Krebs Daily Briefing 23 May 2016


U.S. lifts arms ban on old foe Vietnam as regional tensions simmer

The United States announced an end to its embargo on sales of lethal arms to Vietnam on Monday, an historic step that draws a line under the two countries’ old enmity and underscores their shared concerns about Beijing’s growing military clout. The move came during President Barack Obama’s first visit to Hanoi, which his welcoming hosts described as the arrival of a warm spring and a new chapter in relations between two countries that were at war four decades ago. Obama, the third U.S. president to visit Vietnam since diplomatic relations were restored in 1995, has made a strategic ‘rebalance’ toward Asia a centerpiece of his foreign policy. Vietnam, a neighbor of China, is a key part of that strategy amid worries about Beijing’s assertiveness and sovereignty claims in the South China Sea. The decision to lift the arms trade ban, which followed intense debate within the Obama administration, suggested that such concerns outweighed arguments that Vietnam had not done enough to improve its human rights record and that Washington would lose leverage for reforms. Obama told a joint news conference with Vietnamese President Tran Dai Quang that disputes in the South China Sea should be resolved peacefully and not by whoever “throws their weight around”. But he insisted the arms embargo move was not linked to China. “The decision to lift the ban was not based on China or any other considerations. It was based on our desire to complete what has been a lengthy process of moving towards normalization with Vietnam,” he said. He later added that his visit to a former foe showed “hearts can change and peace is possible”. The sale of arms, Obama said, would depend on Vietnam’s human rights commitments, which would be made on a case-by-case basis. More:

Obama Confirms Death of Mullah Mansour, Taliban Leader, in U.S. Strike

HANOI, Vietnam — An American drone strike in a restive province of Pakistan killed Mullah Akhtar Muhammad Mansour, the leader of the Afghan Taliban, the White House confirmed on Monday. Calling the death “an important milestone,” President Obama said in a statement, released just as he was meeting with top officials in Vietnam, that the United States had “removed the leader of an organization that has continued to plot against and unleash attacks on American and coalition forces.” “Mansour rejected efforts by the Afghan government to seriously engage in peace talks and end the violence that has taken the lives of countless innocent Afghan men, women and children,” Mr. Obama continued in the statement. “The Taliban should seize the opportunity to pursue the only real path for ending this long conflict — joining the Afghan government in a reconciliation process that leads to lasting peace and stability.” At a news conference with President Tran Dai Quang of Vietnam, Mr. Obama said that targeting Mullah Mansour did not represent a shift in strategy for the United States mission in Afghanistan. “We are not re-entering the day-to-day combat operations that are currently being conducted by Afghanistan forces,” he said. But Mullah Mansour was a danger to American forces there, he said. “He is an individual who as head of the Taliban was specifically targeting U.S. personnel and troops inside of Afghanistan who are there as part of the mission I have set to maintain a counterterrorism platform and provide assistance,” Mr. Obama said. Killing Mullah Mansour sent a message that “we’re going to protect our people,” he said. The strike was the first such American drone attack in the southwestern Pakistani province of Baluchistan, which is the de facto headquarters of the Afghan Taliban. Nearly all other drone strikes have taken place in other Pakistani and Afghan areas. More:

As Obama Heads to Vietnam, Current Events Overshadow History

HANOI, Vietnam — When Bill Clinton landed in this lake-studded capital 16 years ago, the first American president to visit since the end of the Vietnam War, his mission was to put that conflict behind him, and the trip was among the most remarkable of his presidency. When President Obama arrives here early Monday, his task may be a bit less dramatic, but is in many ways far more ambitious. These two countries, bedeviled by decades of misunderstandings, violence and wariness, now have the chance to create a partnership that seemed unlikely even three years ago. Since then, China’s expansion in the South China Sea has deeply shaken a new Vietnamese government. While the leadership here has not let up on its repression of its people — the police have beaten protesters in demonstrations over an environmental disaster — it now appears more interested in playing one superpower off against the other, perhaps even giving the Pentagon some rotating access to key Vietnamese ports. It would not be an alliance; neither side seems ready for that. But it could throw Beijing off balance in the daily shadowboxing over who will dominate one of the world’s most strategically vital waterways. “It does show how history can work in unpredictable ways,” said Benjamin J. Rhodes, a deputy national security adviser who spent time over the past two years luring Myanmar out of its shell. “Even the worst conflicts can be relatively quickly left behind.” In many parts of Asia, Mr. Obama’s strategy of focusing on the region is still more of a slogan than an operational plan. He has been drawn back into Middle East conflicts in Iraq, Syria and Yemen. But in this part of Southeast Asia, particularly Vietnam, he seems on the verge of the kind of progress Mr. Clinton could only imagine during that first visit, only 10 months before the Sept. 11 attacks changed America’s priorities. Slurping noodles in a shop in Ho Chi Minh City at the end of that trip, Mr. Clinton wondered aloud to a reporter whether the Communist leaders in Vietnam were really willing to turn away from their traditional link to China. It turned out they were not. But now the Chinese, who hindered American efforts during the Vietnam War, are making things easier for the United States. For years, the Communist Party leadership in Vietnam, headed by Nguyen Phu Trong, ignored Chinese activity off the country’s coast even as its deeply nationalistic population became increasingly alarmed. But in 2014, China placed a deep-sea drilling rig to explore for oil and gas right off Vietnam, and Mr. Trong, the party’s general secretary, could not even get his phone calls to Beijing returned. More:

Report: Iraqi military starts to retake Fallujah

Iraqi Prime Minister Haider al-Abadi announced Sunday the start of military operations to retake the city of Fallujah, which has been controlled by Islamic State militants. In a televised address, al-Abadi said Iraqi forces are “approaching a moment of great victory” against the terror group, the Associated Press reported. Al-Abadi reportedly was surrounded by top military commanders from the country’s elite counterterrorism forces as he made the announcement. Fallujah is about 40 miles west of Baghdad and has been under the control of the Islamic State, also known as ISIL or ISIS, for more than two years. The government warned Fallujah residents earlier Sunday to prepare to flee the city or hang white flags outside their homes when the military began its offensive. Earlier, Defense Minister Khalid al-Obeidi had said the liberation of Fallujah would begin “in the coming days” and asked residents to cooperate with security forces. Tanks and other military vehicles lined some streets outside the city Sunday, trying to create safe exit routes. The United Nations Assistance Mission for Iraq issued a report last month saying militants were killing residents attempting to leave the city. The report said residents face acute shortages of food and medicine, and that “humanitarian conditions are worsening and human suffering is increasing” in the city. Iraqi Special Forces, backed by coalition air support, recaptured the Anbar provincial capital of Ramadi in December. Since then, Operation Desert Lynx has seen Iraqi military forces liberating a handful of towns and villages from militant control. Last week, Iraqi soldiers fighting with tribal forces and aided by air support from the U.S.-led coalition reclaimed the town of Rutbah, which sits on the highway linking Syria with Jordan. Iraqi Brig. Gen. Abdul-Ameer al-Khazraji said militants, offered little resistance. Iraq has made consistent gains against the militants on the battlefield in recent months, although suicide bombings and other terror attacks have taken a brutal toll. Even Baghdad’s heavily guarded Green Zone, home to government ministries and international operations, has seen breaches. Anti-government protesters overran blast walls Friday, drawing fire from Iraqi security forces. Scores were wounded, and the violence caused Iraqi Prime Minister Haider al-Abadi to impose a curfew in the city.

Mexico grants extradition of drug lord Joaquin ‘El Chapo’ Guzman to U.S.

Convicted drug lord Joaquin “El Chapo” Guzman can be extradited to the United States, Mexico’s Foreign Relations Department said Friday. The process can still be appealed, which means it could take weeks or months before the Sinaloa cartel leader may be sent north. Guzman’s lawyers have 30 days to appeal the decision. Juan Pablo Badillo, one of Guzman’s lawyers, told Reuters he would file “many” legal challenges in the coming days. If the extradition goes through, Guzman, who has escaped Mexican prisons twice and led authorities on a months-long search in 2015, will be transferred to U.S. Federal District Court for the Western District of Texas, according to a Mexican government website. The charges are conspiracy, organized crime, weapons possession, murder and money laundering. He will also be prosecuted in the Southern District of California on charges related to cocaine trafficking, according to the Mexican authorities. The department said Friday that the United States has guaranteed that Guzman would not face the death penalty, which is not applied in Mexico. Guzman made world headlines in July when he slipped out of his cell in the maximum security Altiplano federal prison and through a mile-long tunnel to freedom. The dramatic escape prompted a worldwide manhunt which concluded in January with his arrest following a deadly shootout in Los Mochis, a Mexican coastal city of 250,000 in Guzman’s home state of Sinaloa. Attorney General Arely Gómez González said the search had drawn few valuable clues until Guzman reached out to actors and producers and began planning a biopic. That tipped off investigators to his location, and Gómez said a journey to the rugged Sierra Madre by American actor Sean Penn drew authorities to Guzman. El Chapo — meaning “Shorty” for his 5-foot-6 stature — has been an iconic figure in the drug trade for decades. He was first captured in Guatemala in 1993 and was extradited to Mexico. He was serving a 20-year sentence on drug-trafficking charges in a different prison when he pulled off an equally intricate escape in 2001. He was recaptured in Mexico in February 2014. His grip on the multibillion-dollar cartel remained strong. The U.S. Drug Enforcement Administration says he was able to remain a force by communicating with his son and other cartel leaders through lawyers and others who visited him at the Altiplano prison outside Mexico City.



