion

Speaker Mike Hubbard is so worried that he will be convicted on the 23 felony counts of violating State ethics laws, that his legal team has filed a seal motion to have those laws ruled unconstitutional. After reviewing thousands of documents and hearing hundreds of hours of testimony, 18 citizens in Lee County found probable cause to indict and arrest Mike Hubbard, the most powerful politician in their district, on 23 felonies. There are some who do not believe that 12 other citizens called from that same district will find him guilty of those 23 felonies. But, there is one group that is worried he will be convicted:  Hubbard’s criminal defense team. Criminal defense attorney J. Mark White said, the reason they filed the motion to challenge the constitutionality of the laws under which Hubbard was indicted, and have them placed under seal, was because it contained grand jury testimony. Matt Hart, Chief of the AG’s Special Prosecution Division, said in court that the real reason was because the filing would embarrass Hubbard. Trail Judge Jacob Walker III agreed that the motion should be unsealed, and gave the defense until Friday August 21, to publicly file the motion.  For the moment, the public and the media can only speculate on what grounds Hubbard will challenge the laws he championed, voted for, and praised saying:  “Because of the laws passed in the [2010] Special Session, and proudly signed into law by Governor Riley, Alabama ethics laws are now among the strongest in the nation.” What outrageous argument will Hubbard trot out to make the court believe that the laws he passed are somehow illegal?  Hubbard also wrote one of those ethics laws:   “It is my hope that future historians will say that this was the legislature that brought the reforms Alabama had needed for so long and that fundamentally changed how state government operates… Most voters in Alabama had become used to hearing politicians say one thing on the campaign trail and do something else once elected. That kind of empty rhetoric and broken promises has given Alabamians a serious distrust of state government for decades. We vowed to change that.” In his own words Hubbard proclaimed boldly that what he and the Republican supermajority “proudly” passed were historic ethics reforms, “that fundamentally changed how state government operates.” Now, he wants the court to believe that it was all a mistake?


Morning Money

WHILE WE WERE OUT — Just a little market action while your regular MM host was on the beach, eh? Can’t leave you people alone for a second! At least as a pure reaction to a Chinese slowdown, the 1,000-point Dow move seems way overdone. Per Pantheon’s Ian Shepherdson: “Exports to China account for just 0.7 percent of U.S. GDP; exports to all emerging markets account for 2.1 percent. So, even a 25 percent plunge in exports to these economies — comparable to the meltdown seen as global trade collapsed after the financial crisis — would subtract only 0.5 percent from U.S. growth over a full year …

The good news: “What matters, though, is the net impact on the U.S., which probably will be positive, thanks to the drop in commodity prices, especially oil. With crude oil dipping almost to $40 on Friday, retail gasoline prices will fall over the next couple of weeks, likely reaching just $1.85 per gallon by early September. In September last year, prices averaged $3.39. The saving to consumers from cheaper gas alone from last year’s peak to our September forecast will be some $180B, or 1.0 percent of GDP, at an annualized rate.”

THE ROUT CONTINUES — Reuters: “Alarm bells rang across world markets on Monday as a 9 percent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors. European stocks … opened more than 3 percent in the red after their Asian counterparts slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand. Safe-haven government bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown kicked in. …

PANIC ON THE STREETS OF … EVERYWHERE — “‘Markets are panicking. Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable,’ said Takako Masai, head of research at Shinsei Bank in Tokyo. With serious doubts now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies …

“Commodity markets took a fresh battering. Brent and U.S. crude oil futures hit 6-1/2-year lows as concerns about a global supply glut added to worries over potentially weaker demand from China. … Copper, seen as a barometer of global industrial demand, tumbled 2.5 percent”

$5 TRILLION IN GLOBAL WEALTH … OBLITERATED — Bloomberg: “A wave of selling gripped global markets as the rout in all but the safest assets deepened. … European stocks dropped as U.S. equity-index futures signaled a fifth straight day of losses and the Shanghai Composite Index lost as much as 9 percent. Brent crude tumbled through $45 a barrel and even gold wasn’t spared as metals slid. South …

“More than $5 trillion has been erased from the value of global stocks since China unexpectedly devalued the yuan, fueling speculation that the slowdown in the world’s second-largest economy may be deeper than previously thought. The rout is shaking confidence that the global economy will be strong enough to withstand higher U.S. interest rates, even as bets on a September liftoff evaporate. … The Stoxx Europe 600 Index slid 3.1 percent by 8:21 a.m. in London, taking its loss through the last four days close to 10 percent. Germany’s DAX Index retreated 3.2 percent and is heading for its longest streak of losses in almost four years.”

RIP UP THE PLAYBOOK — WSJ’s Min Zeng: “The moves come as many investors rip up their playbooks for what might work for the rest of 2015. Fresh jitters about the global economy are giving U.S. government bonds an unexpected boost, once again wrong-footing investors who were convinced the three-decade-long rally in Treasurys was over. Gold and European bonds are also benefiting, while emerging markets and commodities bear the brunt of the selloff.”

NYT LEAD STORY AS OF 415am by Neil Gough “Global Stocks Tumble”: “Global markets continued to plunge on Monday, with stocks across Asia and Europe sliding sharply, led by a rout in China. … The selling in China has accelerated despite extraordinary government intervention in the past two months aimed at propping up share prices. As the slide highlighted on Monday, those efforts have not been a success. …

“Investors’ concerns over China’s economic slowdown and a souring view of once-favored emerging economies have rattled financial markets around the world in recent days, and showed no signs of letting up on Monday The gloom was shared across the region. In Japan, the Nikkei 225 stock average closed 4.6 percent lower, while Australia’s main index fell 4.1 percent.”

FT HEADLINE: “China plunges 8.5 percent triggering global rout … Beijing’s official mouthpiece dubs slide ‘Black Monday’”

THIS JUST IN: John McCain is suspending his presidential campaign to return to Washington for crisis meetings on the market turmoil (#ThingsThatHappenedIn2008)

HOW MUCH SHOULD YOU BE FREAKING OUT? — Honestly we are in no position to say having just returned from vacation. And U.S. stocks could certainly take some more hits this week. But there is nothing like the massive credit bubble and super-leveraged Wall Street time bomb ticking in the U.S. to create a real domestic crisis like we saw in 2008 and 2009. But at least in terms of Chinese stocks, there seems to be no bottom.

HOT READ: LARRY SUMMERS WARNS THE FED — Per Larry Summers’ latest FT op-ed: “Raising rates this year will threaten all of the central bank’s major objectives  … [A] reasonable assessment of current conditions suggest that raising rates in the near future would be a serious error that would threaten all three of the Fed’s major objectives — price stability, full employment and financial stability. … Unless … inflation sharply accelerates, or euphoria in markets breaks out, there is no case for the Fed to adjust policy interest rates.”

KOTOK SAYS SUMMERS IS WRONG! — Cumberland Advisor’s David Kotok: “We believe the Fed will hike before the end of this year, most likely at the September meeting: they have no reason to wait. In fact, waiting would send a message to the markets that members of the Fed were more worried than markets believed them to be. The risk does not lie in the Fed’s implementing a single hike and letting markets reckon with the fact that you can move away from the zero bound and the world will not end. The risk lies in doing nothing.”

JACKSON HOLE PREVIEW — Mohamed A. El-Erian on Bloomberg View: “The annual “Economic Policy Symposium” in Jackson Hole, Wyoming, which brings together academic experts, financial market participants and many of the world’s central bankers, begins Aug. 27. The timing couldn’t be better, on paper, at least. … [T]he event organized by the Federal Reserve Bank of Kansas City should also be an opportunity to discuss the challenges facing the global economy, including the slowdown in the emerging world and the threat it presents to social wellbeing and financial stability.

“Yet what is desirable is not always feasible. In past years, U.S. officials in particular have varied in their approach to Jackson Hole. This year, they are most likely to play down any discussion of immediate policy issues, particularly given the genuine questions about whether central banks have exhausted their available policy responses.  … Fed Chair Janet Yellen has appeared less eager to use Jackson Hole as a policy platform — especially given that market participants had come to expect major policy announcements at these gatherings” [Yellen is reportedly skipping Jackson Hole this year]

GOOD MONDAY MORNING — Good to be back after two weeks away, though we wouldn’t mind a softer re-entry than a full-blown global market meltdown. Thanks so much to everyone on the amazing POLITICO Pro Financial Services team for keeping things cranking along in my absence. Please forgive any rust as we restart our engine.

DRIVING THE WEEK — Will the market crash keep rolling in the U.S. this week? Will 2016ers have to start weighing in? Will it give Donald Trump more opportunities to be Donald Trump and claim he can fix everything? … President Obama is back from vacation and heads to Las Vegas today to deliver remarks at the National Clean Energy Summit … Case-Shiller Home Prices at 9:00 a.m. Tuesday expected to rise 0.1 percent. … Consumer Confidence at 10:00 a.m. Tuesday expected to rise to 93.0 from 90.9 … Second estimate on Q2 GDP at 8:30 a.m. Thursday expected to be revised up to a solid 3.2 percent from 2.3 percent … Personal income and spending at 8:30 a.m. Friday both expected to rise 0.4 percent … Kansas City Fed’s Jackson Hole conference starts Thursday …

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Zachary Warmbrodt’s exclusive exit interview with departing CFTC commissioner Mark Wetjen []. For Pro’s subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or

TRUMP STARTS RAISING CASH … — POLITICO’s Katy O’Donnell: “Donald Trump has boldly touted his independence from big donors, in June proclaiming ‘I’m using my own money’ during his presidential announcement speech … But even as Trump publicly scorned other candidates’ use of super PACs, he tacitly gave approval to the Make America Great Again PAC by attending a fundraiser the group held in New York last month. Trump spoke for between 10 and 15 minutes at the mid-July fundraiser, where about 200 people packed into a private residence in Manhattan. …

“Asked about the event, Trump campaign manager Corey Lewandowski initially told POLITICO on Thursday that Trump had not attended any PAC fundraisers ‘to my knowledge.’ However, on Friday a campaign spokeswoman confirmed that Trump did attend, and forwarded a message from the Republican presidential candidate. ‘There are so many people wanting to contribute and I am so grateful for their support. I appreciate the moral investment in my vision to Make America Great Again,’ Trump said in an e-mailed statement to POLITICO Friday.”

 … AND SLAPS AT HEDGE FUND MANAGERS — FT’s Barney Jopson: “Trump on Sunday turned his fire on hedge fund managers, calling them ‘paper-pushers’ who do not pay their fair share of tax, in the latest attack of his bombastic presidential campaign. Mr Trump … indicated he would close a loophole that lets hedge fund and private equity managers pay taxes at a lower capital gains rate instead of as income tax.  … The billionaire’s comments add a new dimension to his unorthodox campaign because support for ending the so-called ‘carried interest loophole’ stretches across party lines, encompassing conservatives as well as Democrats. …

“Vowing to reform the tax law, Mr Trump said on Sunday that he would target hedge fund managers. ‘They are energetic. They are very smart. But a lot of them — they are paper-pushers. They make a fortune. They pay no tax. It’s ridiculous, OK?’ he told CBS television. ‘The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.’ Mr Trump said he would not be deterred by his relationships with hedge fund managers. ‘Some of them are friends of mine, some of them I couldn’t care less about,’ he said. ‘It’s the wrong thing. These guys are getting away with murder. I want to lower the rates for the middle class.’”

BIDEN CLOSES IN ON RUN — POLITICO’s Edward-Isaac Dovere: “In interviews, current and former White House staffers say that as [Joe] Biden has ratcheted up the seriousness of his explorations, including having aides reach out to former top political operatives for President Barack Obama to gauge interest, the situation looks very different from when they’d been assuming [Hillary Clinton would] be the only real Democratic candidate in 2016. They had convinced themselves that she could be the heir to Obama and the one to protect his legacy, and they were excited about it. A Biden run would upend that.

“They know how hard it would be for Biden to win, even if progressive icon Elizabeth Warren were to back him. (The two held an unannounced meeting over the weekend.) They know that Clinton’s the heavy favorite to be the nominee. They’re still pretty confident she’s the one who’d put together the operation that would make her the strongest candidate next November. ‘I don’t know what the official line will be,’ said one West Wing staffer, ‘but you will have a lot of people in the building rooting for him.’”

THE BIG IDEA: IS THE FED’S RATE THEORY WRONG? — WSJ’s Ben Leubsdorf: “Federal Reserve officials might raise interest rates soon because they have a theory: Falling unemployment pushes up prices and wages, requiring tighter credit to keep inflation in check. What they don’t have is proof that the theory has worked consistently in the past, or evidence it is working now. … The U.S. unemployment rate was 5.3 percent in July, just above the 5 percent to 5.2 percent range that Fed officials expect in the long run. But annual inflation readings have remained below the Fed’s 2 percent target, while pay raises seem stuck in low gear.

“Fed Chairwoman Janet Yellen and her colleagues face a tough decision at their Sept. 16-17 policy meeting. They can assume inflation will ramp up, and raise interest rates at the risk of smothering modest economic growth, or they could wait for evidence of an inflation uptick and risk seeing prices rise too fast. Their trust in the late economist A.W. Phillips, whose work on the relationship between the job market and wages remains popular but controversial four decades after his death, might matter as much as hard data on consumer prices and worker pay”

MARKET SLIDE RIPS TECH GIANTS — FT’s Richard Waters: “Investors are wary of the technology sector’s prospects this week after one of the market’s remaining bulwarks fell victim to the widespread equities rout late last week amid growing fears over the Chinese economy. Friday’s tumble deepened a slide that left some of the best-known tech names nursing even bigger losses than the rest of the market, with Apple, Microsoft, and Intel each falling nearly 9 per cent during the week. The setback has also exposed a widening gulf between the euphoric valuations for private tech companies and the more sombre public stock market, increasing the chances of a reversal for a group of high-flying private companies …

“Although public tech companies were not trading at high valuations by historic standards, the sector has been caught up in a wider market collapse that was ‘a carte blanche bloodbath for everyone’, said Kevin Walkush, a portfolio manager at Jensen Investment Management. Many US tech companies generate more than half their sales overseas, making them particularly exposed to a rising US dollar as other currencies slide, said Ryan Jacob, of Jacob Asset Management.”

POTUS Events

10:30 am || Receives the Presidential Daily Briefing
12:30 pm || Lunch with Biden
2:40 pm || Departs White House
4:20 pm PT || Arrives Las Vegas
4:00 pm PT || Delivers remarks at the National Clean Energy Summit; Las Vegas
6:35 pm PT || Attends a fundraiser for the Nevada State Democratic Party; private residence, Henderson, Nevada

Live Stream of White House briefing at 12:30 pm
All times Eastern except as noted

Floor Action

Congress is in recess.


Key Tax Tips on the Tax Effects of Divorce or Separation

Income tax may be the last thing on your mind after a divorce or separation. However, these events can have a big impact on your taxes. Alimony and a name change are just a few items you may need to consider. Here are some key tax tips to keep in mind if you get divorced or separated.

  • Child Support.  If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
  • Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony. This applies only if the payments qualify as alimony for federal tax purposes. If the decree or agreement does not require the payments, they do not qualify as alimony.
  • Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
  • Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change. File Form SS-5, Application for a Social Security Card. You can get the form on or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can delay your refund.

Health Care Law Considerations

  • Special Marketplace Enrollment Period.  If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
  • Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, you should report changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.

For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on at any time.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on

Krebs Daily Briefing 26 August 2015


Tsipras Calls Early Greek Elections to Strengthen Grip on Power

Greek Prime Minister Alexis Tsipras announced he will step down with an eye to snap elections, a move the embattled leader will likely use to shut out dissenters and return to power with a more manageable coalition. “Now the Greek people need to have their say,” Tsipras said. “With your vote you will show who can lead Greece on the difficult but promising road ahead of us, and how. With your vote you will judge us all.” After his televised speech, Tsipras emerged from his Athens office onto the sidewalk at about 8:50pm local time and walked next door and handed his resignation to the Greek president, Prokopis Pavlopoulos, asking him to set in motion procedures for a swift return to the ballots. A government official earlier said a vote could be held as soon as Sept. 20. Though his eight months at the helm of Europe’s most indebted country was beset by turmoil and brought the economy on the brink of ruin, Tsipras used his broadcast to list his achievements, from clinching a new aid package to securing a commitment from euro-area partners to consider debt relief. Market response to the announcement was muted. The Standard & Poor’s 500 Index remained down, falling 1.7 percent for the day. Greek bonds fell, sending yields on 10-year notes up 21 basis points to 9.56 percent. The prospect of yet another vote, on the heels of a traumatic referendum that was followed by capital controls, introduces an element of uncertainty just as a bailout of 86 billion euros ($96 billion) was secured.

The Islamic State’s horrifying practice of sex slavery, explained

Violence against women is often cast in the history books as a side effect of war, the inevitable outcome when empires clash, cities fall and triumphant armies let loose on helpless civilians. But as a flurry of recent reports note, there’s nothing inadvertent about the Islamic State’s systematic enslavement and abuse of hundreds of captured women — rather, it’s embedded in the group’s worldview and strategic operations. The Middle East Media Research Institute (MEMRI), which monitors Islamist militant online activity, this week published a comprehensive analysis of the jihadists’ practice of sexual slavery, drawn from Islamic State communiques as well as the social media accounts of its members and supporters. It followed a searing expose by New York Times reporter Rukmini Callimachi detailing how the Islamic State has “enshrined” a “theology of rape.” Reports of the Islamic State capturing women and often forcing them to serve as the jihadists’ enslaved concubines began piling up last autumn after the militants overran villages in the shadow of Iraq’s Sinjar mountain. The region is home to the Yazidi sect, a largely Kurdish-speaking minority whose faith predates the advent of Islam and is considered apostate by fundamentalists. Some of the Yazidis who couldn’t escape, particularly able-bodied men, were summarily executed. Others, particularly young women, were rounded up and carried away. More than 5,000 Yazidi women were captured last year, and an estimated 3,144 are still being held by the militants, according to the Times. The testimony of those who eventually escaped — or had their freedom bought by relatives and friends — has provided a shocking window into the world of the Islamic State. Callimachi charted the elaborate system the Islamic State put in place to transport, house and trade female slaves. It involves buses seized from the Iraqi government, large warehouses and office buildings as holding pens and a bureaucracy of courts and notaries that presides over contracts and deeds of sale. Younger Yazidi girls fetch higher prices in the Islamic State slave markets. According to some accounts, those higher up in the organization’s command structure get first choice. But it’s clear the trade comprises a real wing of the Islamic State’s internal economy.

