Krebs Daily Briefing 15 April 2016

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


Exclusive: U.S. considers supporting new U.A.E. push against al Qaeda in Yemen

The United States is considering a request from the United Arab Emirates for military support to assist a new offensive in Yemen against al Qaeda’s most dangerous affiliate, U.S. officials tell Reuters. A U.S.-backed military push by the Gulf ally could allow the administration of President Barack Obama to help strike a fresh blow against a group that has plotted to down U.S. airliners and claimed responsibility for last year’s attacks on the office of Charlie Hebdo magazine in Paris. Al Qaeda in the Arabian Peninsula (AQAP) has exploited the chaos of Yemen’s year-old civil war to become more powerful than any time in its history, and now controls a swathe of the country. The UAE has asked for U.S. help on medical evacuation and combat search and rescue as part of a broad request for American air power, intelligence and logistics support, the U.S. officials said. It was unclear whether U.S. special operations forces – already stretched thin by the conflicts in Iraq, Syria and Afghanistan – were part of the request. The U.S. officials, speaking on condition of anonymity, said the UAE was preparing for a campaign against AQAP, but declined to offer details, citing operational security. The UAE is playing a key role in the Saudi-led coalition fighting Houthi rebels in Yemen that are loosely allied with Iran. The White House and the Pentagon declined to comment. Government officials in the UAE did not respond to request for comment. Washington’s consideration of the request comes ahead of Obama’s planned trip next week to a summit of Gulf leaders in Saudi Arabia. The multiple conflicts in Yemen will be high on the agenda. Saudi-backed Yemen government forces and the Houthi fighters began a tentative truce on Sunday, although there have been reports of violations. Despite significant U.S. strikes, including one that killed AQAP’s leader last year, U.S. counter terrorism efforts have been undermined by Yemen’s civil strife. The worsening conflict forced the evacuation in early 2015 of U.S. military and intelligence personnel who had orchestrated an anti-AQAP campaign involving Yemeni special forces raids backed by U.S. air power. Renewed ground operations spearheaded by UAE special forces would fit the so-called “Obama doctrine” of relying mostly on local partners instead of large-scale U.S. troop deployments. Washington’s use of surrogate fighters has been criticized as inadequate in conflicts ranging from Iraq to Syria to Afghanistan.

Policymakers fret as storm clouds gather over world economy

World financial leaders sounded a sour note on the global economy on Thursday, pointing to Britain’s possible exit from the European Union as a serious threat alongside China’s bumpy growth path and dissent over interest rates in the euro zone. Concern that British voters are edging closer to leaving the EU in a June 23 referendum has spooked finance ministers, central bankers and other officials gathered here for the International Monetary Fund and World Bank spring meetings. IMF Managing Director Christine Lagarde signaled policymakers’ heightened fears that a “Brexit” could derail Europe’s shaky economic recovery and reverberate further afield. “We have clearly elevated ‘Brexit’ as one of the serious downside risks on the horizon of global growth,” Lagarde said in a press conference just two days after the IMF cut its 2016 global growth forecasts for the fourth time in less than a year. Lagarde, who said it was her personal hope that Britain remain in the EU, predicted a divorce would lead to years of financial uncertainty. EU Economic and Monetary Affairs Commissioner Pierre Moscovici chimed in at a separate event, describing the political repercussions of a British vote to leave the bloc as “very bad news.” Their comments followed the Bank of England’s clearest warning yet that Britain’s economy would likely suffer and its currency slide if it bolted from the EU. Moscovici added that the near-term European growth outlook was already worsening. “Overall, we now expect GDP growth in the first quarter of this year to have been positive but slower than we had expected,” Moscovici said in a speech at the Peterson Institute for International Economics.


Yahoo’s Suitors Uncover Few Financial Details

SAN FRANCISCO — As Yahoo prepares to accept first-round bids for its core Internet business on Monday, potential buyers have found themselves facing one big problem: How do you value a company with a declining business when the company appears reluctant to share vital financial details? In meetings and phone calls with potential bidders, Yahoo executives have offered gloomy financial projections for the current year, but have refused to discuss the outlook for 2017 or answer questions about crucial aspects of the business. Some of the three dozen or so potential suitors have even questioned what is truly for sale. But several big companies are expected to place bids for Yahoo anyway, according to people briefed on the matter. Verizon Communications, which has publicly expressed interest in buying Yahoo’s core Internet business and merging it with its AOL division, plans to press forward with a bid, some of these people said. The Daily Mail, a British tabloid newspaper and website, said publicly that it had considered joining with potential investors, including one or more private equity firm, for a bid. And the private equity firm TPG plans to make a bid in the first round on its own, according to a person briefed on the matter. Yet other huge companies plan to sit out the bidding. Google, which competes with Yahoo on search and display advertising and has a search partnership with the company, considered making an offer, but is unlikely to proceed because it fears any deal would draw stiff antitrust scrutiny, according to people briefed on the company’s thinking. Other notable businesses, including AT&T, CBS and the investment firms Silver Lake, Kohlberg Kravis Roberts and General Atlantic, are unlikely to bid, according to others briefed on their plans. And SoftBank, the Japanese telecommunications giant that controls Yahoo Japan, does not plan to bid despite press reports to the contrary.

Bear Stearns Emails Show Its Financing Breaking Away

Within weeks of the shocking collapse of Bear Stearns in March 2008, I started interviewing former executives of the firm to try to figure out what had just happened and why. One of those executives was Paul Friedman, a senior managing director who had been at the firm for 27 years and who oversaw Bear’s fixed-income repo desk. His job, especially in the last year or so of Bear’s existence, was to make sure the company could finance itself on a daily basis in the short-term debt markets. While Bear had about $18 billion in cash on its balance sheet, it needed more than $75 billion in cash on a daily basis to keep operating. For years, making sure that amount was on hand had been a perfunctory, check-the-box assignment. That all changed in the summer of 2007, when two Bear Stearns-related hedge funds collapsed and Bear liquidated them. Short-term lenders began to question the judgment of Bear’s management, and Mr. Friedman was on the front lines of gauging how the market viewed the firm as a credit risk. He quickly discovered, much to his dismay, that Bear had become a pariah. After the final Bear Stearns shareholder meeting, on May 29, 2008, Mr. Friedman told me, in no uncertain terms, that he believed the firm got what was coming to it. “We’re the bad guys,” he said. “We did this to ourselves. We put ourselves in a position where this could happen. It is our fault for allowing it to get this far, and for not taking any steps to do anything about it. It’s a classic case of mismanagement at the top. There’s just no question about it.” But times and perspectives change. When Mr. Friedman appeared before the government’s Financial Crisis Inquiry Commission two years later, Phil Angelides, the commission’s chairman, asked about his comments to me that Bear had been responsible for its own downfall. Much to my surprise, under oath and on national television, Mr. Friedman walked back the statement. After explaining to Mr. Angelides how shocking it was to watch the firm he had worked at for 27 years suddenly implode, he said, “I was angry. I was interviewed over a period when I was looking to find someone to blame. I lashed out.” He apologized and said he had been regretting what he told me two years earlier.


The Winds From Washington Chill Wall Street’s Deal Making

 On Wall Street, the phones have been a little quieter. The workload has been a little lighter. The happy hours have been starting earlier. For most people, that would be a good thing. But not for deal-hungry lawyers and bankers, who are experiencing a recent slowdown in megadeals. A series of broken transactions and stock-market volatility have shaken the confidence of some in the boardroom to tackle their next big acquisition. The value of abandoned deals has been higher than that of newly signed deals in the United States so far this year. Almost $340 billion worth of mergers have been withdrawn in 2016, while $282 billion worth of newly signed deals were announced, according to data compiled by Dealogic. The cancellations are skewed toward megadeals, defined as those worth $10 billion or more. Of the 26 deals pulled so far this year, including Pfizer’s $152 billion combination with Allergan, the average deal size is $13 billion, according to Dealogic. Another 2,800 deals have been announced, with an average size of $100 million. So the bigger acquisitions are being withdrawn, while the smaller ones are as active as ever. The divergence in the deal market comes largely as a result of a regulatory clampdown.

Over the last year, with shareholder encouragement, companies ventured into large, complex and risky deals. Last week, the government fought back, in a lawsuit by the Justice Department and new rules from the Treasury Department, to stop many of the transactions. One lawyer described a depression that set over mergers and acquisitions as a result of those two actions. A banker said that Wall Street had come to a grinding halt. These deal makers requested anonymity, so as not to be seen at odds with the government’s decisions. During an election year, advisers say, the big, politically unpopular deals may just have to wait. “Companies were concerned that their large deals would draw political focus and be criticized as part of the campaigning,” Marc-Anthony Hourihan, co-head of Americas mergers and acquisitions at UBS, said. Robert A. Profusek, who heads Jones Day’s global mergers and acquisitions practice, said, “The gargantuan deals, they’re harder; there’s no question in my mind.” “The government has been tougher, but they would say: ‘That’s because you guys have been jamming these giant deals at us. What do you expect us to do?’” Mr. Profusek said.


Goldman’s Blankfein Demands Deepest Cost Cuts in Years

Goldman Sachs Group Inc. is embarking on its biggest cost-cutting push in years as it tries to weather a slump in trading and dealmaking, according to two people with knowledge of the effort. The firm, already expected to report a steep drop in expenses for the first quarter, recently began dismissing more support staff and is increasingly rejecting bankers’ spending on airfare, hotels and entertainment unless it directly serves clients, the people said. For example, the company cut technology workers in London this week, one person said, and some employees in Europe aren’t being permitted to take once-routine trips to other offices in the region, said another. Additional cuts are likely. Chief Executive Officer Lloyd Blankfein, 61, is trying to ride out a years-long bond-trading slump that’s being compounded by market swings and stiffer regulations — challenges that have forced many competitors to scale back. He already has adjusted his workforce, relying more on junior bankers, moving support staff to cheaper locations and investing in technology to improve productivity. “They are getting even leaner,” said Chris Wheeler, analyst at Atlantic Equities LLP in London who has an overweight rating on the bank’s shares. “They have also reduced traders in the business as the electronification of the business increases and as they see credit, rates and commodities follow equities and foreign-exchange onto electronic platforms.” The question is whether his efforts will be enough to satisfy investors when the bank reports quarterly results Tuesday. Betsy Graseck, a Morgan Stanley analyst, estimates Goldman Sachs will say operating expenses declined 29 percent to $4.76 billion — the lowest for the start of a fiscal year in a decade. Still, that’s not as steep as the 37 percent drop in revenue that analysts anticipate. More:


Regulators: Federal Preemption of State Blockchain Laws Unlikely

A member of the Federal Deposit Insurance Corporation (FDIC) and three state-level regulators discussed blockchain technology at a panel today centered on the future of US FinTech policy. Held at the Blockchain & Distributed Ledger Technology Conference in New York City, the panelprovided a window into the complicated series of exchanges – ranging from state-level interactions with citizens to potential top-level federal regulation – that are influencing this discussion. FDIC associate counsel Adriana Rojas said that while her agency wants to take a leadership position, its interaction with state controllers and private institutions is still in early stages. Rojas told the audience: “We need to be proactive. We need to come to these conferences. I think that’s how regulators can get in front of it. … We can’t regulate what we don’t know exists.” Apart from providing the FDIC’s view on the industry, the day’s panel was rare in that the audience was also given a chance to hear what three specific state representatives had to share on the matter. Alabama – The sharp discrepancies in how states are treating bitcoin and blockchain firms was perhaps best on display during a talk by Joseph Borg, director of the Alabama Securities Commission, an independent agency that works with government regulators. Borg said his state is currently receiving applications from industry businesses that “run the gamut” from refined business models, to amateur or even legally dubious proposals. Though one or two inquiries have come from entrepreneurs using an alternative digital currency, “only bitcoin” companies have submitted actual applications, he said. Borg continued:  “The industry is fragmented as far as we’re concerned. Many people want to play in the sandbox but many of them aren’t designed to play in the sandbox.” Borg has been with the Alabama commission for 21 years and says that partnerships have been crucial to his organization’s work to understand the still-developing industry. In addition to attending a training session about blockchain taught by the FDIC, he says the commission has “agreements” with FinCEN, the US Treasury and the Consumer Financial Protection Bureau (CFPB). More:

Retirees Rally at the Capitol, Protesting Pension Cuts

WASHINGTON — Some 400,000 retirees who worked in the trucking, parcel delivery and grocery supply industries face drastic pension cuts on July 1 as a result of a little-noticed measure attached to a huge end-of-year spending bill passed in December 2014. Many members of Congress say they were not given the time to read the provisions or did not grasp the ramifications at the time, and they now say they would not have voted for the legislation. The bill allowed trustees of multi-employer retirement plans to slash benefits if a pension fund’s failure was likely to overwhelm the underfunded Pension Benefit Guaranty Corporation, the federal government’s main insurance program for pension plans. The retirees, all beneficiaries of the Central States Pension Fund, which is projected to be insolvent within a decade, were informed of the reductions through letters that began arriving in the mail last October. In many cases, the July 1 cuts would be severe. James Lambert, 69, a former trucker, from Randolph, Ohio, was told his $2,200 monthly pension payment would be slashed to $1,200. Bob Berg, 61, of Hendrum, Minn., who drove a UPS delivery truck for 30 years, was informed that his current monthly payment would drop from $2,200 to $1,150. And Judy Weeks, 62, of Davenport, Iowa, went back to work almost immediately after retiring when her husband, Terry, a former grocery store warehouse worker, learned his benefit would drop from $3,000 to $1,258. They were among hundreds of people who rallied in front of the Capitol on Thursday chanting “No cuts!” — and who were joined by members of Congress who readily acknowledged that working Americans had been let down by the people who represent them.

“I am not sure I have ever seen anything that is so wrong as this pension cut,” said Senator Heidi Heitkamp, Democrat of North Dakota. Representative Marcy Kaptur, Democrat of Ohio, said, “I can tell you as someone who has served here for over three decades now, it’s not on the level. You should know that when the decision was made to force your pension cuts, that bill did not come up under regular order. It never, ever had its own day in the sun.” By law, the cuts must be approved or rejected by the Treasury Department, which in the face of outcry has now turned for help to Kenneth R. Feinberg, the lawyer who administered compensation related to the Sept. 11 attacks and the BP oil spill in the Gulf of Mexico.

Mr. Feinberg has been given a May 7 deadline to make a decision. The law also contains provisions that require beneficiaries to vote on accepting the cuts, and a quirky rule that counts any beneficiaries who do not submit ballots to be in favor of the cuts. At Thursday’s rally, the outrage focused on the seeming lack of political will from Congress to rescue a pension plan that had promised retirement benefits to middle-class workers, even when the same Congress was willing to bail out major financial institutions during the 2008 financial crisis. The workers blamed some of the same Wall Street banks that needed bailouts for the poor investment decisions that sent the Central States Pension Fund hurtling toward insolvency.

The bill at the center of the controversy, the Multistate Employer Pension Reform Act, was largely intended to protect the Pension Benefits Guaranty Corporation, which was at risk of being pushed into insolvency by large numbers of pension failures. The plight of the Central States Pension Fund beneficiaries is proving a potent issue in states with some of the most hotly contested Congressional races, including Ohio and Wisconsin, where tens of thousands of people are at risk of their pensions being reduced, many of them members of the Teamsters union. Senator Rob Portman, Republican of Ohio, who is up for re-election, has spoken out in support of the pensioners and introduced legislation that would change the voting process on any required cuts. But Mr. Portman, who is known as a fiscal conservative, has stopped short of calling for legislation that would immediately inject cash into the Central States fund.


Fiduciary Rule Won’t Solve Retirement Savings Crisis

The latest numbers on the U.S. retirement crisis are in, and they point to a massive opportunity for financial planners if they can meet the challenge of providing unbiased retirement advice in a new fiduciary world. The annual survey of retirement confidence from the Employee Benefit Research Institute (EBRI) released in March suggests workers are more optimistic than they’ve been since the Great Recession. The Retirement Confidence Survey (RCS) found that 21 percent of workers this year are very confident about their retirement prospects, compared with 13 percent in 2013. Those who are somewhat confident rose to 42 percent, up from 38 percent in 2013. But their confidence is driven by rising confidence in the macro economy, not improving retirement prospects at the individual household level. Fifty-four percent of households have saved less than $25,000—and within that group, 26 percent have less than $1,000. The saving levels are better for older workers. Among workers aged 55 or higher, 30 percent have saved more than $250,000 and 15 percent between $100,000 and $249,000. But even within this group, 33 percent have less than $25,000. Just as troubling, most of the RCS respondents don’t have a good grasp of retirement planning basics. Consider the numbers: More:


Pork Served Up on Hill as Pig Sleeps

Lawmakers and a live pig in an American flag hat joined forces on Wednesday to expose pork-barrel spending in this year’s Congressional Pig Book. This year is the 24th edition of the Citizens Against Government Waste’s book, which documents spending on questionable projects that lawmakers inserted into the budget. The release is especially timely due to the attempts to restore earmarks from both sides of the aisle, according to the organization. “The American people don’t believe we’ve made significant progress in eliminating waste here in Washington, D.C.,” Arizona Republican Sen. John McCain said, describing the rise of outsider candidates in this election at a news conference at the Phoenix Park Hotel.

The defense hawk spoke on the waste that occurs in the Defense Appropriations bill, including a push by Sen. Richard Shelby, R-Ala., for $225 million worth of Navy vessels “that the Navy neither needs, nor wants.” McCain also spoke on the inclusion of medical research in the same bill. “No one is opposed to medical research,” he said. “I’m opposed to medical research funding being put in a Defense Appropriations bill.” Arizona Republican Sen. Jeff Flake has his own personal favorites when it comes to what he considers government waste. He said his office has a tournament-style bracket of waste, and the top ones include money for the East-West Center in Hawaii that “the State Department said they don’t want” and a rapid bus system in Aspen, Colo. In 1960, Congress created the East-West Center for education and research in the relationship between Asia and the U.S. “We must cut this out-of-control spending … if we are ever going to get the debt under control,” said fellow Sen. Joni Ernst, R-Iowa.

While the lawmakers spoke, the pig in the back of the room roamed around. But, at one point, Rep. Mick Mulvaney, R-S.C., pointed out that it had fallen asleep. “I’ve spoken in some really tough rooms but, I’ve never spoken in a room where the pig fell asleep,” he said. House Republican Study Committee Chairman Bill Flores touted the panel’s conservative budget proposal rolled out last month. “We also know that talk is not enough,” he said.


In Democratic Debate, Clinton and Sanders Spar Over Judgment

Senator Bernie Sanders, seizing on potential vulnerabilities for Hillary Clinton in the coming New York primary, repeatedly savaged her ties to wealthy donors and Wall Street banks during their debate on Thursday night, delivering a ferocious performance that Mrs. Clinton countered with steely confidence and her own sharp elbows. Mr. Sanders, hoping to humiliate Mrs. Clinton in her adopted home state in Tuesday’s primary, bluntly challenged her fitness for the presidency, saying she had the experience and intelligence for the job but adding, “I do question her judgment.” He listed her most controversial actions over the years, from voting to authorize the American invasion of Iraq to supporting some free-trade deals and taking $675,000 in speaking fees from Goldman Sachs. While he did not repeat his recent remark that she was unqualified to be president, he constantly edged up to the line. “Do we really feel confident about a candidate who says she will bring change in America when she is so dependent on big money interests?” Mr. Sanders asked. “I don’t think so.” Mrs. Clinton fought back hard, especially in a fierce exchange over Israel, as the two candidates played to a rambunctious and roaring audience at the Brooklyn Navy Yard: a classic New York crowd that interrupted, booed and cheered in sports arena style, creating a highly charged atmosphere. The forum also revealed the increasing animosity between Mr. Sanders and Mrs. Clinton, who no longer offer each other the polite rejoinders and carefully couched criticisms that characterized the early part of the campaign. Feisty and frequently sarcastic, Mr. Sanders could barely contain his disgust with Mrs. Clinton’s ties with Wall Street, a ripe target among liberals in New York City and in economically depressed upstate regions. After Mrs. Clinton said she had stood up to bankers and “called them out” on their shaky financial practices before the recession, Mr. Sanders delivered his retort with the flair of a veteran Broadway actor.

Board Recommends Parole for Charles Manson Follower Leslie Van Houten

A California review board recommended parole Thursday for former Charles Manson “family” member Leslie Van Houten, who was convicted along with other members of the cult in the 1969 killings of Leno and Rosemary LaBianca. Van Houten, 66, had been denied parole 19 times by the state parole board since being convicted of first-degree murder and sentenced to life in prison. After the two commissioners on the panel issued their decision at a hearing at the California Institution for Women in Chino, Van Houten said she felt “numb,” according to her attorney, Richard Pfeiffer. “The opposition to parole has always been the name Manson,” Pfeiffer said. “A lot of people who oppose parole don’t know anything about Leslie’s conduct. Her role was bad. Everyone’s was. But they don’t know what she’s done since then and all of the good she’s done.” The ruling will be reviewed by the parole board’s legal team. If upheld, it will be forwarded to Gov. Jerry Brown, who could decide to block Van Houten’s release. A spokesman for the governor said Thursday that it would be premature for his office to comment.