Fannie, Freddie and the Secrets of a Bailout With No Exit


When Washington took over the beleaguered mortgage giants Fannie Mae and Freddie Mac during the collapse of the housing market and the financial crisis of 2008, it was with the implicit promise that they would be returned to shareholders after being nursed back to health. But now, with the unsealing of documents this week that were produced as part of a lawsuit filed against the government, new evidence is coming to light on how intimately the White House was involved in the Treasury’s decision in August 2012 to keep all the companies’ profits for the government. That move effectively maintained Fannie’s and Freddie’s status as wards of the state. The newly released documents go beyond previous disclosures in the case and make clear that the Obama administration never had any intention of restoring Fannie and Freddie, which enjoyed implicit backing from the government before the takeover, to their status as stand-alone entities. An email from Jim Parrott, then a top White House official on housing finance, was sent the day the so-called profit sweep was announced. It said the change was structured to ensure that the companies couldn’t “repay their debt and escape as it were.” The documents also show the Treasury moving to modify the terms of the mortgage finance giants’ $187.5 billion bailout shortly after a July 2012 meeting when the Federal Housing Finance Agency, Fannie’s and Freddie’s regulator, learned that they were about to enter “the golden years” of profitability. Since then, Fannie and Freddie have returned to the Treasury over $50 billion more than they received in the bailout. But the amount they owe to the government remains outstanding. The new materials cast further doubt on arguments made in court by government lawyers that the profit sweep came about because Fannie and Freddie were in a death spiral and taxpayers needed protection from future losses. Documents unsealed last month also served to undermine that legal stance. A Justice Department spokeswoman declined to comment. The trickle of documents comes years after Fannie and Freddie shareholders sued the government, contending that its decision regarding the companies’ profits was illegal. Defending against an array of these suits, lawyers for the Justice Department have requested confidential treatment for thousands of pages of materials. In a case brought in Federal Claims Court, the government’s lawyers assertedpresidential privilege in 45 documents. The Treasury’s integral role in the profit sweep comes through clearly in the new materials, indicating that it was in charge of decisions on Fannie and Freddie, and that the Federal Housing Finance Agency, created by Congress in 2008 as a purportedly independent regulator, did as directed.


Returns are big, but the jury is still out on lawsuit investing


Heads up, financial advisers, because some of the latest performance from a fledgling investment category known as litigation finance could start catching the attention of your clients. The idea of investing capital to help finance a lawsuit is not completely new, but the May 16 passage of a provision of the 2012 JOBS Act could pave the way for lawsuit-investing pitches at the retail investor level. There is no denying the risks that a lawsuit could lose or result in a minimal settlement. But when the latest figures are showing annualized returns in the 90% range, advisers should expect the noise surrounding litigation finance to keep getting louder. “That’s what you get in these low-interest-rate markets; all the weird [stuff] comes out,” said Ed Butowsky, managing partner at Chapwood Capital Investment Management.

Mr. Butowsky is not a fan of investing in lawsuits, and wouldn’t advise his clients to do so, the same way he is personally opposed to investing in marijuana-related businesses. Part of his issue with litigation finance is that he believes gathering investment capital to finance lawsuits will lead to more lawsuits.

“I don’t like the business, and no matter how good it looks I’m not going to invest in that because I just don’t like to be associated with that kind of stuff,” he said. “There’s lots of things where the returns look strong, but you also have to check your moral character. I don’t like extortion and that’s what I think a lot of plaintiff attorneys do.” It would be difficult to dispute that the returns do look good. TrialFunder, which funded its first lawsuit last summer, is touting a 108.7% return over nine months from the settlement of a police brutality case. In another investment on the platform, investors gained 98% by advancing the settlement payout from a trip-and-fall injury lawsuit. Amoush Hakimi, a practicing attorney and TrialFunder chief executive, said he is just weeks away from rolling out a multi-lawsuit fund to be offered on the platform. For now, the litigation finance platforms are all still limited to accredited investors, but the May 16 expansion of the JOBS Act paves the way for such platforms to potentially solicit capital from retail-class investors. Mr. Hakimi said he is already eyeing a retail platform, but that he is “waiting for more clarity on the rules.”


Candidates Who Backed the Oregon Militia Overwhelmingly Voted Out


Voters in rural Harney County, Oregon, overwhelmingly rejected the ideology of right-wing militia members who made the local wildlife refuge famous with their ill-fated occupation earlier this year. Candidates sympathetic to Ammon Bundy and his fellow “patriots” were overwhelmingly voted down in Tuesday’s election, according to Oregon Public Broadcasting. The Malheur National Wildlife Refuge was temporarily “liberated” from government “tyranny” by the marauding band of misfits for three weeks in January. The militia members were protesting the harsh sentences a local rancher and his son were given after they were found guilty of arson. The stand-off ended with an FBI raid that left one occupier, Robert “LaVoy” Finicum, dead. Statewide, only a little more than half of Oregon’s eligible voters turned out in Tuesday’s primary — despite the fact that, as Rolling Stone reported, officials have made it quite easy to vote in the state. Harney County, by contrast, saw 72 percent of eligible voters cast ballots — the highest rate of voter participation in the state. During the occupation, militia members received support, in the form of food and supplies, from around the country, but Tuesday’s election showed there was only tepid enthusiasm for the goal of returning federal land to local control. Tom Schaefer, a candidate running for county judge who invoked the militia’s pet issue in his stump speeches — saying things like, “I think we need to push back with every opportunity and every bit of leverage that we have against these federal agencies that are strangling us” — took third place in his race for county judge. The winner of that race, former County Commissioner Pete Runnels, opposed the occupation. (The Pacific Patriot Network, an organization that supported the militia, called for Runnels’ resignation back in January.) Republican gubernatorial candidate Bruce Cuff, who campaigned on the issue of transferring federal lands to state control and who aligned himself with militia members by speaking at rallies protesting the shooting death of Finicum, came in third in Harney County behind Allen Alley and Bud Pierce, who won the statewide vote.


Veterans Groups Seek a Crackdown on Deceptive Colleges


WASHINGTON — Some of the nation’s largest veterans and military organizations sent letters last week to the Veterans Affairs Departmentasking it to crack down on colleges that prey on veterans by charging exorbitant fees for degrees that mostly fail to deliver promised skills and jobs. The letters were signed by top officials at the American Legion, the National Military Family Association, the Military Officers Association of America and nearly 20 other groups. They called on the department to improve its oversight of colleges that have engaged in deceptive recruiting and other illicit practices but that continue to receive millions in funding under the G.I. Bill. “We encourage you” to take steps against the dozen or so colleges facing “federal and state action for deceiving students,” one of the letters says. The career training and for-profit college industry has been accused in recent years of exploiting veterans, poor people and minorities. Veterans are an especially enticing target because, under a loophole in federal law, money from the G.I. Bill does not count against a cap on federal funding to for-profit schools.

The Veterans Affairs Department has traditionally done little to police the for-profit college industry despite handing more than $1.7 billion for the 2012-13 school year to for-profit colleges. A 2014 Senate reportfound that seven of the eight for-profit college operators that received the most money from the department were under investigation by state or federal authorities for misleading recruiting practices or other violations of federal law. In an emailed statement, Terry Jemison, a spokesman for the department, said it relied largely on states to police the industry. State agencies “are required to ensure that all schools, including nonaccredited schools, have been licensed to operate in their state,” Mr. Jemison wrote. But a recent study by Yale law students found that the department was required by statute to enforce federal education guidelines prohibiting fraudulent practices. Democrats on Capitol Hill have cited the study as more evidence that the department is failing to protect veterans from predatory practices.

“The failure to crack down defies not only the White House priorities and congressional demands, but logic and common sense,” Senator Richard Blumenthal, Democrat of Connecticut, said in an interview.