Has the U.S. really spent more on Afghanistan than on post-WWII Europe?

The days of a massive American military presence in Afghanistan are over. Afghan forces might benefit from about 10,000 U.S. trainers and advisers, but otherwise, the country’s security is in their hands. Yet after more than a dozen years of American engagement, the situation is fragile in the extreme. Talks between the government of President Ashraf Ghani and the Taliban are on hold with no date to restart. Military casualties are up 50 percent from last year. Nearly 5,000 civilians have died so far in 2015. In this context, Politico cartoonist Matt Wuerker offered his take on the results of billions of American taxpayer dollars invested in rebuilding the country. In an Aug. 4, 2015, cartoon, a bewildered Uncle Sam stands on top of a pipeline of aid to Afghanistan riven with cracks that spell the word “corruption.”  Superimposed is a box that says, “The U.S. has now spent more on reconstructing Afghanistan than was spent on the Marshall Plan and the reconstruction of Europe.” A reader asked us to verify that comparison. In terms of inflation-adjusted dollars, the statement holds up. But, as we’ll explain, it falls short on two points.

How Loudspeakers and Balloons Heighten Tension Along the Korean Border

Tensions along the inaptly named “demilitarized zone” on the border between North and South Korea flared up on Thursday, as the two countries exchanged rocket and artillery fire for the first time since 2010. The incident—which caused no injuries—was an escalation in a recent series of incidents along the border. On August 4, the South Korean government accused the North of planting land mines along the border that wounded two South soldiers. Thursday’s incident also reinforced the uniquely powerful role that propaganda plays in driving the Korean conflict, which has remained unresolved following the 1953 ceasefire that ended the Korean War. Following the land-mine injuries earlier this month, the South revived a dormant practice of broadcasting messages through loudspeakers alongside the border, something it had not done in 11 years. The North retaliated in kind, threatening the South with war. South Koreans also brought back the years-old practice of releasing balloons into the sky. South Korean activists insert messages written in Korean into the tall, cylindrical tubes, and then release them into North Korean territory. Traditionally, these balloons have only a modest effect on their intended audience—North Koreans tend to be suspicious of propaganda messages delivered by non-government actors. The balloons can also contain objects such as DVDs, USB sticks, and even chocolates—giving the isolated northerners a glimpse into the world beyond their borders. “When North Koreans see high-quality consumer goods produced overseas, they begin to understand that their economic system doesn’t really deliver,” Andrei Lankov, a worldwide leader in North Korean expertise, told the BBC in 2012 of the benefits of dispatching the balloons.

Asian markets tumble in wake of U.S. sell-off


Global markets tumbled Friday after Wall Street stocks declined sharply in the prior session while weak Chinese manufacturing data added to investor concerns about that country’s economy. Tokyo’s Nikkei 225 index plunged nearly 3% and theShanghai composite index on mainland China dropped over 4%. In Hong Kong, the Hang Seng index fell 1.9%. MarketWatch reported that China’s benchmark index is down 32% since June 12. U.S. stock futures fared better, but traded in a narrow range Friday. Dow futures were off 0.4%. In Europe, shares fell sharply. Germany’s DAX index lost 1.5%. On Thursday, U.S. stocks suffered their worst day in 18 months. The Dow Jones industrial average and Standard & Poor’s 500 indexes both closed down 2.1%. The Nasdaq composite index shed down 2.8% of its value. Adding to market jitters Friday, the preliminary version of the Caixin purchasing managers’ index fell to an unexpectedly low 47.1 points from July’s 47.8 points on a 100-point scale.  Numbers below 50 show a contraction. China’s cooling economy has caused the Shanghai index to tumble this week despite a massive government intervention. And last week’s surprise devaluation of China’s yuan by Beijing sent shockwaves through other emerging countries that might face tougher competition from lower-priced Chinese exports. Japan’s Nikkei newspaper quoted Friday Taro Aso, the nation’s finance minister, as saying that China was a big reason why shares prices fell sharply in Tokyo.



Banks’ Shackled Balance Sheets Make Them Bond Market’s Darlings

Boring is proving to be profitable for investors who bought the debt of Citigroup Inc., Goldman Sachs Group Inc. and other Wall Street banks. Gains on bonds issued by these firms are exceeding the paltry gains on all other corporate bonds. While regulations and more than seven years of near-zero interest rates have crimped the ability of financial firms to embark on shareholder friendly activities, such as dividends, stock buybacks and takeovers, it has made their debt one of the few bright spots in the bond market. Bank bonds have gained about 1.3 percent this year, which is 10 times more than the entire U.S. corporate bond market. Their stocks have lost 1.1 percent in the same time. “They’re kind of like financial utilities,” said Jerome Conner, who helps oversee $52.9 billion as a senior investment analyst at Federated Investors Inc. “They can’t do a whole lot in terms of shareholder-friendly activity. They’re not involved in a lot of M&A activity. All of their capital return plans have to be approved.” Regulations following the financial crisis have forced them to bolster their balance sheets and impose limitations on stock buyback plans. Leverage at the six largest U.S. banks shrank by almost half to 10.8 times at the end of last year from 2007, according to data compiled by Bloomberg. Gains on the Bank of America Lynch U.S. Banking Index exceed the 0.08 percent advance in investment grade debt and 0.18 percent gain in junk bonds. “Banks haven’t been able to grow their margins in the traditional way, which can only go on so long if they want to grow. But for now they are much stronger and more capable of weathering the storm,” said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, which manages $61 billion in assets.

U.S. banks moved billions of dollars in trades beyond Washington’s reach

NEW YORK – This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished. “We saw strange things in the data,” said Chris Barnes, a former swaps trader now with ClarusFT, a London-based data firm. The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators. The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in swaps rules that banks successfully won from the Commodity Futures Trading Commission in 2013. The products affected by that loophole include some of the most widely traded financial derivatives in the world – such as interest rate swaps, where a bank takes a fee for exchanging a variable-rate interest payment for a fixed rate with a client, and credit default swaps, a sort of insurance where one party, often a bank, agrees to pay another party in the event of a bond default. For large investors, the products are an important tool to hedge risk. But in times of crisis, they can turn toxic. In 2008, some of these instruments helped topple major financial institutions, crashing the U.S. economy and leading to government bailouts.

U.S. Shouldn’t Take a Back Seat in Global Regulation of Insurers

The state-based system of insurance regulation in the United States is the most developed in the world. It should never take a back seat in any deliberation of the industry’s future global standards. That is why some recent regulatory actions are so concerning. In July 2013, the global Financial Stability Board labeled MetLife and Prudential Financial “systemically important” insurers. This occurred before the Financial Stability Oversight Council designated those companies as systemically important financial institutions in the U.S. Roy Woodall, FSOC’s independent member with insurance expertise, raised serious concerns about the timing of the global designations. Woodall noted that the FSB’s actions were taken in consultation with members of FSOC, and that these discussions appear to have pre-judged FSOC’s independent designation process. “It is clear to me,” he wrote, “that the consent and agreement by some of the Council’s members at the FSB to identify MetLife as a [Global] G-SIFI … sent a strong signal early on of a predisposition as to the status of MetLife in the U.S. — ahead of the Council’s own decision by all of its members.” He expressed a similar concern with regard to Prudential, saying that the global designation had “overtaken the Council’s own determination process.” Woodall’s concerns are legitimate. FSOC has a mandate to designate nonbank financial companies based on criteria established by Congress. Its designation decisions should not be pre-determined by the actions of the FSB.

Exclusive: New Jersey paid $720 million to exit all swaps under Christie

New Jersey has terminated all of its interest rate swap agreements under Governor Chris Christie, paying banks $720 million to unravel $4.2 billion of swaps and wiping from its books a potentially big, unpredictable liquidity risk. The derivative deals, which states and cities use to lower financing costs by hedging interest rate changes, have caused financial turmoil for some, most recently Detroit and Chicago. The deals either soured when rates did not move as expected or led to big termination fees triggered by credit rating downgrades. In New Jersey, another credit cut would likely have left some of its debt just one notch above the level that would trigger swap termination payments. The state has suffered nine downgrades during Christie’s tenure and is at risk of another because of its underfunded public pensions and financial weakness. Swaps “have been considered to be toxic by market participants and the administration. The state saw an opportunity to clean up its balance sheet and did so,” New Jersey Treasury spokesman Christopher Santarelli told Reuters in an e-mail. The full cost of terminating all the swaps, a figure Santarelli provided, has not previously been reported. New Jersey and its state bonding entities had $4.2 billion of outstanding swaps when Christie, a 2016 Republican presidential candidate, took office in 2010.

The Laboratory of New Orleans

Referring to New Orleans as anything like a “laboratory” during the first weeks and months after Hurricane Katrina’s floodwaters receded would have been a bad move. As displaced residents trickled back into the city, they were first and foremost seeking help with piecing their old lives back together: How were they going to pay for a new roof? Where could they find their displaced aunts and nephews? How would they soothe their traumatized children back to sleep during rainstorms? Any conversation about “experimentation” wasn’t going to fly with already-rattled residents. And yet, public hypothesizing about a “new” New Orleans began nearly immediately. James Reiss, an avatar of Uptown wealth and chairman of the Regional Transit Authority, helicoptered back into New Orleans after the floods to declare, “Those who want to see this city rebuilt want to see it done in a completely different way: demographically, geographically and politically.” If there was any ambiguity about what that meant, Louisiana state representative Richard Baker was more plainspoken: Katrina had “finally cleaned up public housing in New Orleans. We couldn’t do it, but God did.” Baker was referring to the city’s shuttering of the “Big Four” federally subsidized housing complexes—even though most endured minimal flood damage. Meanwhile, most of the city’s schools were beyond ruin, leading economist Milton Friedman to call the disaster “an opportunity to radically reform the education system.” Indeed, much of the built environment of New Orleans—including City Hall, thousands of private homes, roads, and other infrastructure—was ravaged during the city’s weeks-long submersion under flood waters. Many of these structures—and institutions—were already disintegrating before Katrina hit, and it was going to take a storm of ideas to revive them. Like it or not, the city needed to experiment with solutions nearly across the board. And 10 years later, looking back at all of the reform policies that were instituted city wide, it’s difficult to argue that New Orleans didn’t benefit from becoming the world’s learning lab. Today, the word “laboratory” seems less loaded than it did in those early days. New Orleans Mayor Mitch Landrieu recently called the city “the nation’s leading laboratory for social change.” New Orleans-based journalist and Floodlines author Jordan Flaherty called it a laboratory for progressive, grassroots organizing.

Early-Stage Breast Condition May Not Require Cancer Treatment

As many as 60,000 American women each year are told they have a very early stage of breast cancer — Stage 0, as it is commonly known — a possible precursor to what could be a deadly tumor. And almost every one of the women has either a lumpectomy or a mastectomy, and often a double mastectomy, removing a healthy breast as well. Yet it now appears that treatment may make no difference in their outcomes. Patients with this condition had close to the same likelihood of dying of breast cancer as women in the general population, and the few who died did so despite treatment, not for lack of it, researchers reported Thursday in JAMA Oncology. Their conclusions were based on the most extensive collection of data ever analyzed on the condition, known as ductal carcinoma in situ, or D.C.I.S.: 100,000 women followed for 20 years. The findings are likely to fan debate about whether tens of thousands of patients are undergoing unnecessary and sometimes disfiguring treatments for premalignant conditions that are unlikely to develop into life-threatening cancers. Diagnoses of D.C.I.S., involving abnormal cells confined to the milk ducts of the breast, have soared in recent decades. They now account for as much as a quarter of cancerdiagnoses made with mammography, as radiologists find smaller and smaller lesions. But the new data on outcomes raises provocative questions: Is D.C.I.S. cancer, a precursor to the disease or just a risk factor for some women? Is there any reason for most patients with the diagnosis to receive brutal therapies? If treatment does not make a difference, should women even be told they have the condition? Such questions are unlikely to be resolved by the new study. Some doctors, including the chief breast cancer surgeon at Memorial Sloan Kettering Cancer Center, said they did not see reason to change the current approach. Dr. Otis W. Brawley, chief medical officer at the American Cancer Society, said he was not ready to abandon treatment until a large clinical trial is done that randomly assigns women to receive mastectomies, lumpectomies or no treatment for D.C.I.S., and that shows treatment is unnecessary for most patients. But Dr. Brawley, who was not involved in the study, also said he had no doubt that treatment had been excessive. “In medicine, we have a tendency to get too enthusiastic about a technique and overuse it,” Dr. Brawley said. “This has happened with the treatment of D.C.I.S.”

People Love Pretending To Be the President On Ashley Madison

If the Ashley Madison hack taught us one thing, it’s that cheaters who don’t want to get caught masquerade as the commander in chief. Sixteen people signed up for the Web site, which helps married people facilitate affairs, using the names of the last three presidents or simply the word “president” in front of e-mail addresses, according to data provided by Errata Security’s Robert Graham. Earlier this week, hackers released personal data, including names, addresses, phone numbers, and e-mails, of the nearly 40 million users of For now, most of the information lives on what’s known as the “dark web” and isn’t yet searchable on Google or other common search engines. Experts like Graham, however, are able to cull through it, looking for e-mail addresses linked to the White House and 2016 presidential campaigns or candidates, if a reporter asks nicely. Variations on what some assumed would be President Barack Obama’s e-mail turned up the most results, with seven stylized versions of his name. This includes and, of course, Of course, none of these e-mail addresses are likely to actually be the president trolling for dates on the side. Ashley Madison users were able to sign up for the site using any e-mail address, including ones tied to the White House, even if it did not belong to them. None other than Bill Clinton came in second behind Obama, with four Ashley Madison accounts tied to some imagined version of his White House e-mail—“billclinton,” “billybob,” and just plain old among them. For his part, George W. Bush had three assumed impersonators. Two accounts were more plainly linked to “president” and “President” at the White House’s e-mail convention. Not to be left out, vice presidents also got a nod from users, with one account registered to and another to Graham searched the database for e-mail addresses associated with 2016 campaigns. The only one that came up was one account tied to

Deez Nuts, explained

The 2016 presidential race has already had its share of crazy developments — the most momentous of which has been Donald Trump reaching the top of the Republican field and staying there for weeks. But this month saw another not-very-serious candidate get surprisingly strong poll results. According to Federal Election Commission filings, Deez Nuts lives in Iowa and is running for president as an independent. And polls show him getting at least 7 percent of the vote in Minnesota, Iowa, and North Carolina. Nuts, of course, isn’t a real person. But a real polling firm has been including him in real polls. And the results tell us something about the state of the presidential race — and Trump’s prospects for winning the presidency. Who is Deez Nuts? People have been using “deez nuts” as a vulgar slang term at least since it was used in a 1992 hip-hop song. But use of the term soared in March 2015. That’s when a video of internet personality welvendagreat saying “deez nuts” into a cellphone and laughing uproariously was posted on YouTube. The video went viral, racking up 17 million views and spawning an internet catchphrase.

How Google Could Rig the 2016 Election

America’s next president could be eased into office not just by TV ads or speeches, but by Google’s secret decisions, and no one—except for me and perhaps a few other obscure researchers—would know how this was accomplished. Research I have been directing in recent years suggests that Google, Inc., has amassed far more power to control elections—indeed, to control a wide variety of opinions and beliefs—than any company in history has ever had. Google’s search algorithm can easily shift the voting preferences of undecided voters by 20 percent or more—up to 80 percent in some demographic groups—with virtually no one knowing they are being manipulated, according to experiments I conducted recently with Ronald E. Robertson. Given that many elections are won by small margins, this gives Google the power, right now, to flip upwards of 25 percent of the national elections worldwide. In the United States, half of our presidential elections have been won by margins under 7.6 percent, and the 2012 election was won by a margin of only 3.9 percent—well within Google’s control. There are at least three very real scenarios whereby Google—perhaps even without its leaders’ knowledge—could shape or even decide the election next year. Whether or not Google executives see it this way, the employees who constantly adjust the search giant’s algorithms are manipulating people every minute of every day. The adjustments they make increasingly influence our thinking—including, it turns out, our voting preferences.

August: Season of rules

August comes and lawmakers quickly flee Washington, avoiding the summer heat and taking a much-needed vacation. But the rest of the government—including regulators—is still hard at work. In fact, August appears to be when those regulators are working the hardest. A new report from the American Action Forum finds that Washington releases a disproportionate number of major federal regulations in August. Last year, for instance, August saw 15 major rules, compared to just 6 per month for the rest of the year. That trend holds for not only President Obama’s time in office, but for the last few years of the George W. Bush administration as well.



