Krebs Daily Briefing 23 October 2015


G.I. Killed Freeing Prisoners of ISIS in Iraq, First in 4 Years

BAGHDAD — An American soldier was killed on Thursday morning as American and Kurdish commandos raided an Islamic State outpost near the northern Iraqi town of Hawija, freeing prisoners there and capturing some of the militants themselves, Iraqi and American officials said. The commando became the first American soldier killed in action in Iraq since the withdrawal in 2011. American military officials declined to comment on the details of the classified operation, some of which remained unclear. But as described by Iraqi officials in the area, the mission appeared to be a significant joint strike against the Islamic State, also known as ISIS or ISIL, at a time when Iraqi and American officials are trying to mount a wider counteroffensive against the militants. Iraqi officials said the raid involved American helicopters, Kurdish and American Special Operations forces, and airstrikes. The officials said the objective had been a prison run by the militants at a village east of Hawija. According to these accounts, American helicopters flew the commandos to the site. Kurdish special forces were said to have been in the lead, but American commandos were also on the ground. American airstrikes were also carried out to cut the roads leading to the site. Senior militants from the Islamic State were captured, and some of their prisoners were said to have been freed, the officials said. “They cut off roads and raided the place successfully,” one of the officials who confirmed the raid, Najmaldin Karim, the governor of surrounding Kirkuk Province, said in a telephone interview. “They were able to take people with them.” In Washington, two senior United States military officials confirmed the broad outlines of the operation but refused to provide details.

For Bitcoin, EU Tax Ruling Was Right on the Money

As the bitcoin industry embarks on an outreach campaign with U.S. law enforcement authorities, a court ruling handed down in Europe on Thursday is a sign of how deep its inroads across the Atlantic have reached. Bitcoin should be treated like traditional currencies under tax law, ruled the the European Court of Justice, concluding that transactions involving the virtual currency qualify for the same consumption-levy exemption that euros get when they exchange hands. Bloomberg has more on the ruling:  The lack of clarification from the EU on how bitcoin should be treated for tax purposes has been “a bit of a hindrance,” said Dixon. Bitcoin has “properties of a commodity, some of the properties of a currency and it’s also a technology,” he said by phone from London. The EU court said to exclude bitcoin exchanges from the tax exemptions given to traditional exchanges “would deprive it of part of its effects,” given that the exemption’s aim is to counter “the difficulties connected with determining the taxable amount and the amount of VAT deductible” in cases of taxation of financial transactions. The case came at the request of a Swedish national who planned to operate a Bitcoin exchange service but wasn’t sure if he would have to pay a consumption tax, known as a value-added tax or VAT, on purchases and sales of the virtual currency units. The money has to be used as legal tender to qualify for the tax exemption under EU law. The Court of Justice said it didn’t see why bitcoins, which they said “have no purpose other than to be a means of payment,” should fall under a different tax regime. The decision, hailed by bitcoin investors as an important vote of confidence for digital currency’s most promising experiment that would help ensure free-flowing exchanges.  “It’s very good news,” bitcoin venture capitalist Simon Dixon, the founder of crowdfunding platform Bank to the Future, told Bloomberg. The EU ruling stands in contrast to bitcoin’s uncertain regulatory status in the United States.  Just last month,  the Commodity Futures Trading Commission asserted that bitcoin and other cryptocurrencies aren’t currency but should be defined as commodities like gold and silver, falling under the agency’s jurisdiction. Last year, the Internal Revenue Service said bitcoin should be treated as property for federal tax purposes. As WSJ’s Paul Vigna observes over at Money Beat, the currency hasn’t quite shed its underworld reputation as a digital accessory to drug dealing and violent crime, an impression shaped by the collapse of the early bitcoin exchange Mt. Gox and the prosecution of its founder and the take-down of online drug bazaar Silk Road. But there’s some indication of a thaw. Bitcoiners recently weathered the  scrutiny of the New York Department of Financial Services and its former superintendent Benjamin Lawsky, who unveiled a regulatory framework for digital-currency businesses that didn’t prove to be the industry-stifling crackdown they had feared. WSJ reports on Thursday how two bitcoin trade groups based in Washington, D.C., have launched a group called the Blockchain Alliance to foster an open-ended dialogue with law enforcement agencies and help them navigate the currency’s complexities. “The truth is,” said Kathryn Haun, an Assistant U.S. Attorney in the Department of Justice’s San Francisco office, “these kinds of alliances exist whether formally or informally in numerous industries. Yes, we have different goals than they do, but sometimes those goals overlap, and that’s not different here with the Blockchain Alliance.”


Congress Dances With Default—Again

Republicans in Congress have finally, at long last, found a speaker of the House. Now, they have less than two weeks to find a way to raise the debt ceiling. The nation will exceed its borrowing limit by November 3, according to a series of increasingly urgent letters and public statements by Treasury Secretary Jacob Lew. And Speaker John Boehner has said he wants to deal with the debt ceiling before he leaves Congress on October 30, both to avert an unprecedented U.S. default and to dispense with an annual political headache before his successor is sworn in. Yet as is so often the case with the debt limit, the task is proving more difficult than it seemed. Nearly five years into their House majority, most Republicans still cannot stomach the thought of voting to raise the debt limit without significant concessions, in large part because their constituents have been led to believe that they would be voting to authorize huge amounts of new spending, rather than paying for bills Congress has previously incurred. At the very least, GOP lawmakers believe the debt-limit hike should be used as an opportunity to impose fiscal discipline, but President Obama and congressional Democrats have held firm in their refusal to negotiate on what they say is a routine congressional responsibility. The simplest way to handle it—as Democrats and moderate Republicans frequently point out—is for Boehner to bring up a clean bill extending the Treasury’s borrowing authority for at least another year. That’s what Boehner did the last time it came up, in February 2014, when he abandoned his previous demand that an increase in the debt ceiling be accompanied by equivalent cuts in spending. That measure passed narrowly, with just 28 Republicans joining all Democrats in support.

Clinton largely unscathed by GOP Benghazi hearing

The appearance was seen as a crucial moment for the former secretary of State, and the Republican panel lobbed dozens of questions at her about her personal email setup, her longtime associate Sidney Blumenthal, and Chris Stevens, the U.S. ambassador to Libya killed in the 2012 terrorist attacks in Benghazi. But none of the lawmakers’ critiques throughout the course of the long day seemed to stick.

“I don’t know that she testified that much different today than she has in the past,” Chairman Trey Gowdy (R-S.C.) conceded as the hearing wrapped up. If anything, the only serious political damage seemed to have been done to GOP leaders of the panel, who were repeatedly put on defense by harsh barbs from committee’s Democrats. “We’re better than using taxpayer dollars to try and destroy a campaign,” Rep. Elijah Cummings (Md.), the committee’s top Democrat, said as the 11-hour hearing was entering its final moments, it was part of a rousing speech that was cheered in the committee room. “That’s not what America is all about.” The stakes were high for both sides coming into Thursday. Clinton, a Democratic presidential candidate, needed to escape undamaged without losing her calm about the Sept. 11, 2012, attacks that killed four Americans. Gowdy and fellow committee Republicans needed to prove their worth after a month of allegations that the panel’s motivations were at least partly political. Clinton did her job, keeping her head down and staying cool under GOP pressure. During a previous appearance in Congress, Clinton lost her temper and pounded on the table to ask Sen. Ron Johnson (R-Wis.) “what difference, at this point, does it make” why the attack occurred. On Thursday, that tone was absent.

Instead, committee Democrats stepped in to offer an assist whenever Clinton needed it, to change the conversation back to Republicans and what Democrats characterized as the GOP’s partisan plan to sink her presidential campaign. Longtime Clinton allies were thrilled by her testimony, and they maintained that it only added to her recent momentum, beginning with her strong performance in last week’s initial Democratic presidential debate. “It was a textbook performance,” one longtime ally said. “I don’t think it could have gone any better,” another said. “She schooled them. I think she’s on a roll.” Tommy Vietor, the National Security Council spokesman during the 2012 attacks and a current Clinton supporter, said Republicans failed to rattle the former secretary of State. “She was completely calm and relaxed and professional,” Vietor said. “Gowdy was defensive and had to spend much of the time defending the existence of the committee. He looked angry and petty and political.” More:

5 Absurd Moments From the Hillary Clinton Benghazi Hearing

Former Secretary of State Hillary Clinton testified before the House Select Committee on Benghazi Thursday. For those of you keeping track at home, the hearing marked the eighth Congressional investigation into the 2012 attacks in Libya that left four Americans dead, including Ambassador Chris Stevens. A CNN/ORC poll released the morning of the hearing found an overwhelming majority of Americans — 72 percent — believe the House committee is politically motivated. That impression was no doubt bolstered by remarks by two Republican Congressmen — House Majority Leader Kevin McCarthy, who proudly claimed the committee drove down Clinton’s poll numbers, and Rep. Richard Hanna, who said the committee was “designed to go after” Hillary Clinton — and one of the committee’s own ex-investigators, Major Bradley Podlisa, who described it as “a partisan investigation” earlier this month. Such comments prompted the chairman of the House committee, Rep. Trey Gowdy — whose ties to an anti-Clinton super PAC were reported by the Washington Post earlier this week — to tell fellow Republicans to “shut up talking about things that you don’t know anything about.” This is all to say: There remained little doubt in most Americans’ minds that the purpose of Thursday’s hearing was to do as much political damage possible to Hillary Clinton’s presidential campaign. Riding high after a widely praised performance in the first Democratic debate and, no doubt, Vice President Joe Biden’s announcement that he would not challenge her in the Democratic primary, Clinton was ready for every question committee members lobbed her way. Here were some of the key moments from the marathon hearing.
Paul Ryan Seals Republican Support to Mount House Speaker Bid

Representative Paul Ryan declared that he will serve as U.S. House speaker to quell the turmoil that has left Congress’s Republican majority without a fiscal strategy just 13 days before the country could default on its debt. A full House vote on Oct. 29 is now essentially a formality. Ryan had said he would only enter the speaker’s race if he could lock up support from three wings of the fractious party, and in the space of 72 hours this week, he did. He is heeding the pleas of fellow Republicans who want him to unite the party after hard-liners drove Speaker John Boehner to resign. “I am ready and eager to be our speaker,” Ryan said in a letter to colleagues Thursday night. “We can show the country what a commonsense conservative agenda looks like.” Ryan is one of the Republican Party’s most recognizable figures after his failed 2012 vice presidential bid, and at 45, he stands to shape the party’s message and vision for years to come. He took a circuitous route toward the speaker’s chair, telling the party not once but twice that he wouldn’t run but emerging after a week at home in Wisconsin to say he’d take the job, with conditions. He wants to preserve time at home with his three children by avoiding much of the endless fundraising of past speakers. He also asked Republicans to make it harder to remove him from the job.

Obama vetoes defense bill

President Obama on Thursday took the rare step of vetoing a major defense policy bill, upping the stakes in a faceoff with Republicans over government spending. Obama used his veto pen on the National Defense Authorization Act during a photo-op in Oval Office. “I’m going to be vetoing this authorization bill. I’m going to be sending it back to Congress, and my message to them is very simple: Let’s do this right,” Obama said. It’s highly unusual for a president to veto the defense legislation, which typically becomes law with bipartisan support. The move amounts to a public rebuke of congressional Republicans, who warned that vetoing the $612 billion measure would put the nation’s security at risk. The veto was Obama’s third this year and the fifth of his presidency. The Defense authorization bill has been vetoed four times in the last half-decade. Obama argues the bill irresponsibly skirts spending caps adopted in 2011 by putting $38 billion into a war fund not subject to the limits, a move he called a “gimmick.” He has called on Congress to increase both defense and nondefense spending. “Let’s have a budget that properly funds our national security as well as economic security, let’s make sure that we’re able in a constructive way to reform our military spending to make it sustainable over the long term,” Obama said.

The president also objects to language in the bill that requires the Guantanamo Bay, Cuba, military prison to remain open. Republican leaders expressed outrage with Obama’s decision to veto the bill, pointing out that it puts a scheduled pay raise for troops, among other policy changes, at risk. “By placing domestic politics ahead of our troops, President Obama has put America’s national security at risk,” Speaker John Boehner (R-Ohio) said in a statement. “This indefensible veto blocks pay and vital tools for our troops while Iranian terrorists prepare to gain billions under the president’s nuclear deal.” The move forces Congress to revisit the bill and send it back to the president. The military will continue to operate under last year’s defense policy if lawmakers cannot reach an agreement. Republicans have pledged to attempt to override Obama’s veto, but it’s unlikely they have the votes to do so. The Senate voted 70-27 to pass the bill, and overriding the veto would require 67 votes. But Democratic leaders have said some members would switch their vote to avoid defying the president. The House vote count, 270-156, would not be enough to override a veto, which would take 290 votes. Asked how confident the White House is Obama’s veto will be sustained, White House spokesman Eric Schultz replied: “very.”


Here’s Why Donald Trump Really Could Be Elected President

From Brentwood mansions to Embassy Row in Washington, D.C., the idea that Donald Trump could become president has alternately set off fits of laughter and terror. While some political insiders, including a growing number of establishment Republicans, concede that Trump could win the nomination, few believe that Trump could actually become president. But a close analysis of the political climate and electoral path to the presidency shows that the possibility of a Donald in chief is less far-fetched than people imagine. The establishment argument goes something like this: first, Trump will implode, owing to some stupid thing he says or does (so far no sign of this). Then, maybe he could win the nomination but ultimately voters will see what “we” (the elites) all see: he is unfit to be president and they will vote for an alternative. That argument might work well if elections were won by a national vote taken the year before the election, when the majority of people paying attention are political elites, plus a small number of people in early primary states. However, elections are won by achieving a mathematical number: 270 electoral votes. In that formula, Trump is just as competitive—and perhaps more so—as either John McCain, in 2008, or Mitt Romney, in 2012. To be clear, at the moment Trump is the absolute and clear front-runner for the Republican nomination. Trump has been the front-runner longer and by a more significant margin than any of the many flameouts he is often compared to from past campaigns. Comments made by Trump, which would have tanked any other politician’s campaign, seem to bounce off him, and even make him more compelling to certain voters. Assuming Hillary Clinton is the Democratic nominee, some inside the Beltway believe there is a possibility that she might win states like Indiana, North Carolina, Missouri, and Montana, which Obama won or only narrowly lost in 2008. But with Trump in the race, all of those states—which are more red than they were in ’08—are likely out for Democrats. Swing states like Colorado and Virginia are clear toss-ups. There are few states that Romney or McCain won where Trump, as the Republican nominee, wouldn’t be in the running, and an analysis of other key states shows that Trump’s in far better position than his detractors would like to admit. If Trump were to win every state that Romney won, Trump would stand today at 206 electoral votes, with 55 electoral votes up for grabs in Pennsylvania, Colorado, Nevada, Wisconsin, Iowa, and New Hampshire. Similarly, Trump does not necessarily lose in a single toss-up state versus Hillary Clinton and, in fact, is seemingly competitive in many. Virginia is trending blue, but could be a toss-up, particularly given the tale of Dave Brat, whose success in 2014 could be read as a harbinger of Trump. More:

Pro-Trump super PAC shuts down

The main super PAC backing Donald Trump is shutting down amidst increasing scrutiny of its ties to Trump’s campaign. Trump, who has made his independence from wealthy donors a cornerstone of his anti-establishment presidential campaign, never officially blessed the Make America Great super PAC. But Mike Ciletti, a Republican operative based in Colorado, reportedly used contact information obtained from a top Trump aide to reach out to prospective donors. Ciletti told POLITICO that his decision Thursday to shut down the organization, which he launched in July in an effort to boost Trump’s candidacy, is an attempt “to erase any questions as to whether he has a super PAC.” “Mr. Trump has said he doesn’t have a super PAC,” Ciletti continued. “So to honor his wishes, I’m shutting my organization down.” Ciletti declined to say how much money he was able to raise in roughly four months or whether anyone specifically asked him to shut the organization down. He plans to refund contributions after making sure existing contractual obligations to various vendors (mostly related to voter targeting and advertising) are met. Corey Lewandowski, Trump’s campaign manager, has insisted that Trump has never blessed or worked with a super PAC, although recent FEC filings revealed that the campaign directed hard dollars to two Colorado-based companies both affiliated with Ciletti.

U.S. Prosecutor to Drop Insider Trading Cases Against Seven

The impact of a landmark decision that made it harder to prosecute insider trading was amply demonstrated on Thursday as the top federal prosecutor in Manhattan moved to dismiss the charges and convictions of seven people. The 2013 conviction of Michael S. Steinberg — the highest-ranking employee at SAC Capital Advisors to stand trial for insider trading — would be dropped, as would the guilty pleas of six cooperating witnesses. The decision by Preet Bharara, the United States attorney in Manhattan, came just a little more than two weeks after the United States Supreme Court declined to review a ruling by the United States Court of Appeals for the Second Circuit that tossed out two other insider trading convictions and made it harder for authorities to pursue certain kinds of wrongful trading cases. A dismissal of Mr. Steinberg’s conviction had been seen as a possibility in light of the appeals court ruling, which overturned the earlier convictions of two former hedge fund managers, Anthony Chiasson and Todd Newman, on similar evidence of improper trading in shares of two technology companies.


US regulator signals bid to curb high-speed trading


New York: A major US financial regulator has signalled the first serious effort to curb high-speed automated trading in the futures market, which increasingly influences benchmark assets such as equities, commodities and government bonds. The plans detailed by Timothy Massad, chairman of the Commodity Futures Trading Commission, come with concern growing among regulators over the sudden large price movements that have plagued a number of markets in recent years. Such so-called “flash events” have become linked with the growing popularity of high-speed, computerised trading, which has been criticised by institutional investors for fuelling volatility. Massad made his comments on Wednesday at a conference examining the market for US Treasury bonds, a bedrock of the financial system which last October swung wildly in a 12-minute span, unnerving investors and regulators. A July report by the US Treasury and regulators into the so-called “flash event” found the growth of rapid electronic trading had played a central role in the abrupt price and yield swings. Automated traders account for about 67 per cent of 10-year Treasury futures listed on the Chicago Board of Trade, Massad said. They are on at least one side of half the trades in metals and energy futures, he added. More:

Court Rules That Student Loan Company Isn’t Above the Law

The scariest thing about the calls that Lee Pele started to get from debt collectors was not that they wanted $137,000. It was that he was sure he didn’t owe the money. The company servicing the student debt got him confused with someone else, he said, but it refused to correct the error when he offered evidence that the loans were not his. The alleged mistake ruined Pele’s credit, he said, just as he was trying to pay for an engagement ring for his fiancée and buy a house with her. On Wednesday, a federal court in Richmond, Va., gave Pele a shot a vindication. The Fourth Circuit Court of Appeals said Pele could proceed (PDF) with his lawsuit against the Pennsylvania Higher Education Assistance Agency, the company that serviced the debt. The court said the company does not have the right to “sovereign immunity,” as it had argued, which would have denied consumers the right to sue it in most circumstances. The ruling is significant. At stake was the right of borrowers to take one of the largest servicers in the country, and possibly others, to court if they believe it has broken the law. “This is a victory for corporate accountability,” said Scott Michelman, the attorney who represented Pele. “There are very few avenues for folks to challenge the actions of student lenders. This wasn’t just an attempt to shut off the few avenues remaining, this was an attempt to shut off all avenues remaining.” PHEAA, which also does business as American Education Services and FedLoan Servicing, services about $287 billion in debt. The company had urged the court to give it the type of immunity from lawsuits that the law grants federal and state governments, which cannot be sued unless they waive their immunity or Congress intervenes. The servicing giant has close ties to the State of Pennsylvania, which has some control over its business. The company argued that the close relationship to Pennsylvania made it an “arm of the state” and entitled to the government’s exemption from most lawsuits. A ruling in its favor would have immediately affected millions of borrowers it serves. It also could have affected Americans across the country who interact with several other state-based servicers because other federal courts may have been encouraged to give those companies immunity, too. “This was like a blanket, get-out-of-jail-free card that PHEAA asked for,” said Michelman. PHEAA did not respond to requests for comment.


Documents Raise New Questions About Valeant’s Pharmacy Relationships in California


Over the last week, Valeant Pharmaceuticals International, a large drug maker, has seen its stock price plunge amid allegations of questionable dealings with pharmacies. Now ProPublica has obtained documents showing how people affiliated with Valeant’s main pharmacy used a backdoor approach to gain an ownership stake in California after the pharmacy, Philidor Rx Services, was denied a permit to operate in the state. Philidor’s license application was denied in May 2014 after the California Board of Pharmacy accused the company and its representatives of making “false statements of fact.” Specifically, the board said Philidor lied when listing the pharmacy’s owners, its accountant and its authorized signatories for financial transactions. Several months later, a holding company whose chief executive identifies herself onlineas Philidor’s director of pharmacy operations purchased a 10 percent stake in West Wilshire Pharmacy in Los Angeles. Since last Friday, Valeant’s stock has plummeted almost 40 percent as investors have raised as-yet-unanswered questions about its accounting and business practices, particularly its relationship with so-called specialty pharmacies that generally charge patients lower co-payments than retail pharmacies. Disclosure of the West Wilshire transaction seems likely to intensify those questions. It’s unclear how it enables Philidor or Valeant to distribute drugs any more easily than a contractual relationship with a California pharmacy would. Calls to Philidor, Valeant and West Wilshire were not returned. Virginia Herold, the executive officer of California’s Board of Pharmacy, said it’s vital that pharmacies and their owners provide truthful information to the board. “The board spends a lot of time investigating applications to ensure the individuals are who they say they are,” Herold said, though she declined to discuss Philidor specifically because the pharmacy has appealed its license denial. “It is a concern to us when someone misrepresents that.” Valeant rose to prominence through acquisitions of drugs and companies, including Bausch & Lomb and skin-care company Medicis. It specializes in taking over companies with portfolios of small, sleepy drugs, slashing research and development spending, and raising drug prices aggressively. A bevy of high-profile hedge funds, most prominently Bill Ackman’s Pershing Square Capital Management, have taken big stakes in Valeant. Increasingly, Valeant and other drug companies are encouraging patients to use specialty pharmacies. They are essentially mail-order pharmacies that help patients and doctors navigate insurance company requirements. More:

FCC votes to slash cost of prison phone calls

The Federal Communications Commission on Thursday voted to slash what it called “excessive rates and egregious fees” that families have to pay to call their relatives in prison. Currently, calls to inmates can cost as much as $14 a minute. Under the new plan, calls will cost no more than $1.65 for 15 minutes. Rates will be slightly higher in jails that have less than 250 inmates, and free for inmates with disabilities.  “While contact between inmates and their loved ones has been shown to reduce the rate of recidivism, high inmate calling rates have made that contact unaffordable for many families, who often live in poverty. Reducing the cost of these calls measurably increases the amount of contact between inmates and their loved ones, making an important contribution to the criminal justice reforms sweeping the nation,” the FCC said in a statement. The new rates will go into effect in 90 days, and the FCC has pledged to closely monitor the implementation of the new reform; communication providers will be asked to disclose rates and fees. The federal agency said it began implementing changes amid concerns about the high cost of calls in 2013, after Martha Wright, a grandmother from Washington, D.C.,  said she was paying about $1,000 a year to talk to her grandson. Lee Petero, a lawyer who represented Wright pro bono, said the agency’s reform effort will “lead to immediate relief to millions of families and specially the 2.7 million children who have at least one parent in jail and want to stay in touch,” NBC News reported. “Calls that used to cost a dollar a minute now could be as low as 11 cents,” said ​Aleks Kajstura, legal director at the Prison Policy Initiative, a criminal justice reform group that ​has been pushing to make prison calls more affordable. “Studies show keeping communication in between families members and incarcerated loved ones reduces recidivism, and that helps us all.” The FCC decision comes a week after Democratic presidential candidate Sen. Bernie Sanders and 15 other Democrats wrote a letter to the agency’s chairman Thomas Wheeler​ in support of his reform effort. The lawmakers were critical of the existing system, which they said has profited from charging inmates “unreasonably” high call rates.


More than 100 former attorneys general ask US Supreme Court to review Siegelman sentence

More than 100 former state attorneys general are asking the U.S. Supreme Court to review the sentence of former Alabama Gov. Don Siegelman, who remains behind bars for his conviction in a government corruption case. The brief, filed Wednesday and signed by 116 former attorneys general, supported Siegelman’s latest appeal. Siegelman argues a judge wrongly gave him a longer sentence for pervasive corruption even though a jury acquitted him of those charges. While the Supreme Court has upheld the use of acquitted conduct in sentencing under certain conditions, the attorneys general said the practice violates both the U.S. Constitution and the public’s sense of justice. “People should not go to prison for conduct a jury finds them innocent of and finds that they did not commit,” the governor’s son, Joseph Siegelman, said Thursday. Former New York Attorney General Robert Abrams said it is an issue of “basic fairness.” “We think the Siegelman case cries out for justice from many vantage points,” Abrams said. The Alabama Democrat is serving a 6 ½-year sentence for bribery and obstruction of justice convictions. Siegelman, 69, has a projected release date of Aug. 8, 2017. The request for the review of the sentence is the latest appeal in Siegelman’s long-running and so far unsuccessful effort to overturn his conviction. The U.S. Circuit Court of Appeals in May upheld both Siegelman’s conviction and sentence. A federal jury in 2006 convicted Siegelman on charges that he sold a seat on a state regulatory board to HealthSouth founder Richard Scrushy in exchange for $500,000 in donations to his 1999 campaign to establish a state lottery. Siegelman also was convicted on a separate obstruction of justice charge. The Justice Department has argued Siegelman’s sentence enhancement was deserved because he eroded the public trust in government. Prosecutors also argued his ultimate sentence fell within accepted guidelines for his convictions. However, the former attorneys’ general said in their brief that the guidelines were calculated incorrectly and that Siegelman should have gotten a shorter sentence. Siegelman, who was governor from 2009 to 2013, also served as Alabama’s attorney general. This is not the first time he has gotten assistance from his former colleagues. Former attorneys general asked the Supreme Court to hear his appeal in 2009, saying the case raised free speech issues. Joseph Siegelman, who was a teen during his father’s 2006 trial but is now a part of his legal team, said his father has been in prison a long time but remains strong. “He is strong and will hopefully be able to complete his sentence and return to his family soon,” Joseph Siegelman said.

Republicans who voted for taxes: ‘We tried to act responsibly. I think that helps the Republican brand.’

Republican Party chair Terry Lathan recently told Gov. Robert Bentley the party’s brand had been damaged by his push for tax increases and the support for gambling by others in the party. Lathan made her comments in a closed door meeting of the governing body of the state GOP Bentley had called. A recording of the meeting was provided to While Lathan has bemoaned the fact that someone in the room recorded the meeting and released it, it’s the sometimes sharp disagreements between some of those in the room over issues like taxes and gambling and Lathan’s admonition of Bentley that has generated a lot of reaction in GOP circles. There are any number of follow-up questions that Lathan’s comment about party brand raises, but one certainly is: If Bentley damaged the party brand by pushing for tax hike, how do Republican lawmakers who voted for them feel about what they did? Did their ‘yes’ votes to hike the tax on cigarettes by 25 cents a pack and smaller tax hikes in two other areas damage the GOP brand? “No. I don’t think my vote for taxes damaged the Republican brand,” said Sen. Cam Ward, R-Alabaster. “First of all, these were reasonable tax increases. Now maybe had we voted hundreds of millions of dollars in increases it might have had an impact but I’m not so sure given that what the governor originally sought would have had no impact on income or property taxes. “It’s been over a month since the vote and I’ve heard no negative feedback from the people in my district and its one of the most Republican districts in the state,” added Ward. Rep. Steve Clouse is a Republican from Ozark and chairman of the House General Fund Committee. As such he played a leading role in guiding the tax increases that eventually passed the Legislature through the House. “No. Not at all,” said Clouse when asked if he thought his vote to increases taxes hurts the party. “I don’t think the party people understand,” said Clouse. “To say what we did somehow damaged the party brand is to fail to understand what our jobs as legislators are, what the job of the governor is. That job is to govern. That means making decisions, a lot of them centered around how we spend our tax dollars on the goods and services people need and so many depend on. “I think sometimes the party people get those of us in the Legislature confused with the guys and women in Washington. Unlike what happens in Washington, in Montgomery we can’t print money,” added Clouse. Clouse said the state faced a serious budget situation and had to make some hard decisions and that included raising some taxes. “We were trying to adequately fund some pretty important programs like Medicaid and public safety. We tried to act responsibly. I think that helps the Republican brand,” said Clouse. Sen. Jabo Waggoner, R-Vestavia Hills, has been in the Legislature over 40 years, first as a Democrat and for decades now as a Republican. He voted for the three tax increases and said it was a relatively easy call for him. “There were other proposed tax increases I opposed and some others I supported but the ones we approved were the ones that got a majority of the votes from Republicans, and some Democrats, and I don’t think we hurt our brand at all,” said Waggoner. More:

Hubbard Subpoenaed Journalist Testimony

MONTGOMERY—In an attempt to prove prosecutorial misconduct during his indictment on 23 felony counts of public corruption, Speaker Mike Hubbard subpoenaed journalist John Archibald to testify in Lee County on October 26. Archibald filed a motion to quash the subpoena citing the Alabama Shield Statute, the Alabama Reporter’s Privilege, and the First Amendment to the United States Constitution. Archibald’s subpoena was later pulled when on Thursday he filed an affidavit which gave the defense nothing except a way out of an embarrassing situation. Hubbard, and his criminal defense team, led by J. Mark White, have repeatedly shown a blatant disregard for State law, even challenging the constitutionality of the ethics laws he championed and voted to pass. Hubbard had also demanded, “the production of documents sent to or received from an alleged source(s), drafts of articles and notes used in the editorial process, and text messages and emails relating to but not limited to two news articles” written by Archibald. To subpoena a working journalist sends a chilling message, not only to every reporter in the State, but to every freedom loving citizen in the entire country. Hubbard has shown a complete disrespect for State law, the judge’s orders, and made evident his willingness to sacrifice every principle on which our society is founded to save himself. If Judge Walker had permitted Hubbard to drag Archibald to the witness stand, then any effort to report on government and public corruption would have been compromised, and a death-spiral of honest, intrepid reporting would have been set in motion. In the motion to quash, Archibald argues, “The subpoena should be quashed because Alabama courts recognize a qualified privilege under the First Amendment to the United States Constitution, which protects a reporter from testifying about anything obtained while in a news gathering capacity,” the motion reads. “There exists ‘an important societal interest in protecting the free flow of information to the public,’ and ‘[a]ny unwarranted restraints upon the process of news gathering and reporting could jeopardize [this interest].’” Judge Walker has ordered that the October 26 evidentiary hearing would be narrow in scope and evidence would be limited to prosecutorial misconduct as defined in the Bank of Nova Scotia, et al. v. United States, which states, “dismissal of the indictment is appropriate only ‘if it is established that the violation substantially influenced the grand jury’s decision to indict,’ or if there is ‘grave doubt’ that the decision to indict was free from the substantial influence of such violations….” Hubbard’s legal team in seeking information about Archibald’s columns, which were written after Hubbard was indicted would have fallen outside the standard set under the Nova Scotia ruling. White and Hubbard have repeatedly dismissed Judge Walker’s orders, acting as if they are above the law, or a law unto themselves. According to several House members, Hubbard has been boasting that many of the 23 charges against him will be dismissed after the October 26 hearing. Hubbard and White have bragged about how they will “expose” the prosecution on the 26th. Archibald’s motion to quash concludes, “…enforcement of subpoenas such as this one would render the reporter’s privilege effectively meaningless.” If Walker would have compelled Archibald to testify, the corruption charges surrounding Hubbard would have been just be a small manifestation of a much deeper cancer that effects Alabama politics.