The industry, defending itself against the allegations, says it offers nontraditional students a flexible way to gain career skills. More:


Key G.O.P. Donors Still Deeply Resist Donald Trump’s Candidacy


A powerful array of the Republican Party’s largest financial backers remains deeply resistant to Donald J. Trump’s presidential candidacy, forming a wall of opposition that could make it exceedingly difficult for him to meet his goal of raising $1 billion before the November election. Interviews and emails with more than 50 of the Republican Party’s largest donors, or their representatives, revealed a measure of contempt and distrust toward their own party’s nominee that is unheard of in modern presidential politics.

More than a dozen of the party’s most reliable individual contributors and wealthy families indicated that they would not give to or raise money for Mr. Trump. This group has contributed a combined $90 million to conservative candidates and causes in the last three federal elections, mainly to “super PACs” dedicated to electing Republican candidates. Up to this point, Mr. Trump has embraced the hostility of the Republican establishment, goading the party’s angry base with diatribes against wealthy donors who he claimed controlled politicians. And he has succeeded while defying conventions of presidential campaigning, relying on media attention and large rallies to fire up supporters, and funding his operation with a mix of his own money and small-dollar contributions. But that formula will be tested as he presents himself to a far larger audience of voters. Mr. Trump has turned to the task of winning over elites he once attacked, with some initial success. And he has said he hopes to raise $1 billion, an enormous task given that he named a finance chairman and started scheduling fund-raisers only this month.


Trump camp quietly courts Muslims


Donald Trump’s top foreign policy adviser has quietly opened backchannels within Muslim and Middle Eastern communities in the U.S. in an attempt to win over a small but increasingly important voting bloc.
Walid Phares, a top national security adviser for Trump, has been courting prominent Muslim Republicans and conservative Middle Eastern activists in the U.S. Some Muslim Republicans and conservative Middle Eastern activists have also engaged with other top campaign officials about furthering Trump’s outreach to those communities. In a Friday phone interview with The Hill, Phares said Trump campaign officials had not directed him to engage with the groups. Rather, he described the talks as a natural extension of the relationships he’s built over decades of policy work on Middle Eastern affairs. Phares said that he initiated contact with several individuals and groups to ask them to organize for Trump or to sell them on Trump’s positions in hopes that they’d at some point support the likely GOP nominee. But the bulk of the discussions, Phares said, were initiated by curious Muslim Republicans or Middle Eastern conservatives seeking additional information on Trump’s views or hoping to influence his policies – particularly as they pertain to the temporary ban on Muslims entering the country. “Most of those who reached out said they want to support Mr. Trump, but they’re not clear about some of the statements he’s made,” Phares said.
“These people know what they want – they’re concerned about the well-being of their communities and believe that Trump has the right economic and social agenda,” he continued. “But they’re trying to get a handle on how he’ll deal with the Middle East.” The behind-the-scenes discussions come as Trump continues to deal with blowback over his proposal to temporarily ban Muslims from entering the country.
The presumptive GOP nominee has also said he’s considering convening a commission headed by former New York City mayor Rudy Giuliani (R) to examine the “problem“ of “radical Islam.”  Trump’s critics have cited those remarks as evidence he’s racist or xenophobic. Trump has since softened his rhetoric on the ban, saying it’s merely a “suggestion.” Phares described the ban as a statement about how seriously Trump views the terror threat, rather than a statement of policy. He said Trump will further explain and refine his position as he takes government briefings and meets with interested parties. More:

How the GOP Went South

By joining the Republican Party, once hated in Dixie for being the party of Lincoln and subsequent carpetbaggers, the South helped transform the GOP into the dominant national party for decades. The conservative movement’s founders might have been intellectuals and the GOP establishment once might have been Northeastern elites, but that arrangement was always tenuous. When Willie Sutton was asked why he robbed banks, the infamous outlaw supposedly replied, “Because that’s where the money is.” Likewise, anyone who seeks to understand why conservatism became what it is can only expect this answer: “Because that’s where the votes were.” Indeed, after the 2014 midterms, almost half of the Republican congressional delegation represented Southern districts. But what happens when you build your political coalition around a constituency that is no longer sufficient? What is more, what happens when appeasing your base and growing your coalition become mutually exclusive goals? Times change, and yesterday’s solution becomes tomorrow’s challenge. Such is the case with today’s GOP and the South. The South helped fuel Richard Nixon’s romp over George McGovern and Ronald Reagan’s 49—1 rout of Walter Mondale. It did its part in saving us from a President Dukakis or Kerry. It would be hard to overestimate the importance of the GOP aligning with Southern values. Redskins coach George Allen was famous for saying, “The future is now.” Sometimes, to borrow a phrase from Donald Rumsfeld, you go to war with the army you have. That’s the tradeoff Republicans made, and it was perfectly rational. But there were also unintended consequences. A political party inevitably reflects its constituents’ attitudes and biases. The notion that any party can change its voter base without changing its philosophy and its politicians is naive; pandering inevitably becomes a self‑fulfilling prophecy. Republicans captured the South, yes, but the South also captured the GOP. The addition of the South and rural communities in states like South Carolina, Alabama, and Mississippi as a reliable bloc of the Republican coalition was one of the many factors leading to the GOP’s image as both the stupid party and the party of white men with Confederate flag stickers on the backs of their trucks. This may not be fair—it certainly plays to stereotypes. But that hardly matters. Today, this is increasingly seen as a liability.


Primed to Fight the Government


REDMOND, Ore. — B.J. Soper took aim with his AR-15 semiautomatic rifle and fired a dozen shots at a human silhouette target. Soper’s wife and their 16-year-old daughter practiced drawing pistols. Then Soper helped his 4-year-old daughter, in pink sneakers and a ponytail, work on her marksmanship with a .22-caliber rifle. Deep in the heart of a vast U.S. military training ground, surrounded by spent shotgun shells and juniper trees blasted to shreds, the Central Oregon Constitutional Guard was conducting its weekly firearms training. “The intent is to be able to work together and defend ourselves if we need to,” said Soper, 40, a building contractor who is an emerging leader in a growing national movement rooted in distrust of the federal government, one that increasingly finds itself in armed conflicts with authorities.

Those in the movement call themselves patriots, demanding that the federal government adhere to the Constitution and stop what they see as systematic abuse of land rights, gun rights, freedom of speech and other liberties. Law enforcement officials call them dangerous, delusional and sometimes violent, and say that their numbers are growing amid a wave of anger at the government that has been gaining strength since 2008, a surge that coincided with the election of the first black U.S. president and a crippling economic recession. Soper started his group, which consists of about 30 men, women and children from a handful of families, two years ago as a “defensive unit” against “all enemies foreign and domestic.” Mainly, he’s talking about the federal government, which he thinks is capable of unprovoked aggression against its own people. The group’s members are drywallers and flooring contractors, nurses and painters and high school students, who stockpile supplies, practice survival skills and “basic infantry” tactics, learn how to treat combat injuries, study the Constitution and train with their concealed handguns and combat-style rifles. “It doesn’t say in our Constitution that you can’t stand up and defend yourself,” Soper said. “We’ve let the government step over the line and rule us, and that was never the intent of this country.” More:


This Is What the Future of American Politics Looks Like
For political observers, 2016 feels like an earthquake — a once-in-a-generation event that will remake American politics. The Republican party is fracturing around support for Donald Trump. An avowed socialist has made an insurgent challenge for the Democratic Party’s nomination. On left and right, it feels as though a new era is beginning. And a new era is beginning, but not in the way most people think. Though this election feels like the beginning of a partisan realignment, it’s actually the end of one. The partisan coalitions that defined the Democratic and Republican parties for decades in the middle of the twentieth century broke apart long ago; over the past half century, their component voting blocs — ideological, demographic, economic, geographic, cultural — have reshuffled. The reassembling of new Democratic and Republican coalitions is nearly finished. What we’re seeing this year is the beginning of a policy realignment, when those new partisan coalitions decide which ideas and beliefs they stand for — when, in essence, the party platforms catch up to the shift in party voters that has already happened. The type of conservatism long championed by the Republican Party was destined to fall as soon as a candidate came along who could rally its voters without being beholden to its donors, experts and pundits. The future is being built before our eyes, with far-reaching consequences for every facet of American politics.  The 2016 race is a sign that American politics is changing in profound and lasting ways; by the 2020s and 2030s, partisan platforms will have changed drastically. You may find yourself voting for a party you could never imagine supporting right now. What will that political future look like? Today’s Republican Party is predominantly a Midwestern, white, working-class party with its geographic epicenter in the South and interior West. Today’s Democratic Party is a coalition of relatively upscale whites with racial and ethnic minorities, concentrated in an archipelago of densely populated blue cities.