State health officer: Expand Medicaid, improve health

Dr. Don Williamson was direct when asked how to improve Alabama’s health. “I would expand Medicaid,” Williamson, the State Health Officer, said at a meeting of the Alabama Health Improvement Task Force Wednesday afternoon. “It’s that simple.” But Williamson, a 20-year veteran of Alabama state government leaving in November to head the Alabama Hospital Association, pointed out after the meeting that the state’s health care politics aren’t simple. “To expand the number people to be covered, you need the money for match,” Williamson said after the meeting. “You’ve got to have legislative support for that. And rule revisions. You’ve got to have rule revisions that are going to have to go through Legislative Council . . . you can’t cover the working poor without a consensus. Not only of the executive branch, but of the legislative branch.” Still, the comments represented the first time a high-ranking state official, one who worked with Gov. Robert Bentley on changes to Medicaid delivery, openly discussed advantages of opting into the Affordable Care Act’s expansion option. Eligibility for Medicaid in Alabama is limited to children and pregnant women. Childless adults almost never qualify, and parents of children on Medicaid can receive benefits only if they make 18 percent of the poverty level — $4,368 a year in a household of four. Under the ACA, Medicaid eligibility would expand to those making 138 percent of the poverty line — $16,243 a year for an individual, and $33,465 for a family of four. According to the Kaiser Family Foundation, about 176,000 Alabamians fall into a “coverage gap,” where they make too much money to qualify for Medicaid, and too little to qualify for subsidies offered in the federal insurance exchange. Alabama Republicans oppose Medicaid expansion, saying the state cannot afford it. The Senate passed a resolution in April expressing opposition to the idea. Bentley, who refused to consider the proposal for most of his first term, said last December he was open to a block grant program with a work requirement. The Center for Medicare and Medicaid Services (CMS), which oversees both program, has rejected similar programs from other states, and health care advocates say most of those in the coverage gap have jobs. Bentley said Tuesday talks were continuing with CMS. “We haven’t agreed yet on everything,” he said. “That’s just some preliminary talks we’re working on right now.” Williamson also voiced frustration with the limited benefits given to Medicaid recipients in the program. In particular, Williamson said he was “bothered” that the state did not cover adult dental care, insulin pumps or BRCA tests that identify a woman’s likelihood of developing breast or ovarian cancer. “Blue Cross does that,” he said. “We ought to be able to do that.” Williamson also noted that Alabama covers about 35 percent more people than Mississippi, but pays 35 percent less. By most measures, Alabama needs healthier outcomes. The state has a high infant mortality rate and the highest rate of diabetes in the nation, according to America’s Health Rankings, run by the United Health Foundation. Alabama also tends to rank high for obesity rates. Williamson in the past has spoken about his broad support for access to health insurance, which he repeated on Tuesday after his Medicaid expansion comments. “I am absolutely convinced people with access to health care have better outcomes,” he said. “I think people who have insurance do better. That’s what Don Williamson, the state health officer would do. I understand the politics.”

Mercedes supplier SMP to open $150M facility in Tuscaloosa, creating 650 jobs


Alabama has landed another auto supplier that will bring over 600 new jobs to Tuscaloosa County.

Samvardhana Motherson Group, a Mercedes-Benz supplier, plans to invest $150 million in a new manufacturing facility in Tuscaloosa, creating 650 jobs by the fourth year of operation, a report from the Department of Commerce’s Made in Alabama website confirmed. The 700,000-square-foot facility will be located in the Cedar Cove Technology Park, less than four miles from the Mercedes-Benz manufacturing facility. “SMP will benefit from the Tuscaloosa region’s reliable labor force and be supported by a successful and continuously improving workforce development and training network,” said Dara Longgrear, executive director of the Tuscaloosa Industrial Development Authority. UPC

Construction on the site is set to begin before the end of 2015. “We are very excited to finally establish a footprint in the Tuscaloosa region,” said Vivek Chaand Sehgal, chairman of the Samvardhana Motherson Group (SMG). “The new plant will be a clear sign of a successful partnership with our customer and the state of Alabama.” The new facility will be called SMP Automotive Systems Alabama Inc. and will manufacture exterior and interior components for future models produced at the Mercedes plant in Vance, the report said.

Former mayoral aide was ‘straw buyer’ of expensive cars for 3 drug dealers, prosecutor says

Kenneth Lee Crittenden, a former aide to Birmingham Mayor William Bell, was sentenced Thursday to two and a half years in federal prison for helping a local drug dealer launder money. Crittenden, 52, who had scheduled events at Birmingham’s Crossplex sports complex as part of his job with the mayor’s office, was sentenced by U.S. District Court Judge Sharon Lovelace Blackburn. Crittenden is to report to prison Sept. 28. He was the last of 11 people who have been sentenced on charges related to an investigation by local police and FBI and IRS agents. Crittenden’s money laundering charge is related to being the “straw purchaser” of a $90,000 Corvette ZR1 for Billy “Champ” Williams Jr., who is serving a nearly 22-year sentence on charges related to a heroin and cocaine distribution ring prosecutors say he ran in western Birmingham. Williams threw $60,000 in cash out of his window at the City Federal building as agents raided his condo in 2013. At Thursday’s hearing a prosecutor told the judge they did not charge Crittenden with also helping two other drug dealers in the operation buy expensive cars. Also, when agents raided Williams’ condo they also found a document that showed he and Crittenden had opened a joint bank account together, Dimler said. Crittenden told them the two were planning to open a car dealership together, he said. Blackburn had begun a sentencing hearing in July. But she halted it after she believed Crittenden had lied when he told her he didn’t know Williams was a drug dealer until later.

We’re busted! Leaked Ashley Madison data shows Alabama leads nation in infidelity

Remember all that stuff about Alabama being among the most conservative states in the country? Well… An analysis of leaked Ashley Madison data by scientist Jake Popham shows Alabama is the least faithful state in the country, at least when it comes to how much money people spent on the extramarital dating site. Alabama comes in first on the list, followed by Colorado and Washington, D.C. Among the states where people are least likely to cheat are West Virginia, Mississippi and Idaho. The analysis showed Alabamians spent about $5.50 per capita on the site. Colorado, which came in second, spent about $4.50. The most-faithful state in the country, West Virginia, barely managed $1 per person. Hackers are believed to have stolen personal information from as many as 36 million different Ashley Madison users and that number is expected to grow in coming days. More than 15,000 of the addresses belonged to .mil or .gov accounts, including some from Alabama. Experts are cautioning, however, that because there is no verification that the emails provided are accurate, the exact users may never be known. And, as for state data, one theory on why Alabama may be taking the blame is because it falls first on the alphabetical list for those who wanted to set up a fake – and untraceable – account.

Where are the mayoral candidates getting their campaign money?

Three of the five mayoral candidates were the primary financial contributors to their own campaign, but no one came close to investing as much as Artur Davis. Artur Davis put $643,000 in personal money in his campaign for Montgomery mayor, according to his campaign finance reports. The loans total 89 percent of the $720,285 Davis has raised. The former congressman gave his campaign $2,500 on Jan. 15, $400,625 on Jan. 23, $160,000 on June 19 and $80,000 on July 30. Davis is not the only candidate to make loans to his campaign — both Dan Harris and Buena Browder have taken out loans — but none have matched the scale of the loans Davis has extended himself. Davis declined to answer emailed questions about the loans or his Statement of Economic Interests. In a statement provided by his campaign, Davis said he was following similar actions undertaken by Gov. Robert Bentley in the 2010 race and former U.S. Rep. Parker Griffith, the Democrats’ nominee for governor, in 2014. Both funded their campaigns through personal loans. The loans made up the majority of the $720,285.60 Davis raised for the campaign since October. His private, business and PAC donations totaled $68,938, including a $10,000 contribution from Davis in December. Davis reported $21,668 on hand on Aug. 18, the date of his last report. After moving to Virginia following an unsuccessful bid for the Democratic gubernatorial nomination in Alabama in 2010, Davis became a director at Huntington Ingalls Industries, a Fortune 500 shipbuilder based in Newport News, Virginia. Public records show he made $120,000 in the position in 2013. Davis resigned from the company late last year to focus on the mayoral race. According to a form filed by Huntington Ingalls on Dec. 12, Davis held 12,947.67 Huntington Ingalls shares, worth $1.34 million at the time. Those shares would be worth $1.53 million at the close of the day Wednesday. “I find it interesting that there are Todd Strange supporters who for some reason question my ability to do what is a common practice in Alabama politics,” the statement from Davis said. “I will note that my campaign is not funded by developers who have bought property or obtained benefits from the city, which contrasts me with Mayor Strange.” Part of that statement may allude to an allegation that Stivers Ford dealership contributed $4,000 to Strange’s $561,297.42 campaign fund after Stivers received public funds to help with a $3.35 million expansion.



A new poll says Democrats could actually win in Alabama… who knew?

The Alabama Republican Party is, for lack of a better word, a disaster. Five years after storming the State House on a unified platform of rooting out corrupt Democrats, lowering taxes and shrinking government, Party leaders have devolved into a frustrating stalemate. The GOP may excel at campaigning but they also seem increasingly ill-equipped to govern. They’re entering a second (costly) special session with no ability to pass a budget and little consensus on the purpose of government and the future of Alabama. In theory, this should present a perfect opportunity for an opposition party. However, the Democratic Party seems ill-prepared to take advantage of the moment presented by a Republican ineptitude. That’s a shame, because according to a new poll of Southern voters, reports of the death of the “Southern Democrat” have been greatly exaggerated. Public Policy Polling surveyed 2,800 southern voters across Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Virginia, and found a surprising amount of Democratic support. If you squint hard enough, it looks like Southern voters may view Democrats more favorably overall than Republicans – Democrats’ ratings combined for 47% favorable or very favorable vs. 49% unfavorable or very unfavorable, while Republicans were viewed 42% favorable or very favorable vs. 53% unfavorable or very unfavorable. Contrary to popular wisdom, nearly as many Southern voters believe that Democrats share their values as Republicans, 40% for Democrats vs.  43% for Republicans. There’s clearly a discrepancy between polls and voter turnout but according to Gerald Johnson, Auburn, Emeritus Professor of Political Science, the data ring true. “In terms of party identification in the state of Alabama, it has essentially always been a third, a third, a third,” said Johnson, referring to the breakdown of voters self-identifying as Democrats, Republicans and Independents.

It won’t be pretty when boomers lose their cars

My late mother-in-law lived in a lovely side-split house on a cul-de-sac in suburban Toronto, and she stayed there after her daughter left home and even after her husband died 20 years ago. She had a car and could drive to the grocery store and the bank — until she couldn’t any more, and my wife had to drive 45 minutes out there to take her shopping, and to the bank, and to the doctor. Being a side-split, there was a powder room at entry level, a kitchen on the middle level, a bathroom on the upper level. When it got to the point that she could barely walk, it got difficult to decide whether to eat or go to the bathroom. Finally my wife convinced her to sell the house and junk the car and move to a retirement home. Four months later, she died. Many baby boomers are going through this now, taking care of seriously old parents. (I’m off to my 97-year-old mom’s birthday party as soon as I finish writing this post). Many baby boomers are also setting themselves up for the same problem in the not-too-distant future. Jane Gould writes about it in “Aging in Suburbia,” a fascinating and troubling book that covers so many of the issues we will be facing down the winding cul-de-sac. She notes that boomers and older age groups own 60 percent of the owner-occupied homes in America. An estimated 70 percent of Baby Boomers live in areas served by limited or no public transit. If Boomers stay in their homes as they age and continue to drive their cars, do they put other drivers and pedestrians at risk? We have all heard of the elderly man or woman who can barely see over the dashboard and veers into adjacent lanes. Most boomers do not seeing this happening to them; they are fine drivers. They have a good job and they can afford to get the roof fixed. They can make the payments on that refinancing they did to buy the granite counters in the kitchen — or not. Moreover, suburban homes, many built thirty or forty years ago, are not energy efficient and require extensive upkeep and maintenance. These household issues do not suit an older, aging population. The Baby Boomers, who now range between ages 50 to 68, have begun to retire. Most of them have not considered, at a personal level, what they will do when their homes are too large, their incomes shrink, and their mobility needs are in flux.


Morning Money

MEGA-BANKS BACK BURR — Three of the four U.S. banks with more than $1 trillion in assets are hitting limits on campaign contributions to Republican Sen. Richard Burr. Under campaign finance laws, multi-candidate PACs can only give campaigns $5,000 per election. In the case of Burr, a Wells Fargo PAC has given $10,000 to split between his primary and general races. A PAC for Bank of America, which calls North Carolina home, hit the $5,000 limit for Burr’s general election as of July 31. A Citigroup PAC has maxed out contributions for his primary. Burr, who sits on the Senate finance and labor committees, had $3.8 million in cash on hand for his 2016 re-election campaign at the end of June.

Wells, the country’s largest mortgage lender, is giving similar treatment to House Financial Services Committee senior members Ed Royce and Frank Lucas, who have each received $10,000 from the San Francisco-based bank this year. The latest round of monthly Federal Election Commission filings were due yesterday. Here’s a handy chart on how much you can contribute during this election cycle:

NEXT-GEN PREDICTION MARKET TO TEST LIMITS IN D.C. — A group of software developers who cut their teeth in the world of Bitcoin is preparing to launch a decentralized, distributed prediction market platform where users can bet on anything from elections to rainfall. In an interview this week, the brains behind the concept, called Augur, said they were trying to get ahead of the potential regulatory complications that preceded the closure of prediction betting site Intrade in 2013. Augur co-founder Jeremy Gardner, 23, said legal challenges were”unavoidable” but that initial conversations with the Commodity Futures Trading Commission, which sued Intrade in 2012, were “very promising.” Gardner said Augur is striving to be the “most compliant organization possible.” Augur’s advisers include Intrade co-founder Ron Bernstein and New York Law School professor Houman Shadab. Law firm Pillsbury Withrop Shaw Pittman is also working with the team.

“This is going to be, when it’s up and running, an early warning system for everything,” said Peronet Despeignes, who handles “special ops” at Augur. “Imagine a weather report that’s about a lot more than just the weather.” A CFTC spokeswoman declined to comment. Play around with Augur’s alpha preview here:

GET READY FOR MORE GREEK DRAMA — POLITICO’s Helen Popper in Athens: “Greek Prime Minister Alexis Tsipras resigned Thursday, calling for a snap election just seven months after he took office and plunging the debt-stricken nation into fresh uncertainty. … The vote is widely expected for September 20. … Political analysts say seeking re-election will allow Tsipras to oust the rebels and capitalize on his current popularity, in turn bolstering his parliamentary majority and stamping his authority on a post-bailout Syriza.”

HAPPY FRIDAY — I predict Ben will be back next week. Please direct tips and gossip to or @morningmoneyben.

DRIVING THE DAY — MetLife is expected to file its final brief in a lawsuit against the Financial Stability Oversight Council.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Jon Prior on the CFPB and NY Department of Financial Services crackdown on pension-advance lenders….[] For Pro’s subscriber-only coverage — and to get Morning Money every day before 6 a.m.– please contact Pro Services at (703) 341-4600or

PEOPLE MOVES — Former U.S. Army Chief of Staff Ray Odierno is going to work for JPMorgan Chase as a senior adviser to CEO Jamie Dimon and the bank’s board … Citigroup corporate communications director Molly Millerwise Meiners will join Reservoir Communications Group’s Washington headquarters on Oct. 12 as managing director … Artemis Strategies vice president Joe Harris is moving to the government affairs team at the National Association of Realtors at the end of the month.

FINANCIAL REFORMERS UNHAPPY WITH CFTC — Americans for Financial Reform is calling out last week’s decision by CFTC Chairman Tim Massad to punt a controversial regulation for international swaps until September 2016. The group, which advocates for tougher bank rules, said the CFTC and the Securities and Exchange Commission have shown a “disturbing willingness to permit major global banks to avoid the full scope of Dodd-Frank derivatives regulations based on paper distinctions that do not reflect true risks to major U.S. banks and ultimately the U.S. economy and the U.S. taxpayer.” The regulation at issue, first drafted without a commission vote under former CFTC Chairman Gary Gensler, said that foreign banking organizations that use United States-based personnel to arrange or negotiate swaps with non-U.S. counterparties would have to comply with new rules.

FHA ASKED FOR MORE ASSURANCES FROM NEW GRADING SYSTEM — After launching a new grading system for its lenders (which was delayed by software problems), the Federal Housing Administration is being asked for more assurances that the government’s mortgage insurance arm won’t crack down on those who perform well under it. The powerful National Association of Realtors said in a letter to FHA that it “would like to see more certainty that the lender will not be subject to termination unless there are additional factors that merit such a step.” The new system is meant to boost the housing market by getting lenders to shake off worries about offering loans to borrowers with less than pristine credit (h/t Jon Prior).

MINERS GET CREATIVE AMID PRICE SLUMP — WSJ’s Tatyana Shumsky and Timothy Puko: “In a sign of desperation amid plunging commodity prices, mining companies are delving into low-margin businesses — traditionally the domain of the industry’s middlemen — for new sources of revenue. Rio Tinto PLC for the first time has started to refine other companies’ copper ore. Brazil’s Vale SA, the world’s largest iron-ore producer, has begun mixing minerals to make custom supplies for buyers. U.S. coal miner Murray Energy Corp. in June launched its own trading unit. The mining companies are seeking to alleviate the financial pressure from tumbling raw-materials prices.”

DEMARCO URGES 2016 POLITICAL DEBATE ON FANNIE AND FREDDIE — The man who regulated Fannie Mae and Freddie Mac in the aftermath of the housing meltdown — and who fought for almost five years to get rid of them — has an op-ed in the WSJ calling for presidential candidates to discuss the future of the two companies. “Fundamental problems with the system — especially the roles of Fannie Mae and Freddie Mac — remain unreformed,” writes Edward DeMarco, now a senior fellow at the Milken Institute’s Center for Financial Markets. “If today’s presidential candidates want to engage in a policy debate that affects the lives of nearly all Americans, this is it.”

ANALYST GETS CREATIVE WITH GRAPHICS IN BOA CRITIQUE — In what Business Insider calls “the finest trolling we’ve ever seen in a Wall Street analyst note,” Mike Mayo marked up several pages of a Bank of America proxy statement to illustrate his unhappiness with the bank’s leadership structure.

DEBRIEF FRIDAY PREVIEW: Every Friday, the Agenda’s Debrief catches you up on the policy conversation for the week ahead. In two minutes. This week on the Friday Preview:  the EPA’s water play, Obama’s climate pitch, and campaign policy heats up. Watch it here:

Home of the Nation’s Most Successful Trash Incinerator: The sheer volume of trash that Americans throw out overwhelms the efforts of most municipalities, but not Minneapolis. What could have been the city’s biggest, smelliest and potentially most dangerous eyesore, has become something entirely unique in American waste management: the heart of the city’s most desirable neighborhood. Read more in the latest installment of POLITICO Magazine’s What Works:

POTUS Events

The President is vacationing at Martha’s Vineyard.

Floor Action

Congress is in recess.


Health Care Law Tax Provisions: IRS Recorded Webinars for Employers and Coverage Providers  

Employers and health coverage providers now have access to recorded webinars from IRS about the Affordable Care Act’s employer provisions and related tax requirements. If you are a business owner, tax manager, employee benefits manager, or health coverage provider, you can access and review these videos anytime to better understand how the health care law may affect your organization.

Each of the following ACA videos on the IRS Video Portal provides about 40 minutes of detailed information on the specific tax provision mentioned in the title.

Employer Shared Responsibility Provision (47 minutes)

Learn about determining applicable large employer status, payments, and transition relief for 2015.