Cory LaBianca, who was 21 when her father, a wealthy grocer, and stepmother were slain in their Los Feliz home, said she was disappointed by the parole board’s decision and planned to lobby the governor to reject Van Houten’s release. “Maybe Leslie Van Houten has been a model prisoner,” Cory LaBianca said. “But you know what? We still suffer our loss. My father will never be paroled. My stepmother will never get her life back. There’s no way I can agree with the ruling today.” Los Angeles County Dist. Atty. Jackie Lacey, whose office argued for Van Houten to remain behind bars, also expressed disapproval in a statement: “We disagree with the board’s decision and will evaluate how we plan to proceed.” More:


My Night at the Playboy Mansion With Donald Trump

The last time I saw Donald Trump, he was screaming at me on stage at the Hollywood Bowl.

In 2006, I was a contestant on Season 6 of The Apprentice, the NBC show in which 18 contestants competed for a managerial job working for Donald Trump, the program’s host. Each week, members of the losing team would be called to Trump’s boardroom where at least one would be “fired.” I lasted eight episodes. At the season finale, those of us cast off in earlier episodes were brought back to witness the spectacle of the winning “apprentice” being chosen before an audience, in a live broadcast. Sitting onstage in a fake boardroom set, Trump asked the former contestants for their opinions on which finalist he should hire, turning finally to me before announcing his decision. I jokingly suggested that he choose Sanjaya, the goofily flamboyant singer then enjoying a run on American Idol. I meant it as a quip about the triviality of the whole self-serious reality-audition process. It was live TV, so I couldn’t be edited out.

Moments after we went off-air, with the stage full and audience members still exiting their seats, Trump spotted me and jabbed a finger at my face. “What was that?,” he barked. I told him the truth: I had nothing nice to say about either of the finalists, and rather than insult them, I went for humor. Humor was not, apparently, welcome in the boardroom. “Well, it wasn’t funny,” Trump snapped, his face inches away from mine. He stormed off. Up to that point, I felt I had been on Trump’s good side. It’s true that he’d fired me, but he fires most people on the show, and some of them have gone on to be his biggest boosters. Somewhere in my parents’ house, there’s even a personal post-firing letter from Trump, encouraging and complimentary. So naturally, I was taken aback when my joke turned into an onstage browbeating.



Alabama woman keeps resurrecting shoddy day cares in God’s name

This story was produced and written by Reveal from The Center for Investigative Reporting. Learn more at and subscribe to the podcast, produced with PRX, on iTunes. She’s been called a crook. A con artist. A snake in the grass. But in Alabama, the only thing that really matters to state regulators is that she calls herself a Christian. She ran a church day care from a decrepit warehouse that one worker called a “house out of a horror movie.” She opened another child care center next to a porn store.  Each of her day cares has been dogged by complaints of abuse and neglect. Workers said she hit children with flyswatters, locked them in closets or rapped them with rulers. She’s failed to pay so many employees that one reportedly slapped her in the face and another threatened to hurl a pickle jar at her, according to police reports. She has been arrested multiple times, for crimes ranging from theft to child endangerment. In total, Deborah Stokes has operated at least a dozen Christian day cares across southern Alabama. Every time she is chased out of town by furious parents, workers or landlords, she reopens in the next town over. In the process, she has collected at least $86,000 in taxpayer funding to run her day cares with almost no oversight. She doesn’t need a license. She doesn’t need a curriculum or qualified workers. All she needs is a building with a roof, desperate parents and a piece of paper saying she runs a church. In 16 states, day cares that claim to be religious get a pass on certain licensing rules. Alabama offers religious day cares the most freedom of any state, shielding them from most government oversight. Reveal from The Center for Investigative Reporting found no evidence that Stokes’ church, which she founded, holds services or performs outreach. The ministry’s address changes often, to Stokes’ new day care or her rental home. But by saying that her day cares are religious, she has remained virtually untouchable for a decade. Police, county health officials, building inspectors, city council members and throngs of angry parents and former employees have done everything in their limited power to shut down Stokes for good. All of them have failed. “I wouldn’t trust her with a glow stick, let alone a child,” said Kimberly Nicole Hinman, a former employee at one of Stokes’ day cares. “But she says she’s a Christian, and people trust her.”  A Reveal investigation found that the religious exemption has become a safe haven for dangerous day care operators who can’t stay out of trouble. Combing through records around the country, we identified at least 80 operators who rebranded themselves as religious – sometimes just days after regulators took the extreme step of shutting down their licensed day cares. In Alabama, 13 day care operators lost their licenses from 2004 to 2014; three reopened as religious entities. After that, the trio faced almost no oversight: More:


Gov. Robert Bentley, Rebekah Mason flew to Vegas, attended Celine Dion show

On Nov. 17 of last year, Gov. Robert Bentley boarded a state airplane for Las Vegas, along with his former political adviser Rebekah Caldwell Mason, communications director Jennifer Ardis, Deputy Chief of Staff Jon Barganier and his security detail. They went to attend the Republican Governors Association Annual Conference. Oh. And to catch a show. They didn’t have to think twice before going to the Colosseum at Caesar’s Palace for an elaborate concert by Celine Dion. Bentley went backstage and made Dion an honorary Alabamian. He posed for pictures with her, which he showed around the office – along with backstage passes for which he was ungubernatorially proud. Mason and Ardis posed for pictures, too. The concert was “amazing,” Ardis said. Bentley’s staff argues that there is no foul. Ardis said Bentley himself paid for all the Celine Dion tickets, and the Republican Governors Association reimbursed the Bentley campaign for the cost of the conference and the flight. The campaign reimbursed the state, and no taxpayer money was used, she said. She did provide a copy of a deposit to the state of Alabama in the amount of $11,641.35. It was dated March 25 of this year. It came almost 19 weeks after the trip. And it came 3 days after former Alabama Law Enforcement Agency chief Spencer Collier went public with claims that Bentley and Mason had been engaged in an affair, and that Bentley had been warned that using state or campaign assets to carry out an affair could be illegal. Ardis said the Republican Governors Association wired Bentley’s campaign the reimbursement. She said she does not know why there was a delay or when the payments will appear on campaign finance reports. Attempts to reach the RGA to confirm the amount and the scenario were unsuccessful Thursday. But the concert – and the money – are just part of the issue. Some who have been close to the governor claim Bentley boasted prior to the trip of wanting to use Las Vegas to get some personal time with Mason. More:


VictoryLand’s McGregor could take case to U.S. Supreme Court

VictoryLand owner Milton McGregor said Thursday that he won’t apply for a rehearing before the Alabama Supreme Court, which ruled two weeks ago that electronic bingo games being played at McGregor’s casino were illegal slot machines. Instead, McGregor is taking his case to the people. And then, if necessary, to the U.S. Supreme Court. “There is no need to go before that corrupt Bob Riley court again, because everyone in the state knows what the outcome would be,” said McGregor, referencing the former governor who started the state’s crackdown on electronic bingo casinos. “For them, it’s not about the law,” McGregor continued. “If they truly cared about the law, they would have allowed us to present oral arguments. They didn’t have the decency to even respond to our request. Instead, they hid in the shadows behind closed doors and come up with a ruling that was purely political.” The Alabama Supreme Court overturned a Montgomery Circuit Court judge’s ruling in the case, which was a civil forfeiture hearing to determine if the state had the right to keep more than 1,000 electronic bingo machines and over $200,000 in cash seized from VictoryLand during a 2013 raid by the state’s attorney general’s office. Circuit Court Judge William Shashy originally ruled last June, and then again in October, that the state had treated VictoryLand unfairly by singling it out for prosecution and stated that the voters in Macon had knowingly approved electronic bingo when they passed a 2003 constitutional amendment. More:


State legislator vows to introduce bill requiring all day cares to be licensed after reading Reveal story on

A story produced and written by Reveal from The Center for Investigative Reporting published on this morning took a deeper look at the negligent and even abusive Alabama day cares that benefit from religious exemption loopholes in state law. After reading the story, State Rep. Patricia Todd announced she would present a bill next week to require all day cares to be licensed and regulated. “We should not have any unlicensed childcare centers,” said Todd, D-Birmingham. “We license tattoo parlors and want to license barbers. “What is more precious than a child? That should be our top priority.” The story, published by and produced by Reveal from The Center for Investigative Reporting, comes after a series of stories in the past year about the state’s religious exemption for day care centers. State law allows day cares that operate as part of a church to go unregulated, uninspected and unlicensed by the Alabama Department of Human Resources. Alabama offers the least regulation of any state over religiously-affiliated day care centers. Because DHR is not allowed to investigate or reprimand those centers, in some instances gross negligence and abuse of children has gone unchecked.

Todd spoke with legislative services today and asked for a bill to be drafted that she could introduce next week. She admitted it’s unlikely the bill will pass during this legislative session since the session is nearly over. DHR would need additional funding to be able to inspect and regulate the additional 900 or so day cares that are currently license-exempt, and the state budget has already passed. But, she said, a bill now could open the door to a stronger bill during the next legislative session.



Rotten day cares don’t hide behind God, just the Alabama Legislature

In Alabama there are real problems and there are imaginary problems. The state’s ban on hunting over baited fields is an imaginary problem, but that hasn’t stopped some lawmakers from trying make it legal to hunt over a big pile of corn.  Lane Cake is an imaginary problem, and yetevery year the Alabama Legislature considers the same resolution to make it the Alabama state dessert. If they’d just pass the thing so we could move on to more important imaginary matters, like the state appetizer or the state cocktail. Religious oppression in schools is an imaginary problem, too, which Rep. Mack Butler solved last year by passing a bill that made things like student-led prayer legal. By Butler’s own admission, everything his bill legalized was already legal, constitutionally protected and fully litigated before the United States Supreme Court. He just wanted to make those legal things even more legal. Lawmakers love imaginary problems because there’s no cost to them politically and little cost to the state financially, except when they invite federal court challenges. Real problems, on the other hand, cost money. Real problems take effort to solve. Real problems don’t lend themselves to State House grandstanding, nor do they yield the kind of constituent back-patting lawmakers crave. Alabama’s negligence when it comes to regulating and licensing religious affiliated daycares is a real problem. Alabama law doesn’t merely neglect state oversight of religious-affiliated daycares, it strains the muscles in its neck looking the other way. It’s as simple as this: In Alabama, a day care can invoke a religious exemption to the rules and regulations that apply to for-profit and other non-profit child care centers. As a result, hundreds of child care centers throughout the state operate without oversight. In some instances, operators who have been shut down by the state have reopened by hiding behind Alabama’s religious exemption. Let’s be clear here. We’re not talking about the state dictating curriculum. We’re talking about simple, basic stuff, such as ensuring these facilities have employees who know CPR and that they don’t hire convicted pedophiles to change children’s diapers. And let’s be clear about something else. This isn’t about targeting religious daycares for a greater degree of scrutiny. My wife and I recently put our new son in a church day care that, not only subjects itself voluntarily to much higher degrees of government scrutiny and accreditation, but also actively advocates for the state to close the religious day care loophole. When I take my son there each morning, there on the bulletin board where they post school announcements and notices about baby food recalls, is a poster. It says, “In Alabama tattoo parlors  must be licensed. Child care centers don’t.” The reason my child’s daycare has stepped out on this issue is simple: Ensuring the safety and wellbeing of children is not a matter of religious freedom; it’s about the safety and wellbeing of children. We don’t exempt surgeons from being licensed to cut on patients because they work for religious affiliated hospitals. We don’t let lawyers practice law without passing the bar exam because of where they go to church. We don’t even let barbers and hairdressers cut hair — no, really, they have to be licensed in Alabama — because of which god they worship. But if you wanted to open your own daycare next to a porn store (this really happened) or staff it with child predators, you can do that, as long as you hide behind religion. Not only can you do that, but you can get government money when you do. Meanwhile, Alabama lawmakers would rather drug test food stamp recipients than require background checks on child care workers. When Alabama looks the other way, children get hurt. Sometimes, they die. When I started poking around this issue, I was relieved that lawmakers appeared to be closing the loophole. What else would something called the Alabama Child Care Provider Inclusion Act do? I should know better. Rather than protecting children from ne’er-do-wells and scofflaws, the bill, introduced by Rep. Rich Wingo, R-Tuscaloosa, doesn’t do any such thing at all. Instead, it would protect adoptions agencies that refuse to place orphaned or abandoned children with gay and lesbian couples. I felt naive because, for a moment, I thought our lawmakers wanted to fix a real problem. I guess I let my imagination get away from me.

Editorial: Don Siegelman deserves a pardon by Anniston Star Editorial Board

Over the course of 2015, President Barack Obama used the clemency powers of his office to free more than 100 federal prisoners, most of whom were nonviolent offenders who had been sentenced by overly harsh narcotics laws. The releases were, Obama said in late December, “another step forward in upholding our ideals of justice and fairness.” Those “men and women … had served their debt to society,” he said. More than 100 former state attorneys general are asking Obama to do much the same for Don Siegelman, the former Alabama governor who was convicted in 2006 on federal corruption charges. They have sent the president a letter. “Although nine years have passed, Gov. Siegelman’s unjust conviction continues to eat away at the integrity of the justice system,” reads part of the letter, which was delivered to the White House Wednesday. “Many legal scholars as well as the public at large believe that the prosecution of Gov. Siegelman was a perversion of justice.” The central charge against Siegelman, a Democrat elected in a heavily Republican state, boils down to this. As governor, Siegelman was looking to promote an election on whether or not the state should create a lottery. One generous contributor to the special lottery campaign fund was Richard Scrushy, the high-flying CEO of HealthSouth who wished to be appointed to a state hospital board. Bush-appointed federal prosecutors claimed Scrushy’s $500,000 contribution to the lottery campaign was the price to gain an appointment by Siegelman to the state board. Despite the lack of a smoking gun explicitly showing Siegelman sold a seat on the state hospital board, federal prosecutors won a conviction on their second attempt. The first one was abandoned by prosecutors over a dispute over evidence with the federal judge in the case. After he retired, that judge, U.W. Clemon, wrote that the “2004 prosecution of Mr. Siegelman in the Northern District of Alabama was the most unfounded criminal case over which I presided in my entire judicial career. In my judgment, his prosecution was completely without legal merit; and it could not have been accomplished without the approval of the Department of Justice.” It’s been firmly established that the Bush administration Justice Department wasn’t above playing politics. So, if the standard becomes politicians appointing contributors to valued posts, then plenty U.S. ambassadors will have to be brought home today. That’s a standard that isn’t confined to Siegelman. In fact, in 2013 Bloomberg News reported that 26 ambassadors appointed by Obama had contributed a total of $13.6 million to Democratic Party causes. We urge President Obama to heed the letter from the bipartisan collection of former prosecutors and pardon Don Siegelman.


Morning Money

DEM DEBATE WRAP — Tons of high-decibel Wall Street talk but not a whole lot of new ground between Hillary Clinton and Bernie Sanders in their feisty Brooklyn brawl on Thursday night. A few highlights.

Clinton on breaking up banks: “Dodd-Frank sets fourth the appropriate steps that need to be taken. I will appoint regulators tough enough … to break up any bank that fails the test in Dodd-Frank. … I have been standing up and saying continuously we have the law. We’ve got to execute under it. So you’re right, I will move immediately to break up any financial institution, but I go further because I want the law to the extend to those that are part of the shadow banking industry”

Sanders on breaking up banks: “I don’t need Dodd-Frank now to tell me that we have got to break up these banks, A.) because they’re based on fraudulent principles, and B.) because when you have six financial institutions that have assets equivalent to 58% of the GDP of this country, they were just too big, too much concentration of wealth and power.

Sanders, asked about his NYDN comments about letting banks decide what size to be: “Because I’m not sure that the government should say is you are too big to fail, you’ve got to be a certain size, and then the banks themselves can figure out what they want to sell off. I don’t know that it’s appropriate for the department of Treasury to be making those decisions. What we need is to make sure that they are safe.”

Sanders on Clinton “calling out” banks: “She called them out. My goodness, they must have been really crushed by this. And was that before or after you received huge sums of money by giving speaking engagements? They must have been very, very upset by what you did.”

Clinton on Sanders’ claims that she’s influenced by Wall Street money: “He cannot come up with any example because there is no example.”

INDUSTRY RESPONSE — Via Hamilton Place Strategies: “[T]he Democratic debate featured discussion on large banks’ living wills and whether to break up the banks. Once again, the debate failed to mention the following facts demonstrating the significant changes large banks have made to improve safety and soundness as well as ensure TBTF is over: Three of the six largest banks are smaller since 2007. Four are smaller since Dodd-Frank.

“Meanwhile, JPMorgan shrunk six percent last year. Legal entities have been reduced by 20 percent for the largest banks, simplifying the resolution process. Banks are committed to ensuring they can be resolved in the event of failure without damaging the economy. The living wills process is iterative. Dodd-Frank outlines a specific path for addressing regulatory requirements on living wills prior to forced to divestitures. Capital has than doubled, while liquidity has tripled since 2008.”

CHINA GROWTH SLOWEST IN SEVEN YEARS — Reuters: “China’s economy grew 6.7 percent in the first quarter from a year earlier, meeting expectations and at its slowest pace in seven years, although other indicators show the slowdown in the world’s second largest economy may be bottoming out. .. Analysts polled by Reuters had expected gross domestic product (GDP) to grow 6.7 percent, easing slightly from 6.8 percent in the fourth quarter and marking the slowest rate of growth since the first quarter of 2009, when growth tumbled to 6.2 percent.

“China’s economy grew 6.9 percent in 2015, its weakest rate in a quarter of a century. Analysts polled by Reuters expect the economy will lose more momentum this year, forecasting growth will cool to 6.5 percent even if Beijing ramps up fiscal spending and cuts interest rates again.”

HOUSE GOP PRESSES ON LEAKS — House Financial Services Chair Jeb Hensarling and Oversight subcommittee chair Sean Duffy wrote to the FDIC and Fed complaining about the leak to the WSJ on April 12th of regulators’ decision to reject the living will submissions of several large banks. The results were officially released on the 13th. Among other things, the letter asks for a list of all FDIC and Fed employees who had access to the results on April 12th:

MORNING MONEY RADIO — Catch me and Breaking Views’ Rob Cox on WNYC’s “Money Talking” chatting about money and 2016.

MORE ON COST-BENEFIT ANALYSIS — St. John’s University School of Law professor Jeff Sovern emails: “Consumer protection agencies already use CBA. The Dodd-Frank Act directs the CFPB to ‘consider’ costs and benefits. The FTC has a Bureau of Economics which effectively institutionalizes CBA. Neither the CFPB nor the FTC can find a practice unfair unless they find that it causes ‘substantial injury . . . which is . . . not outweighed by countervailing benefits.’”

AND EVEN MORE! — From a former Hill aide: “‘Common sense’ regulation balances competing interests. For example, you could build the safest plane ever, with quadruple redundancies and every imaginable safety device possible. But, it would either be too heavy to fly or it would be so expensive to ride that only a select few could afford it. … ‘Reformers’ are always pointing to the trillions lost in the crisis — and rightly so.

“The problem is that they ignored their responsibility to develop a regulatory structure where both growth and stability are possible. They threw in all the supposed bells and whistles but the lumbering craft they built only has First Class seats. As such, most of those who lost the trillions have no chance to get it back. They left the economy class stranded in the terminal and all they have to offer as the 1% departs is ‘the old plane crashed.’ That is nonsense, not common sense.”

GOOD FRIDAY MORNING — Have a great weekend, everyone. Email me on and follow me on Twitter @morningmoneyben

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Sabrina Rodriguez on TTIP’s chances — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600

DRIVING THE DAY — IMF/World Bank meetings continue … Puerto Rico bill faces big moment in the House … U.S. Chamber hosts an event on comprehensive tax reform … Industrial production at 9:15 a.m. expected to decline 0.1% … Univ. Michigan Consumer Sentiment at 9:55 a.m. expected to rise to 92.0 from 91.0 … Treasury Secretary Jack Lew holds a press conference in the evening at The George Washington University.

WP ON PUERTO RICO BILL — Via WP edit page: “The good news is that Mr. Ryan and his committee chairmen, working with the Obama administration, are closer than ever to producing a bill — certainly closer than those familiar with the usual congressional dysfunction might have expected. …

“The Obama administration broadly supports the framework; in the interest of a compromise, the administration has dropped its call for extra Medicaid funding and a new earned-income tax credit, which Republicans saw as too close to a taxpayer bailout … In short, there’s a chance for major bipartisan legislation on a big issue — and if Mr. Ryan can rein in his caucus, it might just happen.”

BIG CHALLENGE FOR RYAN — POLITICO’s Colin Wilhelm: “House Speaker Paul Ryan faces a challenge on Friday as he tries to rally Republicans and salvage a deal with the Obama administration that would allow Puerto Rico to restructure more than $70 billion in debt. … If Republicans can’t muster enough conservative support for the bill, the measure could be dramatically rewritten to win over Democrats, who are currently opposed to the legislation.

“But it was those kinds of maneuvers that turned Republicans away from his predecessor, John Boehner. Moving too far leftward risks alienating key members of Rep. Rob Bishop’s House Natural Resources Committee, and could imperil the bill on the House floor. Both Bishop and GOP leadership believe if this bill goes down, a taxpayer bailout would be practically inevitable.”