In both parties, there’s a gap between the inherited orthodoxy of a decade or two ago and the real interests of today’s electoral coalition. And in both parties, that gap between voters and policies is being closed in favor of the voters — a slight transition in the case of Hillary Clinton, but a dramatic one in the case of Donald Trump. More:


Fitbit accuracy questioned in lawsuit

(CNN)Your favorite fitness tracker may not be totally accurate, according to a study used in an amended complaint filed Thursday against Fitbit. The class-action lawsuit, filed earlier this year, argues that the PurePulse technology used in the Fitbit trackers that measure your heart rate doesn’t do it as well as the company’s marketing material promises, a claim Fitbit denies. The technology is used in the more expensive models of the device, the Surge, Blaze and Charge HR. The lawsuit was filed on behalf of people who bought these Fitbits specially to help them track their heart rate, whether for health reasons or to make sure they are getting the most out of their workouts. “We are not arguing that it is a medical device. I think that is irrelevant,” said Jonathan Selbin, one of the attorneys who filed the lawsuit. “This is about the way they market it and that they charge a premium for the heart rate monitor, but it’s not giving a meaningful measurement.” The suit alleges that a defect in the trackers is a safety hazard because people who rely on inaccurate heart rate readings for medical purposes could be at risk. The class-action members say there is no reasonable way for them to know that the devices can be inaccurate and that they might not have even bought them if they knew. The amended complaint, filed Thursday, added a new study that looked at how the trackers worked for 43 healthy adults, compared with an ECG and against each other. The participants wore two Fitbits during the test. The study — which was funded by the legal team that brought the lawsuit — found that the devices were off by, on average, 20 beats per minute during moderate- to high-intensity exercise. The lawsuit concludes that the “devices could not provide meaningful heart rate data” when someone is exercising. More:



New Developments in Bentley Investigation

MONTGOMERY—The investigation into Governor Robert Bentley has taken a new turn, with the recusal of US Attorney for the Middle District of Alabama, George Beck. Those with knowledge of the investigation believe that Beck’s recusal is due to his long association with donor’s, consultants, and advisors, who have been been involved in various capacities with the Bentley administration. While much of the probe into allegations against Bentley has been under the FBI’s Public Integrity Section (PIN), ultimate oversight has now been given to John A. Horn the US Attorney for the Northern District of Georgia. PIN oversees the federal effort to combat corruption by prosecuting elected and appointed public officials at all levels of government. Horn, a career prosecutor, was appointed by the Obama administration in 2015, for the district that runs from the mountains of northern Georgia to the Atlanta suburbs in the south, and from the western border of Alabama to the two Carolinas in the east. The primary office is located in the US courthouse in Atlanta. Bentley continues to claim he has done nothing unethical, or illegal. He recently reminded the voters that God had chosen him to lead the State, and that he would finish that mission. A task force from the FBI, the Postmaster General, and the IRS is conducting the investigation into allegations of obstruction of justice, fraudulent use of campaign contributions, improper use of State resources, and other potential criminal acts, according to former Bentley confidants, and staffers, who are cooperating with the investigators. The most serious scrutiny surrounds Bentley’s involvement with Rebekah Caldwell Mason, his former senior advisor, and alleged paramour. More:


Advisory: Pregnant women, infants should avoid drinking tap water in some parts of AL

(WIAT) — Eight water systems in Alabama are said to have concentrations of chemicals above the health advisory issued by the EPA yesterday. The EPA health advisory was developed to protect “sensitive populations” like breast-fed infants, pregnant women, and infants fed with formula prepared with tap water. The compounds found in the water systems are man-made chemicals that resist heat, oil, grease and water, and are found in products like nonstick cookware, products that protect carpet and waterproof clothing. The chemicals are called perfluorooctane sulfonate (PFOS) and perfluorooactanoic acid (PFOA). According to the EPA, pregnant women in the identified communities (below) should consider finding an alternate source of drinking water. If your infant is fed with formula, consider using formula that does not require adding water. They also say other people may consider these steps. The exposure to the chemicals is mainly from ingestion, so other uses of tap water like showering, bathing and laundry should be fine. PFCs are NOT removed by boiling. “The health effects of exposure in the general population are not totally clear at this time, but the health advisory level will be protective for them as well,” the ADPH said. After the EPA released their final health advisory regarding the chemicals, the Alabama Department of Public Health issued a release, naming the eight North Alabama water systems that have tested as having concentrations above the newly released health advisory levels:


The Council Strikes Back


During its recently concluded regular session, the Alabama Legislature passed — and Gov. Robert Bentley signed into law — substantive changes in the Mayor-Council Act, the document under which Birmingham’s city government has operated since 1963. Essentially, numerous powers once reserved solely to the Birmingham City Council have been either transferred to the Office of the Mayor or are now shared between the two branches of government. Among other things, the amended law mandates that the council elect new officers annually, rather than every four years. With the law becoming effective immediately on its passage, the council was obliged to hold elections last week. By a 5-4 vote, sitting Council President Johnathan Austin was re-elected, while Steven Hoyt replaced Jay Roberson as President Pro-Tem. Following the election, Austin reshuffled the council’s committee assignments to reflect the majority that re-elected him as president. Some of the councilors who were reassigned complained not only about the reshuffling but also about being required to change office space along the long hallway that houses the council. Collectively, these recent events beg questions about how the council will function going forward, both internally and in its relationship to a newly powerful Mayor William Bell — and how those dynamics may impact the municipal election that will take place in 2017. To answer those questions — and to talk about the current state of the city in general — three members of the new council majority visited Weld’s offices on the evening of May 16. Austin and Hoyt were joined by Councilor Sheila Tyson (Councilors Marcus Lundy and Lashunda Scales had prior commitments) in a 90-minute conversation with Weld publisher Mark Kelly, excerpts from which appear at link below.


House Speaker Mike Hubbard’s lawyers drop effort to get identities of 2 commenters


House Speaker Mike Hubbard’s attorneys have dropped efforts to subpoena the Alabama Media Group to reveal the identities of two anonymous commenters to news stories on Hubbard’s attorneys on Friday notified the court it is withdrawing its subpoena to the Alabama Media Group “as it is unnecessary at this time.” The notification did not indicate why the attorneys were seeking to withdraw the subpoena for Hubbard’s ethics trial, which begins Tuesday in Lee County. A hearing on the subpoena request had been set at the start of the trial Tuesday morning, but in Friday’s notice by Hubbard’s attorneys stated the hearing is now unnecessary. Alabama Media Group had asked Lee County Circuit Judge Jacob Walker to block the subpoena because it violates a right to anonymous free speech under the First Amendment and because it violates Alabama law and rules of criminal procedure. The subpoena sought information about the accounts of commenters “Reaganwasbetter” and “noonewouldusethis,” including email addresses, IP addresses and any and all registration information. Among its arguments, AMG asserted that posted comments identified by Hubbard’s lawyers do not satisfy the factors that would outweigh the protection of anonymous free speech. A 16-member jury – including four alternates – was selected last week for the trial that’s expected to last several weeks. A Lee County grand jury indicted Hubbard in October 2014 on 23 felony ethics charges. He is accused of using his political offices to benefit his businesses. Hubbard has denied any wrongdoing.


Impact of Mike Hubbard trial could go beyond courtroom


In a schoolroom-sized chamber on the second floor of the Lee County Justice Center Tuesday, a trial will begin that could cut through Alabama politics like a coroner’s knife, with all the grisly revelations that follow. Lee County Circuit Judge Jacob Walker should hear opening arguments in House Speaker Mike Hubbard’s trial on 23 felony ethics counts, after a possible hearing dealing with outstanding motions in the case Tuesday morning. Prosecutors with the Alabama Attorney General’s Office say Hubbard used his public offices – first as Alabama Republican Party chairman, then as House Speaker – to secure consulting clients and business investments in violation of the Alabama Ethics Act. Hubbard, a Republican from Auburn, maintains his innocence and his attorneys say the transactions were proper.