Employer-Sponsored Health Coverage Information Reporting Requirements for Applicable Large Employers (37 minutes)

Learn about employer-sponsored health coverage information reporting requirements for applicable large employers, including:

  • who is required to report
  • what information the law requires you to report
  • how to complete the required forms

Information Reporting Requirements for Providers of Minimum Essential Coverage (35 minutes)

Learn about the information reporting requirements for providers of minimum essential coverage, including employers that provide self-insured coverage.  Learn about:

  • who is required to report
  • what information the law requires you to report
  • how to complete the required forms

View the recorded webinars in the IRS Video Portal using one of the following tabs: Businesses, Tax Professionals, Governments and Non-Profits. After clicking on one of these tabs, simply select “Affordable Care Act” from the list of topics on the left side of the screen, and you will see a list of recordings about these and other ACA topics.

Krebs Daily Briefing 20 August 2015

Thomas L. Krebs, Securities Litigation, Regulation and Compliance Attorney Lawyer (c)2014 Brandon L. Blankenship
Thomas L. Krebs


ISIS Beheads Syrian Antiquities Scholar in Palmyra

BEIRUT, Lebanon — The extremists of the Islamic State have beheaded the 83-year-old retired director of antiquities in the Syrian city of Palmyra, one of the world’s most important archaeological sites. Before his retirement about a decade ago, the director, Khalid al-Asaad, was the top overseer for Palmyra’s sprawling Roman-era ruins and the gatekeeper for researchers seeking to work there for more than five decades. “Anyone who wanted to do anything in Palmyra had to work though Khalid al-Asaad,” said Amr Al-Azm, a Syrian professor of Middle Eastern history and anthropology at Shawnee State University in Ohio. “He was Mr. Palmyra.” After being detained for weeks by the Islamic State jihadists who seized the city this year, Mr. Asaad was killed on Tuesday, according to the Syrian government and conflict monitoring groups. A photo distributed on social media by Islamic State supporters showed Mr. Asaad’s blood-soaked body suspended by its wrists with string from a traffic light. His head had been cut off and was resting on the ground between his feet, his glasses still on.

How ISIL Out-Terrorized Bin Laden

The American journalist James Foley was beheaded a year ago by an Islamic State fighter in retaliation for U.S. airstrikes on the group. In a video of the brutal act circulated online, Foley’s masked executioner promised more beheadings if the United States didn’t stop attacking the newly-proclaimed caliphate. Three months later, the same fighter beheaded American aid worker Peter Kassig and 18 Syrian soldiers outside the small Syrian town of Dabiq. Although Kassig had converted to Islam, the fighter proclaimed his death to be the first step in fulfilling an ancient Islamic prophecy of an apocalyptic showdown in Dabiq between Muslims and infidels. The Islamic State’s brutality and its insistence on apocalypse now and caliphate now set it apart from al-Qaeda, of which it was a part until 2014. We’re used to thinking of al-Qaeda’s leader Osama bin Laden as the baddest of the bad, but the Islamic State is worse. Bin Laden tamped down messianic fervor and sought popular Muslim support; the return of the early Islamic empire, or caliphate, was a distant dream. In contrast, the Islamic State’s members fight and govern by their own version of Machiavelli’s dictum “It is far safer to be feared than loved.” They stir messianic fervor rather than suppress it. They want God’s kingdom now rather than later. This is not Bin Laden’s jihad. In some ways, the difference between Bin Laden and the Islamic State’s leaders is generational. For Bin Laden’s cohort, the apocalypse wasn’t a great recruiting pitch. Governments in the Middle East two decades ago were more stable, and sectarianism was more subdued. It was better to recruit by calling to arms against corruption and tyranny than against the Antichrist. Today, though, the apocalyptic recruiting pitch makes more sense. Titanic upheavals convulse the region in the very places mentioned in the prophecies. Sunnis and Shi’a are at war, both appealing to their own versions of prophecies to justify their politics.

North and South Korea exchange artillery fire

South Korea fired tens of artillery rounds toward North Korea on Thursday after the North launched shells to protest South Korea’s anti-Pyongyang propaganda broadcasts along the border, as tension escalated on the peninsula. North Korea did not return fire but later warned Seoul in a letter that it would take military action if the South did not stop the loudspeaker broadcasts within 48 hours, the South’s defense ministry said. In a separate letter, Pyongyang said it was willing to offer an opening to resolve the conflict even though it considers the broadcasts a declaration of war, South Korea’s Unification Ministry said. A South Korean military official said the broadcasts, which began on Aug. 10, would continue. South Korea said the North fired a 14.5 mm anti-aircraft shell at 3:52 p.m. (0652 GMT), then fired multiple shells from a 76.2 mm direct fire weapon at 4:15 p.m.  No damage or injuries were reported in the South. South Korean President Park Geun-hye told top defense officials to “react firmly” to North Korean provocations, a spokesman quoted her as saying.



In Bribery Law, a New Tool to Scrutinize Wall Street

If you want to succeed on Wall Street, you have to build relationships. So firms will do almost anything to please clients, catering to their wishes in the hope of winning the next underwriting assignment or new assets to manage. Bank of New York Mellon has now learned that helping a client can get you tangled up in the Foreign Corrupt Practices Act as it settled charges that it gave something of value to keep a large investment with the bank. That law prohibits giving “anything of value” to a foreign official to obtain or retain business with a government entity. The settlement shows Wall Street that its business practices are being put under the uncomfortable glare of the Securities and Exchange Commission and the Justice Department, which are using the law aggressively to police practices that many might consider standard fare for financial firms trying to win business. The settlement requires BNY Mellon to pay a $14.8 million civil penalty for hiring three interns who were relatives of two officials of a Middle East sovereign wealth fund that had invested $711 million with the bank. According to the administrative order entered in the case, two officials at the unidentified sovereign wealth fund put pressure on BNY Mellon managers to provide the internships, making rather unsubtle hints that the investments might be in jeopardy if the bank did not come through with the positions. In one email, a bank employee said that “by not allowing the internships to take place, we potentially jeopardize our mandate,” while another one wrote that it was “silly things like this that help influence who ends up with more assets/retaining dominant position.” The interns were not qualified for BNY Mellon’s regular hiring program, and perhaps unsurprisingly they turned out to be less-than-stellar performers. An intern in the London office was described as “O.K.” in a performance review, while the two in the Boston office, who were paid more than other interns, were confronted by a human resources manager for repeated absences. Someone getting an internship because of connections is certainly nothing new. Look in many Capitol Hill offices and the child of a campaign contributor is likely to be working there for the summer. Keeping the affections of corporate clients is high on any manager’s list of things to do, so it is a small price to pay.

Tom Krebs, securities attorney.

SEC Charges Citigroup Global Markets for Compliance and Surveillance Failures

Washington D.C., Aug. 19, 2015 — The Securities and Exchange Commission today announced that Citigroup Global Markets has agreed to settle charges that it failed to enforce policies and procedures to prevent and detect securities transactions that could involve the misuse of material, nonpublic information.  The firm also failed to adopt and implement policies and procedures to prevent and detect principal transactions conducted by an affiliate. Citigroup agreed to pay a $15 million penalty. Because broker-dealer employees routinely have access to material nonpublic information, the federal securities laws require every firm to take reasonable steps to prevent the misuse of that information.  An SEC investigation found that Citigroup did not review thousands of trades executed by several of its trading desks during a 10-year period.  Personnel used electronically generated reports to review trades on a daily basis, but technological errors caused the reports to omit several sources of information about thousands of relevant trades. “Today’s high-speed markets require that broker-dealers and investment advisers manage the convergence of technology and compliance,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “Firms must ensure that they have devoted sufficient attention and resources to trade surveillance and other compliance systems.”


There Are No Rules in Love and Taxes

Read security news this past summer and you might notice a pattern. First, a U.S. government agency announces that it’s found a security breach and is investigating what occurred. Some time passes. Then, it announces the breach affected a certain number of people—more than it thought at first. More time passes. Finally, it announces that research has revealed the breach to be massive, tearing way further into its servers than initially imagined. Such was the story of the Office of Personnel Management (OPM) hack earlier this summer. As news dribbled out from May to June to July, the size of the OPM hack swelled—from 4 million, to 18 million, to 21.5 million—and the kind of information accessed got worse and worse. In 2014, a hack that accessed information about 800,000 U.S. Postal Service employees followed largely the same story. And now it’s happened again. On Monday, the Internal Revenue Service announced that a security breach first revealed in May affects almost three times as many people as initially thought. The IRS says that it is notifying more than 330,000 households that their tax returns were probably accessed by attackers. The personal information of an additional 170,000 households might be vulnerable as well, the agency also said. In May, the IRS believed that the tax returns of only 114,000 households had been copied.  This is probably not the last case like this. After the OPM hack, President Obama ordered a “30-day cybersecurity sprint.” This improved the situation somewhat—use of security fundamentals like two-factor authentication surged—but some agencies actually reported worse figures for those basics at the end of the month than they did at the beginning.


15,000 government emails revealed in Ashley Madison leak

Thousands of clients using the affair-oriented Ashley Madison website listed email addresses registered to the White House, top federal agencies and military branches, a data dump by hackers revealed. The detailed data, released Tuesday, will likely put Washington, D.C., on edge. The nation’s capital reportedly has the highest rate of membership for the site of any city. Indeed, more than 15,000 of the email addresses used to register accounts were hosted on government and military servers. Buried in the list are emails that could be tied to multiple administration agencies, including the State Department and Department of Homeland Security, as well as several tied to both the House and Senate.  For a month, hackers using the name “Impact Team” have been holding hostage the dating profiles of those who registered on the site. The group threatened to publicly out the potential adulterers if the site’s owner, Avid Life Media, didn’t take down Ashley Madison, which uses the tagline, “Life is short. Have an affair.” Security researchers said on Wednesday that they believe the data released following the hack at Ashley Madison is authentic. “This dump appears to be legit,” said David Kennedy, CEO of information security company TrustedSec, which monitors cyber attacks, in a blog post. “Very, very legit.” Security journalist Brian Krebs reported several of the site’s users told him their real information is in the data dump. The leaked database is staggering, according to researchers, and larger than expected at 37 million records, or nearly 10 gigabytes compressed. “For folks that may not know, that is massive,” Kennedy said. “Huge.” “It’s full account information,” said Robert Graham, CEO of Errata Security, in a blog post. That includes full names, emails, phone numbers, addresses and passwords. “It also includes dating information, like height, weight, and so forth,” Graham added. “It appears to contain addresses, as well as GPS coordinates. I suspect that many people created fake accounts, but with an app that reported their real GPS coordinates.”


State inquiries into Planned Parenthood turn up no evidence of wrongdoing

Planned Parenthood appears to be weathering scrutiny by state legislatures that began in the wake of undercover “sting” videos by anti-abortion activists, as investigations in states across the country have repeatedly turned up no evidence of wrongdoing. Some state officials undertook the investigations even though Planned Parenthood affiliates in their state don’t perform abortions. Others started investigations or defunded the organization even though fetal tissue donation was against the law in their jurisdiction. In South Dakota, for example, officials issued a statement clearing the state’s two abortion providers of wrongdoing. “The department of health has not been provided any evidence, or observed any evidence that the sale of fetal tissue/organs is taking place in [South Dakota],” a spokesperson for the organization said. Officials in Massachusetts found the same. And though an investigation in Georgia was started, the state’s five abortion providers were quickly cleared, since tissue donation is not legal in the state (products of conception, as they are known, must be buried or cremated). Indiana also cleared the healthcare organization of wrongdoing, since affiliates in that state also do not participate in tissue donation. Republicans in many states started inquiries after anti-abortion activists surreptitiously filmed Planned Parenthood employees discussing fetal tissue donation programs, which activists said equated to selling “baby parts”. Health department officials in other states, such as Delaware, have flatly refused to investigate. “There is no tissue donation program at Planned Parenthood to investigate,” the state’s health department leader Dr Karyl Rattay told legislators. Leaders in Minnesota, Idaho, Washington, New York and Virginia have also declined to investigate. Even in states where Planned Parenthood is not licensed to perform abortions, such as in Louisiana, some governors have moved to defund the organization. Louisiana’s Republican governor Bobby Jindal, who is also campaigning for the Republican presidential nomination, ended a Medicaid contract with the healthcare organization, despite federal warnings not to do so. Arkansas, Utah and New Hampshire did the same. Alabama also ended a Medicaid contract with Planned Parenthood, even though providers in that state do not have a tissue donation program. Still other investigations continue. In Tennessee, state legislators are scheduled to hold a “fact-finding” session on Wednesday.


How Teddy Roosevelt Ruined Vacation for U.S. Presidents

Presidents don’t get vacations—they just get a change of scenery,” said Nancy Reagan in 1985 in defense of her husband’s frequent trips to his ranch in California. Indeed, modern presidents are expected to take working vacations—to manage affairs of state, read weighty and important works of nonfiction (dutifully chronicled by obliging press secretaries), keep in close contact with their advisers and, of course, be fully accessible to members of the fourth estate. If they dare mistime their getaways and find themselves, say, answering questions about war or peace on the ninth hole, they can expect the media to pillory them. Whom should presidents blame for this unfortunate state of affairs? None other than Teddy Roosevelt. The first modern president in every sense of the term—particularly in his deliberate courtship and management of the press—TR created the prototype for the public presidential vacation and, in the process, ruined summertime for every person who has held the office since. From the earliest days of the Republic, political opponents have pilloried chief executives whenever they dared leave the capital for rest or recreation. (When John Adams departed Philadelphia in 1797 for an extended visit to his family homestead in Quincy, Massachusetts, amid mounting diplomatic troubles with France (notably, the XYZ Affair), his political opponents charged that he “absconded from the seat of government just exactly when the critical state of affairs had left the public mind exceedingly agitated.”) But notwithstanding the grief they withstood from critics, early presidents often found their holiday getaways genuinely restful and restorative. There was simply little work to be done when Congress was out of session. But when TR came into officethe youngest man ever to occupy the White Househe changed the game. With a firm understanding of how media and communications technology were transforming American politics, TR approached his vacations in the same fashion that he approached his entire presidency: as an opportunity to shape and burnish his public image.


JPMorgan, Goldman Sachs, Morgan Stanley to form data company: WSJ

JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) are working to create a company that will pull together and clean reams of data used to determine pricing and transaction costs, the Wall Street Journal reported. The initiative is currently dubbed “SPReD”, which stands for Securities Product Reference Data, and is likely to be launched in the next six to 12 months, the Journal said, citing people familiar with the matter. Each founding bank is investing “seven figures” in the company, the people said. The banks did not immediately respond to a request from Reuters for comment or were not immediately available for comment.

New company established 11 days before Huma Abedin left State Department

Washington (CNN)A company tied to Huma Abedin was formed in the final days of her work at Hillary Clinton’s side at the State Department. Zain Endeavors was registered 11 days before Abedin left her post as Clinton’s deputy chief of staff to work instead as a consultant for the State Department, the Clinton Foundation and Teneo, a consulting firm with deep ties to the Clintons. A CNN review of public records shows that Zain Endeavors shares Abedin’s home address. And it also shares a name with Abedin’s son, Jordan Zain Weiner, suggesting the company could have been registered for her. Zain Endeavors LLC is registered with the New York Department of State. There is nothing illegal about a private citizen creating a company, nor is it unprecedented for someone who is self-employed to form an LLC to provide them with legal protections and tax benefits. But the timing is noteworthy because some conservative lawmakers and outside groups have questioned whether Abedin’s consulting work for the State Department and private organizations created a conflict of interest. Abedin is now a top official with Clinton’s presidential campaign. Her lawyers, State Department and Clinton campaign officials did not respond to questions about the company. News of the existence of Zain Endeavors, which has not been previously reported, comes as Republicans scrutinize the longtime Clinton confidante’s working arrangement, including the State Department inspector general’s findings that Abedin was overpaid by almost $10,000 when she left the department as a full-time employee. She is disputing the findings.

The Trial of the Alabaster Medallion

This trinket won’t reveal the location of the Ark of the Covenant or allow you to operate a New York City taxicab, but a historical alabaster medallion has spurred a court fight involving some of the top U.S. government agencies. The trouble-causing medallion originally belonged to Secretary of State Dean Rusk. During his tenure from 1961 to 1969, the delicately engraved bald eagle and golden outline hung from his office wall. More than a foot wide but only an inch in depth and bearing the seal of the United States, the piece currently lives with 5,000 historical objects in one of the U.S. Department of State’s diplomatic reception rooms. However, the medallion’s path from Mr. Rusk’s office to the museum-wing of the state department involved more than an elevator ride. And like so many things, that time in between has made all the difference in determining to whom it rightfully belongs. After Mr. Rusk, who was known for championing U.S. involvement in Vietnam, finished his term at the State Department, the medallion eventually came into the hands of an Ohio orthodontist named Melville Donald Hayes. Mr. Hayes, 65 years old, was a devoted son to his mother, who came to rely on him fully after twice becoming a widow, and professionally transformed the smiles of many patients, according to his cousin, who served as a court character witness. Mr. Hayes is also a fan of Americana and spent much of his fortune acquiring various historical pieces, at least $138,000 worth, according to court documents. Unfortunately, maybe it was more than he should have spent. Mr. Hayes filed for chapter 7 bankruptcy in 2011. In his bankruptcy petition, Mr. Hayes claimed $651,874 in assets and more than $1.4 million in liabilities. And despite his propensity for antiques, the only historical items listed on his personal property schedule were dental X-ray machines from another decade, a 1963 inoperable Cadillac Fleetwood and a 10-year-old computer. By the time Mr. Hayes filed for bankruptcy, he’d already donated the medallion to the State Department. He’d also given a number of items, including a Chippendale sofa and a portrait by Rembrandt Peale, to his mother. He owed the Internal Revenue Service more than $125,000 in back taxes from 2005, 2006 and 2007. But after the bankruptcy filing, the federal agency determined that debt was uncollectable. It isn’t legal to give away your most valuable assets and then file for bankruptcy, claiming there’s nothing to pay creditors. It is especially frowned on when a few years later, the debtor re-inherits the assets, as happened in this case when Mr. Hayes’s mother died in 2013. Because Mr. Hayes didn’t list the medallion (and other antiques) on IRS documents, he’s now facing criminal fraud charges.