OIL PLUNGE HITS BANKS — FT’s Ben McLannahan and Alistair Gray: “Three of America’s biggest banks have each taken $500m hits on their energy portfolios and warned of more pain to come, as they spelt out the damage inflicted by lower oil prices. Wells Fargo, Bank of America and JPMorgan Chase were among the most aggressive lenders to the oil boom, putting together portfolios on the basis that high prices were here to stay … But as explorers and producers continue to struggle with crude at about $40 a barrel, down more than 60 per cent from the 2014 peak, the bills are coming due for the lenders that backed them.

“Wells on Thursday announced that it would pump up its reserves for energy losses to $1.7bn, from $1.2bn at the end of the fourth quarter, while Bank of America added $525m to its buffer. A day earlier, JPMorgan Chase said it had increased its reserves by $529m during the quarter — and said it could add another $500m by the time the year is out. … The banks have emphasised that their energy loans are manageable, accounting for about 2 per cent of their total loan books.”

BATS PRICES BIG IPO — WSJ’s Corrie Driebusch: “After a flubbed stock-market debut in 2012, Bats Global Markets Inc. is set to list again in a high-stakes test of its own exchange and of the wider new-issue market after a lackluster first quarter. Bats Global’s initial public offering raised $252.7 million late Thursday after selling 13.3 million shares at $19 apiece, valuing the company at $1.82 billion … Earlier Thursday, Bats had increased the number of shares, which it had priced at between $17 and $19, from 11.2 million, a sign of strong investor interest in the IPO.

“The first quarter was the slowest quarter for U.S. listings since the financial crisis, and a successful Bats debut could help revive the IPO market. For the Lenexa, Kan., exchange operator, it is a shot at redemption. Four years ago, Bats was forced to cancel its IPO after it said a software bug disrupted trading shortly after its stock listed on its own exchange. Bats said it is ready to go this time”

DC CHILLS THE DEALMAKERS — NYT’s Leslie Picker: “On Wall Street, the phones have been a little quieter … . A series of broken transactions and stock-market volatility have shaken the confidence of some in the boardroom to tackle their next big acquisition. The value of abandoned deals has been higher than that of newly signed deals in the United States so far this year. Almost $340 billion worth of mergers have been withdrawn in 2016, while $282 billion worth of newly signed deals were announced …

“The cancellations are skewed toward megadeals, defined as those worth $10 billion or more. … The divergence in the deal market comes largely as a result of a regulatory clampdown. Over the last year, with shareholder encouragement, companies ventured into large, complex and risky deals. Last week, the government fought back, in a lawsuit by the Justice Department and new rules from the Treasury Department, to stop many of the transactions. One lawyer described a depression that set over mergers and acquisitions as a result of those two actions”

CAM FINE ON JAMIE DIMON — ICBA’s Cam Fine in a letter to the WSJ: “The correspondent banking system that Jamie Dimon describes … has existed for 200 years. While the story of our financial system is one of interdependence, the reliance of today’s largest banks on a government guarantee against failure has destabilized the banking ecosystem and threatens institutions not deemed ‘too big to fail.’

“Community banks are critical of the largest financial firms, not merely due to their size but because concentrating most of the industry’s assets in a handful of banks puts the entire system at risk. … It’s a fundamental question of concentration, risk and moral hazard.”

MICROSOFT SUES DOJ — WSJ’s Jay Greene and Devlin Barrett: “Microsoft Corp. sued the Justice Department on Thursday, saying it’s unconstitutional for the government to bar tech companies from telling customers when federal agents have examined their data. The suit … raises a fundamental question of how easily, and secretly, the government should be able to gain access to individuals’ information in the cloud-computing era.

“Critics argue that a person would know if their home or hard drive were searched by investigators, but agents now have the ability — and are using it in thousands of cases — to keep secret their searches of information stored in the massive data centers that power cloud computing.”

POTUS Events

10:00 am || Receives the Presidential Daily Briefing

All times Eastern
Live stream of White House briefing at noon

Floor Action

The House is in at 9 a.m. with first and last votes expected between 10:30 a.m. to 11:30 a.m. On tap is the No Rate Regulation of Broadband Internet Access Act. The Senate is out until Monday.


Last-Minute Tips for Filing Your Taxes

Don’t panic if you haven’t done your taxes yet. There’s no time like the present to prepare and file your 2015 tax return. Visit for tax tools and help to make filing less taxing.

  1. Don’t delay. Don’t wait until the last minute to do your taxes. If you rush to beat the deadline, you may miss out on tax savings or make a mistake. An error may delay your refund and could cause the IRS to send you a letter.
  2. Use IRS Free File. If you made $62,000 or less, you can use free tax software to do your taxes and e-file. If you made more, you can use Free File Fillable Forms. These are electronic versions of IRS paper forms. Free File will also help with the reporting requirements for the Affordable Care Act.
  3. Try IRS e-file. No matter who does your taxes, you should file them using IRS e-file. It’s the safe, easy and accurate way to file your tax return. You’re 20 times less likely to make a mistake when you e-file compared to filing a paper return. Tax software catches and corrects common paper filing errors. It also will alert you to tax credits and deductions you may otherwise miss.
  4. Visit Go online for tax information and resources. The Interactive Tax Assistant, Tax Trails and IRS Tax Map are useful question and answer resources.
  5. File on time. If you owe taxes but can’t pay by the April due date, you should still file on time and pay as much as you can. This will reduce potential penalties and interest charges. If you can’t pay all the tax you owe, you may apply for an installment agreement. The easy way to apply is to use the Online Payment Agreement application on You can also apply by mail using IRS Form 9465, Installment Agreement Request.
  6. File an extension. If you’re not ready to file by April 18 (April 19 for taxpayers in Maine or Massachusetts), you can get an automatic six-month extension. You can e-file your extension request for free using IRS Free File. If you owe tax, you can request your extension when you make a payment with Direct Pay, Electronic Federal Tax Payment System or by debit or credit card and select Form 4868 as the payment type. You may also file using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Make sure to e-file or mail the form and pay an estimate of any tax due by the April due date.
  7. File to reconcile Advance Payments of the Premium Tax Credit. You must file a tax return and submit Form 8962 to reconcile advance payments of the premium tax credit with the actual premium tax credit to which you are entitled. You will need Form 1095-A from the Marketplace to complete Form 8962. Filing your return without reconciling your advance payments will delay your refund and may affect future advance credit payments.

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 13 April 2016

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


How a Japanese Pinball Maker Helped the FBI Crack the San Bernardino iPhone

The hackers at Cellebrite Mobile Synchronization Ltd., the forensics unit of a little-known Japanese pinball company, are fast becoming the go-to guys when law enforcement needs to unlock smartphones. Its group chief has plans to keep the firm on the frontlines against terrorism. In his first interview since Sun Corp. was thrust into the spotlight in the legal tussle between Apple Inc. and U.S. law enforcement over the hacking of an iPhone, Chief Executive Officer Masanori Yamaguchi says his company wants to expand its work countering tech-savvy terrorists. Yamaguchi says he’s willing to spend as much as 20 billion yen ($183 million) to acquire or merge with companies to expand its sought-after data extraction business. “Demand will never go away,” Yamaguchi, 67, said from the company’s headquarters in Aichi prefecture southwest of Tokyo. “Extracting mobile phone data is the fastest way to solve crimes nowadays.” Sun’s shares soared 17 percent, the exchange-imposed limit, in Tokyo trading Wednesday. The shares surged after Sun confirmed Cellebrite’s agreement to provide additional support to Interpol’s global efforts to fight cybercrime. Petah Tikva, Israel-based Cellebrite is said to have worked with the Federal Bureau of Investigation to crack an iPhone connected with the San Bernardino, California terrorist attack in December and the company also helped authorities access devices used by assailants in the Paris shootings last year, according to people familiar with the matter.  Aside from the FBI, Cellebrite now has a client list that includes some of the world’s most secretive spy organizations, such as the U.S. Central Intelligence Agency and Interpol, according to the people, who asked to not be identified because the information is private. Interpol signed an agreement with Cellebrite Tuesday in which the company will provide a unit of the international police organization with digital forensic equipment and training services over a three-year period. More:

New poll finds young Arabs are less swayed by the Islamic State

Two years after proclaiming a new “caliphate” for Muslims in the Middle East, the Islamic State is seeing a steep slide in support among the young Arab men and women it most wants to attract, a new poll shows. Overwhelming majorities of Arab teens and young adults now strongly oppose the terrorist group, the survey suggests, with nearly 80 percent ruling out any possibility of supporting the Islamic State, even if it were to renounce its brutal tactics. A year ago, about 60 percent expressed that view, according to the 16-country survey released Tuesday. “Tacit support for the militant group is declining,” concludes a summary report by the poll’s sponsor, ASDA’A Burson-Marsteller, a public relations firm that has tracked young Arabs’ views in annual surveys for the past nine years. Other recent surveys have found similarly high disapproval rates for the Islamic State among general populations in Muslim-majority countries. The new poll, based on face-to-face interviews with 3,500 respondents ages 18 to 24, suggests that young Arabs are both increasingly fearful of the terrorist group and less swayed by its propaganda, compared with previous years. More than half the participants ranked the Islamic State as the No. 1 problem facing the Middle East, and 3 out of 4 said they believed that the group would ultimately fail in its quest to establish an Islamic caliphate in Iraq and Syria. The survey suggests that religious fervor plays a secondary role, at best, when young Arabs do decide to sign up with the Islamic State. When asked why Middle Easterners join the group, the participants listed joblessness or poor economic prospects as the top reason. Only 18 percent cited religious views — a “belief that their interpretation of Islam is superior to others” — and nearly as many picked sectarian tensions between Sunnis and Shiites as the chief motivating factor. Young Arabs from countries with high unemployment rates were more likely to list economic hardship as a top reason for wanting to join the Islamic State, the survey found. The results align with the findings of other researchers who have noted that many recruits use religion mostly as a rationalization. More:

A guide to the 6 biggest revelations from the Panama Papers (so far)

When the International Consortium of Investigative Journalists released the trove of data on secret financial dealings now known as the Panama Papers, it claimed it linked 140 politicians from more than 50 companies to secret offshore accounts. In the eight days since, the revelations have ended one political career — that of the prime minister of Iceland — and have revealed new scandals in dozens of other countries. After a year of sleuthing, the ICIJ released findings from 2.6 terabytes of data from Panamanian law firm Mossack Fonseca revealing international corruption and tax evasion by the world’s political elite. From billion-dollar webs of offshore agreements to shady investments, the Panama Papers have proved the pervasiveness of financial loopholes. According to ICIJ, the historic data leak tied “140 politicians from more than 50 countries, connected to offshore companies in 21 different tax havens.” Some of these findings come at tumultuous times in countries around the world. In Brazil, President Dilma Rousseff was already facing impeachment charges for past corruption allegations. Argentina just came out of a 15-year battle over defaulted debts. In other nations, the documents have revealed the vast gulf between politicians’ stump speeches and their personal financial practices. More:

Cuba’s No-Cubans Rule Puts Cruise Lines in Uncharted Waters

Carnival Corp.’s maiden voyage to Cuba next month will be filled with almost 700 cruisers looking to spend time assisting in economic, environmental and community development there. The one thing the boat won’t be carrying, however, is any Cubans. Raul Castro’s government prohibits native-born Cubans from returning by sea, and makes other forms of travel difficult for them as well, a remnant of discord that remains unaltered by U.S. President Barack Obama’s recent visit. Into the middle of this now comes the U.S. cruise industry. Faced with the choice of waiting for Castro to lift the prohibition or gaining access to Cuba immediately, companies such as Carnival have chosen the latter. The argument is that engagement may help facilitate change—but not everyone is happy with that calculus. “Something precious is lost when a foreign government dictates what kinds of U.S. citizens can sail out of the Port of Miami,” Miami Herald columnist Fabiola Santiago, who is Cuban-American, wrote after she was denied a ticket for Carnival’s new Fathom cruise to Cuba. Carnival said it asked Cuba to reconsider the regulation. “We understand and empathize with the concerns being voiced and will continue to work the issue with Cuban officials,” Carnival spokesman Roger Frizzell said in a statement. “It is our hope and intention that we will be able to travel with everyone.” For the moment, Cubans may not. The rule dates to the 1980s when that nation loosened some restrictions to allow immigrants to return to see family, said Wilfredo Allen, a Cuban-American immigration attorney in Miami. He said enforcement is spotty, with the closest scrutiny aimed at Cuban-Americans, not those who live in Mexico, the Caribbean or elsewhere. Carnival officials signed agreements with Cuba last month during Obama’s historic two-day trip, allowing the MS Adonia, leaving from Miami on May 1, to arrive the following morning in Havana. It will be the first U.S. cruise liner to land there in more than 50 years. Under U.S. laws, travel to Cuba is permitted only for Americans who fall into one of 12 categories outlined by the Treasury Department, including professional research and meetings, athletic events, journalism, educational activities and “people-to-people” travel. The new Fathom brand, Carnival’s 10th cruise line, is aimed at the “social-impact travel” market, or travelers who are attracted to meaningful experiences with deeper social purpose. Carnival launched the line in June with plans for 7-day cruises to the Dominican Republic, where passengers would volunteer with local organizations. Fathom later added Cuba as a destination.Yesterday, Fathom was forced to cancel its first “soft launch” cruise to the Dominican Republic this week after the U.S. Coast Guard required further testing of the ship. The April 17 inaugural cruise will depart on schedule, Fathom said. More:

Reports: Authorities raid Panama Papers law firm

Authorities on Tuesday raided the law firm connected to the Panama Papers global corruption scandal, two news organizations are reporting. Agence France Presse and ABC News tweeted about the raid, as the Associated Press reported that organized crime prosecutors raided the Panama City headquarters of the Mossack Fonseca law firm that is at the center of the scandal. Police officers guarded the perimeter of the offices while prosecutors worked inside, according to the Associated Press. Documents leaked from the firm’s offices appear to show a series of tax havens created for the wealthy. Journalists and tax authorities around the world have been poring over the more than 10 million documents revealing financial accounts set up in tax-haven countries through Mossack Fonseca. The leaked information was funneled through the International Consortium of Investigative Journalists to more than 100 news outlets in scores of countries. Although the disclosures appear to shed light on how the rich and powerful have hidden fortunes in offshore accounts, Mossack Fonseca has steadfastly maintained that it broke no laws and did nothing wrong. Investigators from Panama’s intellectual property office descended on Mossack Fonseca’s home office in Panama City on Monday, trying to determine how the leak occurred. The release of the data prompted investigations around the world. Controversy surrounding the release led to the stepping down of the prime minister of Iceland. A data trail linked stashed billions to friends of Russian President Vladimir Putin. And British Prime Minister David Cameron released his tax returns for the past seven years following the revelation that his father ran an offshore investment fund before he died. Cameron has pressed for improved financial transparency in the United Kingdom and will host a global anti-corruption summit in London next month.

The brutal toll of Boko Haram’s attacks on civilians

As the Islamic State’s attacks in Europe have captured the world’s attention, an ISIS-affiliated group has been waging an even deadlier campaign in Africa. Hundreds killed when 20 attackers detonated coordinated blasts at police stations around a city. Fifty dead when suicide bombers, including women and children, attacked a market and camps housing people trying to escape the violence. Fifty Christians targeted and killed in a student housing area near a school. These are a few of the hundreds of horrors wrought regularly by Boko Haram, an Islamist militant organization based in Nigeria, over the past six years. The group’s rise, some experts say, is attributable to government corruption and economic differences between the Muslim northern areas and more populous and prosperous Christian South. While military forces have had some success regaining territory in the past year, Boko Haram continues to carry out attacks on civilians. Last year was the group’s deadliest yet, according to the Armed Conflict Location and Event Data Project, which tracks civil unrest and political violence in Africa and Asia.

Swiss group buys Airbus jet for zero-gravity flights

A Swiss aerospace group plans to offer zero-gravity flights this year in an airliner that will expose thrill-seekers with strong stomachs to repeated bouts of weightlessness. In what it called a world premiere, Swiss Space Systems (S3) said on Tuesday it had bought an Airbus A340-300 jet that will carry around 70 passengers on 90-minute flights featuring 15 parabolic arcs. Each parabola will generate 20 to 25 seconds of weightlessness as passengers pass through the top of the arc. “Our ultimate vision is to democratize access to space through our reusable launcher program. Well before our launcher becomes a reality, the ZeroG experience onboard our Airbus aircraft will offer everyone an opportunity to become an astronaut for a day,” S3 Chief Executive Pascal Jaussi said. Prices range from 2,700 Swiss francs ($2,826) for a seat in the “party zone” with up to 40 passengers to as high as 65,000 francs for the VIP Room, which will hold up to 12 passengers, who will also get a luxury watch and can keep their flight suit. The aircraft will also provide a platform for high-precision microgravity experiments, the company said.


Inside the Nondescript Building Where Trillions Trade Each Day

 Six miles northwest of the New York Stock Exchange as the microwave flies, across the Hudson River and within earshot of Interstate 95, is a building with no name. Only three numbers mark its address, and, like much of its surroundings, it’s nondescript, encircled by windblown trash and lonely semitrailers waiting to be hauled away somewhere. It’s a part of New Jersey that’s, well, ugly. It’s also a critical node in the U.S. financial system: The 49 different exchanges that lease space at this data center sent a record 9.6 million messages per second through its fiber-optic cables in February. Every day, electronic trades representing trillions of dollars’ worth of equities, derivatives, currencies, and fixed-income assets pass under this roof. This is NY4. This is where Wall Street actually transacts. It’s just one of the crown jewels of Equinix, the $22.7 billion company that’s quietly grown into the world’s largest owner of interconnected data centers. To give you an idea of Equinix’s lead in the space, you would have to add up the market value of its five closest U.S. competitors to roughly equal its market cap, according to data compiled by Bloomberg. Equinix pitches its centers as more than just storage space for servers. Its clients pay in part because of who else is there. That includes the Chicago Board Options Exchange, Direct Edge, ICAP, Nasdaq, the NYSE, and Bloomberg LP, the parent company of Bloomberg News. IEX Group, the firm that starred in Michael Lewis’s 2014 book Flash Boys, stashes a key piece of its hardware in one of Equinix’s New Jersey data centers: a coil of fiber-optic cable that slows orders down by a fraction of a second. And those firms are just from the handful of financial industry customers Equinix discloses. It connects more than 6,300 businesses to their customers, and most of those firms don’t want it known that they lease one of NY4’s metal cages, which are identified only by numbers, not names. More:


U.S. venture capital fundraising surges in first quarter

U.S. venture capital firms raised larger funds in the first quarter than in the first quarter of 2015 with $12 billion in 57 funds, a 59% increase in capital and a 17% drop in number of funds from the same quarter of 2015, said a venture capital fundraising report by the National Venture Capital Association and Thomson Reuters. By comparison, venture capital firms raised $5.5 billion in 51 funds in the fourth quarter.

The first quarter of this year was the biggest quarter for venture capital raised since the second quarter of 2006 when $14.3 billion was raised by 79 funds, raising more capital than the previous two quarters combined. The second quarter of 2015 was also a big fundraising quarter with $11.1 billion raised by 82 funds. The largest fund raised in the first quarter was the $1.3 billion Founders Fund VI, managed by Founders Fund. Fourteen of the venture capital funds raised in the first quarter were first-time funds, down 39% from the 23 funds raised by new firms in the fourth quarter and down 33% from the 21 first-time funds raised in the first quarter of 2015. The largest first-time fund raised in the first quarter was venture capital firm 1955 Capital’s $200 million first fund.


Public pension debt hurting government staffing — paper

State and local government staffing is being negatively affected by public pension debt, said a white paper from the Manhattan Institute. Since 2010, according to Bureau of Labor Statistics data, the change in total jobs in state and local governments has contracted by 1.5% compared to growth in the private sector of 11.3%, the first time such a discrepancy has occurred since 1955, the report said. Because 84% of state and local workers are participants in defined benefit plans, while only 18% of private-sector employees are in DB plans, and because the assumed rate of return of those public plans is between 7% and 8%, those plans are taking on more risk leading to greater costs, the report says, leading to less robust job growth in that category. According to Census Bureau data the report cites, while public-sector plan assets grew to $3.3 trillion in 2013 from $2.2 trillion in 2002, the average funding ratio still fell to 71% from 93.2%. That same data calculates that state and local pension costs as a share of general revenue has hit 4% for the first time in 2013. In 2002, that number was slightly more than 2%. Pension-related volatility, according to the report, is permanent, and even if all 19 million state and local employees were suddenly enrolled in a defined contribution plan next year, “pension debt would remain,” it says.