The proceedings may pull in other notable political figures, including Gov. Robert Bentley; former Gov. Bob Riley and dozens of legislators, lobbyists and staffers, who all could testify in the case. Hundreds of emails Hubbard sent and received between 2011 and 2013, already included in the case file, will add to the debate by attorneys about the meaning of actions and transactions Hubbard had with dozens of politicians, lobbyists and business leaders inside and outside of Montgomery. Beyond the courtroom, the outcome of the trial could have a significant effect on Alabama politics and the House of Representatives at a time when Bentley and Alabama Chief Justice Roy Moore find themselves stuck in their own controversies and critical decisions on Medicaid loom. The charges against Hubbard fall into four broad categories:


The Mike Hubbard case: Breaking down the charges


While Alabama House Speaker Mike Hubbard faces 23 felony ethics charges, many of the counts cover the same actions. Counts 1 through 4: Craftmasters and the Auburn Network

The charges: Prosecutors accuse Hubbard of using his position as Alabama Republican Party chairman to steer GOP business to the Auburn Network, Hubbard’s consulting firm, and Craftmasters, an Auburn-based printing firm that Hubbard holds a partial interest in. The charge comes under a law preventing public officials from gaining personal benefit from their position. The background: Hubbard served as chairman of the Alabama Republican Party from 2007 to 2011, helping the GOP win control of the Legislature in 2010. In 2012, then-chairman Bill Armistead commissioned an audit of party spending during the campaign that found that close to $800,000 in printing business went to Craftmasters. Hubbard pushed for release of the report. Prosecutors: In a February 2015 filing, prosecutors said the business meant that Hubbard aimed to “essentially embezzle” party money. Prosecutors cite an email where one consultant said they were being “forced” to use Craftmasters despite what they said was higher prices at the company. Hubbard: Hubbard said the contract with Craftmasters allowed economies of scale that saved the party money. In a September 2015 filing challenging the constitutionality of the Ethics Act as applied to Hubbard, Mark White, then an attorney for Hubbard, did not address the specific actions but argued that political parties had the right under the First Amendment to disburse their money as they saw fit. Counts 5 and 6: The American Pharmacy Cooperative Inc. The charges:  Prosecutors accuse Hubbard of attempting to insert language into the 2014 General Fund budget that would have made the American Pharmacy Cooperative Inc. (APCI), one of his clients, the only firm that would have been able to bid on a Pharmacy Benefit Manager (PBM) discussed at the time for the state’s Medicaid program, and then voting for the budget with the language in it. The charge falls under a law forbidding officials from voting for legislation “in which he or she knows or should have known that he or she had a conflict of interest.” The background: Hubbard had a $5,000-a-month consulting contract with APCI, signed in June 2012 that included a provision that prevented Hubbard “from providing the services of consultant … within the state of Alabama.” The speaker voted for a version of the General Fund budget that included the language, which ultimately came out of the final budget. Prosecutors:  Prosecutors say APCI resisted the implementation of a PBM at first but in the spring of 2013 gave suggested budget language to then-Rep. Greg Wren, R-Montgomery, that would have made APCI the only entity that could successfully bid on such a program. Prosecutors say Hubbard or his staff was present during discussions of the language and cite an April 19, 2013, letter from APCI President Tim Hamrick thanking Hubbard for preventing “a large, out-of-state pharmacy benefit manager from taking over the pharmacy program in Medicaid.” Wren, who pleaded guilty to a misdemeanor ethics charge over the issue and resigned his seat, could testify on the issue. Hubbard: Hubbard has said his work on the APCI contract only involved out-of-state issues. White wrote in his September filing the speaker did not have a conflict of interest as defined in state law because he did not hold a leadership role or ownership stake in the organization and because there was no guarantee APCI would have won a contract and the financial benefits of it. Counts 7 through 9: The Southeast Alabama Gas District (SEAGD) The charges: More:




Opinion – Josh Moon: Roy Moore’s attack on Christianity


Enough is enough, Roy Moore. We all get it by now. By this point, there isn’t a person who has lived in this state more than a year who hasn’t listened to a lifetime worth of Moore blather on and on incessantly about his impeccable morals – which have now twice led to him failing to honor the oaths he took when becoming a Supreme Court justice – and blather even more about the moral failings of the sinners all around him. The non-Christians are ruining America. The gays are ruining marriage. The Southern Poverty Law Center is ruining law. Ambrosia Starling is ruining his dreams. It must be mighty tough to be Roy Moore, what with the weight of all that is righteous and holy resting so heavy on his shoulders alone.

Except it’s not. Moore’s faux-Christian Soldier routine is a lucrative one, hauling in millions of dollars for him and his family to spread around. There’s been more than $2.5 million in donations to Moore’s nonprofit organization, the Foundation for Moral Law, in four years. From that pot, he, his wife and his son, Caleb Moore, have earned nice salaries. There are also the questionable avoidances of serious jail time for Caleb Moore, who has now been arrested seven times, failed a drug test while in court-ordered, Christian rehab and was still provided entrance into a pre-trial diversion program following his latest arrest in March 2015. But ignore all of that. And ignore Roy Moore’s continued hateful speech. His willingness to say anything and issue any order – rule of law be damned – to enflame his followers and send them scrambling to write him a check. But mostly, ignore the fact that while Roy Moore is living like a king, reaping the fame and attention that his rhetoric brings, there are actually people out there – good, Christian men and women – teaching and living the actual Christian bible, following the kindness and goodness directed by Jesus Christ. They help the homeless. They feed the needy. They clothe the children. They fight in courtrooms and jails for the rights of the oppressed and abused. They donate their time and money, without a second thought or an expectation of glory, to help those who need it most.

They belittle no one, welcome all. They inspire people just by being themselves and set an example that make others want to live better lives. They work through churches, through government agencies, through private business and just in their own personal ways. If you are a Christian, and for even a second you’ve wondered why your religion has lost the respect or the standing it once had, it is because these people have faded deep into the shadows while the hateful, vitriolic, defensive and offensive speech and tactics of men and women like Roy Moore, Fred Phelps and Franklin Graham have come to be the face of modern Christianity. A perfect example came Thursday, when several pastors and local leaders took to the steps of the Alabama Judicial Building to rally for Roy Moore. All of them were there hoping to grab a piece of fame and notoriety, as they heaped praise on a man who faces removal from the bench for a second time and who has taken great pride in casting as many stones as possible at those who have sinned differently than him. To honor such a person while invoking the name of Jesus Christ, the disconnect from reality has to be great. And it was. Consider Troy Towns, the black vice-chairman of the Alabama GOP, advocating that states have the right to make their own laws – a position that, if followed in the past, would have left Towns speaking at the “colored podium” on Thursday.

Towns also took off on a rant about the horrors of gays being accepted into the church – a phenomenon he blamed on “too many punks in the pulpit.” And somewhere, the original Pulpit Punk – the one who shielded a prostitute, dined with thieves, forgave the immoral woman, touched the leper, washed his disciples’ feet and really harped on love and kindness – had to be disappointed that so much good has been lost to hate and greed. I hear often of the “attacks” on Christianity, and it was a popular theme at Thursday’s rally. But the only real threat to Christianity in a nation where churches are free and plentiful is from the people within who have twisted the faith for their own gain, to excuse their own bigotry and to line their own pockets. People like Roy Moore.


Dear GOP: I’m just not that into you


Dear GOP, I think we need some time apart. Yes, yes, I know we’ve been together since the 1980s. We used to have so much in common — winning the Cold War, free enterprise and most of all a can-do attitude about America. Our closest friends – the Reagans, the Bushes and later the Romneys – were admirable, and how proud we were to be in their company. What nice, upstanding types they were. We believed in standards, civility and — how quaint! — facts. Sure, there were stressful times. Not every four years was a victory party, but there were so many witty and interesting people to lift our spirits — William F. Buckley Jr., Irving Kristol, Jeane Kirkpatrick — and what fun we had defending Western civilization and skewering moral equivalence. It was inspiring. And along came the younger idealists — that nice Paul Ryan and the whip-smart Arthur Brooks. The surly ones were on the left. Nothing was ever good enough for them. The grass was always greener on the other side of the Atlantic. Then our relationship got, well, difficult. In lieu of interesting discussions, there were arguments. Yelling. Accusations. Feelings of betrayal. Instead of fighting the Democrats, we spent precious time and energy fighting one another. No more “Firing Line,” not even “Crossfire.” It got worse: One book after another by know-nothing talk show hosts, the loudmouths in talk radio, the conspiratorialists in the blogs. Suddenly it became chic to be angry and ignorant, and awkward to step outside the conservative cul-de-sac. Folks who had been preaching the gospel of personal responsibility became professional victims. The MSM! The MSM! Enough with all the whining. Between all the nasty language about our immigrant neighbors and the ranting about China, it has become tiresome. Everything’s a conspiracy. Scientists, journalists, foreigners and the miscellaneous elites — can they all be out to get us? You really need to get the whole Trump thing out of your system. The denials and lies, the name-calling. One day it’s cut taxes, then it’s raise them. One day wages are too high, and the next day Trump can’t see how people get by on so little. Yes, release his tax returns; no, then again, don’t. I get a headache just trying to keep up with all the excuses and contradictions. Pretending to be someone else, admitting it and then denying it — that’s all too weird.