Air taxi company expands to Birmingham

ImagineAir– an on-demand air taxi service – on Thursday announced its new partnership with the Bessemer Airport Authority. The company operates the largest fleet of on-demand Cirrus aircraft, and offers regional flights to hundreds of cities across the Southeast directly from Bessemer Airport, ImagineAir said in a release. Local and regional travelers will now have access to over 500 regional airports from Bessemer. The company said this will turn a three to eight-hour drive into a direct one or two-hour flight. Travelers will also be able to reserve and book departure times though a widget on the airport’s website. Flight times will be based on schedules instead of pre-set timetables by traditional airlines.  “We are partnering with Bessemer Airport to provide access to those in the community that might not have otherwise even considered using their local airport as a travel gateway,” said Lynda Jo Norred, vice president of Business Development at ImagineAir. “Most travelers are surprised to learn that more than 80 percent of the population in the U.S. either lives or works within a 15-minute drive of a public use airport.” Flights may be quoted and reserved online through the Bessemer Airport Authority website.


Conservative pundits were not impressed with the GOP’s disastrous Benghazi hearing

Hillary Clinton is a top-tier politician who’s been the subject of nearly constant national media scrutiny for more than 20 years. She also happens to have worked at the House Judiciary Committee during the most famous and most influential congressional investigation into executive branch misconduct of all time. The Benghazi committee, by contrast, is led by a guy who can’t get a proper haircut and composed largely of random backbench Republicans, most of whom run in districts that aren’t remotely competitive. Consequently, it’s not so surprising that she ended up mopping the floor with her antagonists — a group that went in with no clear plan of what they were hoping to accomplish and little substantive understanding of any of the relevant policy issues. And, indeed, the best some conservative pundits could say about it is that the hearing exceeding their low expectations. See comments:

How payday lenders get their money’s worth in Alabama

A funny thing happened earlier this year when the payday lending bill came up in the Alabama House, but perhaps what was most peculiar was that the bill ever got to floor in the first place. There had been attempts before to regulate payday lenders but with little success. Bills usually died in committee. If they didn’t die there, they died with the Rules Committee, which sets the special order calendar, a sort of daily agenda for the House. They don’t make it to the floor. But suddenly, there it was — a payday lending bill — on the special order calendar. The bill’s sponsor Rep. Danny Garrett, R-Trussville, says it was probably a mistake. He had two bills before the Rules Committee that day and he thinks they put the wrong one on the calendar. Most payday loan borrowers have two weeks to repay their loans. Garrett’s bill would have extended that to three months. The effect would have been that, rather than 456 APR, payday loans would have dropped to 36 percent. “They had indicated that one of my other bills was going to be a priority bill, but it [the payday lending bill] was on the calendar,” Garrett said. “At that point, I said let’s go for it.” Before we get to what happened next with Garrett’s bill, let’s pause to talk about what happened more recently. For years the payday lending industry has fought the Alabama State Banking Department, which regulates financial institutions and had insisted that payday lenders enter their loans into a unified database. Already it was illegal for payday lenders collectively to loan more than $500 to one person, but without a unified database the lenders could plead ignorance if one customer had multiple $500 loans out at one time. The Alabama Supreme Court ruled against the payday loan industry, and on August 10, the database went live. Here is what that database has already told us. In the first 10 weeks, there were 462,209 transactions (loans). Of those, the average size was $317. The total loans plus fees was $172.1 million. The approximate gross profit was $25.4 million. If those numbers are typical for the rest of the year — which is being conservative considering what’s likely to happen around the holidays — then Alabamians are on track to take out about 2.4 million payday loans in a year, for more than $890 million. Obviously, many payday loan recipients are rolling over debt, but that’s one payday loan for every two people in the state. And the payday loan industry will bank $132 million. Looking at numbers like those, the $475,000 of campaign donations the industry gave Alabama lawmakers in the last election cycle looks almost insignificant. But it was enough. Which brings us back to what happened next with Garrett’s payday lending bill. Rep. Mike Hill, R-Columbiana, moved to carry the bill over, which is how bills are killed when they make it to the floor. Sometimes a bill comes back after being carried over, but rarely. It should be noted that back in 2002, when Hill was a Democrat, he sponsored the law that made payday lending and its 456 APR loans legal in Alabama. In the last election cycle, Hill got $14,250 from payday and title loan lenders. Rep. Mac McCutcheon, R-Huntsville, asked to carry the bill over, too. McCutcheon chairs the Rule Committee and is one of the most powerful members of the Alabama House after Speaker Mike Hubbard, R-Auburn. McCutcheon got $12,750 of donations from payday and title lenders. Hubbard, who received $37,835 from lenders, wasn’t serving as speaker at that moment. He had vacated his chair, but he was standing just a few feet away when Rep. Alan Boothe, R-Troy, stood in for him. More:

Morning Money

BUSH LAND MIND-MELD: WORRIED ABOUT CRUZ — A lot of Jeb Bush donors say they worry most about Marco Rubio (assuming Trump eventually implodes and the race returns to a more normal footing). But this is not a uniformly held view. Some donors are getting worried about Ted Cruz. One told M.M. on Thursday: “At first I thought the angry, frustrated vote would coalesce around Cruz or Rand Paul. …

“Instead it coalesced around Trump. Now we’ve seen Ben Carson and Carly Fiorina get a look. But if Trump does implode a lot of his support could easily shift to Cruz. He has a ton of cash on hand. He is in a very, very good position to make a move. Marco is kind of like Jeb-lite.” (And no, this is not the same person who referred to Rubio donors as “the JV squad”.)

DEBT LIMIT IMPASSE ALREADY CAUSING PROBLEMS — CNBC’s Reem Nasr: “The U.S. Treasury on Thursday postponed the 2-year note auction scheduled for Tuesday due to debt-ceiling constraints. It said it also may have to postpone the Nov. 2 auction of 2-year notes. Two other auctions scheduled for next week will continue as scheduled. ‘The current debt limit impasse is also now adversely affecting the operation of government financing, increasing federal government borrowing costs, reducing the Treasury bill supply, and increasing the operational risk associated with holding a lower cash balance,’ the department said.

“The Treasury has a limited borrowing authority available and said that ‘cash and nonmarketable debt forecasts are extremely volatile.’ In mid-October, Treasury Secretary Lew told Congress the department estimates it may have less than $30 billion by early November to meet all of the nation’s commitments.’ … Earlier this week, Lew told CNBC that he fears waiting until the last minute to raise the nation’s borrowing authority could result in an accident “that would be terrible.”

GOP SCRAMBLES — POLITICO’s John Bresnahan and Jake Sherman: “Congress has a debt-ceiling problem again. A big one. House GOP leaders initially planned to vote on a red-meat proposal Friday pitched by the Republican Study Committee to increase the debt ceiling while imposing new limits on executive-branch power. That measure stood no chance of passing the Senate, but would at least show effort. … Yet when House Majority Whip Steve Scalise’s (R-La.) team tested Republican support for the legislation, it fell far short of the needed 218 votes, and Speaker John Boehner (R-Ohio) postponed any floor action.

“Now, the U.S. government is 12 days from reaching the debt limit without a clear plan of what to do. Boehner, McCarthy and other GOP leaders are refusing at this point to move ahead with a ‘clean’ debt ceiling bill insisted on by President Barack Obama. Senior leadership aides said they couldn’t find the 30 Republican votes needed to join with all 188 Democrats to pass that proposal — a bleak indication of the current state of play. …

“Obama is playing a strong hand and has refused to make any major concessions. Boehner, who wants to leave Congress next week, remains hopeful he can reach a budget agreement with the president, which would then allow him to put a clean debt bill up for a vote.”

REAL TALK — A budget deal in the next twelve days? Sounds completely impossible but perhaps there are back-channel talks that have yet to leak that could produce some kind of small agreement. Still seems like a last minute clean debt limit hike is the most likely scenario. Such a vote could wait until close to Halloween. Spooky.

RYAN IS READY — From Rep. Paul Ryan’s letter to House GOP colleagues formally announcing his speaker bid: “Instead of rising to the occasion, Washington is falling short — including the House of Representatives. We are not solving the country’s problems; we are only adding to them. But now, we have an opportunity to turn the page, to start with a clean slate, and to rebuild what has been lost. …

“That’s why I’m actually excited for this moment. I’ve spoken with many of you over the past few days, and I can sense the hunger in our conference to get to work. I know many of you want to show the country how to fix our tax code, how to rebuild our military … I never thought I’d be speaker. But I pledged to you that if I could be a unifying figure, then I would serve — I would go all in. … I believe we are ready to move forward as a one, united team. And I am ready and eager to be our speaker.”

OBAMA VETOES DEFENSE BILL — POLITICO’s Austin Wright and Jeremy Herb: “President Barack Obama issued the fifth veto of his seven-year presidency on Thursday, rejecting the sweeping $612 billion National Defense Authorization Act in a move designed to prevent Republicans from getting an edge in nascent budget negotiations. The expected veto of the defense policy bill — approved with wide, bipartisan support in both the House and Senate — shows a new level of resolve from a president who’s threatened in years past to veto the annual measure but had never followed through.

“The president’s action, before a small group of journalists summoned to the Oval Office, also disregards the warnings of Democratic defense hawks who backed the measure. And it demonstrates yet again that the president, emboldened in his second term, has few qualms about taking steps sure to provoke congressional Republicans — like his executive orders on immigration or his moves to limit the ability of Congress to stop his nuclear deal with Iran.”

GOOD FRIDAY MORNING — Hillary Clinton’s Benghazi testimony is now entering its 20th hour. Buffet breakfast now being served. Have a great weekend, all. Email me on and follow me on Twitter @morningmoneyben.

COOL MOVE OF THE DAY — FT’s Hannah Kuchler in San Francisco: “Jack Dorsey, the Twitter co-founder who was recently reinstalled as chief executive, is giving away a third of his shares in the messaging platform to employees, as part of his plan to boost morale and transform the company. Speaking at Twitter’s Teatime town hall event, Mr Dorsey said he was giving away about 1 per cent of the company — or $200m worth of stock — to employees. …

“The shares will go into the pool from which staff are rewarded with stock depending on performance and promotions. If it was distributed evenly, it would work out at about $55,000 worth of stock for each staff member.”

CLINTON BATTLES BENGHAZI PANEL — POLITICO’s Rachel Bade: “Hillary Clinton fought off Republican accusations on Thursday that she was more interested in getting advice from Sidney Blumenthal than protecting diplomats — and offered an emotional account of the death of Ambassador Christopher Stevens, aiming to highlight the panel’s investigation as a misguided partisan attack. …

“Clinton, for her part, maintained a calm demeanor, although she couldn’t conceal her apparent enjoyment when Gowdy and ranking member Elijah Cummings (D-Md.) broke into a shouting match over how much information should be made public from the panel’s closed-door interviews. … And with the panel members busy taking shots at each other, and lobbing accusations of partisanship, Clinton had space to remind lawmakers and viewers that she had “lost more sleep than all of you put together” over the Sept. 11, 2012, terrorist attacks that killed Stevens and three other Americans”

TAKEAWAY — POLITICO’s Glenn Thrush and Gabriel Debenedetti: Clinton “walked away from her long-awaited trial before the GOP-steered Benghazi committee with her eardrums battered and her candidacy mostly unscathed.”

WORD COUNT — The Benghazi hearing featured about 78,000 words, longer than The Catcher in the Rye and nearly as long as Harry Potter: Philosopher’s Stone.

CARSON UP IN IOWA — POLITICO’s Eliza Collins: “Ben Carson pulled ahead of Donald Trump in a new Quinnipiac poll of Iowa. “The retired neurosurgeon leads the Republican field with 28 percent, while Trump has fallen behind with 20 percent. A September survey had Trump at 27 percent, and Carson at 21 percent.”

ICAHN LAYS OUT PAC GOALS — Bloomberg: “Sure, Carl Icahn might make money — lots of money — on his $6 billion stake in Apple Inc. if a political campaign he announced Wednesday to cut taxes on companies’ foreign earnings succeeds. So what? Icahn says. ‘It’ll help Apple, but it will also help America.’

“The billionaire New York investor said this week that he plans to form a $150 million super-PAC to push Congress to deal with the tax issue, a move that would transform the 79-year-old political novice into one of the biggest donors in history. In a phone interview Thursday that he interrupted to field a call from a Republican senator, Icahn said those who questioned his motivations are probably just jealous of the money he stands to make.”

HAPPY FRIDAY! SOLID ECON DATA FOR U.S. — Reuters: “U.S. home resales rebounded strongly in September and new applications for unemployment benefits hovered around 42-year lows last week, pointing at solid domestic fundamentals even as the global economy falters. … Thursday’s upbeat housing and labor market reports could keep the door open to an interest rate hike from the Federal Reserve by the end of the year.

“‘The market has been a little bit quick to price out a December Fed rate hike. What you are seeing in the data is that the domestic picture looks strong and I think that’s what the Fed is going to be looking at closely,’ said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.”

U.S. DROPS SAC INSIDER TRADING CHARGES — WSJ’s Christopher M. Matthews and Aruna Viswanatha: “Manhattan U.S. Attorney Preet Bharara will drop charges against seven people, dealing a blow to what had been one of the most successful insider-trading prosecutions and a marquee case in his tenure. Not long ago, Mr. Bharara boasted a near-perfect conviction rate in the dozens of insider-trading cases pursued by his office. But on Thursday he moved to dismiss charges against former SAC Capital Advisors LP portfolio manager Michael Steinberg and six analysts.

“Mr. Steinberg’s conviction stood out, because it brought prosecutors as close as they ever got to SAC founder Steven A. Cohen, the billionaire founder of the hedge fund, which prosecutors had been investigating for a decade hoping to prove it had relied on illegal insider tips to boost its trading results. Mr. Steinberg was a senior employee at the firm and a confidant of Mr. Cohen’s. Prosecutors have never accused Mr. Cohen of any wrongdoing. None of the defendants have been sentenced and all have remained free on bail since their convictions”

AMAZON POPS ON SURPRISE PROFIT — NYT’s David Streitfeld: “Amazon showed Wall Street just what it was capable of in the third quarter, and investors roared their approval. Revenue at the Seattle-based retail, computing and entertainment company rose 23 percent to $25.4 billion in the third quarter, $500 million more than analysts were expecting. An expected loss turned into a profit. Net income was 17 cents a share. Analysts had expected a loss of 13 cents a share. In the third quarter of 2014, Amazon lost 95 cents.

“For the future, Amazon gave only very general guidelines. It said sales in the fourth quarter, its biggest, would rise in the range of 14 to 25 percent compared with the fourth quarter of 2014. Operating income could be as much as double last year’s fourth quarter, the company said, but it also could be so small as to be no more than the corporate equivalent of pocket change. None of that dented investors’ enthusiasm. Amazon shares, which moved up $8 during regular trading, powered ahead in after-hours trading. The stock quickly moved up more than $50, or about 10 percent.”

MICROSOFT SHARES ALSO SOAR — FT’s Tim Bradshaw in San Francisco: “Microsoft shares touched their highest point in 15 years in after-hours trading on Thursday, as it beat revenue and earnings forecasts in the quarter to September and posted its first ever profit in search. An 8.3 per cent jump in after-hours trading to $52.00, its highest level since 2000, saw Microsoft join a strong afternoon for Silicon Valley …

“Revenues at Microsoft were down 2 per cent to $21.7bn after adjusting for certain items and currency fluctuations, just ahead of Wall Street’s forecasts, with earnings up to 9 cents ahead of expectations at 67 cents. Net income was up 2 per cent to $4.6bn compared with the same quarter a year ago. Analysts said that a strong showing from the Windows business was responsible for the outperformance, as the company bounced back after reporting its worst net loss three months ago”


WEISS ON PUERTO RICO — Treasury’s Antonio Weiss from Thursday’s hearing: “I would like to address the very fair comments made by Senators Hirono and Warren as well. Let me assure this committee that Treasury and the broader administration will apply of its efforts and all of our creativity and all our resources to the resolution of this financial crisis, just as we have in past crises, and we will leave no stone unturned.”

NO LOVE FOR PUERTO RICO HELP — NYT’s Mary Williams Walsh: “Officials from debt-plagued Puerto Rico, hoping for some comfort and sympathy — and even practical advice — from senators at a committee hearing in Washington on Thursday, got little of it. And the Obama administration’s proposal for helping the island out of its financial fix got no love either … There were glimmers of support from two prominent politicians: Senator Bernie Sanders of Vermont, a candidate for the Democratic presidential nomination, and Senator Elizabeth Warren of Massachusetts, a Democrat, but they were just that — glimmers.

“Mr. Sanders said he had heard that some of the bonds the island is in danger of defaulting on might have been issued illegally and perhaps could be torn up. ‘Should debt be repaid if it was incurred in an unconstitutional way?’ he asked, harking back to an argument that changed the course of Detroit’s historic bankruptcy. Whether that was true in Puerto Rico’s case was unclear. And Ms. Warren said she would fight for a new debt restructuring framework for Puerto Rico but chastised the Treasury Department for offering a plan she found unimpressive. But mostly, the committee was critical of Puerto Rico officials, including Gov. Alejandro García Padilla, who testified at the hearing, for providing what it said were confusing and out-of-date numbers”

NASDAQ RELEASES Q3 EARNINGS — Per release: “Third quarter 2015 non-GAAP diluted EPS of $0.88, an increase of 13% compared to the third quarter of 2014. Record revenues and non-GAAP operating, pre-tax income, net income and diluted EPS. Third quarter 2015 GAAP diluted EPS was $0.80.” …

And announces an acquisition: “Nasdaq … has acquired SecondMarket Solutions, Inc., a recognized innovator in facilitating liquidity for private company securities. SecondMarket will be integrated into NASDAQ Private Market, serving customers worldwide with bicoastal headquarters in New York and San Francisco.”

POTUS Events

10:30 am || Receives the Presidential Daily Briefing
4:15 pm || Delivers remarks at the DNC’s Women’s Leadership Forum; Washington
5:05pm || Attends a DNC fundraiser; Washington

All times Eastern
Live stream of White House briefing at 12:30 pm

Floor Action

The House returns at 9 a.m., with first and last votes of the week between 11:45 a.m. and 12:45 a.m. The Senate is out until Monday.

Krebs Daily Briefing 22 October 2015

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


26 bankers already sentenced to a combined 74 years in prison

In two separate rulings last week, the Supreme Court of Iceland and the Reykjavík District Court sentenced three top managers of Landsbankinn and two top managers of Kaupþing, along with one prominent investor, to prison for crimes committed in the lead-up to the financial collapse of 2008. With these rulings the number of bankers and financiers who have been sentenced to prison for crimes relating to the financial collapse has reached 26, and a combined prison time of 74 years. Eleven former bankers have been sentenced to four and a half years or more in prison. The former top bosses of Kaupþing have received the longest sentences to date. Hreiðar Már Sigurðsson, the former CEO of failed bank Kaupþing and Magnús Guðmundsson, the CEO of Kaupþing Luxembourg, top the list, having been sentenced to a combined six years in prison for extensive market manipulation, embezzlement and breach of fiduciary duties. The maximum combined sentence for financial crimes according to Icelandic law is six years. Courts can sentence people to longer prison terms than six years in cases where the crimes are systematic and repeated, and in cases where people make a living from engaging in financial crimes. Future cases against Magnús and Hreiðar Már will determine if the courts consider the two to have engaged in financial criminality of a scale which justifies expanding on the maximum sentences. In addition to Hreiðar Már and Magnús eight other individuals with connections to Kaupþing have been sentenced to prison. Sigurður Einarsson, the Chairman of Kaupþing has been sentenced to a combined prison term of five years in two cases involving market manipulation in the lead up to the 2008 crisis, while the Reykjavík District court sentenced Ingólfur Helgason the CEO of Kaupþing’s domestic division to four and a half years and Bjarki Diego, managing director of the bank’s loan division to two years, both for market manipulation. Three others received suspended sentences. Two financiers with ties to KAupþing have also been sentenced. Ólafur Ólafsson, one of the most powerful “corporate Vikings” of the pre-2008 years and one of the largest shareholders in Kaupþing was sentenced to four and a half years for market manipulation by the Supreme Court while Skúli Þorvaldsson, a prominent investor was sentenced to six months in prison by the District Court for cover-up in a case involving the embezzlement of bank funds by the CEOs of Kaupþing and Kaupþing Luxembourg, Hreiðar Már and Magnús. More:

Forest outside Nazi death camp yields disturbing find

(NEWSER) – For decades, the items sat hidden by shadows and foliage. Then a recent hike through a forest outside the former Stutthof Nazi concentration camp in Poland revealed the disturbing sight: previously unknown artifacts, including hundreds of pairs of shoes, belts, and strips of prisoner uniforms, up to a foot deep, spread across hundreds of square yards. “There are items that may have belonged to concentration camp prisoners,” Danuta Drywa, Stutthof Museum’s head of archives, tells the Telegraph. “I’ve been working here 30 years and none of the employees have ever heard of these items lying in the forest near the museum.” About 85,000 of the camp’s 110,000 prisoners died at Stutthof, where Nazis tested making soap from their victims’ fat. During World War II, the Nazis were known to adjust Stutthof’s size depending on their needs. Originally built to hold 3,500, the death and slave labor camp expanded to house 57,000 in 39 subcamps by 1944, according to the museum’s website. The museum now takes up only a small part of the former camp, which might explain why the artifacts went unnoticed for so long. But the discovery is especially surprising because the Nazis typically gave prisoners wooden clogs and sent their shoes to others in Germany. “To define exactly what kind of shoes they are, how old they are, and what country they came from will need specialized testing,” Drywa says. (Body parts from gas-chamber victims were recently found in a lab.) More:

How Elon Musk’s Mom (and Her Twin Sister) Raised the First Family of Tech

Here’s an idea that one of five young South African cousins threw out sometime in the 1980s: What if they could arbitrage the cost of chocolate in an Easter egg? Plain old chocolate at the time cost virtually nothing, but a nicely packaged chocolate Easter egg cost about one rand. So the young cousins melted regular chocolate, molded it into egg shapes, wrapped the chocolate eggs in foil, and went around the poshest parts of their Pretoria neighborhood. And instead of selling these chocolate eggs for the going rate, they cranked up the price to 10 rand. When neighbors balked at the price, the boys responded as they’d rehearsed. Purchasing from them, they said, would mean the buyer was supporting young capitalists. It worked. This is not the kind of scheme most 14- or 15-year-old relatives dream up, but these were not most 14- or 15-year-olds. This is a piece of lore essential to understanding what may be the 21st century’s First Family of entrepreneurship, a family of happy capitalists intent on cracking today’s toughest problems by building businesses. Those budding teen tycoons included two sets of brothers: Elon Musk, whom you’ve likely heard of, and his brother, Kimbal, a fellow entrepreneur focused on trying to change America’s food culture; and Lyndon and Peter Rive, the founders of SolarCity. (Their brother Russ now runs the art, technology, and design company SuperUber, in Brazil.) Each family also has a sister: Tosca Musk, a filmmaker, and Almeda Rive, a competitive dirt-bike rider. Elon may be the most famous of the clan, thanks to his mad-scientist ways and the Beatles-esque buzz surrounding the companies he’s dreamed up—from PayPal to electric carmaker Tesla Motors to aerospace manufacturer SpaceX to what remains—for now—the mere concept of the high-speed Hyperloop. But each of the Musk-Rive cousins has achieved notable levels of success. Kimbal Musk co-founded The Kitchen, a group of eight restaurants that source directly from local farmers, and the Community Kitchen, a nonprofit that’s opened more than 200 school and community gardens that impact 120,000 kids each day. Lyndon and Peter Rive founded SolarCity, the energy-service company that has a market cap of about $4 billion, after Lyndon, Peter, and Russ sold their company, Everdream, to Dell in 2007. America loves a familial power block—from the Emanuel brothers to the Williams sisters, the Kennedys to the Hemsworths. But there’s something even more intriguing about those Musks and Rives, given what appears to be their genetically pre-programmed ambition. How did five of them grow up to take on some of the knottiest problems on the planet, setting goals so lofty as putting civilians in space and transforming household energy use?


Benghazi 101: What You Need to Know Ahead of Clinton’s Testimony

The 2012 attack on a U.S. compound in Benghazi, Libya, killed four Americans and caused a slew of political fallout, some of which is still reverberating today. On Thursday, Democratic front-runner Hillary Clinton will testify about the attack in front of a Republican-led House committee — and what she says about it could have major implications for her White House bid. Here is what you need to know about the attack itself and the investigation that followed it, plus how it affects Clinton, who was secretary of state at the time. See more:

The Window Closes for Joe Biden

In the end, Joe Biden simply ran out of time. Announcing his reluctant decision to forego a presidential campaign in 2016, the vice president made abundantly clear how badly he wanted to make a third and final run for the job he’s long sniffed but never could grasp. His family, while still grieving over the loss of Biden’s eldest son, was finally on board. Biden had a message and even a compelling stump speech—if anyone doubted so, he delivered it on Wednesday in the Rose Garden, with President Obama and his wife Jill standing by his side. But ultimately, Biden came to the same conclusion that many in the Democratic Party had reached as his period of vacillation extended from weeks to months, and then several agonizing days more. “Unfortunately, I believe we’re out of time, the time necessary to mount a winning campaign for the nomination,” the vice president said. “But while I will not be a candidate, I will not be silent.” Almost from the moment Obama won a second term, Biden’s desire to succeed him had collided with the widespread doubts about whether he could mount a viable campaign. Would he really challenge Hillary Clinton, who was vying not only to become the nation’s first woman president but who had been his close colleague both in the Obama Cabinet and, before that, in the Senate? Clinton’s struggles certainly opened that door, but never quite wide enough. Beau Biden’s death from brain cancer in late May brought the nation’s sympathy to the Biden family and, somewhat improbably, offered a new rationale for a candidacy. Reports surfaced that it was Beau’s dying wish that his father make another run. Yet the tragedy also renewed doubts about whether a grieving Biden was up to the rigor of a presidential bid. More:

GOP draws distance from previous Benghazi conclusions

Republicans are distancing themselves from a prior controversial analysis about the 2012 terror attack in Benghazi, Libya, amid new scrutiny on the House’s special committee investigating the incident. One year after the Republican-led House Intelligence Committee released a report debunking multiple allegations about the violence in Libya, the new head of that committee is saying he won’t stand by its findings. Chairman Devin Nunes (R-Calif.) “never endorsed the report’s conclusions because the committee was not able to interview numerous important witnesses to the Benghazi attack,” his spokesman said in an email to The Hill on Wednesday. Nunes “strongly supported convening” the Selecte Committee on Benghazi “and he continues to support its work,” spokesman Jack Langer added. Rep. Mike Pompeo (R-Kan.), who sits on both the Intelligence panel and the Select Committee on Benghazi, insisted that last year’s report was “factual” but nonetheless restricted by both its own mandate and the Obama administration’s responsiveness. “Its scope was very limited,” Pompeo said in a phone interview this week. “It was limited to intelligence components of the United States government and it was based upon the documentary evidence that was available at the time that that committee has.” “We are far removed from that today.” As evidence, he noted that the Select Committee on Benghazi had received 1,300 emails from Ambassador Christopher Stevens — one of the four Americans killed in the 2012 Benghazi attack — just on Tuesday afternoon. “You ask about a report that’s now how old?” Pompeo said. “It was well before [Tuesday] afternoon at 1 o’clock. So there you go. “We have a great deal more information.” The argument is likely to be a preview of Thursday, when former Secretary of State Hillary Clinton steps before the Benghazi Committee for what is expected to be a marathon session. Clinton and her fellow Democrats have repeatedly pointed to last year’s Intelligence Committee report and multiple other congressional probes into Benghazi as a way to discredit the current investigation. “We know what happened in Libya and we know what needs to be done to prevent future tragedies,” Sen. Dianne Feinstein (Calif.) — the top Democrat on the Senate Intelligence Committee, which issued a report on Benghazi in January of 2014 — said in a statement on Wednesday. Many of the previous congressional reports on Benghazi concluded that there was no imminent warning about an attack on Sept. 11, 2012, but nonetheless faulted the Obama administration for failing to take additional safeguards ahead of time, given the tumultuous state of the country following the revolution that ousted Moammar Gadhafi. Sen. Susan Collins (R-Maine) co-authored a Homeland Security Committee report on the attack in December of 2012. She disputed Democrats’ allegations that the matter has been fully covered. The House’s Special Benghazi Committee “had access to many more witnesses and much more time than we had,” she told The Hill. “I think ultimately we could’ve done a very extensive investigation but we were up against the clock of an expiring Congress.” “We provided a useful preliminary investigative report, but there was certainly room for more,” she said. “More could be done.” Collins was also on the Senate Intelligence Committee when it put out its 2014 report. The House Intelligence Committee’s November 2014 report was considered the most favorable for the administration of the multiple congressional analyses. The report, released after a two-year investigation, concluded that there was “no intelligence failure prior to the attacks” and debunked the notion that there was a “stand down” order issued during the attack. Additionally, the report shut down concerns that anyone from the CIA was intimidated or prevented from speaking to Congress, or that the CIA had secretly sent weapons to Syria from Benghazi ahead of the attack. The report was written by then-Chairman Mike Rogers (R-Mich.), who has since left Congress, and top Democrat Dutch Ruppersberger (D-Md.). An aide to Rogers did not respond to an inquiry about the report. Republicans chided its findings at the time. Sen. Lindsey Graham (R-S.C.), who is currently running for president, at the time called it “full of crap” and accused the Intelligence committee of “doing a lousy job policing their own.” Sen. Mark Kirk (R-Ill.) also accused the committee of trying “to protect its own.” This week, Pompeo insisted that critics were wrong to read the report as a wholesale analysis of the administration’s actions surrounding the attack — as the House committee was created to be. Instead, it was a narrow take on the job of the intelligence workers, he said. “My take is the way the media interpreted that report was completely wrong,” he said. “I’ve heard it used by [top committee Democrat, Maryland Rep.] Cummings and by some of the Clinton apologists as an exoneration of the administration.” “Let me assure you it was not that.”