Documents Undercut U.S. Case for Taking Mortgage Giant Fannie Mae’s Profits

On a Friday in August 2012, the federal government changed the terms of its bailout of Fannie Mae and Freddie Mac, sending all the mortgage finance giants’ profits to the Treasury. The surprise decision prompted a lawsuit from shareholders, who argued that the collection of profits was an improper taking of private property without compensation. As the lawsuit proceeds through Federal Claims Court, documents unsealed in the case on Monday undermine an important defense made by the United States government. Lawyers for the Justice Department maintained early on in the litigation that Fannie and Freddie were in a death spiral and financially weak. Funneling all their profits to the Treasury was a way to protect taxpayers from future losses at the government-sponsored enterprises, the Justice Department said. In a deposition taken last July, for example, Susan McFarland, Fannie’s former chief financial officer, said she told high-level officials at the Treasury on Aug. 9, 2012, that the company was, in fact, “now in a sustainable profitability, that we would be able to deliver sustainable profits over time.” The mortgage finance giants Fannie Mae and Freddie Mac remain wards of the state years after the credit crisis receded into memory. Under their original rescue, in 2008, they were required to pay a 10 percent dividend on the money they had drawn from the Treasury. The revised deal, under which their profits are swept every quarter into the Treasury’s general fund, prompted shareholders to sue in Federal Claims Court. Fairholme Funds, a mutual fund company that owns shares in Fannie and Freddie, filed the suit in 2013. More:


U.S. regulators to notify some banks their ‘living wills’ are flawed: WSJ

U.S regulators are preparing to notify some of the country’s largest banks, including JPMorgan Chase & Co (JPM.N), that they have submitted flawed “living wills,” the Wall Street Journal reported on Tuesday, citing people familiar with the matter. A “living will” refers to a bank’s plan for how it would wind down operations during a crisis without the help of public money. At least half of the eight U.S. banks labeled “systemically important,” meaning they could significantly damage the American financial system if they encountered distress, are expected to receive “harsh verdicts” on their plans for how they would handle a potential bankruptcy without a federal bailout, the Journal reported. The Federal Deposit Insurance Corporation and the Federal Reserve, the two regulators reviewing the wills, declined to comment to Reuters on the report. Reuters was unable to verify the story.  Under the Dodd-Frank Wall Street reform law, banks must submit the plans annually. Banks that submit plans that regulators do not find credible can face higher capital requirements and stricter regulation.

JPMorgan profit hurt by drop in investment banking revenue

JPMorgan Chase & Co (JPM.N), the biggest U.S. bank by assets, reported a 6.7 percent drop in quarterly profit as costs to cover possible sour loans to troubled shale oil companies rose and revenue from trading and investment banking declined. However, both earnings per share and revenue beat analysts’ lowered expectations. The bank’s net income fell to $5.52 billion in the first quarter ended March 31, from $5.91 billion a year earlier. On a per-share basis, earnings fell to $1.35 from $1.45. Analysts had expected earnings of $1.26 per share, according to Thomson Reuters I/B/E/S.( Total revenue fell 3 percent to $24.08 billion, beating the average estimate of $23.40 billion, while revenue from fixed-income trading – often JPMorgan’s most volatile business – fell 13.4 percent to $3.60 billion. JPMorgan is the first U.S. bank to report results since the Federal Reserve’s decision in December to raise interest rates by 0.25 percentage points, the first hike in nearly a decade. Bank of America Corp (BAC.N) and Wells Fargo & Co (WFC.N), the second and third-biggest U.S. banks, report on Thursday. A slide in commodity and oil prices, a slowdown in China, near-zero interest rates, mounting regulatory costs and hefty capital requirements have set up the banking industry for its worst start to a new year since the 2007-2008 financial crisis. And while stock market activity picked up in March, that was not enough to make up for weak trading volumes during a volatile January and February. JPMorgan’s shares were up 2.5 percent at $60.75 in premarket trading. Investment banking revenue fell 24.5 percent to $1.23 billion, even though JPMorgan topped the global league table with $1.22 billion in fees during the quarter, according to Reuters data. Industry-wide, investment banking fees fell 29 percent in the period, the slowest first-quarter since 2009. Financial stocks were the worst performers in the S&P 500 index .SPX in the first three months of 2016, falling 5.6 percent compared with the overall index’s rise of 0.8 percent. JPMorgan’s stock fell 10.3 percent in the period – but the shares of its five big U.S. rivals fell by even more. The bank said its total non-interest expenses fell 7 percent to $13.84 billion, helped by lower legal costs. Like other U.S. banks, JPMorgan has resorted to aggressive cost controls to underpin earnings over the past several quarters as revenue growth remains sluggish.

GOP cosponsor of anti-trans bathroom bill is a danger to ‘unsuspecting women’, probe finds

Republican state lawmaker in Tennessee who is pushing to strip transgender people of bathroom rights has been found to be a danger to “unsuspecting women.” Last week, Tennessee House Speaker Beth Harwell exiled state Rep. Jeremy Durham from his offices at the War Memorial Building and limited his access to other areas after Attorney General Herbert Slatery issued a warning that the lawmaker’s behavior posed “a continuing risk to unsuspecting women who are employed by or interact with the legislature.” Slatery’s office is leading an investigation into multiple sexual harassment complaints against Durham. Although the investigation is not complete, Slatery said that the warning was necessary because of information learned during interviews with 34 different women. “With few exceptions, the women who related incidents felt they could not report Representative Durham’s behavior because nothing could be done and they did not want to lose their jobs or be considered ‘untrustworthy’ by employers, clients or legislators,” the letter said. According to the report, women said that they “avoid or refuse to be alone with Representative Durham, a situation which has affected their ability to perform their jobs.” Speaker Harwell said in a statement that she was moving Durham’s office “to the ground floor of the Rachel Jackson Building, and limiting his access to the Legislative Plaza, War Memorial Building, Rachel Jackson Building, and 2nd floor of the State Capitol for official legislative business only.” The Advocate reported that Durham is one of the key sponsors of House Bill 2414, which would prevent transgender people from using public bathrooms corresponding to their gender. The bill mirrors anti-LGBT bills that have been recently passed in North Carolina and Mississippi. Proponents of the bill argue that it would protect women from being harassed. And although 34 women have stepped forward to complain about Durham, there have been no reported cases of transgender people sexually harassing others in public bathrooms.

North Carolina’s bathroom law just keeps on backfiring on Pat McCrory

When Gov. Pat McCrory (R) signed into law one of this year’s most controversial and heated bathroom bills last month, we predicted that it could backfire on him. And so far, that’s exactly what seems to be happening. After taking heat from businesses, newspapers, the LGBT community and Democrats, McCrory announced Tuesday that he’s signing an executive order aimed at mitigating some provisions in the law — but not the parts that LGBT advocates and businesses have beef with. The whole thing gives the appearance that McCrory has backed down under pressure, but it’s unlikely to actually alleviate any pressure on him. In truth, from the moment the North Carolina legislature decided to convene a special section to override a Charlotte transgender-bathroom ordinance, things haven’t gone McCrory’s way. He opposed the Charlotte ordinance, which let transgender people use the bathroom of the gender they identity with. Such an ordinance would invade people’s privacy, he said. But he didn’t necessarily want the legislature to call a special session to deal with it, either. Lawmakers called one anyway, and roughly 12 hours later, McCrory signed the expansive bill, preventing any municipality from making their own protections for LGBT people, into law. From the jump, McCrory’s camp lost the messaging war. What the law does or doesn’t say got so muddled that McCrory’s team felt they needed to send out talking points to explain their understanding of it. But fact checkers called him out on some of  those”facts.”

“Pat McCrory is wrong when he says North Carolina’s new LGBT law doesn’t take away existing rights,” read a March 30 Politifact piece. Then, just weeks after McCrory signed a deal with PayPal to expand to the state — and days after saying the law wouldn’t cost the state any dollars — PayPal very publicly backed out of the deal, specifically citing the law. Now comes his executive order, which risks making no one in the state happy. Much of the order “reaffirms” that the private sector can make their own bathroom policy, which was already part of the law.


Big Business Re-Evaluates Relationship With GOP

An election cycle that’s produced Donald Trump’s hard-line immigration policies and anti-gay rights laws in Republican-led states such as North Carolina and Mississippi has put corporate America in a tight spot, questioning whether the GOP still speaks for its interests. More than 100 companies — including Northrop Grumman, Intel and Coca-Cola — have called on North Carolina and Mississippi to repeal their new laws, putting the businesses more in line with the Democratic Party on gay rights. At the same time, the nation’s biggest business lobby, the U.S. Chamber of Commerce, has spent all of its nearly $5.5 million in independent expenditures helping Republican candidates, according to Federal Election Commission data, indicating that Republican orthodoxy on taxes and regulations still takes precedence over social issues. “It’s somewhere between a minefield and a giant slalom,” said Doug Pinkham, president of the Public Affairs Council, which represents lobbying and public relations executives from some of the nation’s biggest corporations. “It’s not something you can navigate because that assumes there is a passageway.” Ex-Rep. Jim Gerlach, R-Pa., who runs the Business-Industry Political Action Committee, calls the political year “messy, it is ugly, it’s one for the books. There’s a lot of nervousness from the business community.” Though business PAC has endorsed a slate of 13 House and Senate Republicans, Gerlach said he expects the nonpartisan group will back Democrats, too.

“I’m not sure parties are in control anymore,” he said. “It’s all individual performance.” – See more at:


Billionaire announces $250 million in cancer immunotherapy funding

WASHINGTON — Cancer immunotherapy will get a hefty dose of its own moonshot Wednesday when a tech billionaire announces he’s giving $250 million to six cancer centers nationwide, including Manhattan’s Memorial Sloan Kettering and Stanford. Sean Parker, founder of the music file-sharing service Napster and the founding president of Facebook, says he is putting his money behind cancer immune therapy because it is at a turning point and would benefit from research that is done without regard for the costs. Immunotherapy, which enhances the body’s immune system to kill cancer cells, is best known these days because former president Jimmy Carter was on an immune-based drug treatment when he announced in December that there is no detectable cancer in his body. Parker’s enormous cash infusion is the largest ever for cancer immunotherapy — and one of the largest ever for cancer research — and comes three months after President Obama called for a $1 billion federal cancer research program that he dubbed a “moonshot.” The estate of the billionaire shipping magnate Daniel Ludwig donated $540 million to six cancer centers in 2014 and Nike co-founder Phil Knight pledged $500 million to cancer researchers at Oregon Health & Science University in 2013. Last month, former New York City mayor Michael Bloomberg, Jones Apparel Group founder Sidney Kimmel and other philanthropists announced a $125 million donation for cancer immunotherapy research for the Johns Hopkins University medical school. The new Parker Institute for Cancer Immunotherapy in San Francisco will fund “high risk best ideas that may not get funded by the government,” says Jeffrey Bluestone,  a prominent immunologist and former University of California, San Francisco official who now heads the institute. The institute hopes to improve upon what it calls slow progress in improving cancer survival rates. In the last 20 years, federal data show the the five-year survival rate for lung cancer is up from just over 13% to about 17%. Currently, immune therapy is only approved “as a treatment of last resort,” Parker complains, which he says means it’s only used after patients’ immune systems are destroyed by chemotherapy and radiation. “I want to make it a front-line treatment,” Parker said in an interview here last month. “It would change the whole cost of care downstream.” More:

Brock: Enough opposition research to ‘knock Trump Tower down’

David Brock, in a Monday night speech to some of the biggest liberal donors in the country, boasted that his researchers had assembled a trove of opposition research on Donald Trump that Democrats could use to “knock Trump Tower down to the sub-basement.” Speaking at a reception on the sidelines of the annual spring meeting of the Democracy Alliance liberal donor club at Santa Monica’s tony Fairmont Hotel, Brock said that Trump “was not properly vetted by his rivals — or by the press” during the Republican presidential primary. But Brock, who is a leading supporter of Democratic presidential front-runner Hillary Clinton, said that his non-profit opposition research outfit American Bridge started researching Trump last July, and has unearthed some damning stuff. “We sat on it all so as not to help the candidates who might have been stronger general election candidates,” Brock said, according to his prepared remarks, which American Bridge released to POLITICO. The group, which provides research to Democratic campaigns and party committees, is supported by some Democracy Alliance donors. And sources at the Democracy Alliance meeting said several influential donors attended his reception, including health care tech entrepreneur Paul Egerman, who is close to Elizabeth Warren, as well as Taco Bell heir Rob McKay and New York investor Donald Sussman. While Brock told the donors that American Bridge also had been building oppo files on other prospective Republican presidential nominees — including Ted Cruz and Paul Ryan — he paid special attention to the Manhattan real estate showman who is leading the GOP delegate race, warning: “Trump won’t be a cakewalk defeat” in a general election. “American Bridge is building a database of all the regular people — from unpaid vendors to harassed tenants to defrauded students at Trump University — who got screwed over for one reason only,” said Brock. “They took Trump at his word.” Brock asserted that, if Trump does win the GOP nomination “a bare-knuckles campaign is necessary” to brand him as a greedy. misogynistic racist, and “a danger to the Constitution, a menace to democracy, and a threat to the nation as a whole.”

Alabama all in for Donald Trump at convention

WASHINGTON – The two Alabama Republicans who will help write the rules at July’s GOP National Convention are party delegates pledged to support Donald Trump. State Rep. Ed Henry and Laura Payne were elected to the convention’s Rules Committee on Saturday in Montgomery. That could be important to the Trump campaign if the presidential nomination is still contested by July. In another sign of Trump’s strength in the state, Alabama Republicans also elected Sen. Jeff Sessions, a Trump adviser, to chair the state’s delegation to the convention. Based on the results of the state’s March 1 primary, Alabama Republicans are sending 36 Trump delegates to the convention in Cleveland, along with 13 delegates committed to Texas Sen. Ted Cruz, and one delegate pledged to Florida Sen. Marco Rubio, who suspended his campaign March 15. Ohio Gov. John Kasich didn’t win any delegates in Alabama but is still a candidate. If no candidate gets the 1,237 delegates required to clinch the GOP nomination, the convention in Cleveland could require multiple ballots. That explains the intense interest in how each state party governs its delegates and who is named to the convention’s Rules Committee. The committee could change the rules in ways that help or hurt individual candidates. “It’s important we have the right people on the Rules Committee in case there is a lot of funny business going on,” said Perry Hooper Jr. of Montgomery, a Trump delegate. For Cruz or Kasich supporters who may be looking to poach delegates from Trump in Alabama, the state party rules make it difficult. Like other states, delegates must vote at the convention for the candidate they originally pledged to support. If the convention vote goes to a second ballot Alabama’s delegates may switch candidates only if the original candidate specifically releases them, or if two-thirds of the original candidate’s delegates agree. So if a Trump delegate wanted to switch to Cruz on the second ballot, two-thirds of the other Trump delegates would have to give their permission, a high hurdle compared to GOP rules in other states. “The Alabama delegation is bound extremely tight,” said Alabama Republican Party Chairwoman Terry Lathan. “The interesting part is these are the rules that were in place in 2012 and the presidential year before then. There is nothing new here for us, except a microscopic lens of the nation is watching.”

Sen. Del Marsh says PREP Act might be dead for this session

Senate President Pro Tem Del Marsh said tonight his much debated bill to change teacher tenure and evaluations might not make it to the floor for a vote this session. Marsh said the Preparing and Rewarding Education Professionals, the PREP Act, can’t get past opposition from those against using student growth on standardized tests as a component in evaluating teachers. Marsh said he was not giving up on the bill and would continue talking to his colleagues. “But until I can get the total package and do what I think is right for the state of Alabama, I’m not going to pass half a bill,” Marsh said. Besides setting new guidelines on teacher evaluations, the PREP Act would change the time it takes for teachers to earn tenure from three years to five years, provide incentives for teachers to accept jobs in poor schools and high-demand subject areas, set up a teacher mentoring program and reward high-performing schools. Marsh said the bill would add accountability that he said is sorely needed, particularly in light of the state’s most recent scores on the National Assessment of Educational Progress. Alabama fourth- and eight-graders ranked last among states in math and in the bottom 20 percent in reading. “‘I would think when you look at these test scores, people would be looking for a way to improve that,” Marsh said. “But I’m sorry to say that I don’t see the support of my colleagues to address this issue at this time.” Marsh said opposition from School Superintendents of Alabama has crippled the chances for the PREP Act to pass this session. Eric Mackey, executive director of SSA, said most superintendents generally oppose using a statistical model to measure a teacher’s impact on student test scores as part of teacher evaluations. Mackey said superintendents were also philosophically opposed to the Legislature setting guidelines for teacher evaluations. As for the low NAEP scores, Mackey said the state needs to invest more in math and science education and do a better job in teacher professional development. Marsh said he hoped parents and other citizens would contact lawmakers and superintendents and express their concerns. “I hope that the citizens of this state will talk to their representatives and say we deserve more in education than what we’re getting,” Marsh said.

Ball Claims Political Suppression

MONTGOMERY—Former law enforcement officer/turned politico, State Rep. Mike Ball (R-Huntsville) testified last October that a phone call from Deputy Attorney General Matt Hart was proof of prosecutorial misconduct, in the Speaker Mike Hubbard felony case. Ball was represented during his testimony before Judge Jacob Walker III, by former Attorney General Bill Baxley. Last month on Huntsville radio, Ball claimed not only was Hart guilty of prosecutorial misconduct, but he had also tried to suppress Ball’s political activities. Ball voiced these newly found concerns only after his attorney (Baxley) became Hubbard’s lead counsel in early March. This is not the first time a Baxley client has testified to prosecutorial misconduct, to later be disgraced. Ball claimed that Hart was trying to suppress his political activities in the same way he was trying to keep Baron Coleman “from coming out.” Coleman once fierce adversary of Hubbard came to his aid by claiming Hart may have broken the law by giving him Grand Jury information illegally. This was all about a corrupt prosecutor “covering his tracks,” according to Ball. According to those in law enforcement, Ball shopped his allegations against Hart to the Alabama Law Enforcement Agency (ALEA) and two different District Attorneys. All of them turned him down. Reportedly, one DA asked Ball how, as a retired law enforcement officer, did it take him all most two years to realize that Hart had broken the law. During his radio appearance on March 28, Ball continued to accuse Hart of wrongdoing, an argument that was dealt a fatal blow a day later on March 29, when Judge Walker issued his order denying Hubbard’s motion to dismiss on prosecutorial misconduct. Judge Walker made it clear that those like Ball, who had given testimony on prosecutorial misconduct, were wrong. He also found that Hart was not leaking grand jury information to Coleman, but rather trying to rein Coleman in. Ball has dropped his public accusations against Hart, but continues to tell anyone still listening that the charges against Hubbard are trumped up, and that he will not be convicted, according to several State House republicans. On the Huntsville-based Dale Jackson show, Ball said, when Hubbard was indicted, just two weeks before the Republican primary, he had to go into damage control to protect incumbents he was supporting. Ball claims his attendance at Hubbard’s pep rally, the day after his indictment, was a political rally in support of Hubbard’s candidacy. He told Jackson, he didn’t want to “get into my complaints about Matt Hart because of the political activities.” ALEA didn’t believe Ball, neither did two district attorneys, and Judge Walker closed the door on the matter once and for all. It is not clear if Baxley still represents Ball.

More Money for Mason Via PayPal, Omits Info on Ethics Forms

MONTGOMERY —University of Alabama Systems (UA) online records show Jon Mason’s company received more payments in March. Jon Mason is the husband of Rebekah Caldwell Mason former advisor to Governor Robert Bentley. Both failed to include on their ethics forms that Jon Mason performed consulting work for the University. On his 2012 ethics filing, he does not list his wife or her state job. JRM Enterprises, Inc., is a Tuscaloosa-based, advertising, marketing and design company, established by Jon Mason in 2005, according to the listing on the Secretary of State’s site. Research revealed that JRM received another $29,000 in PayPal payments on March 22, 2016. JRM received $45,450 in payments in February as reported by This brings the total of payments made using PayPal to $74,450, for the months of February and March. UA records show the use of the online payment system for $148,837.14 for all vendors from January through March 2016. Payments to JRM represent over half of the total amount that the University spent the first quarter of this year; some 336 PayPal transactions.PayPal payments do not show up on a search for JRM Enterprises in the University’s system. Only a search on “PayPal” brings up a results list including payments to PAYPAL JRMENTERPRI. University records show they have contracted Jon Mason’s services since 2010, but all previous payments totaling $200,150 have been made by check. University officials maintain that they only paid for services for which they were invoiced. JRM received checks from UA as follows in 2010, $25,500; in 2012, $29,500; in 2013, $104,100; in 2014 $12,150; and in 2015, $28,900. Jon Mason has been employed by since October 2011, earning an annual salary of $98,583.42, after a 16 percent raise in October 2013. Previously, he was paid by the Governor’s Faith-Based Community Initiative. During 2013, Rebekah Mason formed RCM Communications and transitioned from a State employee to a consultant for Gov. Bentley. From July through November that year, she was paid $22,195 in consulting, $200 for fundraising, $112,190 for advertising, and $8,385 in administrative fees. On John Mason’s 2013 Statement of Economic Interest (SOEI) filed with the Ethics Commission, he stated that his income amount for JRM Enterprises was between $10,000 – $50,000 even though he earned $104,100 that year from the University. Also, when asked to list any professional or consulting services performed by “you or your spouse,” he lists one public official, presumably RCM’s consulting for Bentley, however he omits listing the University as a client on both his 2013 and 2014 filings. They should have been listed in the “Miscellaneous” category. More:

Senate committee approves education budget, employee raises

The education budget committee in the Alabama Senate today approved the education budget and a 4 percent pay raise for most school employees. The budget calls for spending $6.3 billion from the Education Trust Fund, a 5 percent increase over this year. It could be considered on the Senate floor as early as Wednesday. The budget and pay raise bills have already passed the House. The committee today changed the pay raise bill in a move intended to recognize the importance of school principals. The House bill provided a 4 percent raise to all K-12 employees making less than $75,000 a year, and a 2 percent raise to those making more. The committee adopted an amendment by Senate budget chairman Arthur Orr, R-Decatur, to apply the 4 percent raise to all principals and assistant principals, even if they make more than $75,000. Orr called principals the “backbones” of schools. “They are the ones on the front lines making sure that schools are running well and teachers are doing their jobs,” Orr said. Education employees have received one cost of living raise since 2007, a 2 percent raise in 2013. The Legislature increased the employees’ contributions toward their retirement a few years ago. “I think the most important part of this budget is the pay raise that it reflects for educators,” Orr said. “They haven’t had a raise for several years now and actually went backwards.”