Now that Reince Priebus fellow now goes around saying all that evidence of Trump’s mistreatment of women is just evidence of a plot by political opponents? Really!? (He sounds like a liberal who won’t “judge” anyone and makes excuses for all sorts of bad behavior. “It’s when people live in glass houses and throw stones that people get in trouble. . . . It’s not necessarily that people make mistakes or have regrets or seek forgiveness. It’s whether or not the person launching the charge is authentic in their own life and can actually be pure enough to make such a charge.” I confess, I haven’t a clue what he means.) Then he sounds like Chicken Little, saying the country will be destroyed if we take up with an earnest conservative. Whenever he is on TV, the poor man looks like he’s making a hostage video. I remain a realistic conservative, a believer in America’s ability and obligation to do good in the world; in the wonders of the free market — including free trade and legal immigration; in limited but energetic government (although not all centralized at the federal level); and in the rule of law and individual rights. Until you get your act together, however, I think some private time would help. I’ll enjoy being independent (still and always a reform-minded conservative) or maybe see if there are any new parties starting up. That Ben Sasse fellow from Nebraska seems awfully smart and well-grounded. You work on your anger management issues. Turn off Fox News and turn on the History Channel. Make some friends who don’t think just like you. Tolerate some iconoclasts. For heaven’s sake, get rid of Trump and get his cult followers out of their trance. No more excuses for bad behavior, and no more pretending we can hide from the rest of the world. Then let’s talk, maybe in December. By then you should have plenty of free time. Yours, Right Turn


Gov. Bentley isn’t stupid, but he thinks you are


Gov. Robert Bentley wants to play games. Thursday I wrote a column about how the governor has been using a private email account for public business, how we asked for those emails under Alabama’s Open Records Act, and how the governor’s office told us in no uncertain terms that those records are not public.

But when reporter Mike Cason asked the governor about it later that afternoon, Bentley decided to be as coy as he was condescending. “They are a public record and in fact, whoever wrote the article does not know how to ask for the material. If they would ask for it properly they could get the material,” Bentley told Cason. If it takes saying “please,” I’m not too proud to be polite. I’ll even give the governor a “pretty please with sugar on top.” But that’s not what the governor wants. Instead, the governor wants to play hide-and-go-seek. From the beginning of his administration, Bentley has used a private email address for public business. He sent work-related email from that account and he received work-related email with that account. Staff knew it, and yet when my colleague John Archibald first asked for the governor’s emails last year, he got this run-around from the governor’s spokeswoman, Jennifer Ardis.

Archibald: “So his emails are held on a private email server? I’m not sure I understand.”

Ardis: “He does not have a state email account.”

Archibald: “Does he send any email in an official capacity? Does he use email?”

Ardis: “The governor does not have nor use a state email account.”

Archibald: “Sorry to be so redundant, but does he use email at all? Seems like if he does we fall into the whole Hillary hole. How is it different?”

Ardis: “Let me check on that and I will get back to you.”

For those keeping score at home, Ardis never got back to him on that.

In fact, the governor’s office never volunteered or admitted the fact that he used only his private email account. We had to get that information from former staffers. With his private email address in-hand, I asked again for those emails. That request was denied. And Bentley blathers on. “Nothing is being hidden,” the governor said Thursday. “Everything is open. All they have to do is access it properly.”

Access it properly? How does that work? Do I say “open sesame”? Do I dance a jig on Jeff Davis’ star?

We submitted a public information request. It was clear which documents we were requesting. The governor’s office said those documents were not public. But the governor says we could have gotten them, not by asking for his email, but by asking for other people’s email. “All of that is public record,” Bentley said. “All they have to do is go and ask the person who either sent the email that’s public or received an email from me, and they can get it. That’s public record.” But here’s the thing. Let’s say that other members of the governor’s staff use private email accounts for their public job (they do), or let’s suppose the governor emails back and forth with his off-the-books senior political advisor/love interest, Rebekah Caldwell Mason at her Gmail account (he did) — using the governor’s method, none of that would be accessible. He knows that. He’s not being stupid. He just thinks you and I are stupid. And let’s face it, the reason the governor is playing this game is that he doesn’t want us to read those emails, just as he doesn’t want us to read the text messages he exchanged with Mason on his burner phone. But that’s not all that those emails could show. They could show, for instance, whether Chattanooga real estate mogul and campaign sugar daddy Franklin Haney improperly influenced the governor regarding a nuclear power plant in northeast Alabama. They could show the political machinations behind the governor’s decision to refuse expanding Medicaid. They could show whether the governor’s concerns with his former ALEA secretary, Spencer Collier, were really about malfeasance or if all that was just a cooked-up excuse invented to discredit Collier. The list goes on and on, but it’s really this simple: Bentley’s emails and text messages could reveal the truth about his administration. And that’s the last thing he wants you to see.


Morning Money

GOLDMAN ON HOW TO INVEST 2016 — From Goldman Sachs’s Weekly Kickstart email: “Although prediction markets currently assign a high probability that Hillary Clinton will win the election, polls in prior contests tightened as voting day approached. Increasing political uncertainty will lift equity market uncertainty in coming months. From a portfolio strategy perspective, protectionism and tax policy are two areas of debate that have investment implications.

“Buy stocks with high US sales and high effective tax rates and avoid firms with high foreign sales and low tax rates. … Politics is now a topic in every client discussion. Last week we argued the S&P 500 was vulnerable to a 5 percent-10 percent drawdown and the index could fall to 1850-1950 during the next several months although it would end the year at 2100, roughly 3 percent above the current level.”

NO NEED TO WORRY ABOUT BREXIT? — Pantheon UK’s Samuel Tombs: “Sterling rebounded last week and the probability of a Brexit, implied by betting markets, fell from 30 percent to 20 percent. … [T]he evidence that support for ‘Bremain’ has risen recently is persuasive. [S]even opinion polls were published last week, all showing that support for the status quo has risen. ‘Bremain’ had an average lead of 14 percent over ‘Brexit’ in four phone polls, exceeding the 9 percent lead in the same polls a month ago. The shift in the online polls was more modest, but visible. …

“The pick up in ‘Bremain’ support seems to reflect voters placing more weight on economic issues, and less on immigration. The economy is now the most often-mentioned consideration among voters, according to ComRes. The barrage of warnings from the Treasury, Bank of England and IMF has paid off. … The situation also still is relatively fluid; about 20 percent of people who have said that they will vote for either Remain or Leave in recent polls also said that they might change their minds”

MAYBE STILL WORRY — FT’s George Parker and Chris Giles: “Britain will be plunged into a year-long recession if it votes to leave the EU, according to a bleak analysis of the short-term economic shock of a Brexit vote to be published on Monday by the Treasury. … David Cameron and George Osborne hope the Treasury warning of an immediate hit to jobs, interest rates and house prices will be the clinching argument for undecided voters as the EU referendum campaign enters its final month.

“The Treasury analysis suggests that growth could be 3.6 per cent lower after two years if Britain votes to leave the EU, compared with the forecast for continued growth after a vote to remain. This would produce a recession similar to that of the early 1990s but not as bad as the one that followed the 2008 crash. Leave campaigners will point to the large margin of error implicit in the Treasury’s economic model, which claims that the economy could be 6 per cent lower than the current forecast under a worst-case scenario”

RIGHT CONTINUES TO RISE IN EUROPE — Vienna/AFP: “Austrian far-right hopes of winning a presidential runoff remained on hold Sunday as the candidates were neck-and-neck in a battle closely watched by the EU, which is struggling to contain a surge of anti-immigrant parties. … A win would see Norbert Hofer of the Freedom Party (FPOe) become the European Union’s first far-right head of state. On Sunday evening, the vote was evenly split between Hofer of the Freedom Party (FPOe) and Green-backed economics professor Alexander van der Bellen, with both on 50.0 …

“As a result, the winner is unlikely to be known before Monday, once the postal vote has been counted. Close to 900,000 people — or a record 14 percent of Austria’s 6.4 million eligible voters — cast their ballot by mail this year. A huge influx of asylum-seekers, rising unemployment and frozen reforms has driven voters away from the two centrist parties that have dominated Austrian politics since 1945”

The far right and far left taking over from establishment candidates? Sure sounds familiar! Though in our election one establishment-friendly candidate still seems like a lock to limp to the nomination.

HRC ON TRUMP: MAYBE HE’S NOT SO RICH — Speaking of that candidate limping to the finishing line, Hillary Clinton on NBC’s “Meet the Press” : “There’s no evidence he has any ideas about making America great, as he advertises. He seems to be particularly focused on making himself appear great. And as we go through this campaign, we’re going to be demonstrating the hollowness of his rhetoric’ … She also attacked him for not releasing his tax returns and proving ‘that he actually has the level of success he claims to have.’”