Valeant Plummets on Allegation of Enron-Like Accounting

Valeant Pharmaceuticals International Inc. shares took a beating, falling more than 30 percent, after a stock-commentary site run by a short seller accused the company of an Enron-like strategy of recording fake sales by using phony customers. Citron Research said Valeant is using a specialty pharmacy called Philidor RX Services to store inventory and record those transactions as sales. “Is this Enron part deux?” the report said. “These similarities are too close to ignore.” Valeant fell 38 percent to $91.45 at 1:19 p.m. in New York, headed for its biggest one-day drop since at least 1994. Citron, founded by Andrew Left, has been a dogged critic of Valeant’s business model, denouncing its reliance on acquiring drugmakers and then jacking up the prices of their products, which have been on the market for years. The report published Wednesday said Valeant uses “phantom accounts” to fool auditors and investors. A spokeswoman for Valeant declined to comment. The company has been at the forefront of an intensifying debate over price increases for older drugs in the U.S. Last week it said it had received subpoenas from the U.S. Attorney’s Office in Massachusetts and the Manhattan U.S. Attorney’s Office seeking information on its patient assistance programs, drug distribution and pricing decisions. Valeant has also been scrutinized by lawmakers for pushing up the prices of heart drugs Isuprel and Nitropress — and Citron has said those price hikes have disguised a lack of growth. Valeant has disputed Citron’s figures. More:

Icahn launches super PAC with $150 million, biggest one-time injection

Billionaire investor activist Carl Icahn tweeted on Wednesday that he is forming a Super PAC with an initial commitment of $150 million, representing the biggest one-time injection of money in the history of such political action committees. Icahn, who supports presidential candidate Donald Trump, said he is targeting “inversions,” which occur when a company changes its domicile, often outside the United States, to take advantage of lower tax rates elsewhere. “Right now, as we speak, there are many companies planning to leave this country,” Icahn said in an interview with CNBC. “It’s so simple to do something about it, it’s a no-brainer.” Icahn said on CNBC that the incentive for companies to leave the U.S. via inversion deals could be eliminated by legislation allowing big companies to repatriate funds held offshore at a discounted tax rate – an approach also favored by Trump. In a letter, released Wednesday and sent to several leading members of Congress, Icahn said as many as 50 companies have left the U.S. over the past few years, representing more than a half-trillion dollars in market value, costing hundreds of millions of dollars in taxes and lost jobs. “There is zero reason not to allow major companies to repatriate this money,” he said, adding that 12 to 15 lawmakers had responded to the letter so far. “I believe my own commitment of $150 million to the PAC will be more than enough to make voters fully aware of the horrible consequences that will ensue if Congress fails to pass legislation immediately to stop these ‘inversions,'” Icahn said. Technically known as independent expenditure-only committees, super PACs may raise unlimited sums of money from corporations, unions, associations and individuals, then spend unlimited sums to overtly advocate for or against political candidates. Icahn’s pledge is even more than Jeb Bush’s “shock-and-awe” fundraising haul of $100 million for his presidential bid. And it is half the $300 million amount that the Koch Brothers network, a group of wealthy mega donors founded by the billionaire industrialists, will pour into the 2016 campaign.

Carl Icahn creates $150 million Super PAC advocating enormous tax cut for Carl Icahn

Legendary investor Carl Icahn today pledged $150 million to launch a new Super PAC designed to advocate for what he calls “desperately needed legislation” to address “the pernicious effects that are occurring and will continue to occur as a result of Congress’s failure to immediately stop so many of our great companies from leaving our country.” This is the problem of so-called tax inversions, in which companies that are primarily based in the US shift their nominal headquarters overseas to reduce their tax burden. It’s an interesting issue, a somewhat important one, and something that Congress should address. But peer into the details, and what Icahn is actually doing is pledging $150 million to the cause of helping Carl Icahn get even richer. As large a sum of money as $150 million is, Icahn’s personal stake in the legislation at hand is even bigger. he specific bill Icahn is advocating for isn’t a narrow effort to address tax inversions; it’s a broad effort to cut corporate income tax rates while generating a one-time windfall for people who currently own large blocks of shares in cash-rich companies. That’s what Icahn is talking about when he refers to “passing legislation for international tax reform as outlined in the framework put forth by Senators Charles Schumer and Robert Portman, and supported by Chairman Paul Ryan, to fund the Highway Bill.” Here’s how it works:

Heads, Paul Ryan wins. Tails, the House Freedom Caucus loses.

What Paul Ryan has done is very smart: He’s set up a game where if he doesn’t take the speakership, it’s only because he’s proven that no one in their right mind should want the speakership. In context, Ryan’s conditions — endorsements from all Republican caucuses, rule changes that make it much harder to challenge a speaker midterm, and a lighter travel and fundraising schedule — verge on the ridiculous. He’s demanding the House Freedom Caucus give up its power to do to him what it did to John Boehner even as he promises to be less accommodating than John Boehner. The idea of the House Freedom Caucus is that the House should be run more, well, freely — their critique of Boehner is that he centralized power in ways that stopped House Republicans from carrying out the conservative will of their people, and their proposed rule changes would decentralize power away from the speaker. But now Ryan is saying he will only take the job if the House Freedom Caucus endorses his effort to further centralize power — a betrayal of everything they stand for. “What Paul Ryan is asking for is even more power and less responsibility,” Rep. Tim Huelskamp told the National Review. That’s basically right. You can read Ryan’s demands two ways, and both of them may be right. One reading is that he actually doesn’t want to be speaker, so he’s drafted conditions that ensure he won’t actually have to be speaker. Given that Ryan firmly and repeatedly refused to run for the position and only reconsidered after massive pressure from his colleagues, that seems the likeliest explanation — these conditions let Ryan avoid the speakership but put the blame on the House Freedom Caucus. More:


Freedom Caucus Majority Backs Paul Ryan for House Speaker

WASHINGTON — A strong majority of anti-establishment lawmakers in the House Freedom Caucus voted on Wednesday night to support Representative Paul D. Ryan of Wisconsin for House speaker, effectively delivering the Republican Party unity that he had sought as a condition for accepting the post. While the vote fell short of the four-fifths majority required for the group’s official endorsement, lawmakers said it nonetheless cleared the way for Mr. Ryan, 45, to be selected as the Republican nominee next Wednesday and affirmed as speaker in a floor vote the next day. Mr. Ryan did not immediately comment on whether the majority vote was sufficient, given that he said he wanted the endorsement of all factions of his party.

Is it time to concede that Donald Trump is likely to win the GOP nomination?

One of the more unusual aspects of Donald Trump’s three-plus months at the top of the Republican presidential field is that to so many, myself included, it still seems like it’s only temporary. A number of people who spend a lot of time looking at the numbers have, since he took the lead in July, written about the various reasons why his lead would be temporary — again, myself included. People who rely on poll data were saying, in some sense, “I’m going with the numbers in my gut.” But the real numbers, including those in a new Washington Post-ABC News poll, support the idea that Trump will continue to lead and that he could win the nomination. There’s the top-line number, of course, which shows Trump with a lead over the rest of the field. Nearly a third of Republican voters pick Trump as their candidate, followed by 22 percent who choose Ben Carson. As we noted last week, those two share a base of support, meaning that if one were to drop out, the other could and probably would pick up much of his support. In other words: Trump has some room to grow. What’s more, his lead has actually been much more stable this year than Mitt Romney’s was in the latter half of 2011. Trump has led consistently for more than three months. In the last six months of 2011, Romney led for only a week or two at a time. More:

The math is clear: Hillary Clinton has better odds of becoming president than anybody else — by far

Hillary Rodham Clinton had a brutal summer-long news cycle that has bled into fall. She has lost ground to Bernie Sanders in Democratic primary polls, and she may draw a new and formidable challenger, Vice President Biden, in the coming days. Despite all that, she’s still the candidate you’d bet on at even odds to be the next president, no matter what your personal views. It’s not even a close call. If you had to bet $100 on any single person to win the 2016 general election — to win $100 if you guess correctly — every rational gambler would chose Clinton. According to online betting markets, she remains the overwhelming favorite to win the nomination of the Democratic Party, which is the party that is favored to win the general election. There is no clear favorite in the very crowded field for the Republican nomination. As such, bettors see Clinton as more than four times as likely to be the next president as her closest rival, Sen. Marco Rubio (R-Fla.). The real question about your presidential bet right now isn’t whether you’d take Clinton above anyone else. It’s whether you’d take her over everyone else combined. If you had that $100 again and one of two choices, which would you choose? Clinton wins? Or, “the field” — any other American except Clinton — wins? A quick read of the odds rounded up by PredictWise suggest you should take the field, barely. They give Clinton a 47 percent chance, as of the afternoon of Oct. 19, of winning the 2016 general election. Those odds might be too low for Clinton, however. Academic research has found that betting markets tend to underrate the chances of big favorites to win elections, while overrating long shots. PredictWise tries to adjust for that bias, but, in this case, some of that bias may still be seeping through, says Justin Wolfers, a University of Michigan economist who was one of the authors of the betting markets research. As Wolfers explains in detail in an e-mail:

Jeb Bush Has Learned the Wrong Lessons from His Family Tradition

Jeb Bush may be his own man, as he has repeatedly insisted to interviewers. But in his place, practically everyone would be influenced––even in spite of themselves––by knowledge of what their father and big brother did in similar situations, especially given that every likeness and reversal will prompt commentary. As voters weigh whether to entrust the presidency to a third member of the Bush family, it is proper to reflect on the legacies of George H.W. and George W. Bush. Those family ties could be a strength. Surely Jeb Bush and Hillary Clinton have gleaned insights and wisdom about being president from their unusual proximity to the office. The question is whether Jeb’s family ties would influence him for better or worse overall. That depends, in part, on whether he sees his family’s legacy more clearly than those in his wing of the Republican Party, who tend to underrate Bush 41 and overrate Bush 43. Perhaps that political reality helps to explain why Jeb has shown no inclination to emulate a tremendously successful father, even as he defends a big brother who has easily done more to tarnish the family legacy than anyone else. Whatever explains Jeb’s failure to embrace his father’s successes or to distance himself from his brother’s failures, the spectacle is confounding to anyone who steps back from America’s irrational political culture to survey the facts of Bush family history.  More:

U.S. Lawmakers Call for More Oversight of Workers’ Comp

 Ten prominent Democratic lawmakers, including presidential candidate Sen. Bernie Sanders, are urging the U.S. secretary of labor to come up with a plan to ensure that state workers’ compensation programs are properly caring for injured workers. The lawmakers’ letter, sent Tuesday, was prompted by an investigation by ProPublica and NPR, which found that more than 30 states have cut benefits to injured workers, created daunting hurdles to getting medical care or made it more difficult for workers with certain injuries and illnesses to qualify. As a result, some workers have been evicted from their homes, denied prosthetic devices their doctors recommended or left in precarious situations when their home health aides were taken away. Denied care, some workers have turned to state Medicaid or federal disability programs, the investigation found. “State workers’ compensation laws are no longer providing adequate levels of support and compensation for workers injured on the job,” the lawmakers wrote. “Instead, costs are increasingly being shifted to the American taxpayers to foot the bill.” The letter also cited a ProPublica and NPR story from last week that detailed a campaign by some of the biggest names in corporate America to let companies “opt out” of workers’ comp and write their own rules for taking care of injured workers. Laws in Texas and Oklahoma already allow such an option and it is under serious consideration in Tennessee and South Carolina.

JPMorgan to Offer a Taste of I.P.O.s to the Masses

A perk that is usually reserved for a bank’s most important (and rich) private clients is coming to the masses. JPMorgan Chase will distribute a small portion of the initial public offerings it leads through the online firm Motif Investing. There are a number of caveats here. JPMorgan will offer only deals it worked on as the lead underwriter. The shares available will depend on the deal, but are expected to range about 5 percent or less of the total offering, at least at first. In addition, the company issuing the I.P.O. must agree to participate. Being “lead left” underwriter is not always a given. So far this year, JPMorgan has held that lead spot in 27 stock debuts, including Shake Shack’s $121 million offering in January and Blue Buffalo’s Pet Products’ $778 million deal in July, according to Dealogic. That is out of 60 deals in which the bank had a book-runner role and 995 I.P.O.s globally so far this year, Dealogic said. Motif, a firm known for selling bundles of up to 30 stocks and exchange-traded funds for $9.95 each, is offering the I.P.O. access to anyone who pays at least $250 to buy shares in an I.P.O. The trades are free of commission. TechCrunch earlier reported the program. Motif’s site will include the offering prospectus and related documents so would-be investors can decide whether to get in on a coming deal, says Hardeep Walia, Motif’s co-founder and chief executive. There is no word on what Motif’s first I.P.O. offering will be, Mr. Walia says.

SEC Faces New Attack on In-House Judges

Legislation to give defendants the right to opt out of the Securities and Exchange Commission’s in-house court is expected to be introduced in Congress on Thursday, ramping up pressure on the agency to further reform its controversial tribunal. Rep. Scott Garrett, (R., N.J.), the chairman of the House Financial Services subcommittee on capital markets, said in an interview he plans to introduce a bill that would give defendants the right to choose a trial by a federal judge or jury, rather than before one of the SEC’s five administrative law judges. “Defendants should have the option to opt out [of the SEC’s in-house court] and go to federal court instead,” he said. A spokesman for the SEC didn’t immediately respond to a request for comment Wednesday. The Congressional move adds to calls for reforms from federal judges, former top SEC officials, defense lawyers and business groups. The U.S. Chamber of Commerce in July called for defendants charged with serious offenses to be given the right to request a trial by jury in federal court, rather than before an SEC judge. The SEC has faced a wave of criticism and legal challenges to its increasing use of its administrative law judges, including for serious cases against people it doesn’t regulate. Critics have raised concerns the SEC tribunal is unduly biased toward the agency and offers too few protections to defendants. Mr. Garrett said the SEC’s much higher success rate against defendants in contested cases heard before its own judges, as opposed to federal court, raised concerns about the fairness of the agency’s tribunal. A page-one article in The Wall Street Journal in May showed the SEC won against 90% of defendants before its own judges from October 2010 through March of this year –  markedly higher than its 69% success rate in federal court over the same period. “If [the in-house and federal courts are] equally fair, the numbers should be much closer,” Mr. Garrett said. SEC officials say both types of court offer sufficient protections to defendants. The SEC is simply using powers that were granted to it by Congress under the 2010 Dodd-Frank financial law to bring a broader array of cases before its own judges, officials say. The SEC’s in-house “administrative proceedings, while different proceedings from district courts, are fair,” Andrew Ceresney, SEC enforcement chief, told a legal event in New York last week. He added that the agency has “done a number of things trying to address some of the concerns that have been raised,” including proposals issued last month to reform how the tribunal operates. But Mr. Garrett said the proposals, while “a good first step,” do not go far enough. Congress needs to act to achieve the more fundamental reform of the system that’s needed, he added. The bill would be introduced into a Congress where the two parties are increasingly polarized, with Democrats increasingly pressing to ramp up punishment on financial wrongdoers while Republicans like Mr. Garrett are focused on protecting defendant rights. Mr. Garrett said that “in the meantime, until the bill becomes law, it … continues the pressure on this topic.”

Powerful admiral punishes suspected whistleblowers, still gets promotion

The Navy is poised to promote the admiral in charge of its elite SEAL teams and other commando units even though Pentagon investigators determined that he illegally retaliated against staff members whom he mistakenly suspected were whistleblowers. Rear Adm. Brian L. Losey was investigated five times by the Defense Department’s inspector general after subordinates complained that he had wrongly fired, demoted or punished them during a vengeful but fruitless hunt for the person who had anonymously reported him for a minor travel-policy infraction, according to documents obtained by The Washington Post. After conducting separate, years-long investigations that involved more than 100 witnesses and 300,000 pages of e-mails, the inspector general upheld complaints from three of the five staff members. In each of those cases, it recommended that the Navy take action against Losey for violating whistleblower-protection laws, the documents show. The Navy, however, dismissed the findings this month and decided not to discipline Losey, a preeminent figure in the military’s secretive Special Operations forces who once commanded SEAL Team 6, the clandestine unit known for killing terrorist targets such as Osama bin Laden. He now leads the Naval Special Warfare Command and has served in Afghanistan, Iraq, Panama, Bosnia, Somalia and other conflict zones. Senior Navy leaders reviewed the inspector general’s investigations but “concluded that none of the allegations rose to the level of misconduct on Admiral Losey’s part,” Rear Adm. Dawn Cutler, the Navy’s chief spokeswoman, said in a statement. She added that “no further action is contemplated.” Losey did not respond to requests for comment placed through the Navy. Documents show that he vigorously contested the complaints, asserting that the staff members were poor performers and that he had acted within his authority as a commander. The decision clears the way for Losey to pin on a higher rank as a two-star admiral. He was selected for the promotion in 2011, but it was put on hold for four years as the inquiries unfolded.

Tom Krebs Security Attorney

Obama Seeks Broad Bankruptcy Power for Puerto Rico Amid Crisis

President Barack Obama’s administration is pressing for Congress to give Puerto Rico broad powers to file for bankruptcy, seeking to help the commonwealth as it struggles with $73 billion of debt. Congress should boost health-care funding for Puerto Rico and extend independent fiscal oversight to the island, Treasury Secretary Jacob J. Lew, National Economic Council Director Jeff Zients, and Health and Human Services Secretary Sylvia Mathews Burwell said in an e-mailed statement Wednesday. Lawmakers should also extend tax credits that are available to the lowest earners in the U.S., according to the statement. “The decade-long recession has taken its toll on Puerto Rico’s finances, its economy, and its people,” officials said in the statement. “To reward work and break this vicious cycle, Congress should enact proven, bipartisan tools for stimulating growth and rewarding work to people living in Puerto Rico.”

The letter escalates the administration’s role in Puerto Rico’s fiscal crisis. It had previously pushed for Congress to allow some of the island’s agencies to file for bankruptcy, as U.S. cities can, only to see the bill fail to advance. Extending bankruptcy protection to the commonwealth would give it greater power to restructure debt in court, which states can’t do. More:

Cuomo Seeks Statewide Uber Policy, Undercutting New York City


Governor Andrew Cuomo said New York state should create a statewide system for regulating Uber Technologies Inc. and other digital ride-sharing companies, a move that could allow anyone with a car in New York City to play the role of a taxi driver. Cuomo, who made the comments to reporters in New York City on Wednesday at an unrelated event, said a statewide license for companies is needed as they cross municipal borders with fares. New York City allows digital companies such as Uber and Lyft Inc. to operate as for-hire black cars regulated by the city Taxi & Limousine Commission; elsewhere in the world, Uber uses a ride-sharing program that allows drivers to pick up fares with their own cars. “You can’t do Uber city by city,” Cuomo said today. “This would be a statewide franchise.” The governor was asked about legislation pending in Albany after Uber on Tuesday joined Lyft in pushing for the measures that would allow the companies to operate on Long Island and in upstate cities and towns, including Buffalo and Rochester. The bills wouldn’t apply the new regulations, which include an overhaul of insurance rules, to New York City. Cuomo’s support of the measures including the largest U.S. city undercuts Mayor Bill de Blasio, who has backing from the city’s yellow-cab industry and in July sought to cap the growth of the ride-sharing companies to study their affect on traffic and the environment. It’s the latest move in a feud between the two Democrats, self-proclaimed friends for more than 20 years who have battled on everything from raising income taxes on the wealthy to mass-transit funding. Karen Hinton, a de Blasio spokeswoman, didn’t immediately respond to a request for comment.

The Myth of Welfare’s Corrupting Influence on the Poor

Does welfare corrupt the poor? Few ideas are so deeply ingrained in the American popular imagination as the belief that government aid for poor people will just encourage bad behavior. The proposition is particularly cherished on the conservative end of the spectrum, articulated with verve by Charles Murray of the American Enterprise Institute, who blamed welfare for everything from higher youth unemployment to increases in “illegitimacy.” His views are shared, to a greater or lesser degree, by Republican politicians like the unsuccessful presidential candidate Mitt Romney and Paul Ryan, the chairman of the House Ways and Means Committee. But even Franklin Delano Roosevelt, the father of the New Deal, called welfare “a narcotic, a subtle destroyer of the human spirit.” And it was President Bill Clinton, a Democrat, who put an end to “welfare as we know it.” Today, almost 20 years after Mr. Clinton signed a law that stopped the federal entitlement to cash assistance for low-income families with children, the argument has solidified into a core tenet influencing social policy not only in the United States but also around the world. And yet, to a significant degree, it is wrong. Actual experience, from the richest country in the world to some of the poorest places on the planet, suggests that cash assistance can be of enormous help for the poor. And freeing them from what President Ronald Reagan memorably termed the “spider’s web of dependency” — also known as forcing the poor to swim or sink — is not the cure-all for social ills its supporters claim. One billion people in developing countries participate in a social safety net. At least one type of unconditional cash assistance is used in 119 countries. In 52 other countries, cash transfers are conditioned on relatively benign requirements like parents’ enrolling their children in school. Abhijit Banerjee, a director of the Poverty Action Lab at the Massachusetts Institute of Technology, released a paper with three colleagues last week that carefully assessed the effects of seven cash-transfer programs in Mexico, Morocco, Honduras, Nicaragua, the Philippines and Indonesia. It found “no systematic evidence that cash transfer programs discourage work.” A World Bank report from 2014 examined cash assistance programs in Africa, Asia and Latin America and found, contrary to popular stereotype, the money was not typically squandered on things like alcohol and tobacco. Still, Professor Banerjee observed, in many countries, “we encounter the idea that handouts will make people lazy.” Professor Banerjee suggests the spread of welfare aversion around the world might be an American confection. “Many governments have economic advisers with degrees from the United States who share the same ideology,” he said. “Ideology is much more pervasive than the facts.” What is most perplexing is that the United States’ own experience with both welfare and its “reform” does not really support the charges. Take births to single mothers. Already in 1995, an analysis of rates of birth to unwed mothers by Hilary Hoynes of the University of California, Berkeley, found that welfare payments did not increase single motherhood. And the experience over the next 20 years suggested that ending welfare did not reduce it. The charge that welfare will become a way of life reproducing itself down the generations is also dubious. Before welfare reform in 1996, some four in 10 Americans on welfare were on it for only one or two years. Only about a third were on it for five years or more. And what about jobs? There is little doubt that welfare can discourage employment, particularly when recipients lose benefits quickly as their earnings from work rise. More:


Private probation service that left Alabama, targeted in Mississippi ‘debtor’s prison’ suit

Judicial Correction Services, the private probation service that announced this week it was ceasing operations in Alabama, is a defendant in a class action lawsuit filed Tuesday in Mississippi. The suit, filed by the American Civil Liberties Union, alleges JCS, the city of Biloxi, its police chief and a municipal judge operate “a modern day debtor’s prison …(and) arrests and jails impoverished people in a scheme to generate municipal revenue through the collection of fines, fees and court costs imposed in traffic and other misdemeanor cases.” One of the plaintiffs, Qumotria Kennedy, a 36-year-old single mother, told The Guardian she was jailed for five days because she was unable to $1,000 in fines and fees. “It was filthy,” she told the Guardian. “The toilet wasn’t working, there was no hot water and I was put in the cell with a woman who had stabbed her husband, so I was scared the entire time. For the first three days, they wouldn’t even let me tell my kids where I was.” “According to the lawsuit, seven months of public records released by the Harrison County Adult Detention Center show that at least 415 people were jailed between September 2014 and March 2015 on charges for failing to pay off their debts owed to Biloxi, MSNBC reported. “The alleged victims include Joseph Anderson, a 52-year-old man with disabilities who according to the lawsuit was unable to pay his $200 traffic fine in full – he made what payments he could using his disability checks. Anderson said he was not aware that police had issued a warrant for his arrest until they stormed into his home and took him away in handcuffs,” the report continued. The federal lawsuit is the latest in a series nationwide to claim that authorities are ignoring constitutional protections against imprisoning poor people for unpaid fines. A similar suit was filed last week alleging illegal detentions in Jackson, Miss. “These two cases are really part of what it a nationwide scourge of debtors’ prisons,” said Nusrat Choudhury, a lawyer for the ACLU.

Alabama Accountability Act groups award 3,600 scholarships

Tax-exempt organizations created under the Alabama Accountability Act awarded about 3,600 scholarships totaling $8.2 million during the quarter that ended Sept. 30. That’s according to quarterly reports filed by five scholarship granting organizations with the Alabama Department of Revenue. Two SGOs — the Alabama Opportunity Scholarship Fund, whose board chairman is former Gov. Bob Riley, and Scholarships for Kids — awarded the vast majority of the scholarships. Twenty-four percent of the scholarships went to students zoned for public schools designated as failing schools under the Accountability Act definition. Students from failing schools get first priority for the scholarships. Failing schools are those that rank in the bottom 6 percent on reading and math assessments, excluding those that exclusively serve special education students. In 2014, the SGOs awarded 5,776 scholarships, with 29 percent going to children who were zoned for failing schools. The family income limit for first-time scholarship recipients is 185 percent of the federal poverty limit, the amount used to determine eligibility for free or reduced lunch in public schools. That’s $44,862 for a family of four. The reports were posted by the Department of Revenue.:

Task force arrests shuts down multi-million dollar drug operation in Jefferson County

A multi-million dollar heroin and cocaine trafficking operation in Jefferson County has been shut down and 22 people have been arrested after a lengthy joint-investigation by federal and local law enforcement agencies, U.S. Attorney Joyce White Vance announced at a news conference today. The arrests come after a nearly 3-year probe into the operation, which was allegedly led by 37-year-old Patrick Dewaye Hall, who has been in custody since Aug. 1 . Others indicted connection with the investigation:  Jesstifur Jahalia Ferrari Hurst, 29, David Wayne Mcdaniel, Eric Demond Hall, 39, Royce Thermon Johnson, 30, Teddy Tonell Davis, 33, Brandon Dion Lewis, 30, James Marion Robinson Iii, 45, Rodriqus Tyrone Sturdivant, 25, Deangela Kay Mcdaniel, 42, Israel Bravo Olasoagar, 37, Lena Kenya Irvine, 30, and Gerline A. Jones, 70, all of Birmingham; Jesse Tyrone Hurst, 58, Corey Lionel Pitts, 24, And Patricia Ann Nelson, 54, all of Bessemer; Deandre Jadarius Hall, 21, of Hoover, Anthony Dejuan Williams, 45, of Pinson, Justice Martinique Holden, 20, of Huntsville, Sonja Denise Mitchell, 55, of Mccalla, and a defendant known only as “Tweety.”  Quotes from law enforcement: U.S. Attorney Joyce White Vance, “Beginning at 6 a.m. today, a group of federal and local law enforcement officers dismantled a drug-trafficking operation charged with dumping heroin and cocaine onto the streets of our city. The indictment of 24 individuals for either drug trafficking or laundering drug money represents years of dedicated work by the FBI, Jefferson County Sheriff’s Office, IRS-CI, and prosecutors in my office. Solving the problems of crime and addiction related to those drugs requires more than enforcement, though. It requires community awareness of the problems of abuse and addiction, which often start with prescription pills, and a commitment to address those problems by talking to our children about the dangers, safely disposing of unused and unneeded medications, and removing the stigma of addiction so that treatment is more readily sought.” More:

Alabama vs Tennessee: cigar tradition explained

The rivalry between the University of Alabama and the University of Tennessee is old. Over 100 years old. No rivalry lasts that long without a few traditions getting started along the way, and for the University of Alabama, that tradition has been cigars. If the Crimson Tide wins, they light up cigars in the locker room. And the tradition continues today, even if, strictly speaking, it’s against the rules. In our video, we look at how the tradition got started and how it’s managed to stay alive. See video:

Dial has fix for driver’s license office closures: let driver’s ed teachers issue licenses

Sen. Gerald Dial says he has a plan to provide driver’s licenses for residents of rural counties where driver’s license offices were closed recently. Dial, a Republican from Lineville, on Tuesday sent a letter to Gov. Robert Bentley and state schools Superintendent Tommy Bice suggesting that state lawmakers authorize Alabama’s driver’s education teachers to issue driver’s licenses once they administer tests. Officials with the Alabama Law Enforcement Agency announced the closure of 31 driver’s license offices as a way to deal with the department’s pared-down budget for the new fiscal year. Lawmakers in September passed a new budget that cut $11 million from ALEA, giving the agency $45 million. According to an Associated Press report, closing the offices will save the state about $100,000. Those 31 offices included ones in St. Clair, Cherokee, Cleburne and Clay counties. Dial’s Senate District 13 includes Cleburne County and parts of Clay County. The agency’s decision gained national attention when some observers criticized the closures as a means of disenfranchising black voters in light of Alabama’s new requirement that voters show photo ID at the polls. Many of the offices closed were in majority African-American counties that have many Democratic voters. Dial said the voter ID controversy has been taken out of context. Residents can still renew their licenses and get a voter ID in every county, he said. “This in no way has an impact on people voting,” Dial said. “It’s like comparing apples and pumpkins.” But the decision to close the 31 offices has affected teenagers seeking their driver’s licenses in rural counties, he said. “Now my kids have got to go either to Talladega, Anniston or Randolph County,” the senator said, referring to young people in his district. Bentley on Friday announced that state officials would open the offices one day per month.In previous years, many of those offices had a worker from a nearby driver’s license office coming in one day a week. Dial said his plan will help people served by those offices. Vaughn Lee is a driver’s education instructor for Cleburne County High School, and he also provides the service to Clay County teens during the summer. Lee said he currently tests about 120 students per year between the two schools. For the students who pass, he sends in their paperwork to the Department of Education, which sends him back a yellow card for each teenager. Students take the yellow card to a driver’s license office and can skip a field test with a state trooper. But according to Lee, a state trooper or properly certified worker at a driver’s license office must issue the license because of security concerns. Lee said Dial’s idea would speed up the process, but he believes it might be difficult to pass because of security concerns, such as the threat of identity theft. Dial said he’s confident state lawmakers can work with ALEA officials and develop a training course that would authorize driver’s ed teachers to issue licenses. State officials would reimburse the teachers for issuing the licenses. “We’ve got those qualified people that are already there, and we could give them some extra money,” Dial said. According to the senator, the details of the plan still need to be worked out, including which agency will handle the payments to the teachers. In an emailed statement to The Star, Department of Education spokesman Michael Sibley wrote, “Dr. Bice is aware of the correspondence from Senator Dial and, as always, is open to discussion. It is important to note, however, that the state has seen a significant decrease in Driver Education instructors in recent years. Those who remain are already stretched thin with existing responsibilities to students.” Contacted by phone Wednesday morning, Dial said he hadn’t heard from Bentley. Efforts to reach the governor for comment Wednesday were unsuccessful.