Impeachment stalls; committee resolution still not ready

A move to impeach Gov. Robert Bentley has apparently hit a stumbling block. House Rules Chairman Mac McCutcheon said today that a resolution to set up a committee to investigate impeachment articles introduced last week is not yet ready. Only 10 days remain in the legislative session, counting today. McCutcheon said today the impeachment process is not dead or stalled and that the effort could be continued during a special session. Under Section 173 of the state Constitution, a majority of the 105 House members can call a special session to consider impeachment of the governor. Last week, McCutcheon and Rep. Ed Henry, sponsor of the impeachment articles, said establishing the committee would be the next key step and that the House would not consider the impeachment articles until they are vetted by the committee. The governor has called the impeachment effort a political attack and said there are no grounds to remove him from office. Henry and 10 other House members sponsored the resolution to impeach the governor for willful neglect of duty, corruption in office, incompetency and offenses of moral turpitude. If the House approved impeachment articles, the Senate would hold a trial to determine whether to remove the governor from office. But much would have to be decided about the process because the state Constitution gives only a broad outline and there is almost no precedent for using it. Rep. Oliver Robinson, D-Birmingham, said today that the House should defer to the Ethics Commission or attorney general’s office for any possible investigation into wrongdoing by the governor. House Minority Leader Craig Ford, D-Gadsden, said he believes the impeachment effort is dead. Ford said he believed the Legislature should proceed with “due diligence” on impeachment even if other investigations are ongoing. Several complaints have been filed with the Alabama Ethics Commission related to the governor’s relationship with former top political adviser Rebekah Caldwell Mason. The Ethics Commission does not comment on complaints or investigations. The governor apologized and asked forgiveness for what he said were inappropriate remarks to Mason after the release of audiotapes on which he is heard talking about being in love, kissing and touching. Bentley and Mason deny they had a sexual affair. Mason resigned. Former Alabama Law Enforcement Secretary Spencer Collier, who was fired by Bentley, said he confronted Bentley about the relationship with Mason in 2014. Collier also accused the governor of asking him to lie to the attorney general’s office about an investigation. The governor said he has never told an employee or cabinet member to lie. Bentley said he fired Collier after an internal investigation found a possibility of misspent public funds at the Alabama Law Enforcement Agency. Collier said he has done nothing wrong and would welcome an investigation.


Gov. Robert Bentley speaks like the queen, but ‘we’ are not amused

Gov. Robert Bentley keeps talking about “we.” The royal we, the majestic plural. Everywhere you turn it’s “we” this and “we” that. “We are going to work through all the difficulties we’re going through.” “We have addressed those issues.” “We’ve had a good administration.” “We will deal with Montgomery…” “We are moving on… “I have no plans to step down. We have done nothing illegal.” I’ve got a few of them for you, governor. We are not amused. We are screwed. And we ought to be ashamed. But that’s not true. It is really the governor who should be ashamed. And not just for lusting after a staff member who could be his daughter. Not for embarrassing his family and his state. Talking like Queen Victoria is just another way to drag the rest of Alabama into his own ineptitude, to deflect attention from his failings and spread the blame. If Gov. Bentley truly thought of Alabama as a “we,” he would remember what he claimed to stand for before he fell into this ring of fire. That he cannot do that now shows how wounded he has become, and how “we” suffer for it. Bentley, before his romantic side became public and his public side became an even bigger train wreck, said the Legislature had to adequately fund Medicaid for the good of the state. He said he would call the Legislature into special session if it overrode his veto of the budget, which cut  Medicaid by $85 million and spat a giant raspberry at the quarter of Alabama’s population that depends on the service to be as healthy and productive as possible. But the Legislature overrode his veto and he sat looking like an impotent old fool. He cannot call a special session because doing so would not only poke lawmakers in the eye, but do it at the same time it provides them another opportunity to get serious about this impeachment thing. So in the end he can talk of “we” all he wants. But he is really only worried about “he.” If “he” were really in it for the “we,” he would think of diabetics who, without Medicaid, will see the cost of drugs soar more than 2,000 percent. In a state with one of the highest rates of diabetes, people who suffer already will have to choose between their own health and paying up to $8,000 out of pocket for medicine. They could just die, I guess. And decrease the surplus population. Kids and old people are who we are talking about here. People with disabilities. A quarter of all Alabamians who, when the going gets real, apparently don’t count in his majesty’s “we.” Hospitals in rural areas may lose doctors, and services, and – as has become standard in this administration – people in Alabama’s least populated and most threatened areas will suffer the brunt of the damage. Out of sight. Out of our minds. But old people and young people and rural people and poor people are not the only “we” who will suffer. Outpatient dialysis is on the chopping block, and those “we’s” will clog the ERs. Eye care programs are on the block, and providers of prosthetics, and care for the elderly, and pay for physicians, and on and on and on. “We” in Alabama face the prospect of losing the federal funding that helps prop up the health care system, and the hospitals and doctors who had for so long served Medicaid patients could lose money or their livelihoods. And then ‘we” – all of us – will lose. Because the governor has lost himself. And his ability to govern.

Medicaid cuts are already having a real impact on Alabamians

By Vernon L. Johnson, CEO of Dale Medical Center

The legislature was warned. It was warned that under-funding Medicaid would result in the loss of both access to care and jobs. The first casualty of the General Fund budget has already occurred, and it took less than a week. Dale County is an under-served community with only one pediatrician who also shares time as an urgent care physician. As a result, Dale Medical Center worked with Dothan Pediatrics to open a satellite office in Ozark so the area could have access to full time pediatric coverage. Plans were set in motion; Dothan Pediatrics opened Ozark Pediatrics in a temporary office in the hospital surgery center, bought land for a new, permanent office, and was ready to break ground next week. They committed to investing and providing care in a rural area in which the recruitment of primary care physicians is difficult. Their commitment would bring construction jobs, health care jobs, and most importantly better access to care for children. But then the legislature overrode the veto of the General Fund, and Medicaid outlined the potential cuts needed as a result of this budget, including significant cuts to primary care doctors. Dothan Pediatrics estimated that the cuts could mean $2 million less each year in revenue. Facing that daunting figure, the practice came to the difficult realization that it could no longer move forward with the construction of a new office. Even worse, if there is no change in the budget, Dothan Pediatrics physicians are concerned they will not be able to maintain any presence in Ozark or possibly other satellite offices across the Wiregrass area. This means the majority of people in Dale County, the privately insured and those on Medicaid, will now have to drive to Dothan for basic, routine, preventative care like check-ups and immunizations. Access to care in Dale County will be in jeopardy, a trend that is likely to continue across the state. This is just the first of many examples to come of how this budget hurts health care and jobs. We warned the legislature, but I guess they didn’t hear us. Now the legislature just has to remember, if you are going to take credit for the budget you passed, you also have to be willing to take responsibility for what comes as a result.

Why does Alabama allow a monopoly on casket sales?

By Jeff Rowes and Renée Flaherty, attorneys with the nonprofit Institute for Justice, which represents Shelia Champion

Huntsville is famous for high-tech companies that make rockets fly faster and farther. But one revolutionary entrepreneur is going low-tech. Shelia Champion has opened a “green” cemetery called The Good Earth in Hazel Green, Alabama, where people will be laid to rest in a wild, untended forest. Remains may not be embalmed, and they will be buried in biodegradable caskets or shrouds. Unfortunately Alabama law has turned Shelia into a criminal. As part of her business, she wants to sell inexpensive caskets and shrouds that her cemetery will accept. But Alabama permits only state-licensed funeral directors to sell funeral merchandise. If Shelia were to sell one of her caskets—made of either cardboard or untreated wood—she would face up to a year in jail. Yes, Shelia could go to jail for selling a cardboard box. Her desire to sell simple caskets has put this unassuming grandmother at the center of one of the most important unsettled constitutional questions in the country: Can the government pass laws just to make industry insiders rich? This law has nothing to do with protecting the public. A casket is just a box and a shroud is just a piece of fabric. Outside of Alabama, there is a thriving retail market for caskets, and even big box stores like Costco sell them. Alabama funeral directors have done here what special interests too often do: Get laws passed that restrict competition and drive up prices for consumers. Funerals are big business. The average funeral now costs $8,000-$10,000. Rocket scientists might be amused to learn that a Texas company will send ashes into orbit for less than what it would cost to bury them on earth. And the casket is usually the biggest expense, which makes Shelia’s innovation such a threat. The funeral industry has a long history of conspiring against consumers using its government-granted monopoly. Traditionally, funeral homes would not itemize prices, would not disclose prices, would charge for goods and services without consent, and would force consumers to buy everything in a bundled package. Thirty years ago, the Federal Trade Commission put a small dent in the monopoly by forcing funeral homes to allow families to use caskets that they acquire from someone else. But the FTC unwisely left it open to states to determine who gets to sell caskets. And so, to make sure that a funeral-home cash register rings every time someone dies, Alabama lets only Alabama funeral directors sell them. Economists estimate that laws like this drive up the cost of funerals by hundreds of dollars, which, of course, is exactly the point. More:

Morning Money

CAN WALL STREET LEARN TO LOVE CRUZ? — POLITICO’s Ben White: “This Monday, assorted bankers, traders and Wall Street lawyers will gather inside the neo-Georgian walls of the Harvard Club in midtown Manhattan to write big checks to an unlikely recipient: Ted Cruz. … Cruz, who attended Harvard Law School, isn’t one to trade too heavily on old school ties and friendships at the likes of Goldman Sachs, where his wife works.

“On the campaign trail, the Texas senator has railed against Wall Street ‘crony capitalism,’ ripped giant banks as ‘too big to fail’ and wrapped himself in populist garb in his quest to take down Donald Trump. But now he’s desperate: Cruz, who has already received $12 million in support from the financial industry, needs Wall Street money more than ever. … Cruz ended February with $8 million in the bank. His campaign says he pulled in $12 million — only a modest haul, for this stage of the campaign — in March, but that money will evaporate quickly during the final sprint.

NOT SOLD ON TED — “Wall Street wants a consensus builder, a negotiator, a meet-in-the-middle builder,’ said Anthony Scaramucci, a hedge fund manager who, like many Republicans on Wall Street, backed candidates now out of the race. … ‘The problem Ted has is, if you are blasting the business community and Wall Street alone for the financial crisis, that is completely unfair because it was a combination of forces that caused it, ” Scaramucci said.

Then there are the many on Wall Street who simply don’t like Cruz as a person. Most won’t say that on the record. But some will. Ken Langone, co-founder of Home Depot and now a Wall Street investor who backs Ohio Governor John Kasich for president, said he could never see himself getting behind Cruz.

“‘I couldn’t do it because I just don’t like the guy,’ Langone said, echoing sentiments uttered privately by executives all over the financial industry. ‘I don’t like the way he presents himself and I don’t like the way he isolates himself. One of the problems in Washington is you have to get things done and I don’t think he’s proven that he can work in that environment. I don’t like the man. I’m not a fan.’”

LIVING WILL FIASCO — Per a former Obama administration senior official: “If the goal of the living wills section of Dodd Frank was to instill confidence in the US financial system, you’d have to give the regulators pretty poor marks for execution. Last year, they failed the banks but gave them precious little instruction on how to pass in the future.

“This year, the regulators leak the test results to the WSJ [more on which below] on the day before banks begin to report earnings and are now scrambling to get the official results out before the JPM earnings call in the morning. Banks are being given their results over night in a rushed fashion, and it looks to be another confusing mish-mash of guidance on how they fared. The FDIC and the Fed couldn’t agree on how to grade the tests so banks, who’ve spent an enormous amount of time and money trying to figure out what the regulators want, won’t get much clarity. … Probably not what Dodd and Frank had in mind but a continuing stream of work for all the ex-regulators toiling away at Promontory, Oliver Wyman and PWC. … On and by the way, the resolution plans were filed last July, and the banks are just getting feedback now. They actually delayed this year’s stress tests so they could expedite the process.”

EVEN MORE ON MET LIFE! — The backlash to the backlash from a financial industry source (no, not the same one from earlier in the week): “It is remarkable that the imperative here is to appeal ‘made up statutory requirements, like cost-benefit analysis.’ So, the goal here is to continue to consider only the benefits and not the costs of government regulation; this former agency official probably still wonders why the Washington elite is hated by the American people, and Trump dominates our politics.”

WH ON FSOC BILL — Per a Statement of Administration Policy on Tuesday night: “The Administration strongly opposes House passage of H.R. 3340, the Financial Stability Oversight Council Reform Act, which seeks to subject [FSOC] and [OFR] to Congressional appropriations. The bill also would require the OFR to submit quarterly reports to the Congress regarding its activities and to provide a public notice and comment period of at least 90 days before issuing any report, rule, or regulation. Subjecting these bodies to Congressional appropriations would hinder their independence and could limit their ability to monitor and address threats to financial stability.”

TRUMP’S ENDGAME? — It’s an oft repeated line on Wall Street that Donald Trump does not want to be president and never expected his campaign to get this far. Now GQ has put that theory in print, via POLITICO’s “2016 Blast” newsletter: “Now here’s an obvious theory: Getting [blanked] at the convention is precisely what Trump wants. You don’t need to be some insane truther to believe that Trump’s entire campaign was a publicity stunt that has spiraled out of control.”

SANDERS HITS GOLDMAN … IN NJ — A Bernie Sanders ad running on NYC-area TV citing Goldman Sachs as a Wall Street boogeyman wrecking the economy for some reason identifies the bank with its Jersey City building rather than its actual NYC headquarters.

FIRST LOOK: HOLTZ-EAKIN ON METLIFE — American Action Forum’s Douglas Holtz-Eakin has a new video up today breaking down the MetLife ruling.

SO RYAN IS REALLY NOT RUNNING — A few comments from House Speaker Paul Ryan at his “really, no I’m serious, I mean it, I am NOT gonna be the nominee” news conference: “I would encourage [them] to put in place a rule that says you can only nominate someone who actually ran for the job. … Let me be clear. I do not want, nor will I accept, the Republican nomination.”

IMF WORRIED ABOUT GROWTH — FT’s Shawn Donnan: “The ‘increasingly disappointing’ world economy is facing the threat of a ‘synchronised slowdown’ and mounting risks including another bout of financial market turmoil and a political backlash against globalisation, the International Monetary Fund has warned. … In its semi-annual World Economic Outlook, the IMF on Tuesday reduced its global growth forecast for 2016 by 0.2 percentage points to 3.2 per cent, downgrading its expectations for a wide range of advanced and emerging economies.”

EMAIL DU JOUR — “Paul Ryan IS running, for the 2020 election. His election cycle is just beginning a bit early.

DRIVING THE DAY — JPMorganChase kicks off bank earnings before the bell … Treasury Secretary Jack Lew will conduct a bilateral meeting with People’s Bank of China Governor Zhou Xiaochuan … In the evening, Secretary Lew will conduct a bilateral meeting with French Finance Minister Michel Sapin … In the afternoon, Deputy Secretary Raskin will deliver welcome remarks at the Committee for Economic Development’s Spring Conference. … Retail Sales at 8:30 expected to rise 0.1 percent and 0.4 percent ex-autos … Producer Prices at 8:30 a.m. expected to rise 0.6 percent headline and 0.2 percent core

DIMON ON YAHOO — Per release: “Tune in live on Wednesday (4/13) at 3:00pm ET as Yahoo Finance Editor in Chief Andy Serwer sits down for an exclusive interview with JPMorgan Chase CEO Jamie Dimon to discuss the state of the banking sector following the company’s Q1 earnings report:

SENATE LOOKS TO AID END USERS — POLITICO’s Patrick Temple-West: “Pension funds, farmers and other downstream users of derivatives would get a “bona fide” exemption from certain hedging rules imposed by the CFTC under Senate Republican legislation released today. On Thursday, the Senate Agriculture Committee will consider advancing the legislation, which would reauthorize the CFTC. … Reauthorization is technically part of how Congress funds the CFTC, but the agency can keep operating without it.

“In practice, reauthorization gives the agriculture committees a vehicle to try to impose changes on the agency. The most recent CFTC reauthorization was approved in 2008 and expired in September 2013. The House passed a reauthorization bill last year. Committee Chairman Pat Roberts’ bill would include the hedging exemption after the CFTC proposed a rule last year that would impose position limits on certain energy products like gasoline futures”

REGS TO REJECT LIVING WILLS — WSJ’s Ryan Tracy: “Regulators are set to reject the so-called living wills of at least half of the U.S.’s systemically important banks, including J.P. Morgan Chase & Co., sending them scrambling to revise plans for a potential bankruptcy … The move, which could come as soon as this week, would raise the prospect of higher capital requirements or other regulatory sanctions for some of the institutions, and underscore fears that the firms remain ‘too big to fail’ without a taxpayer bailout. … At least half of the eight American banks labeled ‘systemically important’ by global regulators are expected to receive a harsh verdict on their ‘living wills’ that they were required to submit under rules crafted since the financial crisis aimed at preventing another bank bailout”

“The long-awaited assessment by the [Fed and FDIC] isn’t yet final and could change, but regulators are putting the finishing touches on their feedback to the firms and will make their views public soon … The Fed’s governing board was set to hold a closed meeting Tuesday afternoon to discuss the matter … Banks have generally said their plans are adequate, and that, to the extent regulators find fault, they expected them to be technical matters that can be fixed without big corporate changes”

DEUTSCHE DITCHES NORTH CAROLINA — NYT’s Peter Eavis: “Deutsche Bank, the German financial giant that has a significant business in the United States, said on Tuesday that it would freeze its plans to add jobs in North Carolina, a response to the passage last month of a state law that, among other things, eliminates antidiscrimination protections based on sexual orientation. … Deutsche Bank had planned to create 250 positions at its technology development center in Cary, N.C., a municipality near Raleigh, that currently employees 900 people.

“In explaining why those plans had been delayed, John Cryan, co-chief executive of Deutsche Bank, took aim at the new law, which also bars transgender people from using bathrooms that do not match their gender at birth. ‘We’re proud of our operations and employees in Cary and regret that as a result of this legislation we are unwilling to include North Carolina in our U.S. expansion plans for now,’ Mr. Cryan … ‘We very much hope that we can revisit our plans to grow this location in the near future.’”

CRUZ SEES CONTESTED CONVENTION — POLITICO’s Nick Gass: “The odds of a contested convention in Cleveland are ‘very high,’ Ted Cruz said Tuesday, in the latest indication that the Texas senator’s campaign is taking seriously its chances of capturing the nomination in a potentially multi-ballot vote.

“During a radio interview at the home of noted Cruz supporter Glenn Beck, the senator explained why he thought he could prevail in a contested environment where supporters of Donald Trump have pledged not to vote for him and Trump’s own supporters have pledged to never vote for Cruz. ‘I think it’s very simple. The odds are now very high that we go to a contested convention. Donald, it is almost impossible for Donald to get to 1,237 delegates,’ Cruz said.”

TREASURY TAX RULES HAVE BIG IMPACT — WSJ’s Richard Rubin: “The Treasury Department’s new corporate rules will reach far beyond the few companies that moved their legal addresses to low-tax countries, forcing many firms based in the U.S. to change their internal financing strategies and tax planning. Corporate tax lawyers, who have spent the past week trying to understand one of the Obama administration’s most far-reaching tax regulations, say the rules cast aside decades of precedents and force corporations to alter routine cash-management techniques.

“The rules would also end a strategy used by companies such as Illinois Tool Works Inc. to repatriate foreign profits without paying U.S. taxes. Tax lawyers were surprised at how many transactions may be affected by the rules, which address the line between internal company debt and equity.”

OIL MAY RISE AGAIN — FT David Sheppard, Anjli Raval and Gregory Meyer in Lausanne: “The heads of the world’s largest oil trading houses sought to draw a line under nearly two years of falling prices on Tuesday as Brent crude rose to its highest level so far in 2016. Vitol, Trafigura, Mercuria, Gunvor, Glencore and Castleton, which sell enough oil to meet almost a fifth of global demand — were all but unanimous in telling a Financial Times conference in Lausanne that oil prices were unlikely to revisit the sub-$30 lows they hit in early January …

“Brent crude oil, the international benchmark, climbed by nearly 4 per cent to hit a four-month high of almost $45 a barrel on Tuesday amid mounting expectation of a deal to freeze production at this weekend’s Opec summit in Doha. Igor Sechin, head of the Kremlin-backed oil company Rosneft, echoed the traders’ view, and argued that a price of at least $50 a barrel was needed to avert future supply shortages.”