Oil Companies Sit on Hands at Auction for Leases

HOUSTON — With oil prices collapsing and companies in retrenchment, a federal auction in the Gulf of Mexico on Wednesday attracted the lowest interest from producers since 1986. It was the clearest sign yet that the fortunes of oil companies are skidding so fast that they now need to cut back on plans for production well into the future. The auction, for drilling leases, attracted a scant $22.7 million in sales from five companies, but energy analysts said that came as no surprise on a day when the American oil benchmark price plummeted by more than 4 percent. For the first time since the recession, it is approaching the symbolic $40-a-barrel level. Last summer, it was above $100 a barrel. A glut on American and world markets is to blame for the depressed prices, but the unusually large daily decline occurred after the Energy Department, in a report, lowered its oil price projections and showed a considerable increase in inventories. Until now, most companies have insisted that they would not sacrifice production in future years when they said oil prices were sure to rebound strongly. But in recent weeks, executives have expressed concern that the oil price collapse could last through 2016 and even 2017, and it is important that they tighten their belts even more.


Jimmy Carter Says He Will Undergo Treatment for Cancer in Brain

Former President Jimmy Carter said he has melanoma in his brain, and that he will receive radiation treatment for the cancer beginning Thursday while scaling back work for his philanthropic foundation. “They had a very high suspicion then and now that the melanoma started somewhere else on my body and spread to my liver,” Carter, 90, told reporters Thursday at the Carter Center in Atlanta. He will undergo four treatments scheduled a three-week intervals, he said. The cancer was discovered during liver surgery on Aug. 3, Carter said in an Aug. 12 statement. He said he would re-arrange his schedule to undergo treatment at Emory Healthcare in Atlanta.



Bentley: Special session likely after Labor Day

Gov. Robert Bentley said Tuesday he may call the Legislature into special session within two weeks of Labor Day. The confrontations of the previous six months may return. Speaking before the state’s Health Care Improvement Task Force Tuesday, the governor – who says the troubled General Fund needs at least $300 million in revenue – challenged legislators opposing new taxes to submit a list of the agencies they wanted to reduce. “If they’re not going to support $300 million in taxes, I want to know what they want to cut,” Bentley said. “I want to know their list. We’ll write it down and see. The people of Alabama, they may not like taxes, but they hate cuts.” Bentley also said he would veto a budget he found unacceptable, while adding that he expected the Legislature to override that veto. Should that occur, the governor threatened to shame House and Senate members who voted for cuts. Bentley suggested that if state parks had to close, he would put signs at the gates listing House and Senate members who voted to do so. “We’re not going to get blamed for it, because we’re going to put the blame where the blame is,” he said. “The people are going to know who’s responsible for not solving it.” The General Fund, which pays for most noneducation funding in the state, faces a shortfall of at least $200 million. Legislators must find a remedy by Oct. 1, the start of the 2016 fiscal year.


Poll Predicts Runoff in Montgomery Mayoral Contest

MONTGOMERY—Confidential poling results acquired by the Alabama Political Reporter show that the Montgomery mayoral race is tightening. According to a survey conducted on August 12-13, 2015 by Alan Secrest and Associates, incumbent Mayor Todd Strange, and former US Congressman Artur Davis, appear to be headed for a run-off. The poll was commissioned by the Davis campaign. With approximately one week to go before the election, a tracking poll of 502 registered voters, who classified themselves as almost certain, or likely to vote in the August 25 Montgomery mayoral election, found Davis continues to show notable gains with black voters, and currently holds his strongest favorable to unfavorable share with blacks, since this campaign began surveying the Montgomery electorate in January 2014. Overall, 50 percent of black voters hold a favorable opinion of Davis, compared to 26 percent who hold an unfavorable opinion. Davis has shown particular gains with black men, who now view Davis favorably by a ratio of 54-22. According to the survey, 27 percent remain undecided, with fewer than 40 percent of the undecided believing Montgomery is on the right track. The survey notes say, “Strange’s job approval rating with undecideds is a tepid 46 percent, with 38 percent of them having a negative opinion of Strange’s record in office. In contrast, Davis’ favorable/unfavorable ratio with undecideds is an impressive 44-14.” The survey also found, that neither Dan Harris, nor Ella Bell had significant voter support at this point in the race, with both remaining in single digits with voters overall. The poll predicts a runoff between Strange and Davis. The final question is the size of the margin between them. The pollsters believe:   “A younger, more African American electorate will benefit Davis, while an older, less diverse electorate will benefit Mayor Strange. Also, given Strange’s relative weakness with undecideds on the job approval, and right track elements, and Davis’ high favorable to unfavorable split with this group, there is potential for major continued movement in the lead challenger’s direction.”


Trump moves rally to 50,000-capacity stadium

GOP presidential candidate Donald Trump is again moving his Friday evening rally in Mobile, Ala., to a venue with more seating amid overwhelming demand, according to a Thursday news report. Trump is now conducting a Friday night pep rally and town hall event at the Ladd Peebles Stadium, home to the University of South Alabama’s football team, according to CBS’s local affiliate. Trump had already moved from the Mobile Civic Center Theater to the center’s main arena, which has a capacity of 14,000. Tickets for Trump’s stop were selling so quickly, however, that another venue move was needed. “It’s going to end up at thirty- to fourty-thousand people in Alabama,” Trump said this week. Ladd Peebles Stadium hosts the South Alabama Jaguars’ home games, as well as two college bowl games a season. The sporting arena also reportedly has maximum capacity of 50,000 people. Trump’s stop in Mobile comes as he leads the race for the GOP’s 2016 presidential nomination across multiple national polls. The outspoken billionaire stopped in Merrimack, N.H., on Wednesday evening for a press conference followed by a town hall, where he mocked establishment candidate Jeb Bush.  “Right down the road we have Jeb,” he said of the former Florida governor, who was hosting his own event in nearby Derry.  “Very small crowd…you know what’s happening to Jeb’s crowd right down the street?” Trump asked. “They’re sleeping now. I don’t see how he’s electable.” Wisconsin Gov. Scott Walker, another contender for the 2016 GOP nomination, also plans on visiting Alabama this week. The state is part of the “SEC primary” block that will pick its candidate on March 1.


Bentley expected to announce auto supplier bringing 600 jobs to Tuscaloosa

Gov. Robert Bentley on Thursday is expected to make a major jobs announcement for Tuscaloosa County. Fox 6 reported that an auto parts supplier will set up operations the area that will bring over 600 jobs. The report said the supplier will build door panels for Mercedes and other vehicles. Bentley’s announcement is expected to come at 11 a.m. Officials from the unnamed company will visit Tuscaloosa to talk about future plans. The BBJ will have more on this story as it develops.




Morning Money

FED AHEAD: JACKSON HOLE — After mixed signals on a September rate hike from the July FOMC meeting minutes, the Fed’s next big event will be its summer gathering that starts Aug. 27. WSJ’s Jon Hilsenrath — who calls the Fed’s decision a “cliffhanger” — reports, “Adding to uncertainty for markets, [Janet] Yellen won’t be attending the central bank’s annual retreat in Jackson Hole, Wyo., later this month, where officials in the past at times have left clues about future policy decisions.”

FED OFFICIALS GETTING CLOSER TO RATE HIKE AS FOREIGN WORRIES WANE — Politico’s Jon Prior reports: “Federal Reserve officials are seeing continued improvement in the U.S. economy, which could soon lead to the first hike to the central bank’s main borrowing rate as their worries about recent developments overseas diminish, according to the minutes of the Federal Open Market Committee’s July meetings.”

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SOME ANALYSTS DISAGREE —, citing Wells Fargo analysts, says: “The Federal Reserve’s dovish tone in the minutes of its July meeting, released Wednesday, takes a September rate increase out of the spotlight.”

GOOD THURSDAY MORNING — Keep sending news tips to Clea Benson at Ben White returns from his summer vacation next week.

DRIVING THE DAY — Donald Trump talks with Fox Business at 7 a.m. … Initial jobless claims are released at 8:30 a.m. … Leading economic indicators are published at 10 a.m. by The Conference Board.

OIL HITS SIX-YEAR LOW AS GLUT GROWS — After the U.S. Energy Information Administration reported Wednesday that crude stockpiles unexpectedly rose, West Texas Intermediate, the benchmark for U.S. crude oil, fell 4.3% to $40.80 a barrel. Forbes’ Nathan Vardi reports: “The great oil crash that started in the fall of 2014 has returned in the summer of 2015 with a vengeance.” Some analysts and traders are predicting oil prices could soon drop to $30 a barrel, according to the WSJ: A federal auction for drilling leases attracted the least interest since 1986. NYT:


WHY YUAN MOVES MERIT SKEPTICISM — The WSJ’s Greg Ip has a piece on why Treasury is right to question China’s claim that the Yuan devaluation is about moving toward a market-driven exchange rate: “China’s trading partners are right to suspect that the real purpose of the so-called reform is competitive devaluation that boost exports and growth at the rest of the world’s expense.”

IMF DEFERS DECISION ON YUAN’S ADDITION TO CURRENCY BENCHMARK — Though Beijing’s loosening of government controls on the currency was seen as a move toward a freer exchange rate, the IMF decision to freeze its currency basket until Oct. 2016 defers implementation of any move to add the Yuan, Reuters’ Jason Lange reports:

MYSTERY OF THE MISSING CANAL — Nicaragua’s Daniel Ortega two years ago chose a Chinese businessman to build a $50 billion canal to compete with Panama. Bloomberg sent a reporter to the spot, and all he found were chickens and pigs roaming around outside of tin-roofed huts. Conspiracy theories abound:


GREECE TO RECEIVE BAILOUT FUNDS TODAY — The first infusion of $95 billion in aid for Greece will arrive today, in time to pay its arrears to the ECB, Bloomberg’s Rebecca Christie reports: “The International Monetary Fund will review whether to contribute money to Greece later this year when European authorities will also assess the nation’s progress in meeting its commitments. The euro area also plans to evaluate debt relief options for Greece at that time.”

NY FED STUDIES TREASURY-MARKET TRADING — “Identifying the growing role played by high-frequency trading in U.S. Treasury markets is important for understanding the price discovery process,” Fed economists reported. “Market participants often presume that price discovery happens in Treasury futures. However, our findings show that this is not always the case: Although futures usually lead cash, the reverse is also often true. Therefore, from a price discovery point of view, the two markets can effectively be seen as one.”

LEW TALKS TRADE, IRAN IN CHARLOTTE — Treasury Department Secretary Jack Lew met with BoA’s Brian Moynihan, other local CEOs, and the Carolina Panthers owner Jerry Richardson. From the Treasury Department: “Secretary [Lew] underscored that the Administration is working to complete negotiations on the Trans-Pacific Partnership (TPP) … The participants also discussed the Iran deal.”

AND ALSO WHICH WOMAN TO FEATURE ON THE $10 BILL — According to the Charlotte Observer, Lew said in another “closed-door meeting” that he’s heard from 1.5 million people through tweets, letters and meetings about the proposal to shove Alexander Hamilton aside for a woman on the 10-spot. Participants suggested Harriet Tubman and Eleanor Roosevelt, according to attendee of the meeting, which included officials from Planned Parenthood and a local community college:

CONSUMER GROUPS COMPLAIN ABOUT NEW AFFORDABLE HOUSING GOALS — Remember Fannie Mae and Freddie Mac’s affordable-housing goals, the ones championed by Elizabeth Warren but blamed by conservatives for causing the financial crisis? The companies’ regulator, the Federal Housing Finance Agency, tweaked them slightly yesterday, requiring the two companies to purchase slightly more mortgages in low-income areas. Consumer groups, who were hoping that FHFA Director Mel Watt — a Democrat — would make significant changes, are disappointed. “FHFA missed a key opportunity to promote homeownership for low-income borrowers and communities of color,” said Julia Gordon at the Center for American Progress.

GOLDMAN ON LIQUIDITY RISKS — Despite regulators’ skepticism, expect Wall Street to keep raising the specter of a crisis magnified by liquidity problems that are caused by … regulation. The latest “Exchanges at Goldman Sachs” podcast discusses the issue:

BANKERS USING ASHLEYMADISON.COM — “Hundreds” of bankers may have registered for adultery website using their work email addresses, MarketWatch’s Priya Anand reports. MarketWatch got the data from an Atlanta-based security researcher after hackers on Tuesday purported to release details on 36 million users of the site. A search of alleged user emails turned up 665 with big-bank domains. Wells Fargo topped the list with 175. “While we cannot speak to the veracity of the data, as a matter of company policy we require that team members use personal email addresses to conduct personal business,” A WFC spokesman told MarketWatch.

POTUS Events

The President is vacationing at Martha’s Vineyard.

Floor Action

Congress is in recess.

Krebs Daily Briefing 19 August 2015


Vladimir Putin’s Bonfire of the Delicacies

In the first five days after Russia started burning, crushing, and otherwise annihilating food smuggled in from Western countries, 552 kilograms of contraband brought by Russian citizens in their carry-on luggage were destroyed. That’s 1,200 pounds of everything from French Camembert to Italian prosciutto — anything that was made illegal a year ago. That’s when, in a tit-for-tat move, Moscowimposed sanctions on food imported from the countries that imposed sanctions on Russia for dismembering Ukraine. Those 1,200 pounds of carry-on foodstuffs, though, are nothing compared to the hundreds of tons of agricultural produce — cheese, peaches, and pork — that were torched in incinerators or pulverized under tractor treads in just five days. If you have any knowledge of Russian history, you know that the index of any book on the subject has a substantial “famine” entry. You may also have heard that the Russian economy has been slowly and steadily cratering for nearly two years now. According to the Kremlin’s own estimates, the number of Russians living in poverty has increased: 16 percent more in the first quarter of this year than last. Over 15 percent of Russians now live in poverty. And if you’ve seen the photos of local residents trying to salvage some tractor-scarred Greek nectarines out of the dirt, you might be wondering: Why is Russia destroying perfectly good food? It’s a question some Russians are asking themselves. “When Putin signed the order about destroying contraband produce, I was very surprised,” wrote journalist Valery Panyushkin, noting the irony of the president’s own history. “A Leningrader? The son of a woman who survived the siege of Leningrad, the son of a man wounded in thebattle for the city? The brother of a child who died in the besieged city? Destroying food? How?”

Bank of New York Mellon Settles Bribery Case Over Interns

The three interns at Bank of New York Mellon who joined the firm in the summer of 2010 seemed unusual choices on paper. None met the financial giant’s rigorous criteria, and none were hired through the usual internship programs. They gained their positions a different way, according to government regulators: Their relatives were high-ranking officials at a Middle Eastern sovereign wealth fund that was a client of the firm. The Securities and Exchange Commission announced on Tuesday that it had settled a foreign bribery case with Bank of New York Mellon, accusing the bank of doling out the three internships as a way to appease officials at the Middle Eastern investment fund.  Handing out the three internships — to the son and the nephew of one official at the sovereign fund, and to the son of another official — to keep a hefty client mandate violated the Foreign Corrupt Practices Act, according to the regulator. The law prohibits American companies from trying to woo foreign officials with valuable offerings like cash or gifts. Internships, while not straight-up cash payments, can amount to valuable presents all the same. The bestowing of coveted work positions has come under scrutiny on Wall Street in the past, including moves by other major banks to hire the children of top Chinese government officials.

Losing $51 Billion May Not Matter for Swiss National Bank

Losing 50 billion francs ($51 billion) in half a year might seem like a big deal, unless you’re the Swiss National Bank. For the majority of economists in Bloomberg’s monthly survey — 15 of 23 — the record shortfall reported last month doesn’t matter for SNB policy. That still leaves a sizable group in the other camp; one concern is that such a loss could make it harder for President Thomas Jordan to push back against any market pressure on the franc with interventions. The SNB has already cut its deposit rate far below zero — charging banks to hold their money — and built up hundreds of billions of francs in reserves, by defending a currency cap until January this year and now through occasional forays into the market. If losses mount, investors could start to buy francs to a greater degree if they question the SNB’s firepower. The loss “limits the credibility of the SNB to pursue a monetary policy that might come with short term financial losses,” Bank J. Safra Sarasin Ltd Chief Economist Karsten Junius said. “Unlimited foreign-currency interventions are therefore not credible as markets would regard them as unsustainable.” According to the survey, the SNB has limited room left on the interest-rate front to keep the franc in check, meaning interventions are likely to retain their importance. The SNB can take its deposit rate, currently at minus 0.75 percent, to minus 1.25 percent, according to the survey.  The other issue for Jordan is a potential political backlash.


Turkey’s War Within

DIYARBAKIR, Turkey — There’s no such thing as a quiet night in this southeastern city anymore. On an average night, residents say, police fire tear gas at Kurdish protesters and mark their chests with the red laser dots of sniper rifles; youths respond with firecrackers and sound bombs. On a bad night, residents go to sleep to the sounds of both sides exchanging gunfire and military helicopters buzzing overhead. But some residents of Diyarbakir, the unofficial capital of the country’s Kurdish heartland, fear that the worst is yet to come. “People are getting weapons, preparing for urban war,” said Brusk, 34, a prematurely gray-haired café owner in Diyarbakir. “They see it as protection from Huda-Par [a Kurdish Sunni Islamist movement] and other agents of the state.” The long-dormant conflict between Kurds and the Turkish state has returned with a vengeance. According to a Turkish official, 39 Turkish police and soldiers have been killed in attacks by the outlawed Kurdistan Workers’ Party, or PKK, which fought a three-decade insurgency against the state but had been holding a cease-fire until the current spasm of violence, in the past month. Turkey, meanwhile, has also detained more than 1,000 Kurdish activists and begun a fierce air campaign against the PKK’s hideouts both inside Turkey and in northern Iraq, launching hundreds of air sorties that Turkish security officials claim have killed 390 PKK militants and wounded hundreds more. The violence has flared up during a critical political moment for Turkey. Negotiations to form a coalition government collapsed on Monday, seemingly paving the way for an early election. The Justice and Development Party, or AKP, from which President Recep Tayyip Erdogan hails, failed for the first time since it came to power to win a majority of seats in the June parliamentary election — in a new vote, it will aim to regain its majority and form a single-party government. AKP officials have signaled that the snap election could be held in November.