46,000 payday loans are taken out in Alabama each week, database shows

A new state database that tracks payday lending shows that people took out 462,209 payday loans — totaling $146 million— from payday loan stores in Alabama in the past 10 weeks. The Alabama Banking Department began tracking the loans in August after winning a court fight over the creation of the database to enforce an existing law that limits people to having no more than $500 in payday loans at one time. The numbers provided a neutral glimpse of how much Alabamians borrow from payday lenders in the state. “Anyone, who looks at these numbers, I challenge them not to have their eyes opened because it is shocking,” Shay Farley, legal director for Alabama Appleseed, which has lobbied for more regulations for payday lenders. Critics of payday lending said the state needs to take additional action to protect borrowers from they call a debt trap, while an industry representative said the database numbers show an industry already in decline from increased state regulation. With payday loans, people pay a flat fee of up to $17.50 per $100 to borrow money for a period of 10 to 14 days. Critics argue the loans become a debt trap when people borrow more money when they can’t pay off the first loan. Farley said Alabama is “above the curve” in payday loan usage. South Carolina, which has a similar population size and loan limits, had about one million payday loans in all of 2013. The state of Washington had 871,801 loans in 2013, Farley said. “In other states that have moved for reforms, there has been no rioting in the streets to bring back payday loans,” Farley said. However, an industry representative said the numbers show that people need the service and that the industry is taking a hit from regulation.


The confederate flag and window dressing racism by Kyle Campbell

I can’t tell you the date; all I remember is that it was a Sunday morning. It was one of many long, nondescript Sunday mornings I spent on the hour-long ride from my home in the Wiregrass to DeFuniak Springs, Florida, where my family attended church. I don’t know what it was that made it stick out to me that day. I had seen it so many times before. All I know is that it sparked an unrelenting flame of self-awareness, one that flickers from time to time but burns often enough to remind me of who I am. That confederate flag on the grounds of the DeFuniak Springs courthouse still flies today. I didn’t really understand it at the time, given that we had just learned about the Civil War in school, and I was told that the South lost, so I asked my dad about it. After that morning’s benediction at the A.M.E. church I attended for my entire childhood, we stopped at my aunt’s house near Lake DeFuniak, in what I would learn was the “white” side of town, to drop off my younger sister. She loved to read, so I left her my copy of Shel Silverstein’s Where the Sidewalk Ends, and got back in the car. The sidewalk ended about half a mile down the road. We entered a neighborhood I vaguely remembered but had never stopped in. I saw my father’s childhood home, across the street from Tivoli, the old black high school where my grandfather, a 27-year city councilman at the time of his death, had served as principal. I saw streets named after my family members and kids I recognized from church playing in the streets. But I also saw a new kind of poverty. There were no sidewalks in this neighborhood or even streetlights. The smooth, concrete roads near my aunt’s house were replaced – exactly at the line where Jim Crow once used his batons and water hoses to separate black from white – by rough asphalt. And then I understood. In a city where government services were still denied to the population that needed them most, where my aunt’s presence in a white neighborhood was the exception to a nearly unbreakable rule, flying the confederate flag on municipal property made sense. Perhaps it’s time we fly the confederate flag on the campus of The University of Alabama. Why shouldn’t we? My history teachers throughout middle and high school were quick to defend the South. “Northerners are just as racist,” they said. “They’ll just hide it from you. Racism in the South is more straightforward.” So what’s happened to the University? Has our influx of out-of-state students made us become the dreaded Yankees? Are we afraid to show the world our true colors? Not quite. The building my honors classes are in is named after a prominent eugenicist, so that’s a step in the honest direction. In fact, the names of ardent white supremacists grace the mantles of several buildings on campus, ironically including B.B. Comer Hall, which houses our international programs. Our streets are still lined with antebellum mansions filled with mostly white, privileged youths being served by all-black kitchen staffs, and we remain one of the only major schools in the country without an office of diversity. Yet still, my time at this institution, and all of its recent history, has been characterized by an administration eager to apply Band-Aids to bullet wounds. In 2013, after being dragged kicking and screaming into making minor changes to the white Greek system, all was well. The perverse doctrine of progress advocated by those who wish to see more black and female Fortune 500 CEO’s, in which the oppressed are not liberated, but a select few minorities are allowed to join the ranks of the oppressors, had been achieved. Bill Cosby even came to campus to celebrate. Just a few years before, the University dedicated Malone-Hood plaza, celebrating the first black students to attend The University of Alabama, while half-heartedly “investigating” the racial slurs chalked across campus that year. But building that plaza while doing nothing about the structural inequalities it represents is no different than building a memorial for an ongoing war. Attempting to reconcile problems of the past in place of correcting the problems of the present is ignorant at best and vindictive at worst. Legend has it that Louisa Francis Garland, First Lady of the University during the Civil War, stopped Union soldiers from burning down the President’s Mansion as they burned the rest of the campus. Sometimes I wish she hadn’t. Sometimes I wish I could stand on the ashes of the remaining slave-built properties on this beautiful campus and rejoice. But it wouldn’t matter. They would just rebuild them and name them after more people who hate me. So I’m conceding defeat. I no longer believe this is a place that will be fixed. Fly your flag, keep the names of racists on your buildings, but don’t you dare pretend that this school was built for me any more than it was for Autherine Lucy or Vivian Malone or James Hood. As long as the sidewalk ends at every black front door, you’re all still confederates. Kyle Campbell is a junior majoring in political science. His column runs biweekly on Wednesdays.

The Best Millennial Rant You’ll Ever Read By a spirited Millennial

I hear this all the time. Millennials are lazy. Well here’s the thing. We are a generation that graduated into a terrible recession (like many have before us) but the difference is at the same time our college degrees for the first time have been rendered nearly useless as a “leg up” into the working world and is now a requirement. At the same time, it has never been more expensive to be in the “middle class” and a college degree has never cost more. To top it off, we live in globalized economy. We’re now competing in real time with people who can do our jobs cheaper remotely from across the globe. And finally, many of the jobs that now are taking off require technological skills that didn’t even exist five to 10 years ago. So we are expected to be lifelong learners. And work for cheap. And be grateful for it. An oh, by the way, thanks to the recession there are now people who are 10 years older than we are who lost their jobs in the crash who are competing for the same jobs as we are. We are the best educated generation in the history of society. We were raised on the promise that if you worked hard and studied hard you could make it at least into the middle class. But then we watched all of that get ripped away in the Great Recession while we were still in college taking on mountains of student debt. Upon graduation, we got turned away from jobs that wouldn’t hire us because we “lacked experience.” Which, of course, none of us could get without someone hiring us. I wonder if the people who call us “lazy” have looked at the qualifications required for an entry level office job these days. I’ll tell you what is probably on there: BA required.

  • Probably some technology requirements. Not just Microsoft Office, which is a given, but probably Web platform software, SPSS, or a data program of some kind.
  • Most will ask for a writing sample.
  • Sometimes – if you are able to get an interview – there will be a writing or analytics task.

All that on top of the soft skill requirements that come with an office job, but which no one really teaches you in school.  This current system is particularly damaging to low-income populations or anyone who doesn’t have post-secondary education because it’s not like anyone at school is telling you how to write a professional email. As a millennial with a professional interest in workforce development, I feel I am responsible for understanding the issues from both sides. And while I appreciate that my childhood came with a whole suite of amenities and opportunities that were unavailable to previous generations, I think that older generations have a general lack of understanding of the new challenges that come with being a young professional today that simply didn’t exist when they entered the workforce. Furthermore, many of the people who are at the top of the ranks now rose during the epic ’90s economic boom, and then credited themselves for their hard work instead of their good fortune. They worked hard and got lucky. We are also working hard and have been relatively unlucky. So, of course we’re angry. We’ve been unlucky because those in charge while we were still kids destabilized our financial system, weakened the labor unions, reduced the social safety net and then watched while this economy collapsed and blamed the working poor for not trying hard enough. Meanwhile we took on massive loads of debt, hoping we could educate ourselves out of the recession, because that’s what our parents told us to do, and now 44 percent of us are underemployed or in dead end jobs. Moreover, there’s a common intergenerational conflict at play here. Unsurprisingly, older people don’t like listening to younger people so there’s a general feel of … ‘they are lazy and anything they say to the contrary is merely whining.’ The flaw in that argument is that we’re the largest living generation as of this year, and also the largest segment in the workforce. Functionally, we cannot be ignored.And yes, our values are different from our parents. Much like the Baby Boomers had different values from their parents – Woodstock, the hippie movement, anti-war protesting, rock ‘n’ roll .. Drugs… Women’s lib… Right to choose… Race relations… We’re actually really similar to young Baby Boomers in our idealism. Furthermore, we came of age during the recession, making us fiscally cautious like the Greatest Generation due to their childhoods in the Depression Era.  Finally, we’re the first generation to start work in an age where there is a blurred line between work and home. Recognizing that finding a balance is important, we value extra benefits, flexibility, and work that makes us feel like we’re going to make a difference. No one really works 9 to 5 anymore, and we don’t want to get stuck in unfulfilling jobs and further stunt our professional growth that has already been stymied by the challenges of the hand we were dealt. Basically, the guy who says Millennials are lazy clearly hasn’t spoken with many.


Morning Money

NO GO JOE — POLITICO’s Gabriel Debenedetti and Nick Gass report: “Vice President Joe Biden on Wednesday ended months of breathless will-he-or-won’t-he speculation about a potential presidential run, saying he’s concluded that he’s simply “out of time” to mount a real and winnable campaign. The announcement, in the Rose Garden, with Biden flanked by President Barack Obama and his wife, Jill, means the vice president is foregoing what would have been a third run and likely the last chance to fulfill a lifelong quest to the highest office in the nation.”

BIDEN ON WHY HE SAID NO — “I’ve said all along what I’ve said time and again to others: that it may very well be that that process, by the time we get through it, closes the window on mounting a realistic campaign for president: that it might close. I’ve concluded that it has closed.”

M.M. FLASH BACK — From Oct. 15th: BYE BYE BIDEN? — Via a plugged in Dem consultant: “After Hillary’s impressive performance … it’s tough to see a clear path for him. Unless he’s rescuing the party from a debacle, there is no clear rationale for him to get in.”

HOW IT WENT DOWN — POLITICO’s Edward-Isaac Dovere and Glenn Thrush: “[C]onversations with people in the Biden orbit, advisers, White House staffers and others involved with the discussions about a possible presidential run over the last few weeks and days help explain why the prospects of a run ebbed and flowed so dramatically: Biden was ebbing and flowing that dramatically himself.

“Yet many of them went into the weekend thinking that at the last moment, Biden was going to be a yes. The decision about a campaign manager was looking settled. On Sunday night, Draft Biden staffers were locking down social media and URLs for a new super PAC … The conversations were turning to how big or small the kickoff rally should be. Aides showed up to work on Monday morning convinced he had finally made up his mind to run. Then Biden arrived.”

RYAN MOVES AHEAD WITH SPEAKER BID — POLITICO’s Jake Sherman and Lauren French: “Rep. Paul Ryan will proceed with plans to run for House speaker despite not securing the formal endorsement of the House Freedom Caucus … Ryan’s decision, which came after a high-stakes meeting with the group of House conservatives earlier in the day, all but ensures that the Ways and Means Committee chairman will succeed John Boehner as Republican leader at the end of the month. …

“During a separate meeting later Wednesday night, roughly two-thirds of Freedom Caucus members vowed to back Ryan for the top leadership job. The group’s internal rules, however, dictate that it takes an 80 percent threshold to issue a formal endorsement. The difference was not enough to deter Ryan from mounting a campaign for the job.”

WHAT IT MEANS FOR WALL STREET — The corporate class of the GOP would of course welcome a Ryan speakership for its promise of fewer near-death experiences on the debt limit and government shutdowns. The business community will also embrace the hope of Ryan cutting deals with Democrats on at least some elements of corporate tax reform. But it’s not at all clear that even if Ryan gets the job — as now seems close to certain — that he will be able to corral GOP support for fiscal legislation any better then John Boehner. In fact his lukewarm backing from the Freedom Caucus may prove the high water mark of Ryan’s success with the party’s hard right flank. Boehner clearing the decks before hitting the road still seems like the best shot to take DC chaos off the Wall Street worry list.

BERNANKE: PUZZLED BY GLASS-STEAGALL FOCUS — Thanks to everyone who packed the house at Nasdaq for our interview with former Fed Chair Ben Bernanke and to those who joined on the livestream … POLITICO’s Nick Gass: “Bernanke is ‘a little puzzled’ by the focus of some Democratic presidential candidates on reinstating the Glass-Steagall Act as a means of regulating or breaking up financial institutions, the former Federal Reserve chairman said Wednesday. Democratic candidates Bernie Sanders and Martin O’Malley have pledged to reinstate the Depression-era act … Hillary Clinton’s proposal for Wall Street reform does not include an explicit call for the break-up of so-called ‘too big to fail’ financial institutions.

“‘I’m actually a little puzzled by the focus on that particular provision,’ Bernanke said during a discussion with POLITICO’s Ben White at an America’s Fiscal Future event in Manhattan. ‘I think that if you look at the actual, what happened a few years ago in the crisis, that Glass-Steagall was pretty irrelevant to it because you had banks like Wachovia or [Washington Mutual] that went bad because they made bad loans, and you had investment banks like Bear Stearns and Lehman that went bad because of their investment banking activities.”


COMING UP NEXT — M.M. will sit down with Sen. Elizabeth Warren (D-Mass.) and CFPB Director Richard Cordray next Wednesday, Oct. 28th in DC. Please join us!

CNBC LAYS OUT DEBATE DETAILS — Per release: “Moderated by CNBC’s Carl Quintanilla, co-anchor of “Squawk on the Street” and “Squawk Alley,” Becky Quick, co-anchor of “Squawk Box” and Chief Washington Correspondent John Harwood, the debate will focus on the key issues that matter to all voters — job growth, taxes, technology, retirement and the health of our national economy. The RNC sanctioned debate will be held at the Coors Events Center at the University of Colorado Boulder and broadcast live on CNBC.

“The following 10 candidates will take the stage shortly after 8PM ET: Donald Trump: 25.22; Ben Carson: 19.78; Marco Rubio: 9.67; Jeb Bush: 8.11; Carly Fiorina: 8.11; Ted Cruz: 6.89; Mike Huckabee: 3.56; Chris Christie: 3.00; John Kasich: 3.00; Rand Paul: 3.00. … This specified group of national polls were also used to determine the order that the candidates will appear on stage. Donald Trump and Ben Carson will anchor the center of the stage for the 8PM ET debate

GOOD THURSDAY MORNING — Catch M.M. around 10:15 a.m. on CNBC to talk about Hillary Clinton’s Benghazi testimony. Email me on and follow me on Twitter @morningmoneyben

MEET THE METS! — The Metropolitans are World Series bound after sweeping the Cubs with an 8-3 win last night. Daniel Murphy homered for a record sixth straight post-season game (and had 4 hits) continuing an astounding run.

DRIVING THE DAY — Clinton testimony begins at 10:00 a.m. … Senate Energy and Natural Resources Committee holds a hearing at 10:00 a.m. on Puerto Rico … House Financial Services has a housing hearing at 10:00 a.m. … President Obama hosts Prime Minister Sharif of Pakistan for a bilateral meeting … Existing Home Sales at 10:00 a.m. expected to rise to 5.39M … Index of Leading Indicators at 8:30 a.m. expected to be flat

ALSO TODAY — OFR and the University of Michigan kick off a two-day meeting on financial stability. Agenda:; Livestream:

COMING NEXT WEEK: AEI EVENT IN COLORADO — Per release: “If you’re going to be out in Colorado next week for the GOP economic debate, check out the fantastic panel hosted by AEI and the CU Boulder economics department — a pre-debate conversation previewing the most important topics ahead of the debate. Michael Strain, Ali Velshi, James Pethokoukis, and Jeffrey Zax will be talking growth, tax plans, jobs, and presidential economic policies.”

M.M. WEATHER WATCH: EL NINO EDITION — Via Bloomberg: “It has choked Singapore with smoke, triggered Pacific typhoons and left Vietnamese coffee growers staring nervously at dwindling reservoirs. In Africa, cocoa farmers are blaming it for bad harvests, and in the Americas, it has Argentines bracing for lower milk production and Californians believing that rain is finally, mercifully on the way. El Nino is back and in a big way. Its effects are just beginning in much of the world — for the most part, it hasn’t really reached North America — and yet it’s already shaping up potentially as one of the three strongest El Nino patterns since record-keeping began in 1950. …

“It will dominate weather’s many twists and turns through the end of this year and well into next. And it’s causing gyrations in everything from the price of Colombian coffee to the fate of cold-water fish … The last time there was an El Nino of similar magnitude to the current one, the record-setting event of 1997-1998, floods, fires, droughts and other calamities killed at least 30,000 people and caused $100 billion in damage”

TREASURY LAYS OUT PUERTO RICO PLAN — Per Treasury: “The proposal the Administration released today includes four central elements. First, Congress must provide Puerto Rico with an orderly restructuring regime … Congress should provide independent fiscal oversight to certify that Puerto Rico adheres to the recovery … Congress needs to reform the Commonwealth’s Medicaid program … Congress should provide Puerto Rico with access to the Earned Income Tax Credit (EITC), a proven tool that has bipartisan support for rewarding work and supporting growth”

THAIN LEAVING CEO JOB AT CIT — NYT’s Michael J. de la Merced: “After leading a yearslong turnaround of the CIT Group, a major lender to small and midsize businesses, John A. Thain — the executive who sold Merrill Lynch during the depths of the financial crisis — will retire. … CIT said on Wednesday that Mr. Thain, its chief executive, would step down from that role on March 31, as the firm continued on its path toward becoming a full-fledged commercial bank. Mr. Thain is not completely severing ties with the lender. He will retain his position as chairman.

“Landing at CIT proved to be a comeback story of sorts for Mr. Thain, who rose quickly through the ranks of Goldman Sachs before becoming the head of the New York Stock Exchange. He then jumped to Merrill Lynch as chief executive, where he engineered the $50 billion sale of the Wall Street stalwart to Bank of America to save the firm. Yet he was ousted from Bank of America a few months later, in 2009, amid multibillion-dollar losses, huge bonuses to staff members and a controversial renovation to his office”

DEFAULT FEARS WORRY MARKETS — FT’s Barney Jopson and Sam Fleming in Washington: “Political skirmishes over US government borrowing intensified on Wednesday as anxiety grew in the bond market over a potentially catastrophic debt default that is less than two weeks away. … Although most investors and analysts assume that Congress will avoid a default, the mere prospect of a breach has started to affect financial markets. In recent days the yield on four-week US Treasury bills has jumped as default worries depress the price of tradeable federal debt.

“Republicans are leery of any increases in government spending. But Senator Chuck Schumer, a top Democrat, said their plans to deal with the debt ceiling ‘are nothing more than default and economic collapse by another name’. Republicans in the House of Representatives — where the party faces a leadership vacuum — were set to vote on a bill on Wednesday that would allow the US to prioritise its debt obligations if it hit the borrowing limit.”

VALEANT DENIES IMPROPER ACCOUNTING — NYT’s Jonathan D. Rockoff and Maureen Farrell: “In a chaotic day of trading, once-highflying Valeant Pharmaceuticals International Inc. defended itself Wednesday against some of the most severe criticism yet of its business practices, denying allegations of improper accounting from an investor who is betting against the company. … The short-seller’s report briefly knocked Valeant’s stock down 40 percent — wiping some $20 billion from its market value — before the stock made up some of the loss after analysts expressed support and shareholder William Ackman jumped in to buy more stock.

“The report, from research firm Citron Research, fanned concerns about Valeant’s accounting, raising questions about its use of certain pharmacies to supply its drugs and its accounting for the dispensing. After the stock plunge, Valeant ‘categorically’ denied the report and said its ‘false and misleading statements about Valeant appear to be an attempt to manipulate the market’ to drive down the stock.”

CANADA REJECTS AUSTERITY — Larry Summers: “[I]n an era of extraordinarily low interest rates and slow growth, it is becoming increasingly clear that progressives do best when they reject austerity and embrace public investment. The British Labour Party and the Canadian NDP sought to demonstrate their soundness by embracing budget balancing as an objective. Their results were terrible. The Canadian Liberals on the other hand were rewarded for a very different choice”

MORE ON THE SEC NOMINEES — BPC’s Justin Schardin on why Obama’s GOP pick may get a longer term than his Democratic selection.

POTUS Events

In the morning, the President and the Vice President will receive the Presidential Daily Briefing in the Oval Office. This meeting is closed press.

In the afternoon, the President will travel to Charleston, West Virginia, to host a community discussion on the prescription drug abuse and heroin epidemic. The President’s departure from the South Lawn is open press, and the arrival at McLaughlin Air National Guard Base is open to pre-credentialed media.

While in Charleston, the President will participate in a community forum to discuss local, state and federal efforts as well as private sector initiatives with those who are addressing the epidemic on a daily basis. The President’s remarks at East End Family Resource Center are open to pre-credentialed media.

Later in the afternoon, the President will depart Charleston en route Washington, DC. The departure from McLaughlin Air National Guard Base is open to pre-credentialed media, and the arrival on the South Lawn is open press.

In the evening, the President will host a group of House and Senate Democrats for a working reception at the White House to talk about shared priorities in trade. This event in the State Dining Room is closed press.

Floor Action

The House is in at 10 a.m. The only series of votes will be between 3 p.m. to 4 p.m. and will be taking up the National Strategic and Critical Minerals Production Act. The Senate is in at 10 a.m. and will continue working on cybersecurity legislation. Votes will be held at 11 a.m. on amendments, and another round of votes will be held at 1:45 p.m. on ambassador nominations.

IRS Urges Public to Stay Alert for Scam Phone Calls

The IRS continues to warn consumers to guard against scam phone calls from thieves intent on stealing their money or their identity. Criminals pose as the IRS to trick victims out of their money or personal information. Here are several tips to help you avoid being a victim of these scams:

  • Scammers make unsolicited calls.  Thieves call taxpayers claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via phishing email.
  • Callers try to scare their victims.  Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.
  • Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.
  • Cons try new tricks all the time.  Some schemes provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. Others use emails that contain a fake IRS document with a phone number or an email address for a reply. These scams often use official IRS letterhead in emails or regular mail that they send to their victims. They try these ploys to make the ruse look official.
  • Scams cost victims over $23 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 736,000 scam contacts since October 2013. Nearly 4,550 victims have collectively paid over $23 million as a result of the scam.

The IRS will not:

  • Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount you owe.
  • Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
  • Ask for your credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes, or have no reason to think that you do:

  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe tax:

  • Call the IRS at 800-829-1040. IRS workers can help you.

Phone scams first tried to sting older people, new immigrants to the U.S. and those who speak English as a second language. Now the crooks try to swindle just about anyone. And they’ve ripped-off people in every state in the nation.

Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on

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 21 October 2015


Assad Makes Unannounced Trip to Moscow to Discuss Syria With Putin

MOSCOW — President Vladimir V. Putin of Russia called his counterpart, Bashar al-Assad of Syria, to Moscow for an unannounced visit to discuss their joint military campaign and a future political transition in Syria, the Kremlin announced on Wednesday. According to a transcript posted on the Kremlin’s website, Mr. Putin told the Syrian leader during the meeting late Tuesday that Russia was ready to contribute to the fight against terrorism and to a political settlement of the conflict that has raged for more than four years. Mr. Assad, in turn, briefed the Russian leader about the situation on the ground and on next steps. The surprise visit — evidently Mr. Assad’s first outside Syria since the civil war began there in 2011 — highlighted how the political and military horizon of the long war of attrition has shifted drastically because of Russia’s intervention. In the brief remarks released by the Kremlin, Mr. Putin told Mr. Assad that the military and political issues were linked. “On the question of a settlement in Syria, our position is that positive results in military operations will lay the basis for then working out a long-term settlement, based on a political process that involves all political forces, ethnic and religious groups,” Mr. Putin said. “Ultimately, it is the Syrian people alone who must have the deciding voice here.” In his response, Mr. Assad said that Russian intervention had halted the spread of terrorism and that a political transition could come after that threat was addressed. More:

Justin Trudeau, Son of a Canadian Leader, Follows His Own Path to Power

OTTAWA — When Justin Trudeau moves into the prime minister’s official residence, it will be a homecoming. His parents lived there, in the gray stone house at 24 Sussex Drive in Ottawa, when he was born on Christmas Day in 1971. In a country where political dynasties are rare, Mr. Trudeau will be the first Canadian to follow a parent into the country’s highest political office, thanks to his Liberal Party’ssurprisingly sweeping victory in the election on Monday, ending nine years of Conservative government. And there are many easy parallels to draw between him and his father, Pierre Elliott Trudeau, who led the country for 15 years beginning in 1968. Start with the superficial: good looks, rugged athleticism, glamorous wife, rapturous fans. More substantially: unusual outspokenness, reputations as agents of change, a sharp upward trajectory in the Liberals’ fortunes on each man’s watch. Without doubt, the good luck to be born with Pierre’s surname was a big help. But Justin Trudeau is no dynast who slipped effortlessly into a family political machine. He did not even enter politics until 18 years after his father gave it up, and seven years after his father’s death. He built his own cadre of advisers, mostly from his own generation. And at key points in his career, he chose more difficult roads — partly, it appears, to show he had not been handed a life in politics on a platter.  More:

An Exploding Pension Crisis Feeds Brazil’s Political Turmoil

SÃO PAULO, Brazil — When Rosângela Araújo turned 44, she decided that she had worked long enough. So Ms. Araújo, a public school supervisor, did what millions of others in their 40s and 50s have done in this country: She retired, with a full pension. “I had to take advantage of the benefit that was available to me,” said Ms. Araújo, now 65. Her government pension stands at about $1,000 a month, five times the minimum wage. An exploding pension crisis here in Brazil, Latin America’s biggest country, is wreaking havoc on its public finances, intensifying a political struggle over the economy that already has the president fighting for survival. Brazilians retire at an average age of 54, and some public servants, military officials and politicians manage to collect multiple pensions totaling well over $100,000 year. Then, once they die, loopholes enable their spouses or daughters to go on collecting the pensions for the rest of their lives, too. The phenomenon is so common in Brazil’s vast public bureaucracy that some scholars call it the “Viagra effect” — retired civil servants, many in their 60s or 70s, wed to much younger women who are entitled to the full pensions for decades after their spouses are gone. More:

EU: Starbucks, Fiat profited from illegal tax breaks

The European Union demanded Wednesday that coffee chain Starbucks and carmaker Fiat each repay up to $34 million they received in tax breaks from Luxembourg and the Netherlands. The ruling, which follows an investigation launched last year by the European Commission — the 28-nation bloc’s executive arm — could mean that global multinationals are faced with fewer options when they look for countries with favorable tax deals. Wednesday’s decision applies to tax breaks given to Starbucks and Fiat as a result of what the EU called “artificial and complex” tax methodologies. “Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules. They are illegal. I hope that, with today’s decisions, this message will be heard by member state governments and companies alike,” EU antitrust CommissionerMargrethe Vestager said in a statement from Brussels. “All companies, big or small, multinational or not, should pay their fair share,” she said. Corey duBrowa, a Starbucks spokesperson, said the company “shares the concerns expressed by the Netherlands government that there are significant errors in the (EU) decision, and we plan to appeal.” “Starbucks complies with all OECD rules, guidelines and laws and supports its tax reform process. Starbucks has paid an average global effective tax rate of roughly 33%, well above the 18.5% average rate paid by other large U.S. companies,” he said. The Dutch government said it was “surprised” by the ruling because the arrangement was in line with international standards. Representatives from Fiat and Luxembourg’s national tax authority were not immediately available for comment. The EU’s case is based around how Starbucks and Fiat establish taxable profits. “They do not reflect economic reality,” the European Commission said. More:

Reports: Iran’s supreme leader endorses landmark nuclear deal

Iran’s supreme leader on Wednesday endorsed the landmark nuclear deal with world powers, according to his official website. Ayatollah Ali Khamenei endorsed the deal in a letter to moderate President Hassan Rouhani that was also read on state TV, the Associated Press and Reuters said. Iran’s parliament and the country’s top clerics previously approved the deal, but Khamenei has the final say on major policies. In the United States, congressional Democrats previously blocked a Republican resolution to scupper the agreement. The U.S., Britain, France, China, Russia and Germany reached an accord with Iran in July that would see Tehran curb its nuclear activities in exchange for lifting sanctions. President Obama on Sunday signed an order directing his administration to begin issuing waivers to the sanctions once Iran meets certain tests that need to be certified by the International Atomic Energy Agency.

Why Pope Francis’s fight in Rome is about more than sex and marriage

At Pope Francis’s closed-door meeting in Rome this month, top clergy are intensely debating whether the church should bend more to the messy realities of modern families. On the ground, however, it already has. Questions on the agenda at the rare, high-level meeting that ends this weekend include whether those who divorce and remarry outside the church can receive Communion, and whether there is a place in Catholic life for same-sex couples. Changing Catholicism’s stance towards such things could begin to unravel the unity of the world’s largest church, say opponents who see the debate in Rome as directly tied to the future of Catholicism. But in many parts of the world – the West in particular – the church has for years quietly been making changes to engage with Catholic families who are transforming in ways that mirror the rest of the society. Seminaries and theology schools have added classes on sex and family that were absent a decade or two ago. Some of the highest-level bishops are open about not denying Communion outright to anyone, even if the person appears to be violating church teachings on the family. And Pope Francis has changed the entire conversation about what threatens family stability by emphasizing things like economic stress and cultural isolation rather than a deviation from orthodox sexual ethics. Much of this is happening because church leaders have lived through the same dramatic social changes as everyone else, shifts that have raised new questions. Will the church not recognize longtime committed same-sex couples, including those who are married, in a society that is rapidly accepting gay equality? Or accept expanding reproductive technologies (some now forbidden)? Or reconsider the validity of a second marriage in a world where life spans are dramatically expanding?