HEDGE FUNDS TARGET STATE LAWMAKERS — IBT’s David Sirota and Clark Mindock report that “huge hedge fund campaign donations have flooded into the key states that are considering closing the hedge fund tax loophole”

POTUS Events

10:00 am || Receives the Presidential Daily Briefing
12:30 pm || Lunch with Biden
2:15 pm || Views student science fair projects State Floor
2:50 pm || Delivers remarks at the White House Science Fair East Room
3:50 pm || Meets wtih his National Security Council about ISIS and Syria; CIA, Langley, Virginia
5:30 pm || Delivers a statement; CIA

All times Eastern
Live stream of White House briefing at 12:45 pm

Floor Action

The House returns at 10 a.m. First and last votes between 2 p.m. and 3 p.m. The Senate is back at 9:30 a.m.

AROUND THE HILL. At 10 a.m., Speaker Ryan and GOP leaders will hold a presser while House Minority Leader Nancy Pelosi and other Democratic leaders hold a media availability on the looming budget deadline. At 10:15 a.m., Sen. Angus King meets with SCOTUS nominee Merrick Garland. At 1 p.m., Sens. Barbara Mikulski, Ben Cardin, Mark Warner and Tim Kaine talk metro oversight. At 3 p.m., in Emancipation Hall, House and Senate leaders hold the Gold Medal Ceremony honoring the 65th Infantry Regiment, the Borinqueneers. And at 3:30 p.m., Sen. Patty Murray picks up where King left off, meeting with Garland.


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Krebs Daily Briefing 11 April 2016

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


Revelation on Brussels Attackers Fuels Fears of New Assaults

BRUSSELS — The announcement on Sunday that the plotters of last month’s Brussels terror attacks had originally intended to hit Paris again only heightened the concern among police and intelligence agencies that shadowy Islamic State networks could unleash new attacks at any time, not only in France and Belgium but in other European capitals. As intelligence experts and officials took stock of what they have learned since the Nov. 13 assaults in and around Paris, which killed 130 people, several things have come into focus. The scale of the Islamic State’s operations in Europe are still not known, but they appear to be larger and more layered than investigators at first realized; if the Paris and Brussels attacks are any model, the plotters will rely on local criminal networks in addition to committed extremists. Even as the United States, its allies and Russia have killed leaders of the Islamic State, and have rolled back some of the extremist organization’s gains on the battlefields of Iraq and Syria, the Islamic State appears to be posing a largely hidden and lethal threat across much of Europe. When Belgian prosecutors announced that Mohamed Abrini, one of the men arrested on Friday, had confessed to being the mysterious third man in the Brussels Airport bombing, it seemed to mark a rare victory for Belgian law enforcement, which has struggled to track down extremists. But it also was a reminder of the ease with which the Islamic State’s operatives move across borders and the shifting roles that suspects play: According to prosecutors, Mr. Abrini was a logistician in the Paris attacks but was meant to be a bomber in the Brussels attack — except that his bomb failed to explode. More:

U.S. Navy officer charged with spying, possibly for China, Taiwan

A U.S. Navy officer with access to sensitive U.S. intelligence faces espionage charges over accusations he passed state secrets, possibly to China and Taiwan, a U.S. official told Reuters on Sunday. The official, speaking on condition of anonymity, identified the suspect as Lieutenant Commander Edward Lin, who was born in Taiwan and later became a naturalized U.S. citizen, according a Navy profile article written about him in 2008. A redacted Navy charge sheet said the suspect was assigned to the headquarters for the Navy’s Patrol and Reconnaissance Group, which oversees intelligence collection activities. The charge sheet redacted out the name of the suspect and the Navy declined to provide details on his identity. It accused him twice of communicating secret information and three times of attempting to do so to a representative of a foreign government “with intent or reason to believe it would be used to the advantage of a foreign nation.” The document did not identify what foreign country or countries were involved. The U.S. official said both China and Taiwan were possible but stressed the investigation was still going on. The suspect was also accused of engaging in prostitution and adultery. He has been held in pre-trial confinement for the past eight months or so, the official added. USNI News, which first reported Lin’s identity, said he spoke fluent Mandarin and managed the collection of electronic signals from the EP3-E Aries II signals intelligence aircraft. The U.S. Navy profiled Lin in a 2008 article that focused on his naturalization to the United States, saying his family left Taiwan when he was 14 and stayed in different countries before coming to America. “I always dreamt about coming to America, the ‘promised land’,” he said. “I grew up believing that all the roads in America lead to Disneyland.” The Navy’s article can be seen here: Chinese Foreign Ministry spokesman Lu Kang said he was not aware of the details of the case. He did not elaborate. China’s Defence Ministry did not immediately respond to a request for comment. Taiwan’s Defense Ministry said it had no information on the case. Taiwan’s Foreign Ministry declined to comment.

Hit by Panama row, UK’s Cameron announces new tax evasion law

British Prime Minister David Cameron will try to repair trust in his leadership on Monday by speeding legislation to make companies criminally liable for employees who aid tax evasion. After a week of questions over his personal wealth and his late father’s connection to an offshore fund, Cameron has moved to defuse criticism over his handing of the fallout from the Panama Papers by publishing his own tax records. Seeking to boost his anti-corruption credentials, he will tell parliament on Monday that he will introduce legislation this year making it a criminal offence for companies if they fail to stop employees from instructing clients on ways of evading tax. But with opposition lawmakers saying Cameron had not done enough to silence concerns about his wealth and members of his Conservative Party critical over his role in leading the campaign to stay in the European Union at a June referendum, the move is unlikely to calm the storm over the Panama Papers. “This government has done more than any other to take action against corruption in all its forms, but we will go further,” Cameron will tell parliament, according to advance excerpts of his statement circulated by his Downing Street office. “That is why we will legislate this year to hold companies who fail to stop their employees facilitating tax evasion criminally liable.” The plan was announced by finance minister George Osborne in March 2015, but previously the commitment was to introduce the legislation by 2020, Downing Street said. Accountants said the move could force companies to be punished for “rogue employees” and may increase the risk burden on firms doing business in Britain, which has already seen lower levels of investment because of uncertainty over whether the country will stay in the European Union at the June 23 vote.  “First let’s not have knee jerk reactions to Panama Leaks and the UK PM’s personal issues,” said Chas Roy-Chowdhury, head of tax at ACCA, a global accounting body based in London. “We need to be proportionate and realistic in any new legislation being introduced,” he told Reuters. More:

Billing by Millionths of Pennies, Cloud Computing’s Giants Take In Billions

SAN FRANCISCO — Imagine building an enormous beach resort, maybe the best in the world. Instead of renting the rooms, you charge guests based on the grains of sand they touch. You charge very little per grain, but if they lie on enough of them, it adds up. That is one way to think about what is going on at the world’s biggest cloud-computing companies. Instead of grains of sand, think about computing cycles, the activity that goes on in a computer server that is running software. For a price, think about one line of software code for two one-millionths of a penny. When tolls that tiny are paid often enough, they can make a billion-dollar business. At Amazon Web Services, which pioneered this method late last year, there is no charge for the first million times a customer runs code. Thereafter, A.W.S. charges by the million times, or for the hundreds of milliseconds the computer is used. “The scale at which we operate allows us to do innovative things,” said Matt Wood, general manager of product strategy at A.W.S. “When we get better economies of scale, we’ll use that to our advantage.” This economics of tiny things demonstrates the global power of the few companies, including Microsoft and Google, that can make fortunes counting this small and often. In other words, you have to be really big to worry about making money off things that are really tiny. Google charges pennies for search ads and spends $9.9 billion annually building out a global computing business. Given enough software, in the realm of millionths of pennies, it could do even better. Good luck to any new entrant without the scale of these tech giants, however, as customers come to expect that sort of cheap metering. Cloud-computing companies are not the only ones focused on the small. Banks, of course, have for years been content taking a sliver of big transactions, so long as there are many of them. Uber, which enables private cars to temporarily become taxis, can monitor drivers and riders to adjust prices and routes, changing the value of things throughout the day. An auto insurance company called Metromile charges customers based on how many miles they drive a year. More


CIA director: No waterboarding, even if commanded by future president

Amid ongoing campaign rhetoric, CIA Director John Brennan said the agency will not use “enhanced interrogation” practices such as waterboarding. “I will not agree to carry out some of these tactics and techniques I’ve heard bandied about, because this institution needs to endure,” Brennan told NBC News in an exclusive interview scheduled to air Monday night. “I would not agree to having any CIA officer carrying out waterboarding again,” he said. GOP front-runner Donald Trump gained attention after the Brussels terror attacks by saying under his presidency, he would permit the waterboarding of terror suspects and “a lot more.” “Waterboarding would be fine,” Trump said in a March interview with Retuers. “If they can expand the laws, I would do a lot more than waterboarding.” Presidential hopeful Ted Cruz said in a February GOP debate he doesn’t consider waterboarding torture, but he also said he wouldn’t “bring it back in any sort of widespread use.” During President Obama’s first few days in office, he banned the technique with an executive order, calling it torture.


Getting a Student Loan With Collateral From a Future Job

At Purdue University, some undergraduates will have a new option to help finance their  degrees: pledging to pay a percentage of their future incomes in return for funds today. Starting this fall, juniors and seniors will have access to the school’s Back a Boiler program, an alternative financing arrangement known as an income-share agreement. Such programs are not loans. Instead, students get funds to cover current education expenses, and, in return, they agree to pay a percentage of their future income over an agreed-upon period of time. When that repayment term ends, so does the student’s obligation, even if their total payments are less than the amount they received. Though an emerging corner of the educational finance industry, such programs help ease the often crushing debt many American college students face after graduation, proponents say. A small number of lenders have tested the model in recent years, but Purdue is the first American university to officially embrace the concept. “It looked to us like it was interesting enough that somebody ought to try it,” said Mitch Daniels, the university president and a former governor of Indiana. “For some students, this may be a very preferable option to some of the private loans that are out there.” Purdue, in West Lafayette, Ind., has 30,000 undergraduate students. Indiana residents pay annual tuition fees of $10,000, while students from other states pay nearly $30,000. Its average graduate with debt emerges owing $28,000. The income-sharing program will offer terms based on students’ majors and the projected salaries in those fields. A comparison tool on Purdue’s website lets students estimate how their own offers might look. More:

Small, Piecemeal Mergers in Health Care Fly Under Regulators’ Radars

Federal officials are expected to argue in court starting Monday that a large hospital merger in the Chicago area could hurt consumers and should be stopped. It would be the latest in a series of efforts by regulators to push back against a wave of consolidation among major health care providers. But a frenzy of smaller transactions is also profoundly changing the landscape, many of which face little regulatory resistance. The deals are often for a couple of doctors here, or a hospital there, making them too small to attract much attention. But as those deals add up, they are creating groups that in some cases dominate local or regional markets. And they are raising questions about whether the gaze of antitrust officials is directed in the right place. “There’s a lot of consolidation going on at a lot of levels,” said Leemore S. Dafny, a former federal official who is a health economist at Northwestern University. She added, “I don’t think the antitrust laws are set up to stop it.” Doctors and hospitals are making the calculation that bigger is definitely better. Consolidation, they say, helps them better coordinate care and manage patients, making care more effective and less expensive. Skeptics, however, say that the small combinations can eventually translate into higher costs. By gaining market share, they say, hospitals are able to charge more for their care and gain more influence about where patients are sent for lucrative services. Regulators, meanwhile, are left with limited information about the smaller deals, including answers about whether they diminish competition, leading to higher prices and lower-quality care. Dr. Farzad Mostashari, a former health official in the Obama administration, describes what is taking place as “creeping consolidation” — being done at a pace that keeps it away from prying eyes. “If you move slowly enough, maybe nobody will notice,” he said. Many of the smaller deals go unreported, leaving any tally of them incomplete. But at least 940 health care service transactions took place last year, up from about 480 in 2010, according to Irving Levin Associates, a research firm. This mix of deals, which involved groups like physician practices, hospitals and nursing homes, totaled some $175 billion. Because of the consolidation, patients are more likely to be getting care from providers with formal ties to one another. The doctor who is employed by a hospital, for example, may send a patient for a CT scan at a facility owned by the same hospital. Patients may be discouraged from going to a provider outside a given network, either by their insurer or their doctor. More:

U.S. banks’ dismal first quarter may spell trouble for 2016

It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks. Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week. Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth. Analysts forecast a 20 percent decline on average in earnings from the six biggest U.S. banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs Group Inc (GS.N), are expected to report the worst results in over ten years. This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year. “What’s concerning people is they’re saying, ‘Is this going to spill over into other quarters?'” Goldman’s lead banking analyst Richard Ramsden said in an interview. “If you do have a significant decline in revenues, there is a limit to how much you can cut costs to keep things in equilibrium.” Investors will get some insight on Wednesday, when earnings season kicks off with JPMorgan Chase & Co (JPM.N), the country’s largest bank. That will be followed by Bank of America Corp (BAC.N) and Wells Fargo & Co (WFC.N) on Thursday, Citigroup Inc (C.N) on Friday, and Morgan Stanley (MS.N) and Goldman Sachs Group Inc (GS.N) on Monday and Tuesday, respectively, in the following week. Banks have been struggling to generate more revenue for years, while adapting to a panoply of new regulations that have raised the cost of doing business substantially. The biggest challenge has been fixed-income trading, where heavy capital requirements, new derivatives rules, and restrictions on proprietary trading have made it less profitable, leading most banks to simply shrink the business. Bank executives have already warned investors to expect major declines across other areas as well. Citigroup Inc (C.N) CFO John Gerspach said to expect trading revenue more broadly to drop 15 percent versus the first quarter of last year. JPMorgan Chase & Co’s (JPM.N) Daniel Pinto said to expect a 25 percent decline in investment banking. Several bank executives have warned about declining quality of energy sector loans. Global investment banking fees for completed merger and acquisitions, and stock and bond underwriting, totaled $15.6 billion in the first quarter, a 28 percent decline for the year-ago period, according to Thomson Reuters data. Volatility in stock prices and plunging commodities prices caused trading volume to dry up during most of the quarter. Trading activity picked up slightly in March but was not strong enough to offset declines during the first two months of the year. Analysts have been lowering first-quarter estimates over the last month in light of business pressures. They now expect JPMorgan to report adjusted earnings of $1.30 per share, Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Morgan Stanley to report 63 cents per share. Goldman is expected to report $3.00 per share, the lowest first-quarter earnings since before the financial crisis. Matt Burnell, a Wells Fargo banking analyst, said in a research note Friday that capital markets weakness may extend at least into the second quarter. Analysts said there may be some loan growth outside of the energy sector, and a small uptick in net interest margins, a measure of loan profitability, but overall, the tone was less-than-optimistic. “The first quarter is going to be ugly and we don’t think that necessarily gets recovered in the back half of the year,” said Jerry Braakman, chief investment officer of First American Trust, which owns shares of Citigroup, JPMorgan, Wells Fargo and Goldman. “There are a lot of challenges ahead.”

Unhealthy Citizens, Unhealthy Democracy

The United States has two distinct health systems for the poor: generally, one for blue states and one for red states. One system provides health insurance to the disadvantaged through Medicaid expansion. Over 30 states have elected to expand Medicaid through the Affordable Care Act or opted for a modified version. Democrats in statehouses across the country have led this push, although Kentucky and Ohio are important exceptions.  Unfortunately, individuals in 19 states are being denied access to healthcare. Consequently, the same person could be eligible for insurance in Arkansas, but over the border in Texas, she is uninsured and living in the “Coverage Gap.” This Coverage Gap largely falls along party lines. How did we get here and why does it matter? In National Federation of Independent Business v. Sebelius (2012) the Supreme Court decided that states should not be mandated to expand their Medicaid eligibility thresholds as outlined by the Affordable Care Act (ACA). The Supreme Court’s decision to decouple Medicaid expansion—which guaranteed healthcare to individuals living below 135% of the Federal Poverty Line—from the remainder of the healthcare law devolved the decision to expand Medicaid to the states, leaving healthcare access for millions of Americans to the discretion of Governors and state legislatures. Many states decided not to expand Medicaid, most of them led by Republicans in the South. Consequently, the law became even more complicated and its impact, unevenly distributed. When we deny health insurance to the poor, we create several troubling outcomes. Poor people suffer tremendous health disparities. In the Deep South, these disparities are particularly acute along racial and ethnic lines. African Americans, for example, experience disproportionately worse health outcomes than other races. People without health insurance face significant barriers to accessing care, a problem exacerbated in rural areas with fewer treatment facilities. For example, one in four expectant mothers in rural Alabama receive inadequate prenatal care, contributing to Alabama’s high infant mortality rate. In fact, the average infant mortality rates in Alabama, Mississippi, and Louisiana are so high that they rival that of Botswana. Denying health insurance to the poor also diminishes a sense of citizenship among the uninsured, stifling their willingness to engage in political participation. My doctoral research investigates the voting behavior of 332,000 Alabamians living in the Coverage Gap. I discovered that less than one-third of these citizens were registered to vote, symptomatic of the difficulties poor people face in registering to vote in Alabama. After conducting a randomized Get-Out-The-Vote field experiment, our intervention found that political mobilization among this population to be a tough sell. The uninsured Alabamians I interviewed were neither ignorant nor apathetic. They were disconnected. The parameters of extant public policy were drawn to exclude them from receiving public benefits. Indeed, although they conceived of themselves as “outsiders” in electoral politics, they were committed spectators to the policies that those politics generated. Their state—my state—had legislated their social exclusion. Policy designs have profound effects on subsequent democratic participation, particularly among the poor who live with limited healthcare access. The consistent disengagement of poor, uninsured citizens likely contributes to America’s low voter turnout. We can and should do better to improve the health of America’s people as well as its democracy. * Josh Carpenter is a DPhil candidate in Politics at Oxford University where he studies on a Rhodes Scholarship. He was the Co-founder and President of Bama Covered, a student-led, grassroots non-profit that informed Alabamians about the Affordable Care Act in 2014.

Why America Loves Being the World’s No. 1 Tax Haven

Much ink has been spilled in recent days about the Panama Papers and the perfidy of foreign leaders from Vladimir Putin to the (now-resigned) prime minister of Iceland. But almost nothing has been written about how we have arrived in this surreal place where the United States, which once was the first mover for greater transparency in financial transactions, has now become the biggest obstacle to making that happen. Because it is not Panama or the British Virgin Islands or Switzerland that is now the best place in the world to hide assets. It is the United States. And it’s not so much that the United States has all of a sudden become a good place to hide assets—it’s been that way all along. What’s changed is that other traditionally secretive jurisdictions like Panama have become more transparent, and what rankles many of the leaders in these once-secretive countries is that they opened up under enormous pressure from, guess who, the United States. Now the United States itself won’t play ball, thanks to obstructionist tactics by U.S. banks and their lobbyists on Capitol Hill. The Panama Papers have focused much attention on this offshore world, which the International Consortium of Investigative Journalists and others in the media have portrayed as a den of iniquity. And that was true for decades. Even now, traditional secrecy jurisdictions are not all sweetness and light. But they’re a heck of a lot sweeter and much lighter than before—except for the United States and a handful of tiny countries (Bahrain, Nauru, and Vanuatu). Heck, even Panama, which has recently backtracked on its pledge to be more transparent globally, has signed on to a transparency law that the United States pushed for, the Foreign Account Tax Compliance Act. But that law, passed in 2010, is for the United States benefit—it requires foreign banks to disclose American taxpayers holding offshore accounts and structures. U.S. banks, however, are not doing the same kind of disclosure for their foreign clients, and that’s the problem. America’s refusal to go along with global transparency initiatives was not necessarily by design, nor is it supported by all, or perhaps even a majority, in government. Rather, the United States is a victim of current law: The United States cannot promise to share information it does not currently collect. Collection of that information by the U.S. would require congressional action, specifically a law mandating that banks and other financial institutions pass more detailed information about their account holders to the Treasury Department, which could then share it with other countries. More:

The Strange Tale of Donald Trump’s 1989 Biking Extravaganza

The cyclists had crossed over the Catskill Mountains and pedaled more than 100 miles across the bucolic landscape when the peleton sprinted to the finish line. At any normal bike race they’d have finished before crowds of diehard fans, dressed in team regalia or national colors, pounding excitedly on the fences along the course. This time, they were met by jeering protesters holding signs that said “Die Yuppie $cum,” “Hungry? Eat the Rich” and “Trump = Anti-Christ.” The demonstraters weren’t there for the cyclists. They were there to harry the sponsor of the race, a symbol of wealth and greed and 1980s excess: Donald Trump. The billionaire-turned-politician’s exploits and business dealings may be legendary, but this is the story of one oft-overlooked venture: The Tour de Trump, a cycling event that was supposed to become America’s very own Tour de France. It was to be a cycling event the likes of which had never been seen before in the United States—with big-name bikers, international teams and a course that spanned the Eastern seaboard. And Trump went about making it happen in his unique fashion: Only a bicycle race with Trump’s name could link together a Saudi arms dealer, a Dutch brothel and the prince of New Age Pop piano. But despite its high profile, and even with the real estate nabob’s knack for publicity and pageantry, Trump’s namesake race lasted only two years, the short run largely thanks to his empire’s billions of dollars of debt. It wouldn’t be quite fair to chalk the Tour de Trump up as just another Trump failure, though. In the end, the race found a new and more stable corporate sponsor, became sanctioned internationally and rode on for another five years. Today’s president of USA Cycling says the event did a lot to raise the sport’s profile in the United States. And Trump’s partner in the venture says he admires the businessman so much he plans to vote for him this year. The story of the biking extravaganza that became the Tour de Trump begins in 1987, when a young CBS Sports reporter just back from that year’s Tour de France told then-CBS basketball announcer and entrepreneur Billy Packer that he should consider starting something like it in the United States. The young reporter was John Tesh—yes, the pop piano musician and eventual co-host of Entertainment Tonight, who in 1987 covered the Tour de France for CBS and wrote the background music for the event.