EPA proposes methane emission standards for oil and gas industry

The Environmental Protection Agency on Tuesday proposed new standards to cut greenhouse gas emissions and volatile organic compounds from oil and gas facilities, a key part of a broader strategy to cut methane emissions in the sector by 40 to 45 percent below 2012 levels in the next ten years. The proposed methane standards are expected to reduce the equivalent of 7.7 mln to 9 mln metric tonnes of carbon dioxide in 2025, according to the EPA. The proposal will require oil and gas processing and transmission facilities to find and repair methane leaks, capture natural gas from hydraulically fractured oil wells and limit emissions from pumps and other types of equipment. The proposed rule will help achieve a broader Obama administration strategy to cut methane emissions 40 to 45 percent below 2012 levels by 2025, the EPA said, and forms a key part of its climate change strategy. The release of the proposed standards comes about two weeks after the EPA unveiled the final version of its Clean Power Plan, a sweeping rule that aims to cut national carbon emissions from the power sector to 32 percent below 2005 levels by 2030 through tailored state targets. “Through our cost-effective proposed standards, we are underscoring our commitment to reducing the pollution fueling climate change and protecting public health while supporting responsible energy development, transparency and accountability,” said EPA Administrator Gina McCarthy. The proposed standards build on a voluntary EPA program that enables oil and gas companies to pledge commitments to lower their methane emissions. Environmental groups have complained that those voluntary measures fail to address the projected growth in methane emissions of more than 25 percent by 2025.

BNY Mellon to pay $14.8 million to settle U.S. SEC bribery charges

Bank of New York Mellon Corp (BK.N) will pay $14.8 million to settle charges it gave internships to family members of officials affiliated with a Middle Eastern sovereign wealth fund, violating federal bribery laws, U.S. regulators said. The U.S. Securities and Exchange Commission said the bank failed to evaluate the family members through its highly competitive internship programs and did not apply the rigorous criteria usually required. The family members nonetheless were hired for internships to corruptly influence government officials and to win or keep contracts to manage and service the sovereign wealth fund’s assets, the SEC said. “BNY Mellon deserved significant sanction for providing valuable student internships to family members of foreign officials to influence their actions,” Andrew Ceresney, the SEC’s director of enforcement, said in a statement. BNY Mellon neither admitted nor denied the charges as part of the settlement. The bank in a statement said it has “already taken steps to enhance our existing internal controls and procedures with respect to our internship and hiring practices.” The sovereign wealth fund was not named in an SEC administrative order. The SEC said the Middle East fund had been a BNY Mellon client since 2000 and that during the relevant period the bank held $55 billion in assets for it. The case followed a long-running investigation by the SEC into banks’ dealings with sovereign wealth funds. The SEC had in 2011 sent letters to several financial institutions asking for information about their business with state-owned investment funds as part of a foreign bribery probe. U.S. authorities have also undertaken investigations in recent years into banks’ overseas hiring practices and whether they violate the Foreign Corrupt Practices Act. Other banks that have disclosed FCPA investigations related to their hiring practices include Goldman Sachs Group Inc(GS.N) and Deutsche Bank AG.(DBKGn.DE)

BB&T Is New Deal-Making Powerhouse in Banking

America’s new bank merger and acquisition powerhouse is leaving its rivals for dead. The regional lender BB&T’s $1.8 billion swoop for National Penn Bancshares is its fourth deal in a year. The acquisition makes financial sense and is more proof the Federal Reserve supports industry mergers. Yet few peers are following the lead of BB&T, which is based in North Carolina. A hiatus in industry deal-making was understandable in the years after the financial crisis. The Fed took a lot more time approving deals and started demanding improvements to risk-management and anti-money-laundering systems. That’s why M&T Bank’s 2012 purchase of Hudson City Bancorp has yet to win approval. BB&T has shown that consolidation is back on the agenda. Assuming that its chief executive, Kelly King, secures regulatory approval for this latest deal, he will have added $30 billion in assets and $24 billion in deposits since this time last year. That will leave BB&T with $220 billion in assets. Mr. King is not losing his discipline, either. Expected cost cuts of $65 million a year are now worth $400 million to shareholders, once taxed, capitalized and discounted for the two years it will take to realize them. That certainly eclipses the $270 million premium Mr. King’s bank is paying, even after folding in $100 million in merger costs. The deal also looks savvy strategically. It moves BB&T up to fourth place by market share in Pennsylvania, the nation’s sixth-largest state by population.

Wall Street’s Gilded Maternity Perk: Nannies Fly Free

KKR & Co., one of the oldest private equity firms, is rolling out a new perk in the struggle to hire and retain talent: flying nannies. Billionaire co-founders Henry Kravis and George Roberts in May extended the company’s leave time for new parents and added a benefit allowing them to bring a new child and caregiver on business trips, paid for by KKR. It’s the only major private equity firm, and one of the few U.S. companies, to offer the travel policy, according to the Families and Work Institute. Big private equity firms are vying to add women and minorities to their male-dominated workplaces as they expand beyond buyouts into larger, multifaceted money managers. While diversity has long been considered a corporate asset, the industry has made little progress in placing women in high-level posts, lagging behind other financial companies. “Too many same people means too much same thinking,” Roberts, 71, said in an interview. “We found that people were hiring people like themselves. If you want to stifle innovation, if you want to stifle diverse thinking, if you want to stifle creativity, then just keep hiring people like yourself.” Across the 10 biggest buyout shops, 9 out of 10 senior managers are men, according to data Bloomberg compiled in April. Twelve of KKR’s 93 senior professionals are women, the data showed, compared with 4 out of 71 three years ago.

Q&A: Explaining ‘Birthright Citizenship’

Several Republican presidential candidates, including real-estate mogul Donald Trump and Wisconsin Gov. Scott Walker, have said they would deny U.S. citizenship to children of illegal immigrants, ending “birthright citizenship” in the country. The issue has come up from time to time as part of immigration debates and has a long pedigree in American constitutional law. A primer:


Yelp Wants You to Review the Government

They can now respond to your feedback, too. Reviewing federal agencies on Yelp may soon feel more like a two-way dialogue rather than a shout into the wind, the companyannounced on Tuesday. Under a new agreement with Yelp, federal agencies can now claim their existing Yelp pages or launch new ones to respond officially to reviews, according to Luther Lowe, vice president of public policy at Yelp. “It’s exciting because it allows government agencies to take real-time feedback from citizens and act upon it in a way that helps our democracy operate better,” Lowe says. Non-government services like restaurants and bars have long been able to claim their pages and respond to reviews, Lowe explains, whereas federal agencies had not previously been able to do so — even though many of them, from USPS locations to congressmen offices, have been reviewed on Yelp for years. “Basically, we had to create a special terms of service for government service agencies, to make sure that the government isn’t endorsing one platform over another,” Lowe says. The visual changes on the site are subtle. Users won’t see a badge indicating that a federal agency has claimed its page, Lowe explains. But they can still tell whether a page has been claimed if, under the business information, there remains a link that reads, “Work here? Claim this business.”


Hackers Dump Stolen Ashley Madison Data


Hackers who targeted Ashley Madison, the cheaters’ dating Web site whose slogan is “Life is short. Have an affair,” appear to have made good on their threat to post stolen customer data online Tuesday. A huge amount of personal customer data, including names, addresses, phone numbers, and credit-card and transaction details supposedly attached to Ashley Madison user accounts, was posted to the so-called “dark web,” which can’t be searched by most common search engines. Reports say that account details for anywhere between 32 million to 37 million users made its way onto Torrent file-sharing services over the past 48 hours. The hack was first revealed one month ago by a group who referred to themselves as the “Impact Team.” At the time, they demanded that Avid Life Media, which owns Ashley Madison and brands Established Men and CougarLife, take down the sites and or see their customers’ stolen personal data exposed. The hackers posted a statement under the big, looming headline “Time’s Up!,” Tuesday, before claiming that since Avid Life Media didn’t comply, “now everyone gets to see their data.” The statement was reposted on Krebs on Security. Twisting the knife for Avid Life, the Impact Team wrote that 90 to 95 percent of Ashley Madison’s users were male: “Chances are your man signed up on the world’s biggest affair site, but never had one. He just tried to.” Avid Life said in a statement that it is actively monitoring the situation to determine if the leaked information is, in fact, valid, and is cooperating with law enforcement investigations by Canadian police and the F.B.I.

Former Subway pitchman Jared Fogle appears in court


INDIANAPOLIS — Former Subway restaurant pitchman Jared Fogle will appear before a federal magistrate judge at 11 a.m. Wednesday in Indianapolis. Wearing a black suit and tie, with a stone-faced expression, Fogle was surrounded by attorneys and U.S. marshals as he walked into a second-floor court chamber. Federal prosecutors have released documents accusing Fogle of engaging in sex acts with minors and receiving child pornography, the Associated Press reported. Documents released Wednesday by the U.S. attorney’s office in Indianapolis say the 37-year-old Fogle faces one count of travel to engage in illicit sexual conduct with a minor and one count of distribution and receipt of child pornography.

On Tuesday, WREG-TV, citing unidentified sources, said Fogle was expected to plead guilty to charges related to an investigation into possession of child pornography.



Lawmakers looking at possible RSA changes


MONTGOMERY — A panel of lawmakers studying the Retirement Systems of Alabama meets early this afternoon at the Statehouse. The Joint Commission on Alabama Public Pensions was formed earlier this year by lawmakers, one of several committees looking for possible changes in several state organizations. The commission is being chaired by Sen. Arthur Orr, R-Decatur, and Rep. Lynn Greer, R-Rogersville. Greer last month said that the commission is looking at successful changes other states have made to their pension systems. RSA’s funding comes from three sources: earnings on investments, members’ contributions and employers’ contributions. In 2014, RSA had a total of $5.5 billion in income. While 67 percent of that came from earnings, 16.4 percent, about $902 million, came from the state.

“If we had this money (the state contributes to RSA) we could be giving pay raises (to state employees),” Greer said last month. Orr in April he is working on legislation that would better define the fiduciary responsibilities of those in charge of Retirement Systems of Alabama. At Orr’s request, The Pew Charitable Trusts this spring compared RSA’s operations and governance to those of other states’ pension funds. RSA’s liability was 66 percent funded in 2013, compared to a national average of 72 percent, according to the report. That ratio had decreased in recent years, despite 100 percent of annual required contributions being made. Officials from RSA are participating in the commission’s discussions.


Donald Trump coming to Mobile Friday 


Real estate developer and reality TV star Donald Trump, whose ascent atop early polls has shaken the 2016 GOP presidential primary campaign, will make a stop in Mobile Friday. The “Donald J. Trump for President Pep Rally” will be at 7 p.m. at the Mobile Civic Center Theater. Doors will open at 5:30 p.m. Tickets are required to attend the event and are free to the public. They will be issued on a first come, first serve basis at Overflow for the event will be located in the East Exhibit Area of the Mobile Civic Center. The appearance is likely to draw a big crowd. Trump is soaring ahead other GOP contenders, according to national polling. A CNN/ORC poll, released Tuesday, shows his support at 24 percent among Republican registered voters with the nearest contender, former Florida Gov. Jeb Bush, at 11 points behind at 13 percent. Trump is also polling strong in Alabama. A News-5/Strategy Research poll,released last week, shows “The Apprentice” star with 30 percent of support from GOP voters with Bush polling a distant second. Trump’s trip to Mobile is the first visit from a GOP presidential contender since the first major Republican debate.


Bham City Council approves minimum wage increase to $10.10 in 2017


The Birmingham City Council on Tuesday passed an ordinance to increase minimum wage in the city to $10.10 an hour by July 2017. The measure was proposed by Council President Johnathan Austin, who called for wages to increase to $8.50 in July 2016 and $10.10 in July 2017, according to a report from Fox 6. Alabama currently has no set minimum wage. The federal minimum wage of $7.25 is applied statewide. The ordinance also calls for minimum wage in the city to rise annually as the city’s cost of living goes up. This comes after council members on Aug. 6 voted to increase the salaries of council members from $15,000 to $55,000 in 2017, following the next city council election.

Hoover council approves liquor sales at Galleria Costco

The Hoover City Council approved a liquor license Monday for the Costco at the Riverchase Galleria.

The license, which was approved by the council 4-2, will allow Costco to sell liquor at the Hoover location effective immediately. “We’ve had only positive response from everyone at City Hall and just in town today,” said Allen Pate, executive director of the Hoover Operations Department. Costco store manager Ken McOmber said he will begin planning and building the liquor section, and he’s unsure when the store will begin liquor sales. At the council meeting, multiple people spoke out against granting the store the liquor license, citing safety concerns. Pate said the police department performs background checks on any store which applies for a liquor license in the city of Hoover. “People that drink liquor and want liquor will get it regardless,” Pate said. “Costco has surely been a good business for the city, and time will tell if this is a good thing.”

More cutbacks, fewer journalists

As this week’s print edition was being prepared for press, Weld learned that the Alabama Media Group — publisher of the website and the thrice-weekly newspaper The Birmingham News — has fired a total of 21 staff members in its Birmingham, Huntsville and Mobile offices. The terminations were effective immediately, according to sources. In Birmingham, nine people were let go, including Barnett Wright, who came to the News in 2000, and spent much of his career there on the Jefferson County Courthouse beat. Also fired were Jesse Chambers, who covered western Jefferson County (Chambers also is a former writer and editor at Weld), Over-the-Mountain beat reporters Jon Anderson and Ana Rodriguez, Shelby County beat reporter Martin Reed, veteran photographers Mark Almond and Frank Couch, and reporters Melissa Brown and Stephen Dethrage, who worked in the company’s Tuscaloosa bureau, respectively covering the University of Alabama and crime and courts. The August 18 firings are the latest in a series of newsroom cutbacks dating to 2010, soon after owner Advance Publications consolidated The Birmingham News, The Huntsville Times and The Mobile Press-Register to form the Alabama Media Group. That also began the company’s ongoing transition to a predominantly digital orientation. Michelle Holmes, vice president of content for AMG, alluded to the company’s business model in an email announcing the latest cutbacks to remaining staff members. Holmes — who at press time had not responded to a request to comment for this story — wrote that the firings were part of “a number of content changes in our hubs across Alabama to allow us to continue to serve our rapidly growing digital audience.”



How to NOT pay income taxes in Alabama (if you are an out-of state corporation)

Are you paying Alabama income taxes like a sucker? Are you tired of generating billions in profits only to see the state take four, five or even six and a half percent like you’re a regular shmoe? With this study-at-home course, in just a few short minutes, you will understand how to dodge the Heart of Dixie tax man just like Wal-mart, Home Depot, Toys-R-Us, Staples and many, many others. Don’t waste that money on other people’s prisons, hospitals and schools. Learn now to keep that money in your pocket and away from the government. (Offer good for multi-national corporations only. Does not apply to individuals or families, unless maybe if your name is Walton.) First your business is going to need a name. For our purposes we’ll call it Logo Home and Hardware. Logo Home and Hardware opens large Logo superstores in small town America, where the population has been woefully underserved by smaller, pre-existing home and hardware stores run by owner-operators who barely manage to turn profits. If those smaller owner-operators do turn profits, they have to pay taxes on them. In short order, these inferior competitors leave the market, allowing Logo Home and Hardware to hire those former owner-operators at close to minimum wage. Soon Logo Home and Hardware is making serious money, and if you aren’t careful, that means taxes. There are two options to keep this money away from the government.


Morning Money

THE FED’S TUG-OF-WAR — The Federal Reserve is set to release the minutes for its July meetings this afternoon, which could give more hints about when the central bank will raise interest rates for the first time in almost 10 years. One interesting theme to look for is whether officials are giving more weight to turbulence overseas or progress here at home.

Allianz Chief Economic Adviser Mohamed El-Erian emails: “The hope is that the minutes shed light on how Fed officials assess the tug-of-war between domestic and international developments. The former are consistent with a September rate hike while the latter call for caution. In the past, the Fed has been inclined to follow just domestic indicators. But this is a more globally-oriented Fed, both due to the economy’s evolution and because of the experience of some of the newer FOMC members. Thus the pronounced interest in the minutes.”

He adds the Fed will keep encouraging markets to obsess less about the date of the first hike and more about what is shaping up to be a pretty gradual return to normal. “In sum, it will constitute the ‘loosest tightening’ in the modern history of the Fed,” he writes.

Capital Economic’s Chief U.S. Economist Paul Ashworth emails, noting that the minutes would not capture one recent development in global markets: “Admittedly, that July meeting pre-dated the more recent storm in a tea cup surrounding the PBOC’s attempt to make the Chinese renminbi a more market-driven currency. But Fed officials should have been reassured by the time of this meeting that a messy Greek exit from the euro had been (at least temporarily) avoided.” Stateside, Ashworth writes that the minutes will shed some light on some subtle changes to the most recent Fed statement about the U.S. labor market that indicated signs are pointing to a September hike.

HOUSING EXPECTED TO WITHSTAND FED HIKE — Bloomberg’s Sho Chandra offers a brighter outlook for the housing market after some good construction news yesterday to keep in mind this afternoon: “That signals its momentum will probably continue into 2016, and won’t be derailed by rising borrowing costs, given the prospect that Federal Reserve policy makers will lift interest rates only gradually.”

GOOD WEDNESDAY MORNING — And happy birthday to Bill Clinton and Mohamed El-Erian, who was kind enough to share his thoughts on the Fed above. Keep sending economic birthday news and news tips to Clea Benson at

DEBRIEF INTERVIEW WITH FEMA HEAD: As the 10th anniversary of Katrina quickly approaches, current FEMA head Craig Fugate explains how the agency rebuilt after its huge fumble in New Orleans — and reveals the natural disaster he’s most worried about now. Find out on this week’s Debrief video from The Agenda:

DRIVING THE DAY — July’s Consumer Price index and Core CPI measure come out at 8:30 a.m … FOMC minutes released at 2 p.m … Treasury Secretary Jack Lew travels to Charlotte, NC today to meet with local business leaders at a roundtable hosted by Bank of America President Brian Moynihan. He’ll also attend another roundtable with Charlotte Mayor Dan Clodfelter to discuss his controversial plan to put a woman on the $10 bill.