The Most Diverse S.E.C. Ever May Be Taking Shape

President Obama on Tuesday announced he would nominate Lisa M. Fairfax to be a commissioner to the Securities and Exchange Commission, elevating a law professor who has studied shareholder activism after progressive groups lobbied intensely against naming a Wall Street insider. The selection of Ms. Fairfax, 44, a Harvard-trained legal scholar who teaches securities law and contracts courses at the George Washington University Law School, is the latest sign of the influence of the Democratic Party’s liberal wing in shaping Mr. Obama’s selections for key financial posts. Mr. Obama will also nominate Hester Maria Peirce, 45, a former Senate aide and S.E.C. lawyer who has been a vocal critic of the Dodd-Frank financial protection law, to fill a Republican vacancy on the commission. If the nominations are confirmed by the Senate, it would make the S.E.C. the most diverse it has ever been. Four of the five commissioners will be women for the first time, and Ms. Fairfax would be only the third African-American commissioner in the history of the agency. Senator Sherrod Brown, Democrat of Ohio, supported Ms. Fairfax at the White House. Mr. Brown “urged the administration to choose someone for the Democratic seat who would be a strong advocate for investors and committed to enforcing the law,” said Greg Vadala, a spokesman. “Ms. Fairfax fits the bill.” The selection of Ms. Fairfax comes after a coalition of investor protection groups wrote to Mr. Obama in June charging that his administration had populated the S.E.C. with “‘revolving door’ insiders with a history of moving back and forth between Wall Street firms seeking to escape accountability and the agency charged with defending the public interest,” and calling on him to tap an independent voice. Marcus Stanley, the policy director of Americans for Financial Reform, the nonprofit coalition that coordinated the letter, said his organization was withholding judgment for now on Ms. Fairfax’s nomination. But Mr. Stanley said the group was pleased that Ms. Fairfax appeared to represent a break from the administration’s practice of selecting corporate defense lawyers beholden to the industry they are supposed to be regulating. “She is not a revolving-door candidate, so that is a positive thing,” Mr. Stanley said. “These candidates often face career-based conflicts of interest and they often have internalized this very pro-industry way of looking at issues.” More:

Welcome to CR Hell

The deal closed in Washington on Sept. 30 seemed, in the moment, like the end of a drama. Just as the fiscal calendar ran out, Congress voted for a last-minute agreement to keep the government from shutting down. Lawmakers agreed on a temporary funding patch, the president signed it, and America’s attention quickly moved on to the next political showdown. In official terms, they passed a continuing resolution, and it felt like a crisis averted. It wasn’t. In the more than 100 federal offices, agencies and departments that actually use the money, the crisis was only beginning. With a real spending deal for fiscal year 2016 still uncertain, they started to run a drill that has become depressingly familiar. Under the continuing resolution, multi-year projects like constructing new Coast Guard ships and launching weather satellites faced new delays. Hiring departments closed. Budget officials began to tally losses as their typically powerful purchasing power dwindled. For pretty much the rest of this year, and perhaps 2016, too, the U.S. government will effectively be in a state of suspended animation. Call it CR hell. We’ve been living in it for 21 days and counting. Budget patches might not command the headline-level attention of potential defaults, or fiscal cliffs, or the seemingly constant parade of near-catastrophes that now surround the American budget process. But a POLITICO investigation of the full effects of a continuing resolution suggests that they should. More:


Paul Ryan Says He Would Serve as Speaker if Republicans Unite

WASHINGTON — Representative Paul D. Ryan said for the first time Tuesday that he would be willing to serve as speaker if all factions of House Republicans could unite behind him. Mr. Ryan addressed his colleagues and called for a change to the way the job is structured, saying the speaker should be more focused on communicating the message of the party and house and less on fundraising according to members in the room. He urged members to not try and change the rules “for one group.” Mr. Ryan’s decision changes the dynamic in the race for speaker, and could give Republicans much sought after clarity after weeks of internal turmoil. But it was unclear whether he would win over hard-line Republicans who had forced Mr. Boehner’s resignation and effectively blocked Representative Kevin McCarthy, the majority leader, from ascending. Mr. Ryan is viewed by many in the fractious Republican conference as a force for unity, even as the far-right members have demanded more power and caused more headaches for the party trying to prove itself as capable of governing as a majority. One of the candidates for the job, Representative Jason Chaffetz said in a Twitter message that he would drop out and support Mr. Ryan. There is fear among many Republicans that the same dynamics that brought Mr. Boehner’s leadership to an early end will spell trouble for Mr. Ryan, too, as he faces down a series of difficult fiscal challenges heading into an election year. Included are a possible first-ever federal default if Congress does not increase the government’s borrowing authority and a December deadline for a budget measure to avert a government shutdown. The most conservative group of members have been cool to the idea of his candidacy, and Mr. Ryan had not been willing to yield to their demands that the next speaker change House rules extensively to empower a minority of members. The far-right media has also been bludgeoning Mr. Ryan on a number of issues, including his vote in 2008 to bail out large banks and his role in brokering a bipartisan budget measure. The father of three young children, Mr. Ryan also clearly did not relish the idea of spending hundreds of days on the road raising money for Republican candidates instead of spending time with family in his hometown, Janesville, Wis. Mr. Ryan already has what he has often said is his dream job: chairman of the House Ways and Means Committee, where he has been trying to assemble sweeping legislation to overhaul and simplify the tax code and other measures that could come to fruition under a Republican president. But it seems that the calls of his colleagues — and perhaps the fear that no one qualified would ever step up — changed his mind.

JPMorgan Is Said to Be Near Deal to Spin Off Private Equity Unit

JPMorgan Chase is close to completing a deal to spin off a large private equity unit that has operated within the bank, a person briefed on the deal said on Tuesday. The deal would push Highbridge Capital Management’s $22 billion private equity portfolio outside JPMorgan, though the bank would still keep a minority stake in the business, the person said. Highbridge’s current top executives, including its chief executive, Scott Kapnick, are expected to take ownership of the business. Since the financial crisis, the big banks have been under pressure to spin off their in-house private equity and hedge funds. The first businesses to go were the operations that invested the banks’ own money — so-called proprietary investing — which was banned by a provision of the Dodd-Frank financial reform legislation known as the Volcker Rule. Last year, JPMorgan sold off One Equity Partners, a division that had put the bank’s money into large investments. While the Highbridge business is owned by JPMorgan, it largely invests the money of JPMorgan’s clients. That sort of activity is allowed by the Volcker Rule, but some banks have been scaling it back — or spinning off units — as they faced pressure from regulators and investors to simplify their businesses. The move to spin off Highbridge had been reported by Institutional Investor last year. On Tuesday, The Wall Street Journal reported that as part of the potential deal, JPMorgan would keep ownership of Highbridge’s $6 billion hedge fund portfolio. Even if Highbridge is spun off, JPMorgan will still have a separate in-house unit that makes private equity investments with client money. Highbridge was acquired by JPMorgan in 2004. At the time it was purely a hedge fund. Mr. Kapnick came on board in 2007 and built the private equity arm of the unit.

Labor, pension managers square off over benefits

The Department of the Treasury is facing mounting pressure over a proposal to cut retirement benefits for hundreds of thousands of union workers. Hurtling toward insolvency, the Central States Pension Fund is looking to slash benefits by as much as one-third in order to prevent the program from running out of money in the coming years. Central States is the first multiemployer pension fund to apply for the Treasury Department’s rescue plan, created by federal legislation in 2014. In an application submitted late last month, pension officials acknowledge the cuts will be steep but argue it’s the only way to stanch the bleeding. But the International Brotherhood of Teamsters, whose members make up the largest chunk of Central States’ more than 400,000 participants, is fighting the benefit reductions. With lobbyists from both sides ratcheting up their efforts, the Treasury Department has until early May to make a decision. Approving Central States’ petition could set a precedent allowing for benefit reductions for some 10 million retirees who participate in other multiemployer programs. ”We don’t have time to play chicken with these people’s retirements,” Thomas Nyhan, executive director of Central States Pension Fund, told The Hill in an interview. “We have to act now,” he added. “If we don’t get the plan implemented by 2016, I think the pension will reach the point of no return.” Central States projects the pension will run out of money by 2026. It blames the crisis on thousands of “orphan” retirees whose companies have gone out of business and no longer contribute to the pension, even though they still receive benefits. The fund pays out $2 billion each year in benefits, more than it receives from employer contributions, a loss it says is unsustainable. The proposed pension cuts would take effect July 1.

Will the Benghazi Hearing Help Hillary?

Few House hearings are must-see TV. But on Thursday, Hillary Clinton will testify ahead of the House Select Committee on Benghazi in one of the most-anticipated hearings of the year—but maybe not for the reasons originally predicted. The hearing was never supposed to be easy for Clinton, whose campaign has been hampered by inquiries into her use of a private email server during her tenure as secretary of state. But the threat the committee once posed to her political fortunes has dissipated, as it has instead become a political challenge for House Republicans, as they try to prove that the focus of the committee is on the 2012 attacks in Benghazi, Libya and not a political ploy. The committee’s chair, Representative Trey Gowdy of South Carolina, has been fending off a deluge of criticisms since House Majority Leader Kevin McCarthy suggested that it was reason for Clinton’s drop in the polls. More:


American Cancer Society, in a Shift, Recommends Fewer Mammograms

One of the most respected and influential groups in the continuing breast-cancer screening debate said on Tuesday that women should begin mammograms later and have them less frequently than it had long advocated. The American Cancer Society, which has for years taken the most aggressive approach to screening, issued new guidelines on Tuesday, recommending that women with an average risk of breast cancer start having mammograms at 45 and continue once a year until 54, then every other year for as long as they are healthy and expected to live another 10 years. The organization also said it no longer recommended clinical breast exams, in which doctors or nurses feel for lumps, for women of any age who have had no symptoms of abnormality in the breasts. Previously, the society recommended mammograms and clinical breast exams every year, starting at 40. The changes reflect increasing evidence that mammography is imperfect, that it is less useful in younger women, and that it has serious drawbacks, like false-positive results that lead to additional testing, including biopsies. But the organization’s shift seems unlikely to settle the issue. Some other influential groups recommend earlier and more frequent screening than the cancer society now does, and some recommend less, leaving women and their doctors to sort through the conflicting messages and to figure out what makes the most sense for their circumstances. In fact, although the new guidelines may seem to differ markedly from the old ones, the American Cancer Society carefully tempered its language to leave plenty of room for women’s preferences. Though it no longer recommends mammograms for women ages 40 to 44, it said those women should still “have the opportunity” to have the test if they choose to, and that women 55 and older should be able to keep having mammograms once a year. This year, 231,840 new cases of invasive breast cancer and 40,290 deaths are expected in the United States.


Would Washington’s FDA Fix Cure the Patients or the Drug Industry?


This might seem to be a rough political patch for the pharmaceutical and medical device industries. The exponential price increases of several drugs have brought scrutiny to the overall rise in drug costs and have prompted several 2016 candidates, most notably Hillary Clinton, to vow action to rein in the industry. Meanwhile, thousands of complaints are pouring into the Food and Drug Administration about a contraceptive implant made by Bayer. In Congress, however, things are looking better for the manufacturers. Legislation is advancing that would speed up the FDA’s approval process for medications and medical devices, offering a rare example of how major initiatives can get traction even in today’s gridlocked Washington. The industry has mounted a major lobbying and public relations push for the 21st Century Cures Act. The bill, in turn, has garnered an unusually broad range of support, ranging from Republican lawmakers and conservative think tanks to the White House, patient advocacy groups, Democrats and nonprofit organizations that are typically leery of deregulatory efforts by industry. One reason: Lawmakers softened up the usual opponents of looser rules with a big carrot — billions of dollars in new federal medical research funding for the National Institutes of Health. After years of austerity, that money is awfully difficult to turn down. But the enthusiasts have left a small band of critics warning that bipartisan consensus does not necessarily affirm the bill’s worth. Far from showing that Washington can still get big things done, they say, it shows how a lobby can blow past skeptics if the pot of resources is sweet enough. They maintain that the bill, which easily passed the House in July and has a counterpart soon to be introduced in the Senate, hasn’t received the scrutiny that such sweeping legislation deserves.

“Expanding NIH funding in a substantive amount is a grand and wonderful thing,” said Susan Wood, a former assistant FDA commissioner for women’s health who is now a professor at George Washington University. “But the price of that expansion should not be the gutting of the FDA.” More:

IRS petitioned to punish politically active nonprofit

Political watchdog group Citizens for Responsbility and Ethics in Washington wants the Internal Revenue Service to punish a nonprofit group that spent millions of dollars on advertisements boosting Sen. Thom Tillis, R-N.C., ahead of his election victory last year. The IRS complaint follows a Center for Public Integrity investigation into Carolina Rising’s political activities, which CREW cites several times. Carolina Rising provided “a vehicle for donors to make unlimited secret contributions to benefit candidates, and that is not permitted under the law,” the organization’s Executive Director Noah Bookbinder argues. “While the public is kept in the dark, the candidate or official almost certainly knows who made the often-large contributions.” In the complaint, Bookbinder asks the IRS to consider stripping Carolina Rising of its nonprofit status, hitting the group with excise taxes and treating it as a taxable corporation or political group. But CREW faces major headwinds: The IRS has shown little interest in pursuing politically active nonprofits, particularly in the aftermath of a 2013 scandal in which staffers singled out conservative groups for enhanced scrutiny. In North Carolina’s bitterly fought U.S. Senate contest last year, Carolina Rising ran nearly 4,000 TV ads. In August 2014 alone, it ran more ads than either then-Sen. Kay Hagan, the Democratic candidate, or Tillis, her Republican challenger who ultimately won the seat.

Police Leaders Join Call to Cut Prison Rosters

More than 130 police chiefs, prosecutors and sheriffs — including some of the most prominent law enforcement officials in the country — are adding their clout to the movement to reduce the nation’s incarceration rate. Asserting that “too many people are behind bars that don’t belong there,” the officials plan to announce on Wednesday that they have formed a group to push for alternatives to arrests, reducing the number of criminal laws and ending mandatory minimum prison sentences. Members of the group are scheduled to meet Thursday with President Obama. The group includes the police chiefs of the nation’s largest cities, including William J. Bratton of New York, Charlie Beck of Los Angeles and Garry F. McCarthy of Chicago, as well as prosecutors from around the country, including Cyrus R. Vance Jr., the Manhattan district attorney. Democrats and Republicans alike have pressed to temper the economic and social costs of mass incarceration, which has been driven by harsher penalties approved by Congress and state legislatures from the 1970s to the 1990s, when crime rates were far higher than today. More:

The Drama Continues at Grantland

The defections at Grantland continued today, as popular staff writer Rembert Browne bolted for New York, adding his name to the growing list of staffers who have left the site since the network cut ties with founder Bill Simmons.With a staff exodus underway, a clearer picture of the site’s last year of operations has emerged. Though Simmons has only technically been out at Grantland for five months, many began to see the writing on the wall last fall, when Simmons was suspended for calling N.F.L. commissioner Roger Goodell a liar on his podcast. Insiders at Grantland point out that in the aftermath of Simmons’s suspension, executive vice president Marie Donoghue told the staff that they “shouldn’t worry, because whether or not Bill stays at ESPN, the company is committed to Grantland.” ESPN management says that Donoghue, who oversaw the site, made that statement because staffers were specifically asking whether they should fear for their jobs, “given Bill’s behavior.” She was trying to calm them down, ESPN brass points out, she wasn’t trying to suggest she and the network didn’t want Bill to stay. Several key Grantland members, however, took it another way. Says one, “That was the tipping-point moment. What do you mean if Bill’s here or not? Bill is Grantland! What are you talking about? Bristol never recovered with the staff after that.” Digging deeper into the steaming remains of the ESPN-Simmons divorce, it becomes clear that while the breakup may have been bloody, costly, and emotionally exhausting, it was also certainly worthwhile for both sides. Over 48 tempestuous hours, in more than 15 conversations with current and former ESPN employees, current and former Grantland staffers, and current ESPN senior management, additional information has surfaced suggesting there were numerous areas of major conflict, and several more defined by personal animosity, fundamental misconceptions, and even accusations of sexism. As ports of entry into this Byzantine world, we can look to three major stress points. More:

Ten Reasons Why Early Childhood Education Pays Off

Brain science and economics show that intervening to help children when they’re very young is more cost-effective than waiting until they’re in school. That’s the conclusion of a new report from the Bridgespan Group and the Pritzker Children’s Initiative. The report’s lead author, J.B. Pritzker, is an entrepreneur and philanthropist; his sister, Penny, is the U.S. secretary of commerce.Here are 10 claims sprinkled through the 67-page report for the benefits of investing in early interventions in the lives of disadvantaged children. They’re drawn mostly from others’ research. These are direct quotes:

Subway ‘Footlong’ Settlement Short on Dough

Listen up: If you purchased a Subway six-inch or footlong sandwich between Jan. 1, 2003 and Oct. 2, 2015, “your rights could be affected by a lawsuit.” That’s the urgent message from, the official website of the biggest sandwich-related controversy not involving a sandwich pitchman in recent memory. In case your recent memory doesn’t go back to 2013, here’s a recap: That year reports surfaced that Subway’s fabled “Footlong” didn’t measure up to its name. Plaintiffs’ law firms across the country sued the chain, filing lawsuits seeking class action status alleging that Subway deceived customers by promoting a 12-inch sub that was really more like 11 inches. Plaintiffs’ lawyers and Subway owner Doctor’s Associates Inc. struck a deal last year. The Journal-Sentinel reports that U.S. District Judge Lynn Adelman this month gave the settlement his preliminary approval:  The final approved class may be one of the largest in any kind of lawsuit — everyone who bought a Subway sandwich in the U.S. since 2003. No court records even try to put a number to that; there are 27,000 Subway shops in the U.S … Any class member who objects to the settlement can still write to Adelman by December 16 or attend a final Settlement Fairness Hearing in Milwaukee on Jan. 15. At this point, you might be thinking: ‘Show me the dough.’ While the size of the class is huge, most class members aren’t going to get a penny. If the settlement get a final OK, nine named plaintiffs will be awarded $1,000. Attorney’s fees, expenses, costs are capped at $525,000, split among several firms, according to court documents filed in federal court in Wisconsin. The lead counsel in the case are DeNittis Osefchen, PC in Marlton, N.J., and Zimmerman Law Offices PC. in Chicago. Class members do get piece of mind, though, says, which informs readers that as part of the deal, Subway has agreed to put in place a number of quality-control measures to “help ensure that the bread sold to customers is either 6 or 12 inches long.” For example, Subway is requiring that monthly restaurant inspections “include a sampling of the baked bread to ensure it is at least 12 inches long.” The measures sunset after four years.



Sen. Del Marsh: ‘We can’t have 140 legislators doing whatever they want’

The leader of the state Senate is agreeing with Gov. Robert Bentley’s decision to order state agency heads to stay away from a budget hearing called for this week by Sen. Paul Bussman, R-Cullman. Bussman last week sent an email to all executive branch agency heads, including elected officials such as the state’s secretary of state, treasurer and head of the Public Service Commission, to attend a hearing to discuss the state’s 2016-17 budgets. Bussman’s invite comes only about a month after the Legislature finally passed the 2015-16 General Fund budget which took effect Oct. 1. And the invitation comes months before agency heads and their staffs are due to have their proposed budgets to Gov. Robert Bentley for his review and consideration. Bentley called Bussman’s budget hearing premature and ordered agency heads not to attend Bussman’s meeting. Sen. Del Marsh, R-Anniston, the Senate’s leader, not only agrees with Bentley that Bussman’s actions are premature but said Bussman overstepped himself by calling for the meeting. “Gov. Bentley is right. This is a premature meeting,” said Marsh. “Agency heads are not ready to discuss the next budget year in any kind of detail at this point. I really don’t understand what is going here but if Sen. Bussman wants information I’m sure he could have first reached out to the two able budget chairmen we have in the Senate and there are two able budget chairmen in the House whose responsibilities are the budget. Sen. Bussman chose not to do that but instead decided to make an end run around the process and the law which clearly spells out the process we follow for developing our budgets.” Marsh pointed out that there are 105 members in the Alabama House of Representatives and 35 senators. “We can’t have 140 legislators doing whatever they want,” said Marsh. “We have a process. I know at times all of us can grow tired of the process but if we all start trying to do whatever we want that will not help solve anything.” Bussman said this about why he called the budget meeting. “…All I’m trying to do is to get a discussion going on how we might be able to solve some of these budget issues solved and find a way to go forward,” said Bussman. “Right now we have driver’s license offices closing, some state parks closing, surplus property in a state of uncertainty, ABC stores closing and nobody seems to have really good answers as to why. Department heads are blaming legislators and legislators are blaming department heads.”

Two former AG employees may testify at Hubbard hearing

Mark White, a defense attorney for the Auburn Republican, said Tuesday former Deputy Attorney General Sonny Reagan and Gene Sisson, a former investigator with the office. Attorney General Luther Strange, who has recused himself from Hubbard’s case, accused them of having improper contacts with or giving assistance to the Speaker’s legal team. Former Alabama Ethics Commission director James Sumner may also testify, White said, as well as a defense expert on prosecutorial misconduct. Hubbard’s team has sought additional testimony from Strange. White said the testimony next week will determine that. Attorneys for Hubbard, who faces 23 counts of using public office for private gain, accuse Matt Hart, the director of the Office of Special Prosecutions, of making prejudicial statements about the case and improperly swaying the grand jury that indicted Hubbard last year. The state has said the defense wants to delay the trial. The hearing on the prosecutorial misconduct motion should begin on Monday. Both sides met for a hearing Tuesday in Lee County Circuit Judge Jacob Walker’s courtroom on state motions to quash defense subpoenas. Hubbard’s team bases its case for prosecutorial misconduct on memos from Reagan, which accuse Hart of telling colleagues in the attorney general’s office that he would “dismantle the Riley machine” and revealed grand jury information. Reagan resigned last December, three months after the attorney general’s office suspended him. In a memo, Strange said Reagan shared an attorney with Hubbard and Rep. Barry Moore, R-Enterprise, indicted but later acquitted on perjury charges. Strange also wrote that Reagan had “undisclosed communications” with individuals affiliated with or under investigation by the Lee County grand jury that indicted Hubbard. The Attorney General’s Office fired Sisson earlier this year for helping Reagan record a conversation with W. Van Davis, the acting attorney general in the Hubbard investigation, in August of 2014. Sisson said he followed orders in making the recording and that he was trying to call attention to Hart’s conduct, which he characterized as bullying. Strange wrote in his termination letter that Sisson should have known that “it is a common tactic of criminal defense counsel to accuse the prosecutor of misconduct.” Prosecutors accuse Hubbard of using his position as Speaker and his former role as director of the Alabama Republican Party to solicit jobs or investments from associates. The Speaker is also accused of lobbying Gov. Robert Bentley and other executive branch officials on behalf of clients, and of helping insert language in a General Fund budget that would have benefited a client. Hubbard maintains his innocence, and his attorneys have argued that the transactions were all proper. In a filing in September, Hubbard’s attorneys argued that the Speaker had a constitutional right to lobby on behalf of clients, a stand that has brought Hubbard criticism from within the House Republican caucus. White defended the argument Tuesday, saying the ethics law which Hubbard championed – and which he now is contesting – was applied unconstitutionally in his case. “The Constitution applies to every citizen in the country,” White said. White also suggested that employees in Luther Strange’s office had worked to get business for Strange and his family. Mike Lewis, a spokesman for Strange, declined to comment; White declined to go into details.

Is Gov. Robert Bentley nudging toward expanding Medicaid?

Is Gov. Robert Bentley nudging closer to expanding Medicaid under the Affordable Care Act?
Listen to what the governor said Tuesday when asked the question. “You know I wouldn’t say nudging toward it,” said Bentley. “But we are certainly looking at that; not right now. We are not at that stage right now.” But then the governor added this when asked about remarks he had just made to a group of seniors about the need to improve healthcare in rural areas and how Medicaid expansion might come into play:  “…But you know we do have to realistically look at whether we have adequate funding for rural doctors, primary care doctors. They cannot treat a third of their patients and stay in business. It is a business they run,” said the governor. Expanding Medicaid would pump hundreds of millions of mostly federal dollars into what is Alabama’s primary health care program for children and the poor and provide more dollars for primary care doctors to serve those patients. Bentley has for five years been an outspoken critic of the Affordable Care Act. A doctor himself, Bentley has opposed the law at almost every step of the fight to overturn it. But that legal fight ended this summer when the nation’s highest court upheld the law, a fact Bentley noted while speaking to the Alabama Silver-Haired Legislature, a nonpartisan, nonprofit model legislature made up of persons age 60 and older. “You know for the last few years we’ve been dealing with the Affordable Care Act,” Bentley told the group. “I was personally against the Affordable Care Act. I never called it Obamacare because it’s not a person, it was a philosophy. “But we lost folks. We lost. And we lost in court. So what we have to do now is move past that, take the resources we have available and try to improve the quality of life for the people of Alabama and that’s exactly what I’m going to do,” added Bentley.

Federal prosecutor on DMV closures: Alabama Legislature threw ALEA ‘under the bus’ in budget

George Beck, the U.S. Attorney for the Middle District of Alabama, says Alabama Gov. Robert Bentley could do more to address concerns about the closing of 31 drivers’ license offices, mainly in rural communities around the state, than just re-opening them one day a week. But Beck didn’t put all the blame on Bentley for the DMV closings in the first place. He said the Alabama Legislature threw the department that runs the DMV offices “under the bus” in this year’s budget. Beck said he plans to meet with Bentley in the coming days to discuss the DMV closures. He said in making his plea to the governor he wants to “make certain that any people, of any race, in any county, are not denied the right to register to vote.” Beck noted that Bentley has taken action to re-open the offices once a month but he believes that’s not enough. “We think he can take more (action),” Beck said. “As a citizen of Alabama, in my opinion they ought to return to the status quo and find somewhere else to make the cuts.” Beck, however, said he doesn’t blame Bentley entirely. “I feel like the legislature threw ALEA under the bus,” he said, referring to this year’s budget. Bentley had announced the closing of the offices in the wake of deep budget cuts. Another federal prosecutor in Alabama also has been looking at the closure of the DMV offices. Joyce Vance, the U.S. Attorney for the Northern District of Alabama, held a meeting last week with DOJ civil rights and voting rights attorneys, local lawyers, and representatives from groups representing minorities, the poor, senior citizens and those with disabilities to discuss issues surrounding the office closures. Vance called the meeting a listening session.  “We had a really interesting and very lively conversation about what peoples’ concerns were,” she said. From her perspective, Vance said, the purpose of the meeting was to listen. “My primary concern was learning about what was actually going on and who was being impacted,” she said. “We’ve been very aggressive on how we are looking at this situation because voting rights are very fundamental,” Vance said. In an effort to find out facts about the DMV closures, Vance said her office had some interaction with the Alabama Attorney General’s Office prior to the meeting. While the meeting did not include members of the communities affected by the DMV office closures, the DOJ’s Community Relations Service is being asked to come in and see about holding meetings in the Black Belt to give people in that area an opportunity to express their views and be heard, Vance said. No meetings are set yet in the Black Belt, but Vance said she expects those meetings to be set in a matter of weeks. Beck said that his office had no plans at this point to hold community listening sessions. “Right now we’re going to the heart of the problem and trying to get relief for the communities,” he said. Beck said his office’s main focus has been on the inconvenience to citizens in taking the drivers’ license test. Vance said that even those in counties that haven’t had a DMV office shutdown should also be concerned.  “I think we are all hurt whether we’re in a county that has had a closure or not,” she said. Vance noted that a section of the 1965 Voting Rights Act had been struck down by the U.S. Supreme Court a couple of years ago as a result of a lawsuit by Shelby County. That section had required pre-clearance before the state could make any changes that might impact voting in Alabama. She also said that once the requirement for pre-clearance was eliminated Alabama was “simply free” to pass its law requiring voters to present IDs at the polls. Then not too long after that law was enacted the state announces it is closing DMV offices which could make it harder for voters in more rural counties from getting drivers licenses that are one of the forms of Voter ID, she said. “So you want to make sure you’re viewing all those events in context so that a decision can be made   about whether this is the sort of restriction of rights that requires some form of action,” Vance said. More:

Judge says Strange’s testimony in Hubbard case would be by deposition

Indicted House Speaker Mike Hubbard can’t call Attorney General Luther Strange and his employees to the witness stand, but might be able to take their depositions as he tries to get ethics charges thrown out of court, a judge said Tuesday. Lee County Circuit Judge Jacob Walker issued the decision as he laid the groundwork for a hearing next week on Hubbard’s motions to dismiss the ethics case against him. The Auburn Republican has argued the investigation was a selective and vindictive prosecution tainted by prosecutorial misconduct. Hubbard also says the state’s 2010 ethics law, which he supported, is unconstitutionally vague and being misapplied by prosecutors. Walker did not rule on a state motion to quash defense subpoenas issued to Strange, lead prosecutor Matt Hart, former chief deputy Kevin Turner and other employees from the attorney general’s office. Instead, Walker said Hubbard’s defense can call related witnesses, and he will then decide if additional information from Strange and others is merited. Walker did indicate that any testimony from Strange and his employees would be taken outside court via deposition. Strange has already given a deposition in the case. He responded in writing to questions from Hubbard’s lawyers about his decision to recuse himself from the investigation and appoint acting Attorney General Van Davis to oversee it. More:



Alabama’s blood-sucking judge just part of the system

Everybody knows you can’t squeeze blood from a turnip.  Not because anybody’s tried, but rather because that’s what people say, usually about things that have nothing to do with globular root vegetables. Like people, especially poor people. They’re usually the turnips in this metaphor. And money. That’s usually the blood. But as it turns out, you can squeeze blood from poor people. Last month Circuit Judge Marvin Wiggins tried just that. In Perry County, Wiggins summoned hundreds of offenders who owed fees and fines to the court for what is sometimes called a “pay docket.” According to a complaint filed by the Southern Poverty Law Center, Wiggins didn’t tell defendants that they might have to pay or go to jail before they got there. Defendants weren’t told that they might want to have an attorney, and the clerk’s office even told one defendant that he didn’t need one. When they showed up, though, Judge Wiggins told them they had to pay or go to jail, and there was a third option — open a vein. There was a blood drive going on outside, Wiggins said, and if defendants donated blood, he would give them a $100 credit toward the fees and fines they owed. “Consider that as a discount rather than putting you in jail, if you do not have any money,” Wiggins said. “If you do not have any money and you don’t want to go to jail, consider giving blood today and bring me your receipt back, or the sheriff has enough handcuffs for those who do not have the money.” If this were a charitable option — a quick and easy community service — that the judge told the defendants he would take into consideration, that would have been one thing. But that’s not what he said. Wiggins’s words have one interpretation — pay, roll up your sleeve or go to jail. Maybe Wiggins gets points from some for being tough on deadbeats who aren’t paying their due to society, but there are legal problems here, including the U.S. Constitution. It’s a long-standing matter of law in this country that the indigent cannot be jailed because they cannot pay fines and fees. We don’t do debtors’ prisons here. And coercing people to give their blood? That might make for a decent episode of Buffy the Vampire Slayer, but in the real world, it makes a court action by the SPLC. The SPLC has now filed a complaint against Wiggins with the Judicial Inquiry Commission, with which Wiggins has had issues before. However, there is a bigger underlying problem here. More:

Out of touch? AL GOP Chair Lathan may live in alternate universe

Recently, AL GOP Chair Terry Lathan remarked that Hillary Clinton was out of touch with Alabama because Clinton noted the obvious: that closing driver’s license offices in the Black Belt, regardless of intent, negatively affected the poor, the elderly, and African-Americans in rural communities. Oh, it also didn’t really save any significant amount of money compared to the massive revenue shortfall plaguing the state’s ability to provide basic public services. If Lathan can’t see that, she’s the one out of touch and perhaps, living in an alternate universe where facts are like brief, fleeting asteroids. Of course, Lathan’s bizarre rhetoric didn’t stop there. She went on to say that Clinton was a complete failure as Secretary of State and then predictably and tiredly bashed Obama just in case there weren’t term limits in Lathan’s alternate universe. The truth is that Clinton was key to rebuilding relationships in the Middle East after President Bush’s foreign policy fiascos and she helped negotiate deals that led to a 50 percent increase in exports to China. Then, there was that whole Bin Laden thing, remember? Didn’t Clinton author the sanctions against Iran that led them to a recent agreement that will ensure they don’t develop nuclear weapons? Lathan probably thinks that the millions spent on the endless Benghazi partisan witch-hunt was money well spent. That’s the same thinking that keeps leading the GOP down the rabbit-hole of repeatedly trying to repeal the Affordable Care Act. We’ve been waiting for years for the GOP to articulate a better solution for healthcare, but they don’t seem to have any viable alternative. Lathan probably should focus more on Alabama politics and help voters here understand why we should trust folks like indicted AL House Speaker Mike Hubbard. Maybe, she can explain why Gov. Bentley and other state Republican officials use private e-mail and help us understand why it’s OK for them, but not for Clinton. Maybe, she could explain why the GOP introduced legislation this last session that would impose a regressive business license privilege fee on small businesses in Alabama. Or, she could explain the AL GOP love affair with huge corporations that don’t pay their fair share of taxes in Alabama. The reality of politics in Alabama is that the GOP is the party out of touch with the middle class. The middle class wants better education, jobs, and public services that are open more than one day a month. Middle class business owners have to pay Alabama taxes, so why are big companies getting all the breaks and incentives? Maybe, Lathan ought to really think about why and how the rest of the nation has recovered from Bush’s self-inflicted economic crisis and how the state’s failed GOP leadership perennially keeps Alabama at the bottom of the list in terms of job growth, revenue, and infrastructure. We all appreciate that Lathan couldn’t pass up an opportunity to bash Clinton and act like Alabama’s voter I.D. law somehow makes voting easier and isn’t at all discriminatory, but the AL GOP has really got to start acknowledging facts, not just the cherry-picked convenient ones. If Lathan really wanted to make news, she could enlighten Alabama on how the GOP plans to fix the state’s revenue problem. After two expensive special sessions that were akin to putting a band-aid on arterial bleeding, the whole state is just dying to hear the GOP’s next brilliant idea because we get to deal with it again next year, too. Lathan should be careful throwing rocks, when she and the rest of the AL GOP are living in glass houses.