Some Americans Don’t Know Who Washington, D.C. is Named After

As Forrest Gump says in the eponymous 1994 classic film, stupid is as stupid does. In a YouTube video, media analyst, author and conspiracy theorist Mark Dice took to the beaches of San Diego to ask passersby who our nation’s capital is named after. Spoiler: The capital is Washington, D.C., and it’s named after George Washington, the first president of the United States. Several of those who appear in the video can’t name the capital city. Those who can are still stymied by the namesake.”Our nation’s capital is Washington, D.C.,” one young man says with conviction, “and I don’t know who it’s named after!” The icing on this deeply disappointing cake: An Italian tourist knew the answer immediately and was shocked that some Americans did not. See video:



AEA names Brenda Pike new executive director

Looking for stability after a turbulent time, the Alabama Education Association is turning to someone with experience running a teachers’ group emerging from turmoil. The AEA Saturday announced it had hired Brenda Pike as its new executive director, and the first person to hold that title since the organization revamped its constitution late last year. Pike, a Gadsden native and teacher by training, currently works as the executive director of the Indiana State Teachers Association (ISTA), like AEA an affiliate of the National Education Association. AEA says she will begin her duties as AEA director May 16.

“I am so deeply honored for the opportunity to come back home to serve Alabama educators,” Pike said in a statement released by AEA. “AEA has been the leading advocate for education professionals, public schools and students for 160 years, and I look forward to making a meaningful contribution to its legacy alongside its leaders, staff and members.” Pike has also worked for the Tennessee Education Association and the Texas State Teachers Association. The new director will have no shortage of challenges. Long a major power in Alabama government, the teachers’ organization took hits after Republicans won control of the Legislature in 2010. AEA lost check-off dues, long the group’s major source of income, and its finances deteriorated between 2010 and 2014; the group lost $8.5 million in fiscal year 2014, with significant losses in investment income. An expensive attempt to get involved in the 2014 Republican primaries largely failed. More:


Suit Against Bentley Filed Over Gulf State Park

MONTGOMERY— Former Alabama commissioner of conservation and natural resources, Charley Grimsley, filed suit against Gov. Robert Bentley over his plan to build a resort hotel at Gulf State Park, which Grimsley says will be unaffordable to most Alabamians. The lawsuit, filed in Montgomery County circuit court, challenges the use of the 2010 BP grant funds for the hotel project. “The 2010 BP funds are not a legal funding source according to the 2011 Gulf State Park Projects Act,” Grimsley said. “Instead of using these funds to restore the environmental damage caused by the oil spill, Gov. Bentley is instead trying to use them to build a luxury hotel working people cannot afford.” SEE LAWSUIT HERE This is not the first time Grimsley has used the legal system in his fight to keep Alabama’s State parks affordable to average Alabamians. “In 2005, I sued Gov. Riley over his illegal plan to give a contract to a handpicked luxury hotel developer without competitive bid. After 4 years in court the plan was ruled illegal, and my hope is that Gov. Bentley’s plan will meet the same fate,” said Grimsley. Grimsley believes Gov. Bentley’s “dark money” group, the Alabama Council for Excellent Government, is behind Bentley’s State parks policy that he says caters to the rich at the expense of average Alabamians. He cited a recent report in where insiders claim Rebekah Caldwell Mason, the Governor’s embattled former chief advisor, was responsible for the closure of five State parks. In a meeting with officials concerning closing the five parks, Ms. Mason reportedly said, “Close them. Only poor people use them anyway.” “This shows the genesis of Gov. Bentley’s shocking State parks philosophy,” Grimsley responded. “A discriminatory State park policy is being promoted by a shadowy group that does not answer to the people of Alabama.” More:

State Will Introduce ‘Other Acts’ In Hubbard Trial

MONTGOMERY—The State has given notice to the court that it plans to introduce other crimes, wrongs, or acts in the case against Speaker Mike Hubbard, under Rule 404(b). Rule 404(b) “refers to ‘a crime, wrong, or other act’ and does not say that those other acts need ever have resulted in arrest, prosecution, or conviction or even be criminal,” according to a study made at Indiana University Law. The study states that under Rule 404(b), evidence may be admissible for any of nine other reasons, so as to show motive, opportunity, or intent.  Federal evidence review state, “…the rule allows the introduction of other acts evidence for limited purposes if it bears on a relevant issue, such as motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.” Hubbard is scheduled to stand trial in May on 23 felony counts of public corruption. In the notice filed with the court on April 8, the State says it will offer evidence that Hubbard funneled money through various entities to himself, or businesses with which he is associated, used his position as Chairman of the ALGOP to benefit himself, or a business with which he is associated. That he intended to evade Fair Campaign Practices Act, or Ethics Act reporting requirements, solicited lobbyists and principals for thing(s) of value for himself, businesses with which he was associated, or fellow elected officials. It further states that Hubbard used the mantle of his office to benefit his consulting clients and businesses, with which he was associated, used the mantle of his office to benefit lobbyists and principals during the same time frame he was soliciting and/or receiving thing(s) of value from those lobbyists and principals, and provided things of value to lobbyists and principals during the same time frame he was soliciting and/or receiving things of value from those lobbyists and principals. More:

AL lawmakers set to target Bentley’s cabinet pay raises

MONTGOMERY, AL (WSFA) – Senate lawmakers filed legislation Thursday which could do away with the governor’s cabinet pay raises. Gov. Robert Bentley recently raised the salary of many of his members, but lawmakers may see to it that they are short-lived. The bill would put a “cap” on the salaries and put the state personnel board in charge of the pay scale. The governor’s pay raises garnered major media attention four of Bentley’s cabinet members, ABC Board Administrator Mac Gipson, ADECA Director Jim Byard, Revenue Commissioner Julie Magee and Insurance Commissioner Jim Ridling, received more than a $73,000 raise. Medicaid Commissioner Stephanie Azar received a raise of $60,000. According to the bill co-sponsor, Dick Brewbaker (R-Montgomery), this would roll back the salaries to where they were previously. He said it’s the right thing to do, especially considering state employees have not seen a pay raise in quite sometime. The bill would still need to be passed out of both chambers to take effect and get past the governor to become law.

Bill making it easier for felons to get state jobs passes Alabama Senate Judiciary Committee

A bill intending to make it easier for felons to be considered for state jobs cleared its first hurdle this week after the Senate Judiciary Committee cleared a bill Thursday that would no longer require job applicants to check a box stating whether they were convicted of a crime. Sponsored by Sen. Quinton Ross, D-Montgomery, the bill (SB 327) is intended to give convicted felons a greater chance at rehabilitation by removing a barrier to getting a job. Still, applicants would have to disclose their criminal history should they be offered a job. The legislation would also affect former prisoners who have jobs that require state licenses, Ross explained to “When we talk in terms of prison reform, there are a lot of components to it,” said Ross. “There’s always been kind of a door shut to those kind of individuals who have had the history of serving a criminal offense … that keeps them from getting gainful employment. It really gets the person into a second sentence because they can’t get gainful employment.” The so-called “Ban the Box” bill had initially been broader, encompassing more than just state employment and licensures, but Ross said the legislation was amended to give it a greater chance at passing. While it doesn’t include the private sector or even municipal jobs, Ross noted that some employers like Wal-Mart and Target already don’t ask job applicants if they’ve ever been convicted of a felony. The bill passed committee in a voice vote, meaning the legislation can be considered by the entire Senate. Should it also pass the House and get signed by the governor, Alabama would be the 20th state in the nation to remove criminal history from the job application process.


Alabama Gov. Robert Bentley tosses support behind BP settlement for roads

Alabama Gov. Robert Bentley said Friday that he will support legislation that funnels millions of dollars of BP oil spill settlement money for road projects. Bentley, in Mobile to sign legislation for industrial tax credits, praised efforts that would divert a substantial chunk of the $1 billion settlement for the expensive U.S. 98 and Baldwin Beach Express extensions in South Alabama. “I like that bill,” Bentley said. “I support it. It’s a good piece of legislation and we got it through the Senate. We hope to get it through the House. It’s fair to the entire state of Alabama.” Bentley’s comments focus on SB267, sponsored by Sen. Bill Hightower. The legislation is written as a constitutional amendment. It would let voters decide in November’s general election whether the settlement should be given primarily for road projects.

The legislation, as proposed, diverts $260 million for roadwork in the south portion of the state and also sends $60 million or more to each of the Alabama Department of Transportation’s regions for further projects. In addition, the legislation supplies $161.6 million to the General Fund’s “rainy day” account to help offset unpaid debts. An additional $5 million goes to the Strengthen Alabama Homes Fund, which is designed to provide matching funds for people to build fortified roofs. In South Alabama, the legislation will pay for two projects: The extension of U.S. 98 in Mobile County and connecting the Baldwin Beach Express from Interstate 10 to 65. The U.S. 98 project is a 30-mile express route from Bayou La Batre northwest to Semmes while the Baldwin Beach Express is an estimate 24.5-mile road that will help alleviate growing congestion on roadways leading to Alabama’s beaches. Both projects could cost as much as $200 million apiece, according to some projections. Bentley’s approval is a change in direction since November when, during a luncheon in Gulf Shores, he told coastal business and civic leaders that his goal was to pay off the state’s debts first. He also instructed coastal leaders not to continue arguing with his office about the matter. On Friday, Bentley accused lawmakers of squandering settlement money. “The Legislature in 2017, of the $50 million we will get (from the settlement), $30 million will go toward paying routine debt,” he said. “It will be just gone. We will not get any benefit of it. We’ll just squander it if we don’t put it aside for projects in this state.” Hightower’s legislation won support Tuesday in the Senate on a 30-5 vote. A competing proposal, offered by Sen. Arthur Orr, was defeated with a 23-9 vote. Orr’s plan would have sent $422.4 million to the Alabama Trust Fund and $134 million to Medicaid and Medicare services. It would not have earmarked money for transportation. More:




Obama can appoint Merrick Garland to the Supreme Court if the Senate does nothing

On Nov. 12, 1975, while I was serving as a clerk to Supreme Court Justice Thurgood Marshall, Justice William O. Douglas resigned. On Nov. 28, President Gerald R. Ford nominated John Paul Stevens for the vacant seat. Nineteen days after receiving the nomination, the Senate voted 98 to 0 to confirm the president’s choice. Two days later, I had the pleasure of seeing Ford present Stevens to the court for his swearing-in. The business of the court continued unabated. There were no 4-to-4 decisions that term. Today, the system seems to be broken. Both parties are at fault, seemingly locked in a death spiral to outdo the other in outrageous behavior. Now, the Senate has simply refused to consider President Obama’s nomination of Judge Merrick Garland to the Supreme Court. Meanwhile, dozens of nominations to federal judgeships and executive offices are pending before the Senate, many for more than a year. Our system prides itself on its checks and balances, but there seems to be no balance to the Senate’s refusal to perform its constitutional duty. The Constitution glories in its ambiguities, however, and it is possible to read its language to deny the Senate the right to pocket veto the president’s nominations. Start with the appointments clause of the Constitution. It provides that the president “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Judges of the supreme Court, and all other Officers of the United States.” Note that the president has two powers: the power to “nominate” and the separate power to “appoint.” In between the nomination and the appointment, the president must seek the “Advice and Consent of the Senate.” What does that mean, and what happens when the Senate does nothing? In most respects, the meaning of the “Advice and Consent” clause is obvious. The Senate can always grant or withhold consent by voting on the nominee. The narrower question, starkly presented by the Garland nomination, is what to make of things when the Senate simply fails to perform its constitutional duty. It is altogether proper to view a decision by the Senate not to act as a waiver of its right to provide advice and consent. A waiver is an intentional relinquishment or abandonment of a known right or privilege. As the Supreme Court has said, “ ‘No procedural principle is more familiar to this Court than that a constitutional right,’ or a right of any other sort, ‘may be forfeited in criminal as well as civil cases by the failure to make timely assertion of the right before a tribunal having jurisdiction to determine it.’ ” It is in full accord with traditional notions of waiver to say that the Senate, having been given a reasonable opportunity to provide advice and consent to the president with respect to the nomination of Garland, and having failed to do so, can fairly be deemed to have waived its right. Here’s how that would :

Alabama‘s bingo conundrum

The state’s aggressive campaign against electronic bingo began in late 2009 when former Gov. Bob Riley appointed former Mobile prosecutor John Tyson Jr. to head a special task force to ferret out illegal gambling. It wouldn’t take much ferreting to find the gambling Riley had in his cross-hairs – electronic bingo games were in operation at VictoryLand in Macon County, and in other parts of the state. And here in Houston County, developer Ronnie Gilley was quite vocal about the imminent opening of Country Crossing, a multimillion-dollar music-themed complex crowned by an electronic bingo casino. The trouble, as would soon become apparent, was that the legality of the games was a matter of opinion. Riley, et al. saw the games as slot machines prohibited by the state constitution. Casino operators saw them as bingo games, allowed in various counties by constitutional amendment. The matter was further complicated by tribal casinos operating the same games in the state, although tribal gambling is regulated by federal law, not state law. Fast-forward to today, and the question remains: Are electronic bingo games legal, or illegal? There have been several contradictory court rulings, a blueprint from the Alabama Supreme Court, raids, seizures, and crippling of businesses operating electronic bingo machines. Victoryland saw its electronic bingo machines confiscated by the state in 2013, along with about $200,000. A state court ruled that the state must return the machines and money, but last month, the Alabama Supreme Court overruled that decision. Meanwhile, Victoryland owner Milton McGregor announced that he had arranged to get more electronic bingo games, and would soon re-open his bingo operation. In late March, George Beck, the U.S. Attorney for the Middle District of Alabama, wrote a letter to Attorney General Luther Strange and Gov. Robert Bentley asking for clarification of Alabama’s gambling laws. “I’m just trying to understand the state’s position,” Beck told the Montgomery Advertiser. “This thing has been inconsistent.” In more than six years, the state of Alabama has spent millions chasing after electronic bingo operators, disrupting business and eliminating jobs, but has yet to charge a single person with operating an illegal gambling operation. Even the federal prosecutor is confused by the mission. Is it any wonder that everyone else is, too?


Ala legislature: No one called to demand we do the right thing

The other day, as I was sitting at a traffic light, I noticed an older, blue minivan stopped in the intersection, and an older man behind it, trying to push the stalled van to the curb. For a moment, I considered helping. The guy was elderly and he seemed to have some physical impairments. His wife, who was in the van, was clearly disabled. And by the looks of the van and their tattered clothing, they obviously had little money and a rough life. But then, I thought, I’ve got stuff to do. I’ve got my own life to worry about. And yeah, those people were struggling, but I can’t keep giving my time to others at the expense of myself. After all, they probably made poor decisions and didn’t take advantage of the wonderful opportunities available in America, where we tell children that anyone can be absolutely anything they want to be. Plus, it’s not like anyone was demanding that I, a healthy and able-bodied man with the means and ability to help, get out and push. So, why should I? The light changed. I drove off. I’m sure they were fine. If this seems appalling, it should. Only a heartless, soulless jackass would see that couple struggling and not at least get out and push. Right? Of course that’s right. Which makes it weird how some people’s feelings about helping others seem to change when the person they’re helping isn’t right in front of them. Even if the help they’re providing is much more beneficial and important. Even if they know full well how badly that help is needed. I know that because I know what’s taking place currently in the Alabama Legislature, where the state’s general fund budget is funding Medicaid at $85 million less than the organization said was its bottom dollar need. The governor vetoed that budget because of the Medicaid shortfall and the Legislature overrode that veto. The consequences of such a shortfall are dire. And the people who run Medicaid, who have actually looked at the books and understand the funding breakdowns, have assured everyone who will listen that they’re not bluffing. At a press conference last week, Medicaid officials and Gov. Robert Bentley laid out the crazy cuts. Things like adult eyeglasses, outpatient dialysis, prosthetics and orthodontics would go away. Because who needs those things? Additionally, a raise in doctor reimbursements – which was keeping many doctors and hospitals in rural areas afloat – will be cut, and the reimbursement rates will return to 2005 levels or lower. That will push many physicians out of the state and force the closing of more rural hospitals. In response to pointed questions about all of that, the head of Alabama’s Senate, Del Marsh, said it’s clear that Medicaid funding is a problem, but it’s not like voters were calling and saying they were upset about it. Also, he said there was a consensus in the legislature that Alabama can’t afford to keep putting money into Medicaid at the expense of other agencies and there was no willingness to take money from education or raise taxes. So, tough luck, poor guy with vision problems. Start practicing your squinting. To make sure we’re clear on what’s being said here: This service that is caring for a million Alabamians, primarily children, the disabled and the elderly (to qualify as an able-bodied adult in Alabama you have to be the guardian of a child and make less than $5,000 per year), is going to stop dialysis treatments or providing prosthetics. And the president of Alabama’s Senate’s response to that is: No one called to say that’s wrong. Yeah, probably because they can’t afford a phone. You know, we could probably provide free health care to every citizen of the state if we could stop paying to investigate, try and convict the crooked politicians running the place into the ground. Honestly, I don’t know what else to say. So, let me just clear up one thing: I didn’t drive off and not help the elderly couple I mentioned at the start. I wasn’t even there. Instead, a friend was, and he helped push the van out of the road, got it towed to a local repair place, paid to have it fixed and bought the couple lunch while they waited on it. My friend is not Alabama legislator. Obviously.

We hear you, Gov. Bentley, but nobody believes you

Alabama voters elected Robert Bentley, at least in part, because he was supposed to be a nice guy — modest, warm, grandfatherly. And most of all, honest. He promised not to take a salary until Alabama reached virtual full employment. In 2014, he was still waiting on that first paycheck, but his credibility among voters was enough to get him reelected. Now all of that is gone. He’s lost it, just like he lost his family, in a sordid affair. That promise to go without a paycheck has been eclipsed by his flagrant flying on state planes and helicopters, taking frequent trips by air even when cars were faster. Instead of being Alabama’s grandfather, Bentley is now the dirty old man on your block you tell the kids to stay away from. Rather than warm and modest, he’s become snippy and mean. “Did you hear what I said?” this week the governor snapped at a reporter who didn’t follow his ground rules of no questions about the Rebekah Mason affair. It was a side from Bentley many have never seen — testy and impudent. But the governor’s reputation for honesty has suffered the worst damage. In the last couple of years, Bentley has told some whoppers. The “No New Taxes” pledge — remember that one? He went back on that one, obviously, piling another layer of lies on top of the first. Days after his reelection, Bentley claimed he met with staff who explained that Alabama had systemic problem in its General Fund. First he’d heard of it. Really. Scout’s honor. When the governor didn’t get the tax increases he wanted, he had the Alabama Law Enforcement Agency close driver license offices in rural counties to help close the gap. Those closures, it turned out, would have saved a whopping $100,000, and after the political blowback, they didn’t stick.

And then there was Rebekah Caldwell Mason, his senior political advisor. He didn’t have a physical relationship with that woman. Really. He just talked about the physical relationship he didn’t have in explicit terms on the phone, even Facetiming with her to kiss her ears, reminiscing about fondling her breasts …Not that he ever did any of that. Nope. No, sir. Never a “physical” relationship, whatever that means. The damage to the governor’s reputation has been so horrendous that there’s no way now to listen to what he says and not suspect he’s a lying. And therein lies our problem. Alabama needs a governor who can tell them truths it doesn’t want to hear, and Gov. Bentley is not that governor. Not any longer. The problem for Alabama isn’t when the governor lies. The problem is when he tells the truth and nobody believes him. If you believe Gov. Robert Bentley, the Alabama Legislature’s General Fund budget will be a disaster for the poor and ill in Alabama. We’ve heard this sort of thing before, but this time it’s not drivers license offices and state parks on the chopping block. It’s things like outpatient dialysis for the poor, which keeps patients with kidney disease from clogging up hospital emergency rooms. It’s health care for the elderly and children. It’s the financial sustainability of rural hospitals — for the poor and well-off, alike.That’s what’s on the line right now. Bentley vetoed the Legislature’s budget, but lawmakers quickly and effortlessly overrode that veto. Before the Mason affair destroyed him personally and politically, Bentley promised to call lawmakers back into a special session to deal with Medicaid, but this week, he retreated from that threat. The governor is so politically wounded that, if he called a special session, there’s no guarantee lawmakers might not immediately adjourn and go home. The only way for lawmakers to take this situation seriously is for people to get sick, or even die. When the governor asks, “Did you hear what I said?” he’s asking the wrong question. We hear you, governor, but nobody believes you. Two years ago, when Bentley made his 180-degree turn on new taxes for the General Fund, I said his punishment would be telling the truth when no one would any longer believe him. I was wrong. It wasn’t Bentley’s punishment. It’s ours.