COMMUNITY BANKS, CUs WANT MORE FROM TARGET-VISA DEAL — Target and Visa have agreed to a settlement over the 2013 data breach that could be up to $67 million depending on how many card issuers (banks) take the offer, per WSJ But the news met with little enthusiasm from community banks and credit unions wanting more from the deal and Congress too.

National Association of Federal Credit Union’s Senior Vice President of Government Affairs and General Counsel Carrie Hunt: “This settlement is a step in the right direction but it still may not make credit unions whole. Credit unions deserve to be fully compensated for their losses.”

Independent Community Bankers of America’s Cam Fine: “While this settlement helps address the costs of the Target breach, stronger federal data-security and cybersecurity laws are needed to prevent retailer data breaches from happening in the first place.”

COMMUNITY BANKS AND DODD-FRANK — American Banker’s Victoria Finkle takes a look at claims — including one from Florida Senator and presidential contender Marco Rubio — that community banks have been “eviscerated” by the Dodd-Frank Act. She finds: “On the ground, the story community banks tell is a more complicated one. Bankers seem more inclined to point to specific, troublesome rules within the law, rather than blaming Dodd-Frank in its entirety. In fact, much of the law is focused on winding down the country’s largest institutions and reining in non-banks.”

PROMONTORY DIDN’T ADMIT TO MUCH — One wrinkle in the $15 million settlement between Promontory and the New York Department of Financial Services is that the consulting firm was only forced to admit its past work with Standard Chartered violated the agency’s current standards on independence, not those in place at the time. NYT’s Ben Protess and Jessica Silver-Greenberg called it “a narrow admission” and gave some details on the talks: “When Mr. Albanese declined to negotiate unless Promontory admitted to falling short of consulting standards in regard to Standard Chartered, the conversation broke down. But Sunday afternoon, he received another call. This time, a Promontory representative signaled a willingness to revisit the issue of admissions.”

FANNIE, FREDDIE OVERSEER REVISITS DEBT FORGIVENESS — The Federal Housing Finance Agency is considering whether taxpayer-backed housing giants Fannie Mae and Freddie Mac will forgive mortgage debt for those still struggling with their house payments, an issue that has stirred controversy since they were taken over in 2008. Urban Institute’s housing team finds that “far fewer borrowers would likely benefit” from a program today than when it was first considered.

RICHMOND FED ON THE LAST TIME CONGRESS TACKLED HOUSING REFORM — A new report published by the Federal Reserve Bank of Richmond takes a look at what lessons could be learned the last time Congress tried to tackle the fate of Fannie and Freddie but ended up leaving “much of the status quo intact.”: “‘The fundamental problem in 1992 was that it formalized the hybrid public-private model, which is destined to fail,’ says economist Scott Frame of the Atlanta Fed, who worked with the Treasury Department on the 2008 GSE rescue. ‘If you privatize the gains and socialize the losses, you will create excessive risk-taking incentives.'”

FACEBOOK OVERTAKES GOOGLE FOR NEWS TRAFFIC — Fortune’s Mathew Ingram: “’s chief technical officer Andrew Montalenti said in an interview with Fortune that the company’s latest estimates show that social-media sources (of which Facebook is by far the largest) accounted for about 43 percent of the traffic to the network of media sites, while Google accounted for just 38 percent.”

SENATE DEMS PRESS SEC ON OFFSHORE DRILLING RISK DISCLOSURE — POLITICO’s Alex Guillen alerts us: In the wake of Shell’s Arctic approval, a dozen Senate Democrats led by Maryland’s Ben Cardin want the SEC to review disclosure requirements for companies that drill offshore to make sure “that companies fully and fairly disclose the risks from proposed offshore oil and gas activities.” Shell, they write, “did not disclose risks inherent to its Arctic Ocean exploration program,” despite offshore drilling carry significant risk. “Full and timely disclosure of material risk is necessary to protect investors by enabling them to make informed investment decisions.” Letter:

BANK RUNS AND THE MINNESOTA VIKINGS — Analysts at the Bank of England were trying to find out if Twitter could be an early warning system for bank runs last year, but things went wrong when they started looking for tweets in the middle of a Minnesota Vikings game. WSJ’s Giles Turner: “The reason the model showed an increase in activity was due to fans tweeting about ‘runs’ and ‘RBs’ — which refers to running backs, not The Royal Bank of Scotland.”

POTUS Events

The President is vacationing at Martha’s Vineyard.

Floor Action

Congress is in recess.


How the Health Care Law Affects Aggregated Companies

The Affordable Care Act applies an approach to common ownership that also applies for other tax and employee benefit purposes.  This longstanding rule generally treats companies that have a common owner or similar relationship as a single employer. These are aggregated companies. The law combines these companies to determine whether they employ at least 50 full-time employees including full-time equivalents.

If the combined employee total meets the threshold, then each separate company is an applicable large employer.  Each company – even those that do not individually meet the threshold – is subject to the employer shared responsibility provisions.

These rules for combining related employers do not determine whether a particular company owes an employer shared responsibility payment or the amount of any payment. The IRS will determine payments separately for each company.

For more information about how the employer shared responsibility provisions may affect your company, see our Questions and Answers on For details about how to determine if you are an applicable large employer, including the aggregation rules, see Determining If You Are an Applicable Large Employer.

Krebs Daily Briefing 18 August 2015

Thomas L. Krebs, Securities Litigation, Regulation and Compliance Attorney Lawyer (c)2014 Brandon L. Blankenship
Thomas L. Krebs


How ISIS lured three London teenagers with a mix of jihad and ‘girl power’

LONDON — The night before Khadiza Sultana left for Syria she was dancing in her teenage bedroom. It was a Monday during the February school vacation. Her niece and close friend, at 13 only three years younger than Khadiza, had come for a sleepover. The two girls wore matching pajamas and giggled as they gyrated in unison to the beat. Khadiza offered her niece her room that night and shared a bed with her mother. She was a devoted daughter, particularly since her father had died. The scene in her bedroom, saved on the niece’s cellphone on Feb. 16 and replayed dozens of times by Khadiza’s relatives since, shows the girl they thought they knew: joyful, sociable, funny and kind. As it turned out, it was also the carefully choreographed goodbye of a determined and exceptionally bright teenager who had spent months methodically planning to leave her childhood home in Bethnal Green, East London, with two schoolmates and follow the path of another friend who had already traveled to the territory controlled by the Islamic State.


Body Parts and Pools of Blood Visible at Tourist Site Targeted in Bangkok Bombing

A bomb blast ripped through the center of Thailand’s capital Monday evening, killing at least 20 people and injuring over 80 others. The bomb exploded by the Erawan shrine, a popular religious site located in the heart of Bangkok’s teeming shopping district. “Those who have planted this bomb are cruel. They aim to kill because everyone knows that at 7pm the shrine is crowded with Thais and foreigners,” Somyot Pumpanmuang, Thailand’s national police chief, told reporters. “Planting a bomb there means they want to see a lot of dead people.” Located at an intersection between two major roads and almost directly underneath Bangkok’s aboveground train system, the shrine is wedged amid several huge shopping centers and a five-star hotel. Thousands of office workers, tourists, and shoppers pass by the immediate vicinity on a daily basis, while hundreds pay their respect at the shrine itself. First responders and military personnel cordoned off the area shortly after the blast, placing white sheets over the dead. Crime scene investigators and medical staff immediately began scouring the area for evidence and placing markers around suspicious items, while a team of forensic photographers captured every detail of the harrowing scene.


Ukraine‘s Mystery Battle: Hunting for Truths Across an Elastic Border

The dynamic of claim and counter-claim between the opposing forces in eastern Ukraine is nothing new. From social media posts to ministerial press releases, the conflict is as much a war of words as it is of bombs and bullets. But an incident last week was the subject of such bold and wildly conflicting claims from both the rebels in Donetsk and the government in Kiev that they cast more doubt than certainty over the events they described. According to Kiev, in the early hours of August 10, the front line around the small town of Starohnativka was subjected to a sustained pre-dawn attack from hundreds of pro-Russia fighters, supported by tanks, heavy artillery, and APC-borne troops. Ukraine accused the rebels of carrying out the heaviest shelling in six months and branded it “a dangerous indication” of imminent conflict. International monitors from OSCE observed a significant increase in ceasefire violations around the town and President Petro Poroshenko was even reported to have summoned an emergency defense meeting. Amid mixed reports of multiple fatalities, Ukraine claimed that pro-Kiev forces launched a counterattack and seized strategic rebel positions — a ringing assertion of the first territorial gains made by the government since the February ceasefire deal was signed in Minsk. But top brass in the self-proclaimed Donetsk People’s Republic (DNR) gave a starkly different story. According to them, it was all quiet on the eastern front. Edward Basurin, DNR deputy defense minister, denied that a rebel attack had happened, and insisted the DNR had not broken the ceasefire. He accused Ukraine of making up the story. As stalemate, trench warfare, and consolidation of the de facto border increasingly typify a crumbling ceasefire, the alleged offensive last week could represent a hint of violence to come.



Hacking Case Raises Question on Securities Fraud

The elaborate scheme described by the Justice Department and the Securities and Exchange Commission last week, which involved breaking into computer servers to obtain confidential information about impending corporate announcements, certainly looks like a classic case of insider trading. The defendants are accused of making millions of dollars in profits by using information to trade profitably. But insider trading law as currently interpreted by the courts would not cover this case because the hackers are accused of being thieves, not insiders who breached a duty owed to the source of the information. Indeed, they are as far from a fiduciary as one could find — an important requirement for an insider trading violation. The question is whether trading on stolen information is also a type of securities fraud. The Justice Department filed indictments in Brooklyn and in New Jersey charging nine defendants with securities fraud, wire fraud, conspiracy and computer-related violations. Two defendants operating out of Ukraine are accused of breaking into the servers of three companies — Business Wire, PR Newswire and Marketwired — to obtain news releases about publicly traded companies before they were issued. They provided the information to the other defendants who traded on it in exchange for a cut of the trading profits. Prosecutors can avoid any potential problem about the scope of the securities laws by relying on the federal wire fraud statute, which carries a maximum penalty of 20 years in prison. Wire fraud requires only proof that the defendants obtained valuable property by means of fraud or misrepresentation. Although the companies and news services did not lose any money from the security breach, prosecutors do not have to show any pecuniary harm to the victims. The Supreme Court found in Carpenter v. United States that “confidential business information has long been recognized as property,” so taking it through a deception can be enough for a wire fraud conviction.

Tom Krebs is a securities attorney in Mountain Brook, Alabama.

Citigroup to Pay $180 Million Over Collapsed Hedge Funds

Citigroup has agreed to pay $180 million to settle charges by the Securities and Exchange Commission that the bank concealed problems at two of its now-defunct hedge funds, while taking in additional investments in the months before the financial crisis. Citigroup’s settlement with the Securities and Exchange Commission, announced on Monday, comes more than seven years after the two hedge funds collapsed, saddling investors with billions of dollars in losses. The losses at the Citigroup hedge funds, while largely overshadowed by other problems ricocheting across Wall Street in late 2007 and early 2008, were emblematic of the risky practices that regulators have vowed to undo. The Citigroup hedge funds used large amounts of leverage, or borrowed money, to bolster returns from municipal bonds and other fixed income investments. The funds were sold to investors by Citigroup’s financial advisers, working for the bank’s former Smith Barney wealth management unit, who told clients that the hedge funds were essentially as safe as traditional bond funds, according to the S.E.C. But in 2007 and early 2008, the fund’s managers failed to inform the thousands of investors in the funds about a severe shortage of liquidity and margin calls from lenders providing the leverage to the funds. On several occasions, the funds were forced to sell billions of dollars of assets to meet margin calls, but did not disclose these sales to investors, the agency said in its order. The fund managers, according to the regulator, also misled investors into believing that potential losses from the funds would be minimal when the bank’s own analysis showed they could reach 48 percent under certain circumstances.


IRS says thieves stole tax info from additional 220,000

A computer breach at the IRS in which thieves stole tax information from thousands of taxpayers is much bigger than the agency originally disclosed. An additional 220,000 potential victims had information stolen from an IRS website as part of a sophisticated scheme to use stolen identities to claim fraudulent tax refunds, the IRS said Monday. The revelation more than doubles the total number of potential victims, to 334,000. The tax agency first disclosed the breach in May. The thieves accessed a system called “Get Transcript,” where taxpayers can get tax returns and other filings from previous years. In order to access the information, the thieves cleared a security screen that required knowledge about the taxpayer, including Social Security number, date of birth, tax filing status and street address, the IRS said. The personal information was presumably stolen from other sources. The IRS believes the thieves were accessing the IRS website to get even more information about the taxpayers, which could help them claim fraudulent tax refunds in the future. “As it did in May, the IRS is moving aggressively to protect taxpayers whose account information may have been accessed,” the IRS said in a statement. “The IRS will begin mailing letters in the next few days to about 220,000 taxpayers where there were instances of possible or potential access to `Get Transcript’ taxpayer account information.”


Obama’s Post-Presidency Panel of Experts: Celebrities, Billionaires, and Authors

Much has been made of Barack Obama’s “fourth quarter,” during which the president’s administration has ticked off a string of accomplishments that range from negotiating a nuclear deal with Iran and normalizing relations with Cuba to unveiling sweeping executive orders on immigration and commuting dozens of prison sentences for non-violent offenders. And now, signs are emerging Obama doesn’t see January 20, 2017—the end point of his presidency—as any reason to hit the brakes. Obama has been judiciously planning his life after the White House, which political insiders believe will come together around a foundation—one that could mushroom to an endowment of $1 billion. A report in Monday’s New York Times highlighted the eclectic mix of characters Obama has been asking for advice. There’s actress Eva Longoria and New Yorker writer Malcolm Gladwell. There’s Steven Spielberg and Jeffrey KatzenbergToni Morrison, venture capitalist John Doerr, LinkedIn founder Reid Hoffman, and Sun Microsystems founder Vinod Khosla are also among those with whom the president has consulted. Chicago mayor and former White House chief of staff Rahm Emanuelin May announced that Obama’s presidential library would be constructed on the South Side of Chicago. Aides tell the Times, however, that the Obamas themselves may stay in Washington D.C. until Sasha Obama completes high school. Others say the president will also work out of Columbia University, in his beloved New York City. Last July, rumor had it that the First Family was going to move to California’s Coachella Valley. Where the president chooses to live isn’t the only fuzzy part of the emerging picture: there are a wide range of issues that Obama is expected to focus his efforts on, including criminal-justice reform, promoting civic engagement among youth, promoting diplomatic efforts and buttressing foreign-policy projects, health care, and fighting income inequality. It’s a lot to take in—even for a man who is currently the president of the United States. Perhaps that explains what guests identified as Obama’s preferred libation for his planning events and dinners: an extra-dry Grey Goose vodka martini.


Here’s Why the Close Collaboration Between the NSA and AT&T Matters

Newly disclosed documents unveiling the close relationship between the National Security Agency and AT&T could breathe new life into a long-running legal dispute about the NSA’s controversial method of tapping the Internet backbone on U.S. soil. This program, according to documents provided by Edward Snowden, is largely enabled by telecom giant AT&T, which filters Internet traffic, based on NSA instructions. AT&T then forwards the “take” to the spy agency’s storage facilities for further review and analysis. But a single email traverses the Internet in hundreds of tiny slices, called “packets,’’ that travel separate routes. Grabbing even one email requires a computer search of many slices of other people’s messages. Privacy advocates have long argued in court that grabbing portions of so many emails — involving people not suspected of anything — is a violation of the protection against unreasonable searches and seizures provided by the Fourth Amendment to the Constitution. The Electronic Frontier Foundation, a digital civil liberties group, is nowhoping that the new documents will bolster their claims in a long-running case, Jewel v. NSA. “We will be presenting this information to the court,” said Cindy Cohn, executive director of the foundation. A Department of Justice spokesman declined to comment.


Kentucky clerk given time to appeal gay marriage ruling

A Kentucky county clerk who objects to same-sex marriage will not have to issue marriage licenses while she takes her case to a federal appeals court. Rowan County Clerk Kim Davis is being sued by two gay couples, and U.S. District Judge David Bunning ordered her last week to issue them licenses despite her objections. But on Monday, he granted her request to stay his decision while she pursues her case before the 6th U.S. Circuit Court of Appeals. Davis has refused to grant marriage license to anyone in Rowan County since the U.S. Supreme Court legalized same-sex marriage nationwide. Kentucky’s governor ordered her to issue the licenses immediately, or resign. She told the judge that after consulting God, she decided she couldn’t comply. Bunning said Monday that Davis is not entitled to more time before complying or resigning, but with “emotions are running high on both sides of the debate,” he delayed his order anyway. The ruling imposes more delays on the efforts by two couples to get marriage licenses in the county where they live, work and pay taxes following the U.S. Supreme Court’s decision to legalize same-sex marriage nationwide in June. Davis stopped issuing all marriage licenses after the high court’s ruling, saying it would violate her Christian beliefs to issue a license to a same-sex couple that has her name on it. “It is comparable to forcing the religious objecting nurse to perform an abortion, the religious objecting company or non-profit to pay for abortions or abortion-related insurance coverage, the religious objecting non-combatant to fire on an enemy soldier, or the religious objecting state official to participate in or attend the execution of a convicted prisoner,” Davis’ attorney Jonathan Christman wrote in a motion asking Bunning to delay his order. Stays of court orders are common to maintain the status quo pending an appeal, but in this case, the delay enables the continuation “of an unlawful policy,” the plaintiffs’ attorneys complained. Davis wants Kentucky lawmakers to pass a law allowing county clerks to opt out of issuing marriage licenses for religious reasons. Democratic Gov. Steve Beshear, who went around Kentucky’s Democratic attorney general to defend the state’s ban on same-sex marriage in federal court, has declined to call a special session on the issue. Davis faces fines and a possible jail sentence for contempt of court if she loses the lawsuit, but she can only be impeached from her $80,000 a year job by the state legislature, and lawmakers won’t reconvene until January.