Justin Trudeau victory in Canada is bad news for U.S. conservatives

(CNN)According to the Reputation Institute, it is the “most admired” nation on earth. Immigrants flock there from all over the world — for the most part politely standing in line for the opportunity. Taxes seem to get lower every year and the government runs a surplus. Burdensome regulations have been slashed and the tax code’s been rewritten to encourage business investment and pro-family policies. Abroad, it’s taking the fight to ISIS with a reinvigorated military, standing side by side with Israel and against aggression from the mullahs of Iran and Vladimir Putin’s Russia. No, it’s not three years into the Marco Rubio administration — it’s present-day Canada, and its courageous leader just got booted out of office after nine years of steadily maneuvering the ship of state. The Conservative Party’s loss is to the detriment of its neighbors to the south and the world at large, since the Tory leader, Prime Minister Stephen Harper, was defeated by the unprepared, gaffe-prone but well-coiffed son of a former prime minister, Justin Trudeau. Harper’s fate is all the more shocking when you consider how well Canada weathered the 2008-2009 financial crisis under his watch. He didn’t bail out anyone (except the U.S.-based auto industry), no financial institutions failed and the Canadian economy hummed along. Part of Harper’s success — and doom — lies in the commodity markets. With sky-high oil prices and other resources reaching record highs, Canada got rich as other industrial powers paid top dollar (or top loonie, if you will) for the raw materials they needed to grow. As oil prices fell off a cliff, the Canadian economy slowed, even briefly dipping into recession this year. But Harper made the necessary cuts and kept taxes low. Amazingly, he balanced the budget ahead of schedule as the commodity markets nosedived. The fickle Canadian voters were tired, though. Tired of the scandals and unforced errors that come with years of unchecked power (Canada’s parliamentary system is a unitary executive-legislative branch). Political appointees and friends of Harper’s couldn’t resist feeding at the taxpayers’ trough. Though the trail never led directly to Harper, the scandal only fed a public perception that the cool-to-a-fault, calculating (and yes, even Nixonian) Prime Minister was up to no good. Despite their success, Harper’s policies, too, seemed to echo the “American” political discourse, a byword for becoming what Canadians fear most — too much like their rapacious, bellicose and paranoid neighbors to the south. In Canada, identity is tied up in a few things (hockey, universal health care) but none more powerful than a genteel anti-Americanism that tinges every political debate in the Great White North. When Harper introduced anti-terror legislation called C-51, or “Canada’s Patriot Act,” after prominent attacks inspired by radical Islam, the wing nuts of Canada’s left came out of the woodwork, painting the Prime Minister as a tyrant in the making. His inaction on climate change — a shrewd move for a near-petro state — enraged the ecowarriors. But the final straw came when Harper took a stand for an inclusive, but fully Westernized and assimilating Canada — banning the niqab, or face veil, from being worn at citizenship swearing-in ceremonies. The din of the “culturally sensitive” left’s cries was deafening — “racist,” “Islamophobe” and “anti-immigrant” entered the normally polite Canadian discourse. What lies next for Canada is bad news for America and especially conservatives. Canada under Harper’s leadership was a conservative wonderland with balanced budgets, increasingly low taxes and a robust foreign policy aimed at taking on terrorists and bullies the world over. But that is poised to change under the Liberal Party’s Trudeau, who promises to run deficits, pull out of the anti-ISIS operation in Iraq and Syria, and re-establish ties with Iran. He also wants to bring 25,000 Syrian refugees to Canada. Furthermore, although the abortion debate has been “settled” for a generation by repeated diktats from Canada’s uber-leftist Supreme Court, Trudeau has stamped out dissent within his own party over abortion, where a thriving anti-abortion wing once existed. Without Harper at the helm, the lessons of Canada’s miracle — surviving the financial crisis, balancing budgets, slashing red tape and taxes while maintaining a healthy welfare state — will be lost to history as Trudeau’s Liberals in a fit of pique roll back the gains the Great White North has made. Politics is a fickle game and fatigue is a real phenomenon. Harper’s achievements will be relegated to the dustbin of history. As Shelley’s “Ozymandias” reminds us, “Look on my works, ye Mighty, and despair!”

Morning Money

RYAN IS (ALMOST) IN — “Wisconsin Rep. Paul Ryan, who for years has resisted a move into House Republican leadership, said Tuesday night he would serve as House speaker if he is the party’s ‘unity candidate.’ Ryan, the Ways and Means chairman, wants to know by Friday if the 247 members of the House Republican Conference support him. … Members of the Republican Study Committee and Tuesday Group have already showered praise on Ryan, but members of the Freedom Caucus aren’t quite ready yet to endorse him.”

TWO WEEKS UNTIL DEBT LIMIT DEADLINE, REPUBLICANS AT ODDS — “Ted Cruz is accusing Republican leaders of prematurely capitulating to President Barack Obama and congressional Democrats on the debt ceiling, and he’s urging his party to take a hard line against a ‘clean’ debt ceiling increase even if it means flirting with a default. … Meanwhile, the opening bid from House Republicans is a nonstarter … But with the House leadership drama ongoing, as some Republicans beg retiring Speaker John Boehner to stay on and shepherd a debt-limit bill through, [Senate Majority Leader Mitch] McConnell faces increasing pressure to come up with a fallback plan if the House can’t produce legislation Obama would sign.”

TREASURY, FED HIT THE HILL — Treasury Secretary Jack Lew and Federal Reserve Governor Jerome Powell briefed Senate Finance members yesterday about the debt ceiling. POLITICO’s Brian Faler reports Lew told senators in their closed meeting that the administration would not negotiate over raising the legal cap on the government’s borrowing and that he wants a “clean” increase.

TREASURY MARKET DISSECTED IN NEW YORK — While Washington offered up few answers about how or when the debt ceiling would be raised, a who’s who of regulators, banks and traders convened at the New York Fed yesterday as they continue grasping for answers about structual changes happening in the critical U.S. Treasury market. The packed meeting in a New York Fed auditorium was the latest official reaction to mysterious Treasury market swings last October that unnerved Wall Street and regulators. Officials still haven’t found a smoking gun to explain what happened a year ago, but key themes of the discussion this week include the growing role of automated traders and concerns about a lack of trade data. The agenda:

If you’re around for Day 2 of the conference, please stop and say hello to your M.M. fill-in!

HAPPY WEDNESDAY — Ben is grilling Ben Bernanke this morning and will be back tomorrow. Please direct tips and gossip to or @morningmoneyben.

DRIVING THE DAY — POLITICO’s Ben White interviews former Federal Reserve Chairman Ben Bernanke in New York at 8 a.m. (POLITICO is streaming the event) … Treasury Secretary Jack Lew, Commerce Secretary Penny Pritzker and former Treasury Secretary Larry Summers speak at a Center for American Progress conference beginning at 8:30 a.m. (also streaming) … CFTC Chairman Tim Massad gives the keynote speech at Day 2 of the Treasury market conference at the New York Fed at 8:45 a.m. … Assistant Labor Secretary Phyllis Borzi and Treasury senior adviser J. Mark Iwry talk retirement at the Bipartisan Policy Center at 10 a.m. … Comptroller of the Currency Thomas Curry speaks at an Exchequer Club luncheon at 1 p.m. …

THE WAIT IS OVER: OBAMA NAMES SEC COMMISSIONERS — The president announced yesterday that George Washington Law School professor Lisa Fairfax and Mercatus Center senior research fellow Hester Peirce will be nominated as SEC commissioners. If confirmed, Fairfax would fill a spot reserved for Democrats and Peirce would take a Republican seat.

At least three Democrats responsible for confirming the nominees at the Senate Banking Committee – Sens. Chuck Schumer, Jeff Merkley and Robert Menendez – want them to support a controversial rule requiring public companies to disclose their political spending. Schumer said it was an “incredibly important issue” and that it was “the best hope we have to shed light on the millions of dollars’ worth of dark money.”

DOZENS OF HOUSE MEMBERS TELL BOEHNER, PELOSI FED DIVIDEND CUT ‘PREMATURE’ — In a letter to House leaders, 103 Republicans and 47 Democrats said any plans to cut dividends that the Fed pays to banks should be put on hold. The proposal is afloat as lawmakers look for a way to offset highway spending. Several senior members of the House Financial Services Committee, led by Reps. Bill Huizenga and Bill Foster, said in the letter that the House should wait until the GAO and committees of jurisdiction can study the impact of the proposal.

SUMMERS DISMISSES TRUMP ‘NONSENSE’ — Former Treasury Secretary Larry Summers is defending Fed Chair Janet Yellen after Donald Trump said she was trying to keep interest rates low to help Democrats score political points when it comes to the economy. “That’s not the first thing that Donald Trump has said that was nonsense,” Summers said in a “Wall Street Week” interview. “It’s not the last thing I suspect Donald Trump will say that is nonsense. The idea that Janet Yellen is some part of some elaborate political conspiracy is not something that anyone who has ever met Janet Yellen could plausibly believe.”

WARREN DEFENDS CFPB SETUP — Sen. Elizabeth Warren is out with a Huffington Post piece opposing a bill that would replace the director of the CFPB with a set of commissioners: “Ultimately, a poor director might cause the agency to bring fewer enforcement actions, ease off its supervisory responsibilities, or take other steps to undermine the agency and its mission — and that would be very bad. But those risks are balanced off by the opportunity to make real progress under the leadership of a good director who embraces the agency’s mission. Progress in good times is better than the perpetual gridlock of a commission.”

CLINTON OUTLINES BUSINESS VIEWS — Democratic presidential front-runner Hillary Clinton in Quartz: “First, I will take steps to stop corporate concentration in any industry where it’s unfairly limiting competition. … Second, I will prevent concentration in the first place by beefing up the antitrust enforcement arms of the Department of Justice and the Federal Trade Commission. … Third, I will close the loopholes and end the tax breaks that allow a few big corporations to profit just by stashing their money in offshore tax havens with the help of their lawyers and accountants.”

OUT TODAY: PAYING FOR IT — THE AGENDA TAKES A DIVE INTO THE PERPLEXING WORLD OF AMERICAN BUDGETING: Congress blew straight through its September budget deadline, passed another temporary funding patch, and is headed toward a fresh round of budget chicken as we approach the debt ceiling yet again. This month’s issue of The Agenda examines our broken budget process, looks at some expert ideas for how to fix it, and explores new revenue ideas — as well as spotlighting DC’s favorite sources of imaginary money. Check out the issue:

POTUS Events

10:30 am || Receives the Presidential Daily Briefing
12:15 pm || Departs White House
1:35 pm || Arrives Charleston, West Virginia
2:20 pm || Participates in a community forum on drug abuse; Charleston
4:15 pm || Departs Charleston, West Virginia
5:30 pm || Arrives White House
6:35 pm || Hosts House and Senate Democrats; State Dining Room

All times Eastern

Floor Action

The Senate will continue its work on a long-stalled cyber bill on Wednesday.

The Cybersecurity Information Sharing Act (CISA) reached the Senate floor on Tuesday afternoon after months of being held up because of a packed Senate floor schedule and a fight on amendments.


The legislation is aimed to increasing information sharing between businesses and the government on cyber threats, though it’s drawn pushback from privacy advocates including Sen. Ron Wyden (D-Ore.)


Majority Leader Mitch McConnell (R-Ky.), however, appeared optimistic that the Senate would be able to pass the bill next week.


“This is legislation that we are confident that we can pass,” he told reporters on Tuesday. “We intend to see it through completion hopefully next week.”


The Republican leader on Tuesday night filed cloture on a substitute package, which includes a slate of amendments, to the legislation, as well as the overall cyber bill.


Under Senate rules the first procedural vote would occur on Thursday, with lawmakers expected to continue debating CISA this week.


No votes are currently scheduled in the Senate.


Meanwhile, the House will take up a trio of proposals, including legislation that supporters argue would help prevent a default even if lawmakers fail to raise the debt ceiling.


Democrats, however, have slammed the Default Prevention Act arguing that it places making payments to foreign countries over social and welfare programs for Americans.


Senate Minority Leader Harry Reid (D-Nev.) called the House bill “absurd” and a “partial default.”


“A partial default. Mr. President, you can’t be partially pregnant,” he added. “House Republicans have engineered legislation to pick which debts to ignore and pay. Their proposed legislation is going to pay foreign creditors first, like China.”


Votes in the House are expected between 2:15 p.m. to 3:15 p.m. and 5:30 p.m. to 6:30 p.m.

Krebs Daily Briefing 20 October 2015

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


In Canada, Stunning Rout by Justin Trudeau and the Liberal Party

OTTAWA — The nine-year reign of Prime Minister Stephen Harper and his Conservative Party came to a sudden and stunning end on Monday night at the hands of Justin Trudeau, the young leader of the Liberal Party. Starting with a sweep of the Atlantic provinces, the Liberals capitalized on what many Canadians saw as Mr. Harper’s heavy-handed style, and the party went on to capture 184 of the 338 seats in the next House of Commons. The unexpected rout occurred 47 years after Mr. Trudeau’s father, Pierre Elliott Trudeau, first swept to power. Justin Trudeau, who will be 44 on Christmas Day, will become Canada’s second-youngest prime minister and the first to follow a parent into office. While the Liberal Party had emerged on top in several polls over the past week, its lead was short of conclusive and Mr. Trudeau was an untested figure. There was no ambiguity, however, in Monday’s results. The Conservatives were reduced to 99 seats from 159 in the last Parliament, according to preliminary results. The New Democratic Party, which had held second place and formed the official opposition, held on to only 44 seats after suffering substantial losses in Quebec to the Liberals. More:

Top U.S. military officer Dunford arrives in Iraq

IRBIL, Iraq — America’s top military officer arrived in the Kurdistan region of Iraq on Tuesday, saying that Iraq’s government has not sought Russian airstrikes to help in its fight against Islamic State militants. Marine Gen. Joe Dunford, chairman of the Joint Chiefs of Staff, said he was here to assess coalition efforts to train Iraqi forces and track their efforts to combat the Islamic State, also known as ISIS or ISIL. His visit comes amid heightened Russian involvement in Syria, which has raised concerns among some analysts that its involvement might expand into Iraq. Dunford said Iraqi Prime Minister Haider Abadi told U.S. officials that Iraq is not seeking Russian airstrikes, despite earlier reports suggesting that he would welcome them. “U.S. officials engaged Abadi and he did not request Russian airstrikes,” Dunford said. The United States has about 3,400 troops in Iraq engaged in an effort to train and support Iraq’s military, as the country attempts to push the militants out of territory they seized last year. More:


For Offenders Who Can’t Pay, It’s a Pint of Blood or Jail Time

MARION, Ala. — Judge Marvin Wiggins’s courtroom was packed on a September morning. The docket listed hundreds of offenders who owed fines or fees for a wide variety of crimes — hunting after dark, assault, drug possession and passing bad checks among them.  “Good morning, ladies and gentlemen,” began Judge Wiggins, a circuit judge here in rural Alabama since 1999. “For your consideration, there’s a blood drive outside,” he continued, according to a recording of the hearing. “If you don’t have any money, go out there and give blood and bring in a receipt indicating you gave blood.” For those who had no money or did not want to give blood, the judge concluded: “The sheriff has enough handcuffs.” Efforts by courts and local governments to generate revenue by imposing fines for minor offenses, particularly from poor and working-class people, have attracted widespread attention and condemnation in recent months. But legal and health experts said they could not think of another modern example of a court all but ordering offenders to give blood in lieu of payment, or face jail time. They all agreed that it was improper. “What happened is wrong in about 3,000 ways,” said Arthur L. Caplan, a professor of medical ethics at NYU Langone Medical Center, part of New York University. “You’re basically sentencing someone to an invasive procedure that doesn’t benefit them and isn’t protecting the public health.” Reached by phone, Judge Wiggins said: “I cannot speak with you.” The dozens of offenders who showed up that day, old and young, filed out of the Perry County courthouse and waited their turn at a mobile blood bank parked in the street. They were told to bring a receipt to the clerk showing they had given a pint of blood, and in return they would receive a $100 credit toward their fines — and be allowed to go free. Carl Crocker, who was among those who owed money to the court, recounted seeing one older man pass out after his blood was taken. Another defendant, Traci Green, said that one young man became so angry about the choice he was given that he was taken out of the courtroom. James M. Barnes Jr., a lawyer who was in the courtroom that morning, said, “I thought it was really unusual.” “I don’t know whether it’s legal or not. I don’t know if that violates half the Constitution,” he said. On Monday, the Southern Poverty Law Center filed an ethics complaint against Judge Wiggins, saying he had committed “a violation of bodily integrity.” The group also objected to the hearing beyond the matter of blood collection, calling the entire proceeding unconstitutional. More:


Inside Stanford Business School’s Spiraling Sex Scandal

When, in November 2013, Stanford University held one of its seminars on sexual harassment, Professor James A. Phills, of the Graduate School of Business, heard a lawyer from the general counsel’s office describe a romance gone sour at a primate-research center. A scientist (“Ed”) kicked his former paramour (“Melissa”) off a project involving monkeys, then slashed her bonus 80 percent, all because she refused to bleep him back at the hotel. Such a problem, the lawyer declared, could never arise at Stanford. Had Ed worked there, she explained, he’d have had to cede all decisions regarding Melissa to a higher-up as soon as things turned sexual between them. But even before it was time for questions, Phills was sufficiently skeptical to butt in. “So the policy that Stanford has actually says that where such a recusal is required you must notify your supervisor, department chair, or dean,” he said. “What if the person involved is the dean?” “If the person who is involved is a dean, you should go straight to the provost,” the lawyer replied. “And we will let the deans that are here know that,” she added, prompting scattered laughs from the crowd. She resumed her talk, but before long Phills was at her again. “So suppose Ed were a dean and Melissa was a senior faculty member who was married to another senior faculty member,” he began. “Ed was involved in a relationship with Melissa. Ed would have to recuse himself from making decisions about both Melissa and her husband?” “That would probably pose a real problem,” the lawyer replied. “Do you know something I don’t know?” she asked playfully. He might, Phills replied. “Don’t out him or her here!” the lawyer exclaimed. There was more laughter. “And your expectation would be that the provost or the general counsel, if something like this were to happen, Stanford would be concerned?” Phills pressed. “Yes,” the lawyer said. “And you and I need to talk outside!” More laughs still. Phills assured the Stanford lawyer he was “speaking hypothetically.” Only he wasn’t. By the time of the seminar, the dean of the business school, Garth Saloner, had been involved with Phills’s estranged wife, Deborah Gruenfeld, a social psychologist and professor of organizational behavior there, for more than a year. And while Saloner had ostensibly removed himself from all decisions involving either Phills or Gruenfeld, Phills believed Saloner had remained enmeshed in his affairs, penalizing him professionally and injecting himself into his divorce and custody battles, all to drive him out of Stanford. Some of this was not just conjecture. For three months in the summer and fall of 2012, as the incipient romance between Saloner and Gruenfeld developed, Phills, either sitting at his home computer or manning one of his other electronic devices—including, in one key instance, playing with the cell phone his wife had asked him to fix—had monitored and preserved the e-mails, text messages, and Facebook chats between the two. He’d followed their first walk together, and their first drinks, and their first date, and their first intimacies, real and cyber, fumbled and consummated. And all of this unfolded as he believed the Stanford Graduate School of Business (G.S.B.) was slowly squeezing him out, denying him crucial and lucrative teaching assignments and, by calling for a $250,000 loan to be repaid within less than a year, attempting to force him out of his house on the Stanford campus. More:

The Paths for an Investigation of Fantasy Sports

It is impossible to watch a sports event these days without being inundated with advertisements for the rival fantasy sports companies DraftKings and FanDuel. As Richard Sandomir reported in The New York Times, they have bought nearly $200 million in television commercials since August, outspending longtime sports advertisers like pizza chains and beer brands. For an industry that was hardly noticed five years ago, it has now become a multibillion dollar operation with investors like Robert K. Kraft, owner of the New England Patriots, and Jerry Jones, owner of the Dallas Cowboys, along with Major League Baseball and television networks NBC and Fox. There may be no better sign that a business has hit the big time than when it is being investigated by the Justice Department for possible wrongdoing. First, an employee of DraftKings acknowledged that he might have used inside information from the company about how fantasy sports players were constructing their teams to win $350,000 in a contest run by FanDuel. Since then, it has emerged that a number of leading winners in the contests are employees of the two companies, raising fairness questions when these contests are promoted endlessly in advertisements with breathless references to the millions of dollars available to ordinary players. Since then, The New York Times reported that the Federal Bureau of Investigation has interviewed some prominent players in the contests, including questions about whether deposits have been accepted from people in states that outlaw paying to join fantasy sports. And last week came a report in The Times that a grand jury subpoena was issued to the Fantasy Sports Trade Association, an industry lobbying organization, as part of an investigation being conducted by the United States attorney’s office in Tampa, Fla. More:

Inside Clinton’s Benghazi hearing game plan

Her surrogates have been equipped with talking points blasting the Benghazi Committee as a “partisan charade.” Her main defender David Brock is expected to give a “pre-buttal” speech Wednesday, laying out a detailed case against the committee that essentially turns the tables and puts its members on trial. At Correct The Record, a PAC that coordinates with Hillary Clinton’s campaign, a war room of about 30 staffers will be on hand to defend Clinton and attack the committee as she heads to Capitol Hill Thursday to testify in front of the House Select Committee on Benghazi. And the outside super PAC supporting her campaign, Priorities USA, will be airing its first television commercials of the cycle in the two days leading up to the hearing, and has also conducted its first polls on attitudes toward the Republican-led panel. But Clinton herself is expected to show up solemn and serious in manner, her full commander-in-chief mode on display, allies told POLITICO. In the end, others will do the partisan screaming for her while she attempts to treat the appearance as part of her responsibility to the four Americans killed in Libya under her watch in 2012, as well as an opportunity to outline more broadly how she would conduct foreign policy as president. If there’s a larger theme to the hearing for Clinton — at which she is expected to be grilled on both the Benghazi attacks as well as her use of a private email account while she was secretary of state — it is presenting her theory of the case for American diplomatic engagement abroad. While Clinton to date has largely avoided extensive discussion on the campaign trail of foreign policy matters, she is expected to offer a full-throated defense of the fact that the United States had diplomats on the ground in Benghazi. She is expected to lay out the rationale more broadly for “smart power,” the carrot-and-stick approach of combining soft diplomacy with the threat of force and sanctions. The hearing, allies said, is expected to provide Clinton with a stage to make the case for maintaining a diplomatic force in dangerous corners of the world, rather than retreating. More:


Republican Freedom Caucus’s Revolt in House Is Stoked Back Home

When 87 Republican freshmen arrived in the House of Representatives in 2011 after an election swayed by the Tea Party movement swept Republicans back into the majority, the question was simple: Would they change Washington, or would Washington change them?Four years later, the answer seems clear. Buoyed by a vastly increased majority — Republicans now hold 247 House seats — highly gerrymandered districts and the rise of an intricately coordinated web of conservative media, the new right has had a significant impact on public policy and the ways of Washington. Discretionary government spending, the original target of the group, has dropped to 6.5 percent of the economy in 2015, from 9.1 percent in 2010,according to the Congressional Budget Office. Social issues, which had seemed to be receding in legislative fights, have returned full force. It is also much harder to get things done. The group set off a government shutdown in 2013, came within hours of shuttering the Department of Homeland Security last winter, recently pushed Speaker John A. Boehner of Ohio to announce his resignation and blocked his preferred replacement. But the agenda of the most conservative wing of the House, as personified by the roughly 40 members of the Freedom Caucus, has evolved substantially since 2011. Once unified almost solely around the goal of reducing government spending, the group has expanded its targets to an array of Obama administration policies, most notably immigration this year. At first libertarian — the group early on torpedoed a routine vote on the Patriot Act— it has become more interventionist. While Planned Parenthood has long been in the cross hairs of conservatives, its funding has become a central point of conflict. But it is increasingly clear that what the Freedom Caucus wants more than specific legislation is power. Its members want a greater voice in how legislation comes together and how the House functions, areas traditionally directed by a leadership team of seasoned lawmakers. They have endorsed a candidate for speaker, Representative Daniel Webster of Florida, who, while not as conservative as many of them, seems attractive largely because of his willingness to do as they say. Their long list of demands of a new speaker has few legislative goals, and focuses instead on getting more authority by changing the rules of the House. The fury with which they have challenged their own leaders has largely been embraced by their constituents. Those views poured forth in interviews during last week’s congressional recess in five districts represented by members of the Freedom Caucus. More:

Hedge Funds are Bringing Back Everyone’s Least Favorite Toxic Investment

Joshua Siegel is bringing back one of the most toxic financial vehicles ever devised and arguing that this time it’s going to be different. His StoneCastle Financial is among the hedge funds that are reviving the collateralized debt obligation, or CDO. CDOs stuffed with mortgages and their derivatives caused billions in losses around the world during the 2008 crisis. The CDO that StoneCastle put together is a little different. It’s backed by subordinated debt issued by about 35 community banks, some of them so small they don’t have credit ratings. Subordinated debt is paid off last in a bankruptcy, so issuers typically compensate buyers with higher yields than on other borrowings. Citigroup Inc., which completed the $250 million deal for New York-based StoneCastle this month, calls it a collateralized loan obligation, but it’s a structured security that walks and talks like a CDO. Moody’s Investors Service plans to give it a rating of A3, six grades below Aaa, according to people with knowledge of the deal. Bank bonds rated A typically yield 2.5 percent. Through the wonders of financial engineering, StoneCastle’s Community Funding CLO yields 5.75 percent. “A CDO is just another word for financing,” Siegel said in an e-mail. “What matters are what assets are being financed.” This isn’t the first time Siegel pooled small-bank debt into a structured financial product. At Salomon Smith Barney in the late 1990s, he proposed bundling banks’ trust-preferred securities, a predecessor to subordinated debt, into so-called TruPS CDOs. In a 2001 research report, Siegel divided the U.S. into five regions and wrote that the geographic diversity of the banks whose TruPS he used — picking debt from different areas — would make the CDOs safer. Sales of new TruPS CDOs multiplied in the next seven years by a staggering 7,722 percent, rising to issuance of $60 billion by 2007, according to the Federal Reserve. In all, Siegel said he put together about 13 TruPS CDOs. “There was a cult following,” he said. But banks failed all over the country in the 2008 credit crunch, throwing shade on Siegel’s original theory about regional diversification. Larry Cordell, a vice president at the Federal Reserve Bank of Philadelphia, said that’s because too many banks’ portfolios were concentrated in real estate and mortgages. They weren’t diversified enough, he said. The market for TruPS CDO collapsed. Some investors are still waiting to be repaid.

Thomas Krebs, securities attorney, Mountain Brook, Alabama.

GOP lawmaker floats impeachment for Clinton

A Republican lawmaker is floating impeachment for Hillary Clinton, should the Democratic presidential candidate lock up her party’s nomination and go on to win the White House. Rep. Mo Brooks (R-Ala.) said in a phone interview with The Hill late Monday that he believes Clinton improperly handled classified information on her private email server used during her time as secretary of State. Brooks said that Clinton “would be subject to impeachment,” adding, “subject to impeachment means that should the House and Senate so choose, she could be impeached based on offenses, high crimes and misdemeanors, that she has in all probability already committed.” Brooks pointed to a section in the federal code that prohibits the “unauthorized removal and retention of classified documents or material,” though suggested other areas could also apply to Clinton. “I don’t know, off hand, whether her commission of these offenses is a legal barrier to running for president. But if Congress should so choose, it would be a legal basis for her removal from office,” Brooks said later in the interview. “Why do you think Joe Biden is thinking about running for president?” Brooks asked. “To a large degree, he’s waiting to see if Hillary Clinton gets arrested or indicted.” Brooks caught headlines on Monday when The Huffington Post highlighted his remarks from a recent radio interview when he floated the prospect of impeachment for Clinton on her first day in office.

George W. Bush unleashes on Ted Cruz

Inside a sleek Denver condominium, George W. Bush let a hundred donors to his brother’s campaign in on a secret. Of all the rival Republican candidates, there is one who gets under the former president’s skin, whom he views as perhaps Jeb Bush’s most serious rival for the party’s nomination. It isn’t Donald Trump, whose withering insults have sought to make Jeb pay a political price for his brother’s presidency. It isn’t Marco Rubio, Jeb’s former understudy who now poses a serious threat to his establishment support. It’s George W. Bush’s former employee — Ted Cruz. “I just don’t like the guy,” Bush said Sunday night, according to conversations with more than half a dozen donors who attended the event. One donor in the room said the former president had been offering mostly anodyne accounts of how the Bush family network views the current campaign and charming off-the-cuff jokes, until he launched into Cruz. “I was like, ‘Holy sh-t, did he just say that?’” the donor said. “I remember looking around and seeing that other people were also looking around surprised.”  “The tenor of what he said about the other candidates was really pretty pleasant,” another donor said. “Until he got to Cruz.” Bush took a harsh view of Cruz’s apparent alliance with Trump, who stood with the senator at a Capitol Hill rally last month in opposition to the Iran deal. While Trump, the current GOP poll leaders, has attacked most of his competitors in the 2016 field, he has avoided criticizing Cruz. One donor, paraphrasing the former president’s comment in response to a broad question about how he viewed the primary race and the other Republican candidates, said: “He said he found it ‘opportunistic’ that Cruz was sucking up to Trump and just expecting all of his support to come to him in the end,” that donor added. George W. Bush is well acquainted with his home-state senator, who served as a domestic policy adviser on his 2000 campaign before rising to national prominence by distancing himself from — and often going out of his way to antagonize — the GOP establishment. In his book published earlier this year, Cruz ripped Bush’s record, criticizing elements of his foreign policy and faulting the administration for enabling “bigger government and excessive spending and new entitlements.”