BERNIE DOES IT TOO! — Bernie Sanders on Saturday in California: “[Trump] tells us is he is a billionaire. Who knows? He is probably as broke as everybody else is.”

SENSE A THEME? — Chapter One in the “Beat Trump” playbook is to raise serious questions about whether his biggest selling point — that he is a monster success who could make America “win” again — is built on a huge pile of lies. And until Trump releases tax returns, chipping away at his personal narrative of success is not likely to be all that hard. Democrats will never pry away Trump’s true believers but they could make his recent bump in the polls his high water mark.

ASIA UP; JAPAN DOWN — Reuters: “Asian shares rose on Monday after a solid session on Wall Street, while the dollar moved away from recent highs though remained supported as investors bet that the U.S. Federal Reserve was on track to raise rates sooner rather than later. … But Japan’s Nikkei stock index extended losses, shedding 1.1 percent on worrying economic data and reports that Japan’s sales tax increase would proceed as planned.”

DRIVING THE WEEK — President Obama visits Vietnam and Hiroshima, Japan in one of his last big foreign trips as president. Prior to Hiroshima, President Obama will spend two days in central Japan for his final G-7 meeting … Senate Finance has a hearing Tuesday at 10:00 a.m. on “Debt versus Equity: Corporate Integration Considerations.” … Senate Banking has Iran sanctions hearing at 10:30 a.m. Tuesday and 2:30 p.m. Wednesday … Second estimate of Q1 GDP at 8:30 a.m. Friday expected to rise to 0.9 percent from 0.5 percent.

MONDAY FUNNIES — This gun enthusiast is apparently very worried about losing the constitutional right to wax their arms.

POLL BLAST ONE: THE RACE IS CLOSE — POLITICO’s Matthew Nussbaum: “Donald Trump holds a razor-thin lead over Hillary Clinton in a Washington Post-ABC News poll released Sunday. The presumptive Republican presidential nominee leads by just 2 points, 46 percent to 44 percent, over the Democratic front-runner among registered voters — essentially a dead heat, well within the poll’s 3.5 percentage-point margin of error.

“The poll indicates a race in which Clinton once held a commanding lead is shaping up to be extremely close. Clinton led Trump 50 percent to 41 percent in a March Post/ABC poll. The new poll also tested a race in which 2012 Republican nominee Mitt Romney jumps in. In that matchup, Clinton captured 37 percent of those surveyed, with Trump 35 percent and Romney at 22 percent”

POLL BLAST TWO: THE RACE IS REALLY CLOSE — “Clinton edges past … Trump by just three points in a new national NBC News/Wall Street Journal poll released Sunday. Clinton leads Trump 46 percent to 43 percent, within the poll’s 3.1 percentage-point margin of error. … Clinton led Trump 50 percent to 39 percent in an April NBC News/Wall Street Journal poll”

GREECE APPROVES AUSTERITY — Bloomberg: “Greek lawmakers on Sunday approved additional austerity measures required to unlock more emergency loans from the euro area, ahead of a meeting of finance ministers that will assess the country’s compliance with its bailout program and determine the scope for debt relief.

“Prime Minister Alexis Tsipras secured backing for measures ranging from the taxation of clothing made from crocodile skin to the sale of bad loans to distressed debt funds, after winning the support of the 153 lawmakers from the governing Syriza and Independent Greeks parties in the 300-seat chamber. Syriza governing party lawmaker Vasiliki Katrivanou voted against articles setting up a new privatization fund and the creation of a fiscal break mechanism of contingent measures”

CUBAN ON WALL STREET — Dallas Mavericks owner Mark Cuban on NBC’s “Meet the Press”: “[T]here’s an issue right now for me with market structure. I think we’re at a significant risk, with high frequency trading because what’s happening and, you know, the original goal of Wall Street was to be able to create a source of capital for companies to grow, create liquidity and allow investors to invest.

“But what we’ve evolved to now with things like high frequency and algorithmic trading, but in particularly high frequency trading, is that it’s all about financial engineering. … And so, if you put just a miniscule tax on each trade and possible even a smaller tax on each quote, you’re going to see Wall Street, you’re going to see markets gear back toward actual investments”

MARKETS START TO GET THE FED RIGHT — HFE’s Jim O’Sullivan: “Fed officials had been expressing the view that markets were pricing in too much pessimism and not enough Fed tightening, but it took the more hawkish-than-expected FOMC minutes to get a meaningful reaction. The amount of tightening being priced in over the next year and a half is still far too low, in our view, but at least the implied probability of a move at one of the next two meetings is no longer negligible.

“We think the probability of another tightening move as soon as the June meeting is higher than the estimated 28 percent priced into markets, although we agree it is still below 50 percent. We see a better-than-50 percent probability of a move by the July meeting. We continue to forecast two quarter-point moves this year and four next year”

ICYMI: TIM O’BRIEN ON TRUMP’S WEALTH — Bloomberg View’s Timothy L. O’Brien: “What were the ‘incredible’ numbers the presumptive Republican presidential nominee disclosed in the new filing? More than $557 million in ‘income,’ up from $362 million he disclosed in an FEC document filed last July. Hold on, though. In a press release, the Trump team also described that $557 million as ‘revenue.’

“To be clear, ‘income’ is meant to be the amount of money Trump puts in his own pocket each year and ‘revenue’ is the amount of money his businesses pull in (before expenses and other goodies that reside above the bottom line). As he did in his July release, Trump appears to be conflating income and revenue in his public disclosures. These figures also look a little odd when paired with reporting from Crain’s Aaron Elstein, which showed that Trump received a New York State tax break reserved for households with annual incomes of $500,000 or less”

DOMESTIC MANUFACTURERS BEAT EXPORTERS — WSJ’s Lisa Beilfuss: “The fortunes of U.S. manufacturers are increasingly divided between those looking outward and those looking inward. Global industrial giants are struggling under the weight of a strong dollar, reeling commodity markets and weak demand in emerging and advanced economies alike, from Brazil to Europe to China. But domestically oriented U.S. manufacturers are faring better, with steadier business buoyed by the relatively brighter auto, housing and job markets.

“The split conditions, seen throughout the latest corporate earnings reports and gauges of U.S. factory activity, reflect broader tensions plaguing the global economy. While the world’s largest economy — the U.S. — is struggling to accelerate, it is performing better than many of its counterparts struggling just to stay above water. … At Nation Ford Chemical Co. in South Carolina, about 20 miles outside of Charlotte, N.C., president Jay Dickson is having a hard time finding enough workers to keep up with brisk business … At Caterpillar Inc., on the other hand, some gears are stuck”

STILL TOUGH FOR WOMEN ON WALL STREET — NYT’s Susan Antilla — “Smith Barney paid $150 million in arbitration awards and settlements in the [Boom Boom Room] case, and it and other Wall Street firms rushed to set up anti-harassment training, employee hotlines and programs to recruit women. Twenty years later, permanent change is less obvious. … Complaints persist about pay and promotion disparities and a lack of women in senior management roles, and frustrations are growing about the limited ability of individuals to seek damages in court. …

“Women are slowly joining the senior ranks of Wall Street firms. Last year, women at Deutsche Bank represented 20.5 percent of the firm’s directors and managing directors, up from 17.1 percent in 2011, according to its 2015 human resources report. Goldman Sachs’s latest class of managing directors was 25 percent female, the highest proportion since that title was created in the mid-1990s. The least progress has been made in pay. Last week, a managing director at Bank of America Merrill Lynch filed a gender-discrimination complaint in federal court in New York, noting that her 2015 bonus was $1.55 million while her male counterpart’s was $5.5 million”

SPEAKING OF BOYS CLUBS — Bloomberg’s Keri Geiger: “A managing director suing Bank of America for gender discrimination by what she called an in-house ‘bro’s club’ has set traders on Wall Street buzzing because of a host of other practices alleged in the complaint — including front- running, lying to customers and manipulating bond prices. …

“The lawsuit by Megan Messina, a 42-year-old co-head of the global structured credit products team, describes practices similar to those at the center of a longstanding investigation of the bank by federal prosecutors in Charlotte, where the bank is based.”

POTUS Events

10:25 am || Participates in an arrival ceremony with President Tran Dai Quang of Vietnam; Presidential Palace, Hanoi, Vietnam
10:50 am || Meets with Vietnamese President Tran Dai Quang, Presidential Palace
Noon || Meets with Chairwoman Nguyen Thi Kim Ngan of the National Assembly of Vietnam; International Convention Center, Hanoi
1:05 pm || Obama and Quang hold a press conference; Presidential Palace
2:20 pm || Attends a state luncheon; Internationa Convention Center
3:50 pm || Holds a bilateral meeting with Prime Minister Nguyen Xuan Phuc of Vietnam; Presidential Palace
4:50 pm || Meets with General Secretary Nguyen Phu Trong of the Communist Party of Vietnam; Central Office of the Communist Party of Vietnam, Hanoi

All times Indochina Time, which is 11 hours ahead of U.S. Eastern

Floor Action

The House will move ahead with its appropriations process this week despite the risk of another culture war erupting on the floor, while the Senate takes up a defense policy bill before leaving for the Memorial Day recess.