Feds expanding access to mortgage loans

The Federal Housing Administration (FHA) on Monday announced steps aimed at expanding credit to underserved borrowers while easing risk for approved lenders. The new supplemental performance metric broadens the measurement for a lender’s default performance and is part of an effort to encourage more lending to riskier customers who have been pinched by tight credit conditions. The change, in the works for more than a year, measures a lender’s default rate within three credit score bands and compares that with an FHA target rate instead of comparing it against the lender’s peers in the market. “This is one more tool to help FHA, lenders and the public know exactly who we’re serving,” said Ed Golding, principal deputy assistant secretary for housing at the Department of Housing and Urban Development. “By better understanding FHA’s acceptable risk tolerance levels for a variety of credit scores, lenders will have the confidence to lend more broadly and FHA will have more data on how successful those lenders are,” Golding said. The rule complements the FHA’s so-called compare ratio, which is used to identify lenders with excessive default and claim rates compared with their peers. High rates can lead to termination of a lender by the FHA.


First female soldiers to graduate from Army Ranger School

WASHINGTON — Two female soldiers will graduate from the Army’s legendary Ranger School this week, the first women to complete the course since it was opened to them on an experimental basis this year, the U.S. Army said Monday evening. The two were part of a group of 19 female soldiers who passed a rigorous screening process to begin the physically demanding course that had been closed to women since it opened more than six decades ago. Their names were not revealed. The graduation on Friday will mark a key milestone on the military’s ongoing efforts to open front-line combat units to women. The military services have pledged to do so without compromising standards. Students in the grueling two-month course are required to survive on little food and sleep despite demanding physical activity, including carrying more than 100 pounds of gear through mountains and swamps. It is considered the Army’s most physically challenging course.


Northwestern football players lose bid to start union

In a victory for the NCAA, a federal labor board blocked an effort by members of the Northwestern University football players to form the first union for college athletes. The National Labor Relations Board declined to rule on whether the athletes should be considered employees of the school who have a right to unionize. It cites the fact that labor law only allows the NLRB to look at private-sector work places, but that most college football programs are at state schools. Of the 125 schools eligible to play in a college football bowl, only 17 are private schools like Northwestern. “The Board held that asserting jurisdiction over a single team would not promote stability in labor relations across the league,” said the NLRB statement. The players announced the effort to unionize in January, 2014. They were led by the team’s quarterback, Kain Colter, who said safety issues are the biggest concerns. Specifically, they’re calling for efforts to protect players who suffer concussions, and demanding assurances that players won’t have to pay to treat injuries they suffered during their playing careers. The players also want the right to be paid beyond the scholarships they receive, which typically don’t cover the whole cost of attending school. “We are obviously disappointed,” said Colter on Monday. Still he said the unionization effort has already helped players. Some larger schools have started giving players additional stipends and guaranteed scholarships and instituted protocols to protect players who suffer from concussions. “The overall legacy from this movement is that when players come together to stand up for what they believe in, things get changed,” he said. “For decades, advocates have been fighting for some things that we got changed in one year.”


As US Airways Goes Away, American Plans a Commemorative Last Day

NEW YORK ( TheStreet) — The last US Airways flight will have the flight number 1939, commemorating the year the airline was founded, and the designated aircraft will make a final tour on Oct. 16. US Airways predecessor All American Aviation operated its first official flight on May 12, 1939, with a cutting-edge concept that involved airborne planes picking up mailbags suspended from cables in isolated sites in the Allegheny Mountains of western Pennsylvania. The airline went through a series of name changes first to Allegheny, then to USAir and then to US Airways. In 2013 US Airways merged with American (AALGet Report). Flight 1939 will be the last flight with a US Airways flight number.


Heidi Klum’s Funny Response to Donald Trump’s Insult

During what appeared to be a typically bombastic interview published this past weekend, Donald Trump told The New York Times’s Maureen Dowd that Heidi Klum’s beauty had faded. “Sadly, she’s no longer a 10,” he told the country’s paper of record. The almost mournful insult made its way to Klum, who on Monday afternoon responded to the Republican candidate for president on her Instagram. In the video, a man with a Trump mask rips the number 10 off of Klum’s shirt, only to reveal a 9.99. Klum paired the number with a string of hashtags, including: “sadly,” “NoLongerA10,” “IHadAGoodRun,” “Trumped,” “HeidiTrumpsTrump,” and “BeautyIsInTheEyeOfTheBeheld.” See video:



House Speaker Mike Hubbard’s trial delayed until March

A judge pushed back House Speaker Mike Hubbard’s trial on corruption charges Monday amid a dispute over the accessibility of documents in the case. Lee County Judge Jacob Walker said he would move the start date from October 19 to March. Walker’s decision came after a sometimes heated 45-minute hearing, where tensions between the two sides grew to the point where one attorney’s scolding carried past a bench conference and to the back of the courtroom. Before then, both sides accused their opponents of engaging in delaying tactics. At the heart of the dispute are 2.5 million files provided by th state to the defense earlier this year. Hubbard’s attorneys argue that the files are inaccessible. That, they say, has made it impossible to prepare a defense for the speaker, who faces 23 counts of using public office for private gain. Augusta Dowd, an attorney for Hubbard, said their team had to open each file on its own. Sometimes, she said, they discovered files irrelevant to the case. As example, Dowd played a video for the court — briefly shown to those in attendance — that showed two women dancing, their rear ends exposed to the camera. The footage came with a file produced by the state, the defense said. Dowd called it an “extreme example.” But she added it was a sign of the difficulties they faced in determining the relevance of the material. “We have to look at each file,” she said. “The time consumed is enormous.” Prosecutors accused Hubbard’s team of engaging in “dilatory” tactics. Michael Duffy, a Deputy Attorney General with the Alabama Attorney General’s Office, said they had worked with Hubbard’s team on the file, but never heard complaints until the speaker’s attorneys filed motions on the subject. “By the time we get to October, it will have been six months that they’ve had the same materials that we do,” Duffy said. Matt Hart, the head of the Attorney General’ Office of Special Prosecutions, suggested appointing a neutral technical expert to assess the situation with the files, which defense attorney Mark White agreed to. White and the defense team sought to push the trial into the summer of 2016, saying they would need at least six months to address the document issues. Hart, responding to that argument before Walker’s decision, said they were “moving into the farcical” on the file issues. Prosecutors accuse Hubbard of soliciting jobs or work investments from friends and associates, including former Gov. Bob Riley; lobbying the executive branch on behalf of consulting clients and voting for a budget that benefited one of his clients. The speaker has maintained his innocence, and his attorneys say the transactions were legal and proper. Hubbard sat in the first row of Walker’s courtroom with his wife Monday morning, but did not take part in the hearing. A March start date for the trial would occur in the middle of the regular session of the Alabama Legislature, scheduled to start in February. Walker will take up other motions this afternoon.


City of Birmingham to discuss setting local minimum wage at $10.10 by 2017

 The city of Birmingham plans to discuss and potentially vote on an ordinance that would establish a minimum wage in the city – a wage that eventually would hit $10.10. The ordinance would establish “minimum wage for employers to pay employees in the City of Birmingham,” stated Item 39 in this week’s city council agenda. The item was submitted and recommended by District 5 Councilman Johnathan Austin. The proposed ordinance calls for a minimum wage increase from $7.25 an hour to $8.50 an hour, beginning July 1, 2016, with the minimum wage increasing to $10.10 an hour on July 1, 2017. Austin said the council will discuss the ordinance and if it is determined to be good for the city, the body could vote on the policy this week. “I believe it is something good for the city,” Austin said. “What we’ve seen from other cities is an increase in consumer spending, as well as improving the quality of earnings for our citizens.”

Since 2003, over two dozen cities have voted either through legislation or initiatives to raise the minimum wage, according to the National Employment Law Project. Most of those cities are on the west coast, including 12 in California. Birmingham would be the first city in the deep South to voluntarily increase its minimum wage, according to the organization.


Lawmaker considering bill to eliminate AL Dept. of Education

MORGAN COUNTY, AL (WAFF) – A local state lawmaker said he is considering legislation designed to get rid of the Alabama Department of Education. Representative Ed Henry of Hartselle said it would save the state a billion dollars. “We spend hundreds of millions of dollars each year on bureaucrats in Montgomery that could be used to help kids in K-12 classrooms,” Henry said. Henry, who represents residents in Morgan, Marshall and Cullman counties, said money spent on the Department of Education could instead go straight into the classroom. Department of Education officials said most of the $185 million they got from the state this year does go into classrooms, outside of the Department’s operating budget, which for this year is $24 million. State Board of Education member Mary Scott Hunter said she understands Henry’s frustration with the budget problems, but that cutting the Department of Education would actually make it worse by hurting Alabama’s ability to draw new business to the state. “Whenever we have crises in Alabama politics, we have political theater. And I think Ed Henry wants to solve this problem like everyone else, but this is of course very extreme language, extreme ideas. What we really need to be thinking about an talking about is how education promotes jobs and what we’re doing to bring more jobs to this state,” Hunter said. Decatur City Schools Superintendent Ed Nichols said there are things taken care of by the State Department of Education that, if they became local responsibilities, would cost time and money that school districts just don’t have.



Editorial: Lawmakers, here’s your budget fix for Alabama

The state Legislature is in a bind. Its members must find about $250 million to fill a hole in the 2016 General Fund budget, which begins in about six weeks. During last week’s failed special session, the options were cut the budget or raise taxes. Instead, we propose doing both, plus something more in an idea we’re calling Raise, Lower, Fix. Let us explain, starting with what’s at stake. Without more money, a host of bad consequences will likely follow, including closed state parks, state trooper layoffs, unnecessary suffering by the sickest and poorest, weakened hospitals and nursing homes, diminished mental health services and on and on. Gov. Robert Bentley is proposing tax increases, something most in the Statehouse’s Republican supermajority are ideologically opposed to. They worry — and perhaps rightly so — that raising taxes will anger their constituents and endanger their chances for re-election. The only viable short-run alternative is to pass the scorched-earth budget that will raise the ire of Alabamians who prefer open state parks, financially healthy nursing homes and hospitals, properly patrolled highways, etc. Why not raise taxes under the Bentley plan and lower them at the same time? Here’s how it would work during the next special session to fix the budget crisis. The Legislature passes a budget that gains an estimated $300 million from increasing the business-privilege tax, the tax on tobacco and eliminating some state income tax deductions. (These are the fixes proposed by Gov. Bentley.) At the same time, the Legislature sets an expiration date on the tax increases. After five years, the tax rates return to 2015 levels and the income tax deductions are reinstated. Congratulations, lawmakers, you just raised taxes and lowered taxes. This plan will avoid the most painful cuts that will come without new revenue. Still, without fundamental changes, Alabama will merely forestall the next fiscal crisis for only a few more years. In the longer run, this policy gives the state some breathing room, a little space to work on the deep flaws in Alabama’s system of taxing and spending. That’s why the governor and leaders from the House and Senate should also agree on a bill that would create a blue-ribbon panel of Alabamians to wrestle over our entire budget process. The marching orders: Reform the tax and budget process so that we aren’t forced to leap from crisis to crisis. They’d have to finish their work within five years. Raise, Lower, Fix. Let’s give it a shot.


Morning Money

A NEW DAY AT ABA: @FORUMPREZ IS NOW @BANKERSPREZ — Rob Nichols has a new Twitter handle and many new bankers he needs to get to know. Monday marked the first day on the job for the incoming president and CEO of the American Bankers Association, the lobbying group that has roughly 5,000 members and 50 allied state associations. Its membership of big and small banks eclipses the collective of 18 mega-institution CEOs that Nichols worked for as president of the Financial Services Forum for the last several years.

In an interview a few hours into his first day, Nichols said his Monday included some time on the phone reaching out to executives and filling out a little paperwork. Nichols expects a busy travel schedule during his first year as he tries to meet as many of the group’s members and stakeholders “as I humanly can.” He’s made trips to Colorado and Baltimore and is heading to the west coast for member meetings next week. He said he’s trying to make sure he has a “crisp and firm understanding” of the policy challenges for banks of varying sizes.

“Part of my message is all banks, small, medium, large play a critically important role in our financial ecosystem, that they all uniquely serve the needs of their customers and their clients and their communities,” he said. “My message is our industry, the banking sector, will have more influence and clout while it’s united.”

Nichols said his tenure at ABA will overlap with that of his predecessor, Frank Keating, over a transition during the next several weeks.

While he isn’t getting into the details of his agenda or potential changes at ABA, Nichols said bankers need to be proactive during the various 2016 elections. The veteran of two Bush administrations has contributed money to support former Florida Gov. Jeb Bush’s run for the White House.

“It will be important for bankers representing all types of institutions to make their voice heard in 2016, specifically about the critically important role banks play in serving customers, clients and communities and helping achieve economic growth,” he said. “That message needs to be conveyed and is important to convey even in the context of a presidential or congressional campaign.”

‘FED UP’ ADVOCATE SLAMS DALLAS FED PICK — The director of a labor-affiliated campaign advocating for low interest rates is unhappy with the news that former Goldman Sachs executive Robert Kaplan will be the next president of the Federal Reserve Bank of Dallas. “At a time when the Federal Reserve is starved for new, more well-rounded thinking, it is troubling that its opaque, secretive process for selecting its leadership could only yield a candidate cut from the same cloth as so many previous appointments: Wall Street and the highest echelons of corporate America,” Fed Up campaign director Ady Barkan said.

More details on the Dallas Fed announcement from the bank’s hometown paper:

GOOD TUESDAY MORNING — It’s that time of year again. Say happy birthday today to White House Council of Economic Advisers Chairman Jason Furman, his predecessor Austan Goolsbee and former Treasury Secretary Tim Geithner.

Do you have an economics-related birthday tip for us? Please send that and any other news to Clea Benson at

DRIVING THE DAY — Wal-Mart earnings at 7 a.m. … Home Depot also reports earnings … Housing starts expected to show July increase in data released at 8:30 a.m. … HUD Secretary Julian Castro holds a media briefing on the 10-year anniversary of Hurricane Katrina at 11 a.m.

CAN YOU CHARGE HACKERS WITH SECURITIES FRAUD? Peter Henning in DealBook: “The elaborate scheme described by the Justice Department and the Securities and Exchange Commission last week, which involved breaking into computer servers to obtain confidential information about impending corporate announcements, certainly looks like a classic case of insider trading. … But insider trading law as currently interpreted by the courts would not cover this case because the hackers are accused of being thieves, not insiders who breached a duty owed to the source of the information. … Without the presence of a duty to protect client interests, it is not clear whether any deceptive conduct that results in trading securities would be a violation.”

LEGAL COSTS OF RATE RIGGING COULD GROW — FT’s Emma Dunkley and Lindsay Fortado: “Global banks are facing billions of pounds-worth of civil claims in London and Asia over the rigging of currency markets, following a landmark legal settlement in New York. … Lawyers warned the [settlement] opens the floodgates for an even greater number of claims in London, the largest foreign exchange trading hub in the world, in a sign that the currency manipulation scandal is far from over.”

ACLI GETS NEW COO — Former CVS Health lobbyist Larry Burton is joining the American Council of Life Insurers as chief operating officer. ACLI said the new position would be responsible for coordinating the group’s state, federal and international advocacy work. Before working at CVS Health from 2012 to this year, Burton served as executive director of the Business Roundtable, vice president of external affairs at BP America and held senior positions with Alaska Rep. Don Young and former Sen. Ted Stevens.

JAPAN EASES UP ON U.S. DEBT — Bloomberg’s Scott Lanman: “Japan’s holdings of U.S. Treasuries dipped below $1.2 trillion for the first time since 2013 even as purchases of the government debt accelerated among foreigners as a whole. Japan, the second-largest foreign holder, saw its holdings fall by $17.8 billion in June, the biggest drop in two years, to $1.197 trillion, according to Treasury Department data released Monday in Washington. China’s holdings of Treasuries rose by about $900 million to $1.27 trillion.”

WOES CONTINUE AT CLAREN ROAD — It all began with a bad bet on Fannie Mae and Freddie Mac, then spiraled down from there with bets on Greece, energy and financials. Bloomberg’s Simone Foxman and Saijel Kishan report that the Carlyle Group hedge fund is facing $1.97 billion in withdrawals for the end of the quarter:

WHAT YOU GET FOR THE MONEY IN OXFORD, NEBRASKA — Various news outlets ( have been reporting on a HUD audit that found wealthy families living in public housing — which is apparently allowable under agency rules that only require a means test before tenants move in, not after they’ve been there awhile and their incomes have risen. Among the cases the auditors uncovered: Someone with a net worth of $1.6 million is paying $300 a month to live in low-income housing in Oxford, Neb. MM was curious, so we checked the Oxford Housing Authority website to see what that $300 gets you. Here it is, including landscaping with what the Housing Authority describes as, “an aesthetically pleasing mix of shrubs.” All utilities included:

POTUS Events

The President is vacationing at Martha’s Vineyard.

Floor Action

Congress is in recess.


Moving Expense Deduction

If you move your home you may be able to deduct the cost of the move on your federal tax return next year. This may apply if you move to start a new job or to work at the same job in a new location. In order to deduct your moving expenses, your move must meet three requirements:

  1. Your move must closely relate to the start of work. In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test. Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home. To meet this test, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test. In addition you must work full-time for a total of at least 78 weeks during the first two years at the new job site. If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.

See Publication 521, Moving Expenses, for more information about the rules.

If you qualify for this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct certain transportation and lodging expenses while moving. This applies to costs for yourself and other household members while moving from your old home to your new home. You may not deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your property. This may include the cost to store or insure the items while in transit. You can deduct the cost to disconnect or connect utilities at your old and new homes.
  • Expenses you can’t deduct.  You may not deduct:
    • Any part of the purchase price of your new home.
    • The cost of selling your home.
    • The cost of breaking or entering into a lease.

See Publication 521for more examples.

  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You must report any taxable amount on your tax return in the year you get the payment.
  • Address change.  When you move, make sure to update your address with the IRS and the U.S. Post Office. To notify the IRS, file Form 8822, Change of Address.

Premium Tax CreditChanges in Circumstances.  If you purchased health insurance coverage from the Health Insurance Marketplace, you may receive advance payments of the premium tax credit. It is important that you report changes in circumstances, such as when you move to a new address, to your Marketplace. Other changes that you should report include changes in your income, employment, family size, or eligibility for other coverage. Advance credit payments provide premium assistance to help you pay for the insurance you buy through the Marketplace. Reporting changes will help you get the proper type and amount of premium assistance so you can avoid getting too much or too little in advance.

You can get Publication 521 and Form 8822 on at any time.