Donald Trump is destroying Jeb Bush: Why his 9/11 gambit could be the last straw

It took a while, but the Republican race has finally gotten down and dirty as you knew it must. Aside from the very real frustration of dealing with fools, clowns and oddballs dominating the large pack of candidates, at some point someone was going to have to go mano a mano with Donald Trump. Looks like first up is Jeb Bush. This past weekend, the Donald finally pushed a button that was too much for Jeb to bear: He made the factual observation that Jeb’s brother had been president on 9/11. Well, all hell broke loose, as every GOP establishment figure rose up in untamed fury that Trump would be rude enough to bring such a thing up. Why, that’s sacrilege. Bush followed up with a bizarre tweet which encapsulates the central vulnerability of his campaign and calls into question his entire rationale for running. This is a strange argument, if only because Trump is obviously correct: The attack happened on George W. Bush’s watch. Thus, it’s undeniable that he did not keep us safe. But up until now, it has been considered something of a faux pas to even say as much. Sure, there were some malcontents on the left who tepidly pointed out the obvious truth — that if Al Gore had been president at the time, the Republicans would have impeached him (if not tried and hanged him for treason) — had the shoe been on the other foot. That’s fairly obvious. But people mostly decided to eschew the blame game after 9/11. Gore, for his part, came forward to declare that “George W. Bush is my commander in chief” and exhort his fellow Democrats to “unite behind our president … behind the effort to seek justice, not revenge, to make sure this will never, ever happen again.” Soon after, the entire Congress, except for Rep. Barbara Lee, backed the president’s decision to invade Afghanistan. There was very little political dissension. Indeed, the only serious partisan sniping came from people on the right like Andrew Sullivan, claiming without evidence that “the left” was in league with the terrorists. But for the most part, any blame for the attacks was muted and relegated to the extremes. The government investigated, of course, and quite thoroughly. It created a blue ribbon, bipartisan commission which interviewed everyone involved, held public hearings and published a report in book form for the entire country to see. The hearings were particularly riveting as the nation got to hear from various insiders about what had been going on before, during and after the attacks. Most memorable was former terrorism czar Richard Clarke, who testified that he and others had been running around with their “hair on fire” trying to get the administration to focus on the high probability of an imminent terrorist attack on U.S. soil. And everyone remembers National Security Advisor Condoleeza Rice, under questioning by the commission, admitting that the president had been given a very specific memo warning of the attacks on August 6th, 2001, almost a month before the attacks. When asked what the title of the memo was, Rice replied, to gasps from the audience there and undoubtedly in every living room in America, “I believe it said ‘Bin Laden determined to strike inside the United States.’” It was a while before America got to see that memo, but when we did, we saw that they explicitly warned that they would “follow the example of World Trade Center bomber.” It said that in the first paragraph. There was also a lot of information about the president’s response to the attacks, including the rather bizarre fact that Vice President Dick Cheney seemed to have taken over control in the early going and that the commission was not allowed to interview the president outside the VP’s presence.

Payback: Most Bernie Madoff Ponzi Scheme Victims to Get $1M

Almost seven years after the collapse of the largest Ponzi scheme in U.S. history, many victims who lost big in Bernard Madoff’s crooked plot will be getting a handsome paycheck, officials said today. Stephen Harbeck, President and CEO of the Securities Investors Protection Corporation, told ABC News that anyone who invested up to $1,161,000 will “be made completely whole” in the latest round of distribution payments, per a new motion filed in a New York bankruptcy court today. Harbeck said that will affect a majority of the people who had valid claims to being a Madoff victim. For those who invested more, Harbeck said they could get back at least 61 cents on the dollar for their investments if their claim has been approved. “Coming out of a Ponzi scheme with 61 percent of what you started out with is a major victory,” Harbeck said. U.S. officials have managed to recover $11 billion of the $17 billion that they believe was lost when the Ponzi scheme collapsed in 2008, the biggest chunk coming from the bank accounts of a deceased alleged co-conspirator of Madoff’s, Jeffrey Picower. Picower’s widow agreed to turn over $7.2 billion to the victims, virtually every dollar her husband made in the Madoff scheme – more than Madoff himself, officials said. “I think it was Mr. Picower probably as an individual by far made the most money,” said David Sheehan, a partner at BakerHostetler working with his colleague Irving Picard, the court-appointed banking trustee charged with recovering Madoff’s ill-gotten profits. “That was an amazing day when we actually settled the case and I was getting reports from J.P. Morgan Chase where we actually had the escrow account. In would come a billion dollars, in would come two billion dollars. Phenomenal event.” More:–abc-news-topstories.html#


Federal Reserve Board hands down sanctions to former Regions exec

The Federal Reserve Board on Monday barred Thomas A. Neely Jr., former executive vice president and business services credit executive of Regions Bank, from working at a banking institution and forced him to pay a fine for his part in providing misleading information to examiners. The penalties stem from a 2009 loan accounting issue in which the Securities and Exchange Commission found that Neely and the bank’s head of special assets, Jeffrey Kuehr, and Chief Credit Officer Michael Willoughby had engaged in violations of unsafe and unsound banking practices and breaches of fiduciary duties. It is in connection with Regions Bank’s improper reporting of non-accrual loans in the first quarter of 2009. It also said the bankers provided misleading information to federal and state bank examiners. Neely’s punishment is being barred from participating in the affairs of any insured depository institution and ordered to pay a civil penalty of $100,000 to settle administrative charges. That covers the charge brought by the Federal Reserve Board in June 2014.

Private probation company once called ‘judicially sanctioned extortion racket’ leaving Alabama

Judicial Correction Services Inc., a company that once was criticized by a judge as helping Harpersville run a “debtors prison” and “judicially sanctioned extortion racket,” is pulling up stakes in Alabama after dozens of towns cancelled contracts with the company around the state. JCS issued a brief statement Monday that it was ceasing operations in Alabama. “At this time, JCS has determined that it will discontinue services in the State of Alabama,” according to a statement from the company on Monday. The statement does not say when the shutdown will occur, although the Decatur Daily quoted Hartselle’s city attorney as saying it would be Nov. 13. “As a company, we have operated within full compliance of state law and have worked very hard to serve those municipalities who openly contracted to retain our services,” according to the JCS statement. “We have voluntarily played a proactive role in proposing legislation that would further regulate our industry, but have been unable to reach a resolution with state leadership.” “We have decided that discontinuing our services in Alabama is in the best interest of our organization as well as our municipal partners who were simply looking for an alternative to incarceration when collecting out-standing probationary fines,” according to the company statement. The company declined any further comment on the shutdown. The shutdown of JCS operations in the state came as good news for one group. “We’re glad this company is no longer operating in the state,” said Sam Brooke, deputy legal director at the Southern Poverty Law Center.

Judge to consider Speaker Mike Hubbard’s list of 40 witnesses

Defense lawyers for House Speaker Mike Hubbard are seeking testimony from 40 witnesses to back their efforts to have ethics charges against Hubbard dismissed. Attorneys for the state have asked Lee County Circuit Judge Jacob Walker to block or limit the testimony of the witnesses. Walker will conduct a hearing on the matter Tuesday morning at 9 a.m. at the Lee County courthouse in Opelika. The judge’s decisions could set the stage for another pretrial hearing, scheduled for Oct. 26, on Hubbard’s motions for dismissal. The speaker is seeking dismissal on claims of misconduct by prosecutors, selective and vindictive prosecution and constitutional challenges to the state ethics law that he praised and helped pass five years ago. Hubbard’s trial is scheduled for March. He has pleaded not guilty to 23 felony ethics charges listed in an indictment issued by a special grand jury in Lee County a year ago. Hubbard is accused of using his position as speaker and former position as chairman of the state Republican Party to steer money and investments to his businesses. On Oct. 2, Walker granted Hubbard’s motion for an evidentiary hearing on Hubbard’s claims of prosecutorial misconduct. The judge indicated it would be narrow in scope. Prosecutors, in their motion opposing Hubbard’s list of witnesses, said testimony should be limited to any alleged misconduct that could have substantially influenced the grand jury’s decision to indict. Prosecutors objected to the subpoenas of employees and former employees of the attorney general’s office on the misconduct issue. They said what occurred inside the attorney general’s office could not have affected the grand jury’s decision, and any testimony about what happened in the office is shielded by confidentiality. On the claim of selective and vindictive prosecution, Hubbard’s attorneys are seeking testimony from eight of Hubbard’s fellow legislators at the Oct. 26 hearing. And on the constitutional challenges to the ethics law, Hubbard’s lawyers are seeking testimony from three officials and former officials of the Alabama Ethics Commission. Prosecutors oppose allowing any witness testimony at the Oct. 26 hearing on the claims of selective and vindictive prosecution and the constitutionality of the ethics law. Prosecutors say the judge’s order only allows for arguments on those issues, not testimony.

From the Alabama true crime files: The Black Widow, the Torso Slayer and the Giggling Granny

Viola Hyatt, the Torso Slayer

During the last 10 years of her life, Viola Hyatt was lovingly called the “Mayor of Tuckaway Village.” She spent most of her evenings sitting on her porch, reading the Bible. She looked after all the people in her tiny Jacksonville mobile home park, where she lived on a fixed income, saving coins in a jelly jar. She’d often call working parents to let them know their sons or daughters had gotten home safe and sound. “She never had a job,” according to a 2001 story in The Anniston Star. “She didn’t graduate from high school. Yet, she read voraciously. She was witty, fearless and God-fearing.” In small towns like Jacksonville and Rabbittown, where Hyatt grew up on her father’s farm, people look out for their own. Forgiveness is natural and second chances are deserved, even if those people happen to be infamous. When Viola Hyatt died on June 14, 2000, she was 71 years old. Only about 50 people attended her funeral, for which there was no obituary or funeral notice. For good reason. The people of Calhoun County had forgiven Viola Hyatt, but others might come looking for the story from before she was known as the “Mayor of Tuckaway Village” … back 40 years ago when she was known as the “Torso Slayer.”More:



Black Belt doesn’t want advantage, just equality

The citizens of Alabama’s Black Belt would like a working a driver license office in their counties. They are playing victims. State Rep. Mike Ball says so. Said it on the radio for all the world to hear. Said the citizens there who were complaining were “just blaming government for all of their problems.” It’s funny how that works – that whole “victim” thing. If you expect a working driver license office in your county so you don’t have to drive an hour to the closest open one, you’re a victim. But if you and your family feed off government contracts for generations, you’re just a hard worker taking care of business. Accept help in the form of food stamps, childcare assistance or health care subsidies, you’re a moocher. Accept help in the form of government grants, small business loans or bankruptcy protection, you can be the frontrunner for the GOP nomination. It’s as if there’s a giant double standard at work – one that allows Alabama’s conservative lawmakers to both shut poor citizens out of the voting booth and put them into perpetual cycles of poverty, and then also chastise them for talking about it. The lack of foresight in this state never ceases to amaze. We never see anything coming. We never accurately calculate the long-term effects. We never err on the side of human potential. We will never see how failing at equality hurts us all. We never see it when we fail to properly fund certain school districts and essentially create a pipeline for the children in that district to prison. We never see it when we choose to deny basic health care to people. We never see it when we set up and support an unfair tax system. Over the years, our lawmakers have turned their backs on entire areas of poverty and suffering. As he touted his luring of a copper plant to Wilcox County – the nation’s poorest county – during his 2014 State of the State address, Gov. Robert Bentley noted that Wilcox hadn’t welcomed a new industry since “man first set foot on the moon.” That’s nearly 50 years. And to get that industry here, we only had to give it the land and the building for the factory, hire and train its employees, float millions of dollars in tax breaks and fork over more money in incentives. All to get, at the absolute most, 500 jobs. That’s the same way this state has lured pretty much every industry. Not one company has landed here because of the educated workforce or the superb medical facilities or the awesomely maintained infrastructure or the access to reliable broadband. Because those things don’t exist here. To obtain them would mean setting aside greed and bigotry. It would mean properly funding schools, expanding Medicaid, devoting tax dollars to fixing our infrastructure and actually making access to reliable broadband Internet a priority for rural communities. (On that last one, a recent survey of high school teachers found that 70 percent of them assign homework that requires a reliable Internet connection to complete. Now imagine the number of children who lack that connection. Now imagine what lacking that connection means in the long run.) We don’t do any of those things. Not consistently. Instead, the biases of some dominate the decisions. Just go back to Ball’s comments. His words denigrated an entire group of people in the Black Belt – all of the people who expect fairness and opportunity from the government. If anyone should know how wrong that is, it’s Ball. According to the bio page on his website, Ball was taken away from his home as a child by his mentally disturbed mother, and they spent years bouncing from shelter to shelter. Ball was in foster care for awhile and probably would’ve been stuck there for his entire childhood had it not been for a foster care worker who tracked down his father. Thankfully, that taxpayer-funded foster care system was in place. Thankfully, there was a government-provided way out of poverty and hard times for Ball. Thankfully, there wasn’t some jackass politician looking down on him, mocking his plight and explaining that if he only had a little more try in him he could overcome the unending obstacles his government placed in his path. If only the people in the Black Belt could be so lucky.


Morning Money

FIRST LOOK: GOP STUDY COMMITTEE ON THE DEBT LIMIT — The conservative Republican Study Committee (RSC) on Tuesday plans to unveil its “Terms of Credit” plan to deal with the debt ceiling. According to a person familiar with the plan, the group “will lay out reforms that tackle the root issues driving the national debt as a requisite for any debt limit increase. Provisions include directing Congress to stick to the House- and Senate-passed budget, keeping Congress in session and working if appropriations deadlines are not met, and enacting a regulatory freeze until July 1, 2017 (subject to health, safety, and national security waivers).

“RSC is also championing Rep. Tom McClintock’s Default Prevention Act, which is expected on the House floor later this week. Without a plan from House leadership, the RSC’s Terms of Credit is the only proposal offered by House Republicans thus far to address impending debt limit.”


GETTING IT DONE THIS WEEK? — WP’s Kelsey Snell: “In order to get a bill through Congress before that deadline, congressional aides and lobbyists said Monday that they expect the House will pass an increase in the debt limit by the end of the week, with the help of Democratic votes, so it can then be cleared by the Senate next week before the deadline.”

THE PRIORITIZATION “PLAN” — House Republicans plan to vote on it Wednesday but it’s a charade. If the government pays some bills and not others, it’s still a default and a potential catastrophe. Either the U.S. government lives up to commitments or it doesn’t. Avoiding technical existing bond defaults means nothing.

TRUMP STILL LEADS — POLITICO’s Eliza Collins: “The summer of Donald Trump has apparently not cooled off as fall has taken hold, with the business tycoon getting his highest marks yet in a NBC News/ Wall Street Journal poll out Monday. Trump came in at 25 percent among Republican primary voters — up 4 percent from September and 24 percent from June — but Ben Carson is hot on his heels. The retired neurosurgeon garnered 22 percent support, with the gap between the two falling within the margin of error. …

“Florida Sen. Marco Rubio comes in at third place with 13 percent. In fourth and fifth places are Texas Sen. Ted Cruz and former Florida Gov. Jeb Bush, at 9 and 8 percent respectively. Bush was the clear front-runner early on in the race with 22 percent in June. Carly Fiorina, who had enjoyed a spike in her numbers after her strong performances in the first two GOP debates, has dropped back down to sixth place at 7 percent.”

ROSNER RESPONDS TO WEISS — Graham Fisher’s Josh Rosner emails MM on Antonio Weiss’s op-ed (in MM on Monday) opposing a “recap and release” plan for the GSEs: “[P]erplexing in that it seemed to respond to a debate about future housing policy that has not occurred. And yet, such a dialogue is specifically required by the 2008 Housing and Economic Recovery Act … It is Mr. Weiss’s position that a plan to recapitalize the GSEs is wrongheaded and would hurt the nation’s housing finance system rather than help it. These assertions come without reference to any specific plan, contain several curious claims and omitted several important points. …

“[W]ithout a specific proposed plan to evaluate, there can be no way to assess either its efficiency or effectiveness. … Mr. Weiss also claims that a ‘recap and release’ plan would have a negative impact on affordable housing. Again, without consideration of any specific plan such broad and sweeping statements are completely unsupported and, in fact, likely incorrect.” Full piece:

CANADA GOES LEFT! — FT’s Anna Nicolaou: “Justin Trudeau’s Liberal party was heading for a stunning victory in Monday’s Canadian general election, ousting Stephen Harper and his Conservatives from their near-decade reign over a country now hit by the oil price crash and an economic recession. … Less than an hour after polls closed across the country, the Liberal party was projected to win 189 seats with 40 per cent of the popular vote, according to Elections Canada, the government election agency. …

“The wider than expected margin appeared to be at the expense of the leftwing New Democratic party, which was on track to win only 35 seats, while the Conservatives were heading for 103. The results were far more favourable for the Liberals than had been predicted by pre-election polls, which projected a slim minority win for Mr Trudeau’s party. They also marked a sharp turnround from the 2011 election when the Conservatives crushed the Liberals, winning 166 seats to the Liberals’ 34”

GOOD TUESDAY MORNING — Miss the Star Wars VII trailer on Monday Night Football last night? You must check it out. Gave M.M. serious chills Email me on and follow me on Twitter @morningmoneyben.

DRIVING THE DAY — Jim Webb apparently may announce an independent run for president. Good news for Alec Baldwin! … Will Joe be a go? Who knows! Maybe we will find out today. Or not. … House Republicans meet tonight to plot a way forward on the debt limit and other issues … Fed governor Jerome Powell speaks at 9:15 a.m. in New York on the structure of the Treasury market … Fed Chair Janet Yellen speaks at 11:00 a.m. in brief remarks at a Labor Hall of Honor Induction Ceremony in D.C. … Housing starts at 8:30 a.m. expected to be rise slightly to 1,142K from 1,125K …

MM ERRATA — On Monday we erroneously attributed Treasury counselor Antonio Weiss’s Fannie/Freddie op-ed to the WSJ. It was actually on Bloomberg View:

MORE ON TRUMP’S CASH — Newsweek has excerpts of the new intro to Timothy L. O’Brien’s updated “TrumpNation: The Art of Being Donald”: “TrumpNation came out in in the fall of 2005, and in early 2006 Donald sued me for $5 billion, claiming that the book libeled him because … Evaluating Donald’s riches was like trying to bottle smoke. At one point, when Forbes magazine posited that the Trump coffers were brimming with $2.6 billion, he told me the actual figure was $4 billion to $5 billion. Later the same day, he called and amended his own assessment — to $1.7 billion.

“While I was doing research for TrumpNation later on, he said he had $5 billion to $6 billion stashed away, but when I spent the night at his Palm Beach estate, a glossy little pamphlet found its way into my room stating he had amassed $9.5 billion. And on and on and on. … Donald lost the case, but one of the highlights of the litigation was a two-day deposition my lawyers conducted with him. The deposition established the fact that Donald had overly generous and malleable definitions of being a proprietor when it came to major real estate projects he was involved in”

BARNEY FRANK ON CFPB STRUCTURE — Barney Frank wrote to Rep. Kyrsten Sinema complaining about her op-ed in the WSJ on the structure of the CFPB: “I was very disappointed at your misrepresentation of my position on the CFPB, and of your failure to speak with me before you did so. I have always personally supported a single Director. When we began legislating, Henry Waxman and other Democrats on the Energy and Commerce Committee expressed a strong preference for a Commission. Combining their votes with the votes of those opposed to any CFPB at all meant that I would not have a majority on a floor vote.

“I did manage to get agreement on a single Director to set it up, but I had to agree to switch to a Commission afterwards, not because that was my preference but because it was the political reality. When Chris Dodd had the votes to carry out what was his, Elizabeth Warren’s and my preference for a single Director, I folded in Conference happily and immediately.” Full letter:

NOT ALL BAD NEWS IN CHINA — WSJ’s Ira Iosebashvili: and Carolyn Cui: “There is robust growth in China if you know where to look, some contrarian investors believe. Monday’s gross-domestic-product report offered the latest sign that the world’s second-largest economy is slowing. But the gloom is overdone, said some portfolio managers who are focusing on the nation’s booming service sector. Their purchases amount to a bet on Beijing’s efforts to engineer an economic rebalancing, toward a consumer-led, service-driven economy from one dominated by manufacturing and trade.

“While slowing Chinese economic growth and declines in the country’s use of materials such as copper, nickel and cement have rippled through financial markets, some traders say some less-publicized metrics paint a more upbeat picture. To name a few, box-office sales are up more than 50 percent this year, Internet traffic through mobile devices has nearly doubled and railway passenger traffic and civil aviation are increasing steadily, government data show.”

BLACKSTONE TO BUY STUYTOWN — NYT’s Charles V. Bagli: “Stuyvesant Town-Peter Cooper Village, the largest apartment complex in Manhattan, is expected to be sold for more than $5.3 billion, an agreement that will preserve nearly half the 11,232-unit complex for middle-class families, according to officials involved in the negotiations. The sale, to the Blackstone Group … includes an unusual regulatory agreement with the administration of Mayor Bill de Blasio that would ensure that a block of 5,000 apartments would be affordable for the next 20 years for families of teachers, construction workers, firefighters and others who have traditionally made their homes at Stuyvesant Town.

“The agreement, which covers a high-profile complex that symbolized the rapidly changing nature of New York City housing, represents a victory for Mr. de Blasio, who has made affordable housing a central tenet of his administration. Up to now, tenant activists and elected officials have feared that Stuyvesant Town’s 65-year history as a middle-class bastion was ending. … The 110 plain redbrick buildings that make up the complex have been at the center of a roiling debate over housing in a city where prices have sailed beyond the reach of not only the poor but also many middle-income New Yorkers.”

OOPS! — FT’s Martin Arnold and Katie Martin in London: “Deutsche Bank paid $6bn to a hedge fund client by mistake in a ‘fat finger’ trade on its foreign exchange desk this summer that raises fresh questions about its operational controls and risk management. Germany’s biggest bank recovered the money from the US hedge fund the next day. But the incident in its London-based forex team was an embarrassing blow to the bank, which is already under intense scrutiny from regulators.

“The bank, which on Sunday announced a drastic shake-up of its senior management and split its investment bank in two, is struggling to restore its profitability and reputation in the wake of corruption scandals and missed performance targets. The $6bn trade was processed by a junior member of the bank’s forex sales team in June while his boss was on holiday … Instead of processing a net value, the person processed a gross figure. That meant the trade had ‘too many zeroes’, said one of the people.”


NYSE FILES FOR DIGITAL OPENINGS — In a filing with the SEC, the NYSE proposed to “to amend Rule 123D to specify that Exchange systems may open one or more securities electronically if a Designated Market Maker registered in a security or securities cannot facilitate the opening of trading as required by Exchange rules.” Full filing:

CHIP AND PIN DEBATE HEATS UP — Per a senior GOP hill staffer to M.M.: “It’s troubling that merchant trade associations have chosen to mislead consumers and Members of Congress in their push for ‘chip-and-pin’ for payment cards. This week, merchants will put forward a witness for the House Small Business Committee hearing on EMV migration that Sen. Durbin has dubbed his ‘secret weapon’ on interchange.

“This follows Durbin’s letter to the FBI advocating for an endorsement of ‘chip-and-pin’. It is becoming increasingly clear that ‘chip-and-pin’ is nothing more than an interchange play by the merchants with the help of their old pal Sen. Durbin. I suspect the gloves will be coming off.”

MORGAN STANLEY MISSES — FT’s Ben McLannahan in New York: “Morgan Stanley chief James Gorman promised an ‘intense focus’ on underperforming parts of the Wall Street bank, as weaker bond trading and a collapse in investment management revenues lowered third-quarter profits by 40 per cent. The pledge came amid a mostly weak earnings season for US banks, and as European lenders such as Deutsche Bank and Barclays begin to get to grips with strategic changes under new leadership. … Morgan Stanley, too, struggled to maintain momentum in a quarter marked by a drop in major equity markets and continued ultra-low interest rates. …

“Net revenues were down 13 per cent from a year earlier to $7.77bn, with weakness across the board in the core institutional securities (-14 per cent), wealth management (-4 per cent) and investment management (-59 per cent) divisions. As a result, net income fell 40 per cent to just over $1bn, from $1.69bn a year earlier and $1.81bn in the April-June quarter. Earnings per share came to 48 cents for the period, missing analysts’ forecasts of 64 cents. The company’s return on equity came to 3.9 per cent, down from 8.9 per cent a year earlier”

POTUS Events

No Public Schedule published

Floor Action

The Senate reconvenes at 10 a.m. First votes at 11 a.m. for a judicial nominee. Weekly caucus lunches will start at noon, followed at 2:15 p.m. by a roll call on a prosecutorial vote on the sanctuary cities bill. The House returns for 6:30 p.m. votes.

Krebs Daily Briefing 19 October 2015


Putin Officials Said to Admit Real Syrian Goals Are Far Broader

As Russia’s air war in Syria nears its fourth week, officials now admit that Moscow’s aim is far broader than the publicly announced fight against terrorist groups. The Kremlin’s real goal is to help Syrian President Bashar al-Assad retake as much as possible of the territory his forces have lost to opponents, including U.S.-backed rebels, Russian officials say. Moscow’s deployment of several dozen planes, as well as ships in the Black and Caspian Seas, could last a year or more, one official said. President Vladimir Putin is willing to run the risk of falling into the kind of quagmire that helped sink the Soviet Union a generation ago for the chance to roll back U.S. influence and demonstrate he can dictate terms to Washington. If the strategy is successful, Russia’s largest military drive in decades outside the former Soviet Union would force the U.S. and its allies to choose between Assad, whom they oppose for his human-rights abuses, and the brutal extremists of Islamic State. “They’re going to have to recognize that Islamic State is the real threat that has been countered only by the Syrian regular army commanded by President Bashar al-Assad,” said Iliyas Umakhanov, deputy speaker of the upper house Federation Council, who oversees international relations at the assembly. A top Russian military official said on Friday that the Kremlin sees no moderate opposition in Syria, leaving only terrorists and the pro-Assad forces Moscow is backing. “In the West, they talk about ‘moderate opposition,’ but we so far haven’t seen any in Syria,” General Andrey Kartapolov, commander of the Russian operation in Syria, told the Komsomolskaya Pravda newspaper. “Any person who takes up arms and fights the legal authorities, how moderate can he be?”



Challenging Private Equity Fees Tucked in Footnotes

How much do private equity investors pay to the firms overseeing their portfolios? You might think such a question would be a no-brainer. But in the supersecret world of private equity, it is anything but. That’s why John Chiang, the treasurer of California, recently called for legislation requiring full transparency in the reporting of fees charged by private equity firms. In an Oct. 12 letter to the California Public Employees’ Retirement System and California State Teachers’ Retirement System, Mr. Chiang urged both organizations to help him devise legislation to solve the problem of investors who “pay excessive fees to private equity firms and do not have sufficient visibility into the nature and amount of those fees.” You might think this issue has little to do with the rest of us. But tens of millions of people have entrusted their retirement to pension funds and other big firms with substantial stakes in private equity investments. Opacity is a byproduct of the secrecy permeating the $3.9 trillion private equity industry. Giants like Blackstone,TPG and the Carlyle Group have said that disclosing their agreements with investors would reveal trade secrets. Pension funds investing in these deals also refuse to disclose relevant documents, saying private equity firms would bar them from future deals if they did so. More common knowledge is the “two and 20” that private equity firms typically earn: a 2 percent management fee, based on assets, and 20 percent of any profits generated by the private equity fund.

The Freedom Caucus’ Unprecedented Insurgency

Congress has never seen anything quite like the House Freedom Caucus. There’s always someone unhappy on Capitol Hill and it’s not unusual for malcontents to band together. A rebellion made up of members who refuse to work with either party, however, is something that hasn’t happened in living memory. “This is an unusual and indeed unprecedented development in the history of the party,” says Geoffrey Kabaservice, a research consultant to the Main Street Partnership, a centrist GOP group. Parties—particularly those with large majorities—almost inevitably split into factions. And congressional history is replete with examples of groups that balked at party leadership. But the insurgents we remember—the ones who weren’t quickly and completely marginalized—managed by and large to find common cause with members of the other party. Southern Democrats, for instance, forged a “conservative coalition” with Republicans that dominated Congress for much of the 20th century.  There hasn’t been a bloc like the Freedom Caucus for at least a century, one that refuses to work with its own party leadership while being steadfastly unwilling to reach across the aisle. “There have been groups that often broke from the party, but in doing so, they didn’t stand as a third force,” says former GOP Rep. Mickey Edwards. “This group is very different.” The Freedom Caucus, rather than breaking from Republican ranks, has forced Republican leaders to break from them. It’s a perverse sort of political jujitsu. One of outgoing Speaker John Boehner’s supposed crimes was that he went begging Democrats for help passing legislation when he couldn’t find the votes within his own caucus. Some rank-and-file Republicans, meanwhile, have made a separate peace with Democrats on reviving the Export-Import Bank. Normally the opposite would happen and it would be the insurgents reaching across the aisle. But that presupposes an interest in governing.

Boehner faces treacherous path to the exits

Everyone wants to know whether Paul Ryan is going to run for speaker of the House. No one wants to know more than Speaker John Boehner. Boehner intends this week to set a date for the election to succeed him. But he doesn’t know whether Ryan will run, and, if not, the Ohio Republican could be in a serious jam. Many — including Boehner and his leadership team — believe the 45-year-old Ways and Means Committee chairman is the only viable candidate to be the next speaker. Yet if Ryan doesn’t run, GOP lawmakers and senior aides doubt the election will be wrapped up by Oct. 30, when Boehner planned to leave Congress. Boehner, who has pledged to remain in place until a new speaker is chosen, could be forced to stay put and deal with thorny budget issues and raising the debt ceiling as a lame-duck speaker. His internal clout has been severely diminished, and he would likely have to cut deals with Democrats to get any measures passed while still holding onto the speaker’s gavel. Boehner, who has a condominium in Florida and enjoys his golf, is itching to get out of the Capitol and wrap up his congressional career, allies say. But he has raised $300 million for House Republicans since 2009, spending hundreds of days a year on the road, and he isn’t going to leave the party in the lurch. Boehner is willing to stay for some of November but does not expect to be in Congress come Thanksgiving, according to multiple aides with knowledge of his plans. The end of the year or the end of 2016? That’s a pipe dream for Boehner loyalists.

What If the Parties Didn’t Run Primaries?

In the last year, the state legislature in Nebraska has voted to abolish the death penalty, raise the gas tax, and give driver’s licenses to undocumented immigrants youth—actions that each required lawmakers in one of the nation’s most conservative states to override the veto of a new Republican governor. That flurry of ostensibly liberal victories didn’t come about because of an electoral earthquake at the polls. It occurred in large part because Nebraska’s legislature is run differently than any state in the country. Since 1934, the unicameral chamber has been officially nonpartisan, and so are the elections that form it: Primary contests determine the top two candidates, who then face off in a general election regardless of party identification. The top-two open primary—sometimes known as a jungle primary—is also a feature of elections in Washington state and California, where voters adopted it through a ballot initiative for all state and federal contests except president. Now a group of advocates based in New York is campaigning to take that system nationwide, arguing that it would make elections more competitive and empower the rising number of independent voters disenchanted with the two major parties.