Morning Money

WELCOME TO EARNINGS SEASON: IT’S GONNA STINK — Via Goldman Sachs analysis: “On Monday, Alcoa kicks off what we expect to be a disappointing 1Q earnings season. Our year-end 2016 S&P 500 target of 2100 implies just 3 percent upside from the current level. … 1Q 2016 year/year EPS growth will be at best flat but could fall by as much as 9 percent given the poor operating environment for banks and energy firms …

“Corporates are currently unable to execute discretionary buybacks, the only source of demand for US shares. … Our analysts have highlighted a laundry list of headwinds including energy counterparty risk, a slowdown in capital markets activity, and a bruising quarter for asset managers. We believe Financials EPS could fall by as much as 25 percent.”

FINK SAYS POLITICS ROILING MARKETS — BlackRock’s Larry Fink in his annual shareholder letter: “Electoral politics is contributing to market uncertainty around the globe. Polarizing elections in the U.S. and Germany; government transitions in Spain, Taiwan and Canada; political and economic crises in Brazil; and the UK vote in June on whether to leave the European Union will all continue to drive volatility.” Full letter:

THE BIG IDEA: WILL GROWTH BOUNCE BACK? — Pantheon’s Ian Shepherdson: “[A] sustained decline in the U.S. household saving rate would substantially boost growth … The saving rate typically rises then falls after a big drop in gasoline prices, but the process is long … The longer gas prices remain very low, the more convinced people will be that it is safe to spend the windfall …

“If the saving rate mean-reverts over the next year — our base case — and the drag from the oil and dollar hits fades as much as we expect, GDP growth will accelerate by more than one percentage point. That would push growth above 3 percent and keep it there, for the first time since the crash.”

M.M. SIDEBAR — Flipping from a slow first quarter to a 3 percent growth rate in the second half of the year would give a serious boost to the Democratic presidential nominee …

WSJ RIPS LEW — WSJ edit page: “Treasury Secretary Jack Lew and his media bodyguards are still pouting over his courtroom defeat in the MetLife case. … Mr. Lew’s tantrum includes a rushed Friday notice of appeal filed in the D.C. Circuit Court of Appeals. … Mr. Lew is treating Judge Collyer’s reasoned analysis as a judicial micro-aggression, but he won’t necessarily find his safe space at the appellate level.”

A senior banker emails: “It’s extraordinary how childish the Administration becomes on anything to do with Dodd Frank. They treat it as a political manifesto that one has to swear undying allegiance to and never question. Zero FSOC discussion about whether the judge had raised any valid arguments to be considered. Just a knee jerk reaction that strains any credibility. Met Life might bring down the country’s financial system, seriously?”

REAL TALK ON TRADE — WP’s Jim Tankersley: “Expanded trade with China over the past 15 years has cost the United States at least 2 million jobs. Cracking down on trade with China, by taxing the cheap consumer goods it ships to our store shelves, could cost millions of additional jobs. That both of these things can be true is the conundrum of trade …

“The United States does not have a trade agreement with China, neither a bilateral or a multilateral deal — much less a good one or a bad one. … [W]hen Trump says he would ‘immediately start renegotiating’ America’s trade deal with China, he’s talking about something that doesn’t exist.”

ROUGH YEAR FOR BANKS, ALREADY — Reuters: “It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks. Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week. … Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth.

“Analysts forecast a 20 percent decline on average in earnings from the six biggest U.S. banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs Group … are expected to report the worst results in over ten years. This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year”

BRUSSELS TERRORISTS EYED FRANCE FIRST — Bloomberg: “The terrorists who struck Brussels last month had been plotting a fresh attack in France, but changed their plans as the police were closing in on them, Belgian prosecutors said. The gang whose members allegedly included Mohamed Abrini, the ‘man in the hat’ Brussels airport bombing suspect now in police custody, switched targets to hit Brussels four days after the arrest of one of its members”

GOOD MONDAY MORNING — Hope everyone had a good weekend. For early readers, M.M. is on CNBC’s “Squawk Box” at 6:20 a.m. Later readers can find clips on Twitter @morningmoneyben. And email me news and gossip on

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Zachary Warmbrodt on the upcoming House votes to repeal parts of Dodd-Frank — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600

DRIVING THE WEEK — Treasury Secretary Jack Lew at 8:30 a.m. on Monday delivers remarks at the Council on Foreign Relations in DC on “America and the Global Economy: The Case for U.S. Leadership” … President Obama on Monday afternoon will meet with Federal Reserve Chair Janet Yellen “to discuss the state of the American and global economy, Wall Street Reform, and the long-term economic outlook” … U.S. Chamber of Commerce hosts a summit Tuesday at 8:30 a.m. on investing in American featuring Lew, Secretary of Commerce Penny Pritzker, Secretary of Transportation Anthony Foxx, Senator John McCain, Governor Scott Walker and Governor Terry McAuliffe … What are expected to be grim first quarter bank earnings begin this week with JPMorganChase on Wednesday and Bank of America on Thursday … IMF and World Bank hold spring meetings beginning Tuesday … Senate Finance Committee at 10:00 a.m. Tuesday holds a hearing on cybercrime … Senate Appropriations on Tuesday at 10:30 a.m. holds a hearing and the SEC and CFTC budgets … House Natural Resources holds a hearing Wednesday at 10:00 a.m. on the Puerto Rico bill … House Small Business Committee has a hearing Wednesday at 2:30 p.m. on small business tax simplification … Senate Banking on Thursday at 10:00 a.m. has a hearing on the bond market featuring Treasury Counselor Antonio Weiss … Retail sales at 8:30 a.m. Wednesday expected to rise 0.1 percent and 0.4 percent ex-autos … Producer Prices at 8:30 a.m. Wednesday expected to rise 0.3 percent headline and 0.1 percent core … Consumer Prices at 8:30 a.m. Thursday expected to rise 0.2 percent headline and core … Industrial Production at 9:15 a.m. Friday expected to dip 0.1 percent … Univ. Michigan Consumer Sentiment at 9:55 a.m. Friday expected to rise to 92.0 from 91.0.

HOT CLICK: SHEILA BAIR AND WATSON — Latest IBM “Watson” ad features former FDIC Chair Sheila Bair:

NEW PODCAST — Per Mercatus: “Mercatus is rolling out a new monetary policy podcast, Macro Musings, hosted by David Beckworth … In the first episode, David interviews Scott Sumner and discusses a variety of topics including Fed policy and the Great Depression”

PAUL RYAN’S SHADOW CAMPAIGN — NYT’s Jennifer Steinhauer: “While [Paul] Ryan has repeatedly said that he has no intention of becoming his party’s nominee this year, he is already deep into his own parallel national operation to counter Donald J. Trump and help House and Senate candidates navigate the political headwinds that Mr. Trump would generate as the party’s standard-bearer — or, for that matter, Senator Ted Cruz, who is only slightly more popular.”

TRUMP’S PHILANTHROPY: NOT SO PHILANTHROPIC — WP’s David A. Fahrenthold and Rosalind S. Helderman: “Since the first day of his presidential campaign, Donald Trump has said that he gave more than $102 million to charity in the past five years. To back up that claim, Trump’s campaign compiled a list of his contributions — 4,844 of them, filling 93 pages. But, in that massive list, one thing was missing.

“Not a single one of those donations was actually a personal gift of Trump’s own money. Instead, according to a Washington Post analysis, many of the gifts that Trump cited to prove his generosity were free rounds of golf, given away by his courses for charity auctions and raffles.”

HRC: NO CONTESTED CONVENTION — Reuters: “Democratic front-runner Hillary Clinton on Sunday dismissed the notion of a contested nominating convention and said she was not preparing for such a scenario, after her rival for her party’s presidential nomination racked up another victory. …

“Asked on CNN if she were preparing for such a scenario, Clinton said, ‘No, I intend to have the number of delegates that are required to be nominated.’ The former U.S. secretary of state said she was leading Sanders by 2.5 million popular votes and in pledged delegates. ‘I feel good about the upcoming contests, and I expect to be the nominee,’ she said.”

TRUMP’S TERRIBLE WEEKEND — POLITICO’s Eli Stokols and Kyle Cheney: “Donald Trump’s struggle to win loyal delegates to the Republican National Convention grew even more desperate on Saturday, with crushing losses in Colorado and South Carolina that put victory at a contested convention further from his grasp. … Trump, who handed the reins of much of his campaign this week to strategist Paul Manafort in an effort to shore up his operation before the nomination slips away, was swept out of delegate slots up for grabs at Colorado’s state convention.

“Adding to his woes, he picked up just one delegate of six on the ballot in South Carolina. The most painful result, though, may have been Trump’s failure to capture two of three slots in his strongest South Carolina congressional district. … It’s an extension of a losing streak for Trump that threatens the mogul’s odds of winning the Republican nomination at what is increasingly likely to be a contested convention in July”

BERNIE WINS WYOMING — POLITICO’s Gabriel Debenedetti: “Bernie Sanders notched his eighth win in the last nine contests on Saturday in Wyoming, defeating Hillary Clinton in the final electoral showdown between the two Democratic presidential candidates before New York’s pivotal primary later this month. … Only 14 delegates were at stake in Wyoming — and Clinton’s better-than-expected showing means Sanders will not net many delegates from his victory. But the Vermont senator’s win there will add fuel to his claim that he has the political momentum in the second half of the Democratic primary season”

DAILY MAIL EYES YAHOO (REALLY) — WSJ’s Lukas I. Alpert and Douglas Macmillan: “The parent company of the Daily Mail, the British newspaper and global tabloid website, is in talks with several private-equity firms about a possible bid for Yahoo Inc. … Yahoo has set an April 18 deadline for bids. While as many as 40 firms have expressed some interest in Yahoo’s businesses, the pool of serious bidders is expected to narrow considerably.

“Daily Mail & General Trust PLC’s potential bid could take one of two forms … In one scenario, a private-equity partner would aim to acquire the entirety of Yahoo’s core web business, with the Mail taking over the news and media properties. Those assets include verticals such as Yahoo Finance and Yahoo Sports plus Yahoo News and a video operation whose big star is Katie Couric”

HUGE U.S. PENSION HOLE — FT’s Attracta Mooney: “The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies. According to academic research shared exclusively with FTfm, the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.

“Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits. Joshua Rauh, a senior fellow at the Hoover Institution, a think-tank, and professor of finance at the Stanford Graduate School of Business, who carried out the study, said: ‘The pension problems are threatening to consume state and local budgets in the absence of some major changes.’”

MORE BANKER BLUES — WSJ’s Aaron Kuriloff and Riva Gold: “Bank stocks are having a terrible 2016, as central-bank policies, which for years lifted asset prices, are hurting the financial sector. The impact of economic stimulus efforts on lenders will get a fresh airing this week, as big U.S. banks begin reporting their earnings for the first quarter. Trading revenue is expected to have taken a hit, but the more enduring problem will be visible in the lenders’ net interest margins …

“The broader U.S. stock market has shaken off a steep slump at the beginning of the year and is back in positive territory. But banks and other financial companies are lagging far behind. The divergence highlights the dilemma facing central banks. Easy-money policies have fueled a rally in risky assets. They are also squeezing profits at financial companies, inflicting pain on a sector that is fundamental to the health of the economy.”

TREASURY MOVES TO CATCH TAX CHEATS — POLITICO’s Danny Vinik: “The release … of the leaked ‘Panama Papers,’ revealing hidden offshore accounts held by wealthy and powerful people around the world, set off protests, toppled the prime minister of Iceland and led to investigations on at least two continents. But Americans have escaped largely unscathed … That may be about to end. Later this year, the Treasury Department will release a rule requiring banks to demand the names of the real owners of shell companies that they do business with.

“The rule, released in draft form in August and not yet final, will require financial institutions to collect information on any person who owns more than 25 percent of the shell company opening an account. It will end a common practice for shielding ownership of assets, in which individuals set up companies while providing little identifying information, and then open bank accounts in the name of the firm”

BIG GOP DONORS SIT IT OUT — POLITICO’s Alex Isenstadt and Katie Glueck: “Dispirited over a Republican Party primary that has devolved into an ugly, damaging fight, some of the GOP’s biggest financiers are reevaluating whether to invest in the 2016 presidential contest at all. Among those on the sidelines: Sheldon Adelson, the billionaire casino mogul who hosted the Republican Jewish Coalition’s spring meeting at his Venetian hotel this weekend. His apparent ambivalence about 2016 was shared by many RJC members here.

“With grave doubts about the viability of the few remaining Republican contenders, many of these Republican donors have decided to sit out the rest of the primary entirely. And while some are reluctantly getting behind a remaining candidate, others are shifting their attention to congressional contests. … Over the course of the weekend, some of the party’s disappointed and most sought-after contributors said they may be done with the 2016 race. Mel Sembler, a Florida real estate executive and former U.S. ambassador, said that after helping to bankroll Jeb Bush’s campaign, he had turned his attention to defeating a local medical-marijuana initiative.”

POTUS Events

10:00 am || Receives the Presidential Daily Briefing
3:00 pm || Meets with Federal Reserve Chair Janet Yellen

All times Eastern
Live stream at 12:30 pm of briefing by Press Secretary Josh Earnest, Dr. Anthony Fauci, Director of NIH/NIAID, and Dr. Anne Schuchat, Principal Deputy Director of the CDC

Floor Action

The House returns this week after a long spring break and is expected to blow past the statutory deadline to pass a budget, while across the Capitol, President Obama’s Supreme Court nominee makes the rounds with a growing list of GOP senators.

Congress is supposed to pass a budget by April 15 under the Congressional Budget Act in order to begin the annual spending process. But House members will return into session Tuesday night after a nearly three-week recess without any plan ahead for passing a budget, let alone before the Friday deadline.

The House and Senate could still pass a budget after April 15 if they can reach an agreement. But neither of the two sides — conservatives who want lower spending levels versus lawmakers who want to adhere to last year’s bipartisan deal — are budging.

Nonetheless, House appropriators are still moving forward with individual 2017 spending bills this week despite the dim chances of them ever reaching the floor. The full House Appropriations Committee is expected to advance legislation funding the Department of Veterans’ Affairs and military construction projects during a markup on Wednesday. Two subcommittees overseeing the Energy Department and Department of Agriculture will also meet to move their respective bills on the same day.

The House Appropriations Committee is using the spending levels outlined in last year’s budget deal for now so that its bills can still advance.

Some lawmakers have suggested using a process to “deem” the budget deal level for this year’s appropriations process. But Speaker Paul Ryan (R-Wis.) has maintained that the House should pass a budget first and adhere to so-called “regular order” before taking up any spending bills on the floor.

Supreme Court vacancy

Supreme Court nominee Merrick Garland will sit down with Sen. Chuck Grassley, the chairman of the Judiciary Committee, as he continues his uphill battle of courting GOP support.

The Iowa Republican will have breakfast will Garland Tuesday, though he’s expected to explain why the Senate won’t be taking up his nomination.

Grassley has been at the center of the battle over the Supreme Court. Democrats and outside groups hope a wave of pressure will force him to cave and give Garland a hearing.

Grassley, however, suggested the tactics were effectively a waste of time.

“This strategy has failed to recognize that I am no stranger to political pressure and to strong-arm tactics,” he said Thursday. “When I make a decision based on sound principle, I’m not about to flip-flop because the left has organized what they call a pressure campaign.”

A hearing before the Judiciary Committee would be a first step to getting President Obama’s pick confirmed.

In addition to Grassley, Garland will meet with GOP Sens. Kelly Ayotte (N.H.), Jeff Flake (Ariz.), Lisa Murkowski (Alaska), Rob Portman (Ohio) and Pat Toomey (Pa.) next week.

Each of the senators backs leadership’s strategy of denying Garland a hearing or a vote, though, Flake has suggested he could support taking up the nomination during a lame-duck session if Republicans lose the November election.

Democratic leadership remains adamant that Grassley and Majority Leader Mitch McConnell (R-Ky.) will eventually cave, saying it’s just a question of when.

They point to a spate of recent polling on the Supreme Court, as well as the growing number of Republicans willing to meet with Garland, as evidence that they have momentum on the issue.

Republicans, however, have brushed off the tactics noting that only GOP Sens. Mark Kirk (R-Ill.) and Susan Collins (R-Maine) back having a hearing.

Sen. Orrin Hatch (R-Utah), a member of the Judiciary Committee, added that the frequent verbal attacks from liberal groups were only making Grassley more determined to not move the nomination.

“It’s just making Grassley madder,” he told The Hill. “He’s tough, and they’ve been so rude to him and so out of line.”

A White House official said Garland will also meet next week with Democratic Sens. Tammy Baldwin (Wis.), Michael Bennet (Colo.), Cory Booker (N.J.), Patty Murray (Wash.), Mark Warner (Va), Elizabeth Warren (Mass.) and Independent Sen. Angus King (Maine).

The latest round of meetings come as the Senate will vote on a lower-level court nomination.

Senators will vote Monday on Waverly Crenshaw’s nomination to be to a judge for the Middle District of Tennessee.

Democrats had previously tried to bring him up for a vote but were blocked by Republicans.

FAA reauthorization

The Senate will also continue its work on legislation to reauthorize Federal Aviation Administration (FAA) programs.

The voted last week to take up the legislation after getting a deal on renewable energy tax breaks that Democrats had wanted in the bill.

Senators have adopted nearly a dozen amendments, including two on airport safety. They rejected an amendment from Sen. Chuck Schumer (D-N.Y.) that would have frozen the current size of airplane seats.

Sen. Jeff Flake (R-Ariz.) mocked his vote against the amendment Friday. Posting a photo of himself crammed into an airplane seat, he said his vote might have been a “tad impetuous.”

The Senate’s legislation would green light FAA programs through September 2017, after Congress sent a short-term bill to President Obama’s desk last month.

Senators have filed dozens of amendments to the legislation.

One, from Sen. Cory Gardner would tie a fight over closing Guantanamo Bay to the aviation bill.

The Colorado Republican filed an amendment that would ban using U.S. airspace to fly a detainee from the facility into the United States.

The Obama administration handed over a plan earlier this year to close Guantanamo, including moving some detainees into the United States.

Internet access, Dodd-Frank changes

The House is slated to vote on legislation to prevent the Federal Communications Commission (FCC) from regulating the rates that companies charge consumers for Internet service.

FCC Chairman Tom Wheeler warned lawmakers in a letter last month that the bill could prevent the agency from applying its net neutrality rules to prevent Internet providers from blocking or creating paid fast lanes for preferred traffic.

The bill is part of the GOP’s effort to water down the regulations since the FCC passed its net neutrality rules last year to ensure equal treatment for all Internet traffic.

The House is also expected to consider two financial services measures. One bill up for a House vote this week would make the budgets of the Financial Stability Oversight Council and the Office of Financial Research subject to the annual congressional appropriations process. Both were created as part of the 2010 Wall Street reform law and monitor risks to the financial system.

The second measure would direct the Federal Reserve to expand its policy on the permitted debt levels of certain small bank holding companies. The current policy applies to companies with less than $1 billion in total consolidated assets, while the bill would increase the threshold to $5 billion.


Reporting Health Care Coverage, Exemptions and Payments

When you file your federal tax return, you will need to report minimum essential coverage, and report or claim a health care coverage exemption for any month without coverage for everyone on your tax return.

When you file your tax return, you are required to make a payment for the months that you and any family members do not have minimum essential coverage or a coverage exemption.

You do not need to file a tax return solely to report your health care coverage or to claim an exemption if you are not otherwise required to file. However, if you are not required to file a tax return but choose to file, you should claim the coverage exemption and file Form 8962, Health Coverage Exemptions, when you file your tax return.

If you and your dependents all had minimum essential coverage for each month of the tax year, you will indicate this on your federal tax return by simply checking a box on Form 1040, 1040A or 1040EZ. No further action is required to report your health care coverage.

If you or anyone on your tax return qualifies for a coverage exemption or the Marketplace granted a coverage exemption, you claim or report it on your return by filing Form 8965, Health Coverage Exemptions, with your tax return.

For any month you or your dependents did not have coverage or a coverage exemption, you will have to make a shared responsibility payment. If you have to make a payment, you can use the worksheets located in the instructions to Form 8965 to figure the shared responsibility payment amount. The payment will be reported on Form 1040, line 61 in the “Other Taxes” section and on the corresponding lines on Form 1040A and 1040EZ.

See the Claiming and Reporting an Exemption and Individual Shared Responsibility Provision – Reporting and Calculating the Payment pages on for more information about figuring and reporting the payment.  You can also see our fact sheet, titled Health Coverage Exemptions: What They Are, How to Obtain Them, and How to Claim Them.