How the Republican Obsession With ‘Free Stuff’ Could Backfire

It has become a familiar Republican refrain. Senator Marco Rubio on Wednesday called the first Democratic debate a contest over “who was going to give away the most free stuff.” New Jersey Governor Chris Christie quipped Friday in New Hampshire, “There’s gonna be more free stuff for more people than you can even imagine sitting and listening to Bernie Sanders and Hillary Clinton and the rest of the crew up there.” Last month, Jeb Bush characterized Democrats’ message to African-American voters as “get in line and we’ll take care of you with free stuff.” A few days earlier, Senator Rand Paul mockingly accused  Sanders of promising voters “free stuff.” In 2012, Republican presidential nominee-in-waiting Mitt Romney told a voter, “If you’re looking for more free stuff, vote for the other guy.” These aren’t rhetorical coincidences—the language reflects the strongly held beliefs held by many in the GOP base that spending on safety-net programs should be slashed, and that the Democratic Party is powered by minority and immigrant voters who leech off the government. “I think people need to tread carefully when it comes to that kind of language. We’ve had a long track record of Republican candidates characterizing the Democratic Party as offering voters free stuff. … It hasn’t seemed thus far to end well,” Republican strategist Patrick Ruffini said, citing Romney’s “47 percent” comment to donors in 2012 and his later attribution of defeat to President Barack Obama as a result of the Democrat offering “gifts” to blacks, Hispanics, and young voters. Ruffini argues that linking Democrats with free stuff “certainly will be a popular line in the Republican primary,” but doing so risks alienating minority voters, whom he said the language tends to be associated with, and with whom the GOP needs to improve its performance in order to win a general election. “You do kind of run the risk of slighting those groups of voters by saying they’re only voting Democrat because they’re being bribed,” Ruffini said. “So I think that aspect of it is not necessarily the most productive.” Michael Steele, a former chairman of the Republican National Committee, said the GOP needs to be “less careless in our rhetoric” when it comes to low-income Americans. “If you are a member of the working poor who’s barely making ends meet and need some assistance—maybe food stamps, maybe child care—they don’t consider that free stuff. They consider that necessary stuff so their family isn’t broken up, so they’re not sleeping in cars and park benches,” Steele said. “Be smart and careful about how you describe the plight of others, because there but for the grace of God go you. To judge their existence and how they’re living their lives—we need to get out of that business and get in the business of offering self-empowerment and opportunities.”

States That Declined To Expand Medicaid Face Higher Costs

The 22 states that didn’t expand Medicaid eligibility as part of Obamacare last year saw their costs to provide health care to the poor rise twice as fast as states that extended benefits to more low-income residents. It’s a counterintuitive twist for those states whose governors, most Republicans who opposed the Affordable Care Act, chose not to accept federal funds to extend Medicaid to more people. A Kaiser Family Foundation survey of Medicaid directors in all 50 states and Washington, D.C., showed that those that didn’t broaden coverage saw their Medicaid costs rise 6.9 percent in the fiscal year that ended Sept. 30. The 29 states that took President Obama up on his offer to foot the bill for expanding Medicaid saw their costs rise only 3.4 percent. That modest increase in Medicaid spending in the expansion states came even as the rate of Medicaid participation rose 18 percent, three times as much as the states sitting out. Before Obamacare, able-bodied adults who didn’t have children weren’t eligible for Medicaid. The expansion allows all adults with incomes up to 138 percent of the poverty level to enroll. The federal government pays the entire bill for those people through 2016, after which the federal share tapers down to 90 percent. In the first two years of eligibility, tens of millions of people have signed up for Medicaid in those states that participated. There have been stark differences between states that take up the expansion and those that don’t. More:

High stakes for Hillary, lawmakers in Benghazi panel showdown

Hillary Clinton isn’t the only one with a lot riding on this week’s Capitol Hill hearing on the 2012 Benghazi terrorist attacks. The 12-member Select Committee on Benghazi is loaded with ambitious lawmakers from both parties looking for a breakout moment on the national stage with the Democratic presidential front-runner. More than half of the Republicans serving on the panel have been mentioned as potential candidates to replace Speaker John Boehner (R-Ohio). And the committee’s chairman, GOP Rep. Trey Gowdy (R-S.C.), is widely viewed as having a bright political future back home in South Carolina.  Clinton’s Democratic allies on the panel include one declared Senate candidate, Rep. Tammy Duckworth of Illinois, and another potential one, veteran Rep. Elijah Cummings of Maryland. Here’s a look at seven members of the Benghazi panel who could shine in the spotlight during Thursday’s showdown. Reps. Jim Jordan, Peter Roskam, Mike Pompeo and Lynn Westmoreland The Benghazi panel is small but counts at least four potential Speaker candidates among its ranks: Freedom Caucus Chairman Jim Jordan (R-Ohio), former Chief Deputy Whip Peter Roskam (R-Ill.), and Reps. Mike Pompeo (R-Kansas) and Lynn Westmoreland (R-Ga.). With Majority Leader Kevin McCarthy (R-Calif.) bowing out of the Speaker’s race and Ways and Means Chairman Paul Ryan (R-Wis.) reluctant to take the job, the contest for the House’s top job could become a free-for-all with dozens of lesser-known candidates. Thursday’s long-anticipated Benghazi hearing could offer a national platform for the quartet of Speaker-wannabes. Both Pompeo and Westmoreland, who questioned top Clinton aide Huma Abedin on Friday, have been reaching out to GOP colleagues to gauge support for a potential Speaker bid. Roskam, who’s been pressing leadership to improve internal rules, isn’t running for Speaker but would return to the leadership table if there were an opening. And while Jordan has repeatedly insisted he doesn’t want the Speaker’s gavel, members of his conservative Freedom Caucus are pushing his name anyway. For all four of the Republicans, the hearing carries enormous risks as well. Clinton, who is coming off a strong presidential debate performance, was a formidable foe the last time she testified on Benghazi in 2013. She is nearly certain to go on the attack when testifying Thursday, partly by using the words of Republicans against them. McCarthy suddenly dropped out of the Speaker’s race after suggesting the Benghazi panel was political. If another Speaker hopeful gets tripped up while sparring with Clinton, it could spell the end of their candidacy as well.


Leaked Recording Draws Shock and Ire

MONTGOMERY—A tape recording of a private meeting between Gov. Robert Bentley and the ALGOP Steering Committee was recently leaked to’s Chuck Dean. Several members who were present at the meeting say the written report was a heavily edited version of what actually took place. Committee Vice Chair, Districts 4 and 5, Rep. Ed Henry (R-Hartselle), Jackie Curtiss chair of the Greater Birmingham Young Republicans, and retired Alabama Power executive and ALGOP Treasurer David Wheeler where in attendance, and each recalls a similar story that paints a more troubling picture of the October 7 meeting. ALGOP Chair Terry Lathan was contacted for this report, but contact was not completed before publication deadline. Of the members who spoke on and off the record, most believed the recording was leaked to by someone in Bentley’s inner circle. Each describe the tone of the meeting as contentious, the Governor as condescending, and the story as a misrepresentation of the discussion as a whole. Rep. Henry, an outspoken firebrand of the Republican party, expressed dismay and resentment at what he labeled “The Wrath of Bentley Show.” “It was basically an hour of him telling us how awesome and how impressive he is, and has been over the last five years, and that if we, in the steering committee, didn’t understand that taxes needed to be raised, and that Alabama needed more revenue, then we didn’t understand all the facts like he does,” said Henry. The meeting’s stated purpose was to see how Bentley and ALGOP might work together going forward. Wheeler recalls, “My understanding was that the Governor wanted to hear our concerns and issues. That’s what I was expecting when I left home,” but that’s not how the meeting progressed. “We were brought down there to be scolded,” said Wheeler. “The first 15 to 20 minutes he was griping that we didn’t give him any support…then he said, I wanna hear what you guys are for rather than what you are against.” Curtiss said the meeting was like watching the A&E show Intervention. “It was like that….we were not smiling…there was no shouting,” she recalled. “The room was a little tense, and the tone of the Governor’s voice was not the warm and loving Dr. Bentley. It was direct. Cold.” “If you heard the tape, if we could ever get our hands on that recording, the people of Alabama would get to hear the sniveling, little, cry baby Governor that we have,” said Henry. “I’m telling you, it would be the catalyst for Recall legislation in this State.” After campaigning on “No new taxes,” many in the Republican party called for a recall vote to remove Bentley from office. However, the State Constitution provides no such mechanism. Henry would like to see such a provision added to State law.

Alabama Democrats deny Artur Davis

The Executive Board of the State Democratic Executive Committee on Friday denied former U.S. Congressman Artur Davis’ request to move back to the party, the Montgomery Advertiser reported. After losing his bid for Montgomery mayor in August, Davis was looking to switch back to the Democratic Party and run for a seat on the Montgomery County Commission. Davis told that he now plans to take legal action.Unless the court system takes action, Davis likely won’t be able to run for public office as a Democrat until 2017. The Radney Rule prevents prospective candidates from switching parities if that person has supported an opposing party in the past four years, the Advertiser reported. Davis issued this statement to “In anticipation of an adverse decision, I had already retained legal counsel. They will be filing a motion for a hearing in Circuit Court early next week and given that the timetable for certifying candidates is a few weeks away, we expect a prompt hearing. I will be asking the court to find that the party has applied one standard to my application and a different one to every other individual who has sought reinstatement. The party, under (Joe) Reed’s directions, chose to violate its own commitment to fair and equal treatment, and that is a choice I have to fight.” Davis represented Alabama’s 7th Congressional District for eight years as a Democrat. Three months after losing the Democratic Party’s nomination for governor in 2010, Davis switched to the Republican Party and campaigned for Mitt Romney. Davis spoke at the 2012 Republican National Convention. Its comments he made there that made many Alabama Democrats feel betrayed. Following Friday’s meeting, Tuskegee Mayor Johnny Ford told the Advertiser he voted against Davis because he didn’t tell his story or hold himself accountable for what happened. “He was not sincere,” Ford said. “He was arrogant. He was trying to embarrass us into saying that we were treating him differently but in this business you have to stand on your own.”


Sen. Del Marsh says support for gambling not damaging GOP brand; Party leadership out of touch

Senate leader Del Marsh said Friday he strongly disagrees that his support for legalizing a lottery and casino State gambling is “damaging” the Republican Party brand. “I certainly don’t think that’s true. I very much disagree with that point of view,” said Marsh, an Anniston Republican in his fifth year of leading the Senate. Earlier this year Marsh introduced legislation to create a lottery and establish Las Vegas-style gambling at four sites across the state. The legislation did not go anywhere but it’s also true Marsh didn’t attempt to force the issue either seemingly preferring to take it out for a test run. He is expected to reintroduce his gambling legislation in the next regular session beginning in February and strongly push it. Marsh’s comments comes a day after posted a story where state Republican Party chair Terry Lathan in a closed door meeting of the governing committee of the GOP told Gov. Robert Bentley that the party brand had been damaged by his push for tax increases and the support for gambling by some in the party. Marsh, a former vice chairman of the state GOP, said polling he has seen shows a solid majority of Alabamians – Democrats and Republicans – in support of a lottery and casino gambling. Marsh said he supports legalizing gambling and creating a lottery as the way to help address the state’s long-rang budget problems. How best to address those budget problems saw Marsh and Bentley clash this year. While both men agree that the state needs more dollars to fund essential state services, they disagree on the source of those dollars. Bentley has maintained the budget needs require tax increases. Marsh maintains that before Alabamians are asked to pay significantly more in taxes the state should turn to a lottery and gambling, a move Marsh said would generate over $400 million more a year into state coffers and create up to 11,000 new jobs. Marsh said as strongly as he has disagreed with Bentley over taxes, he does not believe the Republican “brand” has been damaged by the debate over either raising taxes or legalizing gambling. “Look Alabama is a Republican state and the party is a strong party,” said Marsh. “I think we can disagree about solutions to problems and not damage our brand.” Marsh, a lifelong Republican, said debate over issues should make the party stronger, not damage it and he said all he is doing with the gambling solution is offering an option. “I thinking gaming is an option we should strongly consider and one I think a majority of citizens indicate they want to see us consider,” said Marsh. The Senate leader said he was not really surprised by Lathan’s comments nor would he be surprised that many in the governing circles of the state GOP are opposed to gaming. “While I think a majority of Alabamians support the gaming option I’m not really surprised that the leadership of the party might not,” said Marsh. “I think unfortunately the party leadership is probably to the right of most citizens on this issue and many of them I think are just out of touch on the issue. “Things have changed in Alabama in how gaming is seen by many and that includes Republicans; maybe not Republicans on the state Steering Committee but nevertheless many, many other Alabamians who want to have their say on this question,” added Marsh.


Can Alabama fix chronic budget problems? New study suggests how


If Alabama wants to overcome its chronic budgetary problems it should look to other state governments for examples, according to a new study. The study, conducted by the Washington, D.C.-based research institute Center on Budget and Policy Priorities, shows that Alabama consistently ranks as one of the worst states when it comes to employing budgeting strategies that would set the state up to be fiscally responsible in the future. The study found that Alabama had no long-term forecasts for revenues or public-services spending, did not use a consensus process to reduce legislative gridlock and only formed a budget plan spanning three years. If Alabama employed these techniques, which are based off of other state governments, the report found that it could avoid potential budgetary problems. But by not using these strategies, Alabama can’t assess the long-term financial impact of tax breaks and other tax code changes and limits the ability of lawmakers to adequately fund public services. “Alabama has bounced from budget crisis to budget crisis for several years,” said Kimble Forrister, executive director of the Arise Citizens’ Policy Project. “Our leaders should look at what works in other states and use those methods to bring more stability to Alabama’s budgeting system. People across the political spectrum can agree that having the tools to make good long-term decisions about our state’s future is in everyone’s best interest.”


Alabama A&M’s chief operating officer arrested on charges stemming from state audit

Alabama A&M’s chief operating officer was arrested on Saturday after being indicted on charges related to a state investigation into the university’s finances. Kevin Rolle is charged with possession of a forged instrument second degree and first-degree theft of property, Madison County Jail records show. He was released after posting $5,000 bond. The arrest stems from a state audit of the university and whether Rolle, formerly Alabama A&M President Andrew Hugine’s chief of staff, was improperly reimbursed for moving expenses in 2009. Rolle reimbursed the school $6,534.55 in moving expenses, according to the audit report. Rolle produced an invoice to examiners that the moving company could not verify, the report said. Examiners also said the moving company did not have Rolle’s name in their database. Alabama A&M University announced today that Rolle has been administrative leave. “Dr. Rolle is a capable, valued member of our administrative team. We are confident that once the judicial process has run its course, he will be found innocent of the charges laid out against him and this matter will be completely resolved,” the university said in a statement. “We know this process will be an extremely difficult time for Dr. Rolle and his family. They will be in our thoughts and prayers and we wish them well throughout this trying time.”



What It Means To Be Conservative In Alabama

After our legislature finally enacted a pitifully inadequate General Fund budget and as we collectively observe the national implosion of the Republican Party with all the fascination of a movie audience watching a slow-motion train wreck, I have a few things to say about conservative  ideology and how it contributes to the crippling of Alabama. White Alabamians by and large self-identify as politically conservative. White Alabamians like me who self-identify as liberal are rare. Hell, I think most of them are friends of mine on Facebook. But what does it mean to be conservative in Alabama? There are three answers to that question, depending on how deeply you look at it. At the most surface level, the level in the heads of most Alabamians when they self-identify as conservative, the notion of being conservative embraces such ideals as self-reliance, personal responsibility, and fiscal good sense. At this level, Alabama conservatism finds its roots in the ideals of the 19th century Jacksonian Democrats, who proclaimed themselves to be self-reliant frontiersmen who disdained dependence on government or any other large institution. Also at the surface level, you have a few specific policy positions that are generally associated with conservative ideology. Conservatives do not believe in spending money on a social safety net, believing instead that poor people should “pull themselves up by their bootstraps” rather than relying on “government handouts.” Conservatives are hawkish, supporting America’s use of military force in most contexts. Conservatives do not believe in criminal rehabilitation or addressing the social and economic roots of criminal behavior. The conservative answer to crime is more jail time. Conservatives also have well-defined views about social issues. To be conservative is to be against a woman’s right to choose an abortion, against equality of gays and lesbians, and in favor of liberal or no restrictions on firearms. A deeper, second level of being conservative in Alabama has to do with race. Many self-professed Alabama conservatives will deny it, but it cannot be seriously questioned that conservative ideology in Alabama includes strong streaks of racism.



Morning Money

FLASH: CHINA GROWTH FALLS BELOW 7 PERCENT — Reuters/Beijing: “China’s economic growth eased to 6.9 percent in the third quarter from a year earlier, beating expectations but still the slowest since the global financial crisis, putting pressure on policymakers to roll out more support measures as fears of a sharper slowdown spook investors. … Analysts polled by Reuters had predicted gross domestic product (GDP) for the world’s second-largest economy would come in at 6.8 percent, compared with 7 percent in the prior quarter.

“Quarter-on-quarter growth was 1.8 percent, the National Bureau of Statistics said at a news conference on Monday. The market had expected GDP growth to come in at 1.7 percent on a quarterly basis, compared to a revised reading of 1.8 percent the prior quarter. Fixed-asset investment growth eased to 10.3 percent year-on-year in the Jan-September period, missing market expectations”

BIDEN WATCH — Sure seems like a go. One Dem insider emails: “If [Biden] runs, as appears likely, his greatest service to the Democrats may be to make Hillary’s eventual victory actually mean something.”

DEBT LIMIT TIMETABLE — A close DC observer emails re Friday’s item from Heritage Action’s Dan Holler: “I had to read the squib re Heritage saying we don’t need to act until 10/29 multiple times. If Congress tried to take up a debt limit bill on Thursday the 29th, with a deadline of Tuesday the 3rd, it would require not only weekend sessions but also a variety of procedural tools to cut off debate/short circuit the process — exactly the sort of stuff the Freedom Caucus is complaining about. I guess it proves, once again, that irony is not dead.”

STARING INTO THE FISCAL ABYSS — Quorvis’ Stan Collender in a piece posting this a.m.: “Former Federal Reserve Board Chairman Ben Bernanke coined his most famous phrase — the fiscal cliff — to describe what at the time was the possibility of spending cuts and tax increase all happening at about the same time. Given the state of the economy, Bernanke said the fiscal cliff would be the absolutely wrong fiscal policy. … But as frightening that was at the time, ‘cliff” doesn’t do justice to the huge and seemingly bottomless pit of extreme fiscal troubles that could be ahead … As a result, a new and far more ominous label is needed.

“I’ve decided to call what’s ahead ‘the fiscal abyss.’ … The House Freedom Caucus continue to threaten [House Speaker John Boehner] and any successor with political castration if he or she moves ahead with a debt ceiling increase that doesn’t satisfy their demands. As a result, the situation is extremely unsettled. A potential government shut down is also part of the fiscal abyss … But before everything else, the Highway Trust Fund will need to be dealt with in some way before its current extension expires on October 29.”

BERNANKE ON WEDNESDAY — Don’t forget to join me Wednesday at Nasdaq for an “America’s Fiscal Future” event with former Fed Chair Ben Bernanke. We will talk about the abyss ahead and much more. RSVP:

ECONOMISTS STILL SEE FED HIKE THIS YEAR — FT’s Eric Platt: “Nearly two-thirds of economists expect the Federal Reserve to raise US interest rates before the end of the year, despite weakening economic data that several banks have warned have put the central bank’s inflation target in doubt. … Despite a tempering in the US labour market, 65 per cent of the 46 economists from leading banks in the US, Europe and Asia polled by the FT said the central bank would increase the Federal funds rate at its December meeting.”

CANADA VOTES! — Bloomberg’s Theophilos Argitis: “Prime Minister Stephen Harper, in one of his final interviews before Canada’s election, warned that Liberal Leader Justin Trudeau would lead the nation to long-term economic decline, and expressed confidence Canadians will choose his platform of balanced budgets and tax cuts.

“Lagging in the polls ahead of Monday’s vote, Harper has spent the last week of the campaign highlighting what he says are the risks of returning the Liberals to power: higher taxes, deficits and increased government spending”

LEW: NO AVOIDING DEBT LIMIT CRISIS — WSJ’s Nick Timiraos: The U.S. Treasury Department rejected again … the idea that so-called payment prioritization would provide a way for the U.S. to avoid a severe hit to its creditworthiness if Congress didn’t raise the federal borrowing limit before the Treasury runs out of cash. … Treasury Secretary Jacob Lew said … that if the debt ceiling isn’t raised by Nov. 3, it will have to fund the government solely using daily cash flow, and that it could run out of cash to pay its bills soon after that.

“Some congressional Republicans have revived an old idea they say would avoid default that doesn’t require a full increase in the debt limit. They would allow the Treasury Department to borrow above the debt ceiling but only to pay bondholders and make payments related to Social Security benefits. … While technologically possible, Treasury says this is a terrible idea because it would mean paying U.S. creditors, including foreign bondholders, ahead of veterans, soldiers, air traffic controllers, federal law enforcement, and everything and everyone else that’s paid by the government.”

GOOD MONDAY MORNING — Super early risers can catch M.M. on CNBC’s “Worldwide Exchange” at 5:30 a.m.

DRIVING THE WEEK — President Obama today hosts a roundtable with CEOs “to discuss efforts to tackle climate change both in the United States as well as on a global scale” … House Financial Services has a hearing Wednesday at 10:00 a.m. “Examining Legislative Proposals to Reduce Regulatory Burdens on Main Street Job Creators” and at 2:00 p.m. on “The Future of Housing in America: Federal Housing Reforms that Create Housing Opportunity” … CFPB on Thursday at 10:00 a.m. holds a meeting on arbitration, trends and themes in the marketplace, and reaching limited English speaking consumers … Senate Energy and Natural Resources Committee has hearing Thursday at 10:00 a.m. on Puerto Rico’s economy and debt … House Financial Services has a hearing Thursday at 10:00 a.m. on “The Future of Housing in America: 50 Years of HUD and its impact on Federal Housing Policy.” …
Existing Home Sales Thursday at 10:00 a.m. expected to rise to 5.37M from 5.30M … Index of Leading Indicators at 8:30 a.m. Thursday expected to be flat.

WEISS ON FANNIE/FREDDIE — Treasury counselor Antonio Wess is a WSJ op-ed: “The recent push to recapitalize Fannie Mae and Freddie Mac and release them from conservatorship is misguided. Proponents of the proposal known as ‘recap and release’ claim homeowners and taxpayers would benefit if the federal government ceded control of the mortgage finance giants to private shareholders. Just the opposite is true. Recap and release could raise the cost of mortgages for Americans, and potentially expose taxpayers to another painful bailout. […]

“Contrary to the claims of some private investors, taxpayers have not been fully ‘repaid’ for the unprecedented risk they took in the crisis. Taxpayers have now received more in total dividends than they injected into Fannie and Freddie. However, the dividends alone aren’t adequate compensation for the extraordinary risk taxpayers took on and continue to bear. The ‘repayment’ argument also conveniently ignores that the $258 billion commitment of future support continues to underpin Fannie and Freddie’s operations and allows the GSEs to borrow at highly favorable rates”

WHEN TRUMP QUITS — POLITICO’s Ben Schreckinger: “[L]ike many successful businessmen, the real estate developer and GOP pack leader — who often espouses his disdain for ‘losers’ — does not see every venture and contest through to the bitter end. Throughout his career, Trump has demonstrated wild enthusiasm at the start of big projects, and ruthlessly pursued a profit agenda that, in many cases, has led him to ditch the deal when the risks, whether financial or reputational, start to outweigh the prospective reward.

“From a casino in French Lick, Indiana, to a dispute with condo owners in Panama and even in renewing ‘The Apprentice’ reality show on NBC, Trump has time and again spotted the point of diminishing returns and quit. This business record could shed light on Trump’s willingness to fight on and put more of his personal fortune on the line as the presidential contest shifts into the primary phase. In national polls, he’s already come down several points from his September peak, and Ben Carson has risen to within striking distance”

IRAN SANCTIONS LIFTING BEGINS — Reuters: “The United States approved conditional sanctions waivers for Iran on Sunday, though it cautioned they would not take effect until Tehran has curbed its nuclear program as required under a historic nuclear deal reached in Vienna on July 14. … In a memo, [Obama] directed the secretaries of state, treasury, commerce and energy ‘to take all necessary steps to give effect to the U.S. commitments with respect to sanctions described in (the Iran deal).’

“Several senior U.S. officials, who spoke to reporters on condition of anonymity, said actual sanctions relief for Iran was at least two months away. Sunday was ‘adoption day’ for the deal, which came 90 days after the U.N. Security Council endorsed the agreement reached by Iran, the United States, Britain, France,Germany, Russia and China under which most sanctions on Iran would be lifted in exchange for limits on Tehran’s nuclear activities.”

BANKS: WE DON’T WANT YOUR MONEY — WSJ’s Juliet Chung and Sarah Krouse: “U.S. banks are going to new lengths to ward off a surprising threat to their financial health: big cash deposits. State Street Corp., the Boston bank that manages assets for institutional investors, for the first time has begun charging some customers for large dollar deposits … J.P. Morgan Chase & Co … has cut unwanted deposits by more than $150 billion this year, in part by charging fees. The developments underscore a deepening conflict over cash. Many businesses have large sums on hand and opportunities to profitably invest it appear scarce.

“But banks don’t want certain kinds of cash either, judging it costly to keep, and some are imposing fees after jawboning customers to move it. The banks’ actions are driven by profit-crunching low interest rates and regulations adopted since the financial crisis to gird banks against funding disruptions. The latest fees center on large sums deemed risky by regulators, sometimes dubbed hot-money deposits thought likely to flee during times of crises.”

DEUTSCHE BANK SHAKES UP LEADERSHIP — FT’s James Shotter, Martin Arnold and Katie Martin in London: “Deutsche Bank’s new head has announced a radical overhaul of the bank’s senior management and structure, parting ways with several top executives and splitting its powerful investment banking unit in two. The move adds to the upheaval sweeping through Europe’s big investment banks, several of which are in the middle of restructurings of their own and is the most significant yet by John Cryan, who took over in July as co-chief executive from Anshu Jain.

“It comes as Germany’s biggest lender is struggling to restore its profitability and reputation in the wake of corruption scandals and missed performance targets. Deutsche Bank aid on Sunday that two of its divisional heads — Colin Fan, who co-heads the investment bank, and Michele Faissola, who runs the asset and wealth management arm — would depart. Stefan Krause, a former chief financial officer, will also leave, as will Stephan Leithner, who previously headed the bank’s European business outside the UK and Germany.”

POTUS Events

10:00 am || Receives the Presidential Daily Briefing
10:55 am || Holds a roundtable with CEOs; Roosevelt Room
5:15 pm || Meets with Treasury Secretary Lew
7:35 pm || Delivers remarks at the White House Astronomy Night; South Lawn

All times Eastern
Live stream of White House briefing at 12:30 pm

Floor Action

All eyes will be on Rep. Paul Ryan as Congress comes back to Washington after a week-long break.

The Wisconsin Republican remained tight lipped over the Columbus Day recess despite intense pressure from both inside and outside of the Capitol to throw his hat into the ring to replace outgoing Speaker John Boehner (R-Ohio).

Backers of a Ryan bid argue that he has the best shot to unite House Republicans and get them through an upcoming series of fights including negotiating a long-term budget and raising the debt ceiling.

Conservative Republicans have dismissed any notion that the Ways and Means chairman would be a shoo-in, with Rep. Mick Mulvaney (R-S.C.), a founding member of the House Freedom Caucus, saying during a radio interview that “you don’t just win because you’re Paul Ryan.”

But speculation around a Ryan bid has continued to grow, even though he’s repeatedly said he’s not interested in the top spot and his colleagues say it’s 50-50 that he’ll jump in.

If he passes, the race for Speaker likely becomes a free for all, with Reps. Jason Chaffetz (R-Utah), Daniel Webster (R-Fla.) both making bids. Meanwhile at least four Texas lawmakers, including House Homeland Security Chairman Michael McCaul—have suggested they are interested.

Debt ceiling

Amid the ongoing GOP drama, Congress has just 10 legislative days to raise the debt ceiling.

Pressure is building on Republicans to find a way to bring up legislation by the Nov. 3 deadline, which would allow the U.S. government to meet its financial obligations and avoid potentially rolling the global stock markets.

Boehner has suggested he is willing to help clear the deck of any outstanding policy fights before stepping down as Speaker, which could include trying to raise the debt ceiling.

The White House says that it won’t negotiate on an increase, but any push to bring up a “clean” bill could face a revolt by conservative lawmakers, who are already questioning if Boehner should be their party’s negotiator in separate budget talks.

Democrats are seizing on the Republican discord in attempt to build pressure to bring up the “clean” bill. House Minority Leader Nancy Pelosi (D-Calif.) said that Republicans “should bring forward a clean bill to honor the full faith and credit of the United States immediately.”

Her comments follow similar remarks by Senate Minority Leader Harry Reid (D-Nev.), who pointed to the “utter chaos” in the race to replace Boehner.

Sanctuary cities

The Senate is turning to a bill to crackdown on so-called sanctuary cities, which don’t comply with federal immigration law.

But legislation from Sen. David Vitter (R-La.) would limit federal funding and also increase the amount of jail time an undocumented immigrant could serve if they reenter the United States after previously being deported.

Majority Leader Mitch McConnell pressured lawmakers to consider the merits of the bill over the break, but he’ll need 60 votes to overcome an initial procedural hurdle. If he can get the support of every Republican he would need six Democrats to back taking up the legislation.

But Vitter’s proposal has raised concern among western-state Republicans, including Sens. Jeff Flake (Ariz.) and Mike Lee (Utah), who have voiced concerns about broadly creating mandatory minimum punishments for undocumented immigrants. While both senators have pledged to back taking up the legislation, they remain tightlipped on whether they will support it on final passage.


The Senate will convene at 4 p.m., with no votes expected during Monday’s session.


The Senate will vote on Ann Donnelly’s nomination to be U.S. district judge for the Eastern District of New York at 11 a.m.

They will likely recess from 12:30 p.m. to 2:15 p.m. for weekly party lunches, before taking a procedural vote on Vitter’s legislation.

Meanwhile, the House is expected to vote on a handful of non-controversial bills under suspension of the rules at 6:30 p.m.


The House is expected to take up legislation that supporters argue would allow the country to avoid defaulting on its debt even if lawmakers aren’t able to vote to raise the debt ceiling.

Democrats, however, have voiced concerns about the bill, arguing that it would require the Treasury Department to prioritize making payments to foreign countries above payments to Americans including Social Security or Medicaid.