The $602 billion defense authorization before the Senate broadly outlines policy for the Pentagon and military branches, including limitations on President Obama’s push to close the Guantanamo Bay detention center and whether women should be required to register for the Selective Service.

The “must pass” bill attracts hundreds of amendments each year, and lawmakers are expected to battle over a handful of controversial proposals.

Conservative senators are expected to try to remove a provision that would require women to register for the Selective Service, allowing them to be called up if the country returns to a draft.

While the measure was defeated in the House, opponents could face an uphill battle in the Senate.

Sen. John McCain (R-Ariz.), who chairs the Armed Services Committee, and Majority Leader Mitch McConnell (R-Ky.) both support the requirement.

A push to remove the provision was already defeated in committee. A separate bill noting that only Congress can change the Military Selective Service Act, which outlines who is eligible for the draft, has stalled.

While the bill largely holds the line on current restrictions on Guantanamo Bay detainee transfers, Sen. James Inhofe (R-Okla.) said earlier this month that he would push for additional measures.

“I intend to file amendments that… put more safeguards in place to mitigate the threat created by the release of high risk Gitmo detainees,” he said in a statement.

McCain is also expected to open a spending fight with Democrats, who have said breaking the two-year budget deal is a non-starter for their caucus.

The Arizona Republican said in a speech at the Brookings Institution on Thursday evening that he would push for at least an additional $17 billion.

He also sent a “dear colleague” letter ahead of the Senate’s debate, stressing that he believes the current spending caps are undercutting the military.

“For the sake of the men and women serving in our military, I believe the Senate must make a different choice,” he wrote in the letter. “I am committed to seeking solutions to give our service members the resources, training, and the equipment they need and deserve.”

The House passed its version of the defense authorization last week.

D.C. budget autonomy

The House is expected to consider legislation that would repeal a referendum approved by District of Columbia voters three years ago that grants the city the ability to spend local tax dollars without approval from Congress.

A D.C. judge upheld the referendum in a March ruling. But Rep. Mark Meadows’s (R-N.C.) legislation would ensure that the newfound budget autonomy wouldn’t be allowed to go forward.

Under the referendum, D.C.’s budget would still be sent to Congress for a 30-day review. If Congress does not try to change it during that timeframe, the city could proceed as if the budget were automatically approved.

Supporters of the referendum, including D.C.’s non-voting representative in Congress, Del. Eleanor Holmes Norton (D), view it as a step toward statehood.

Meadows, who chairs the House Oversight subcommittee with jurisdiction over D.C., warned during a hearing this month that D.C. government employees could face penalties if the city spends money without congressional approval.

Norton’s office said Friday that she plans to file an amendment that would grant D.C. budget autonomy as an act of Congress. However, GOP leaders might decide against giving her amendment floor consideration.

Energy, environmental regulations

The House is slated to consider a major compromise bill this week to overhaul chemical safety laws.

Bipartisan lawmakers unveiled the legislation on Friday after nearly a year and a half of negotiations. It would reform the Toxic Substance Control Act (TSCA) after decades of complaints that it’s no longer effective.

The measure on the House floor this week would grant the Environmental Protection Agency (EPA) new authority to test and regulate thousands of chemicals considered potentially harmful. The EPA has only banned six chemicals under the TSCA law.

In addition, the House will take up a bill that failed to pass last week under a fast-track procedure that would prohibit the EPA from requiring permits to spray federally approved pesticides into new bodies of water.

The measure was rebranded as a means to help combat the spread of the Zika virus. But opposition from Democrats prevented it from clearing the two-thirds majority threshold to pass it. This time, Republicans are returning it to the floor under a procedure requiring only a simple majority.

The House is also expected to take the procedural steps necessary this week to go to a conference committee with the Senate on an energy reform bill. If negotiators strike a deal this year, it will be the first energy policy overhaul in nearly a decade.


A bulk of the House’s time in session this week will be spent on consideration of the 2017 spending bill for the Department of Energy and water infrastructure projects.

The $37.4 billion measure is expected to be considered under a freewheeling process that allows lawmakers to offer unlimited numbers of amendments, which could open up the possibility of politically risky votes.

The House considered its first spending bill of the year, for the Department of Veterans’ Affairs, last week using the same procedure. That resulted in Democrats offering two particularly controversial amendments regarding the display of the Confederate flag and prohibiting discrimination on the basis of sexual orientation.

The energy spending bill is usually one of the easiest of the 12 annual appropriations to pass. However, a floor fight could erupt again if Rep. Sean Patrick Maloney (D-N.Y.) reprises his amendment from last week to prevent LGBT discrimination.

GOP leaders held last week’s vote open for seven minutes as they scrambled to convince enough Republicans to change their votes so that Maloney’s measure wouldn’t pass.

Krebs Daily Briefing 13 May 2016

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


U.S. establishes Libyan outposts with eye toward offensive against Islamic State

American Special Operations troops have been stationed at two outposts in eastern and western Libya since late 2015, tasked with lining up local partners in advance of a possible offensive against the Islamic State, U.S. officials said. Two teams totaling fewer than 25 troops are operating from around the cities of Misurata and Benghazi to identify potential ­allies among local armed factions and gather intelligence on threats, according to the officials, who spoke on the condition of anonymity to discuss a sensitive mission overseas. The insertion of a tiny group of U.S. personnel into a country rife with militant threats reflects the Obama administration’s worries about the Islamic State’s powerful Libyan branch and the widespread expectations of an expanded campaign against it. For months, the Pentagon has been developing plans for potential action against the group, which has at least several thousand fighters in the coastal city of Sirte and other areas. And the U.S. personnel, whose ongoing presence had not been previously reported, is a sign of the acceleration toward another military campaign in Libya. The mission is also an illustration of President Obama’s reliance on elite units to advance counterterrorism goals in low-visibility operations. The activities of the American “contact teams,” as they are known, take place in parallel to those of elite allied forces from France and other European nations in the same areas, U.S. and Libyan officials said. More:

Women Deacons?

This week, the leaders of female Catholic religious orders from around the world came to the Vatican for a meeting with the pope. During a question-and-answer session Thursday, they asked him why the Church bans women from serving as deacons—a kind of Catholic clergy. Why not at least study the question? they asked. Francis said yes. It is big news that the pope will create a commission to study the possibility of female deacons. For centuries, at least in the West, women have not served in this kind of leadership role in the Catholic Church. The Church has ruled definitively that they cannot be admitted to the priesthood; in 1994, Pope John Paul II reaffirmed this ban in his apostolic exhortation Ordinatio Sacerdotalis, in which he wrote that the Church has “no authority whatsoever to confer priestly ordination on women.” Although women around the world, and particularly in the United States, have pushed for their ordination as priests, it is unlikely that this will change. The diaconate, though, is different. “The Church has every right and possibility of restoring women to the ministry of deacon to our churches,” said Phyllis Zagano, an adjunct professor at Hofstra University who has written extensively on this question. Historically, women have been part of the diaconate—they served the Church in this way until at least the 12th century in the West, she said, and can currently be part of in some Eastern churches, such as the Orthodox Church of Greece. In the West, “over the years, the ministry of women as deacons outside the monastery fell away,” she said. But “the Church has never overruled the need for women deacons.” More:

Brazil’s first female president to be replaced by a man whose wife is 42 years younger than him

Early Thursday, Brazilian legislators voted to suspend President Dilma Rousseff. She will now be forced to step aside while she undergoes an impeachment trial, with Vice President Michel Temer becoming the interim president. If Rousseff is found guilty, Temer will take over the rest of her term. The impeachment of Rousseff is the culmination of a months-long political battle. This battle has been sparked by a variety of issues, including Brazil’s stagnating economy and allegations of corruption that have tarred the leftist government of the former Marxist guerrilla. But to some, Rousseff’s plight can also be seen in stark gender-based terms. Consider this: Rousseff was Brazil’s first female president. Brazil’s Senate is 16 percent female, and the country’s lower house is less than 10 percent female. Journalists have noted that Brazil’s proposed new cabinet would be the first all-male cabinet in Brazil since 1979. Meanwhile, the man who looks likely to replace Rousseff is married to a woman 42 years younger than him. Temer, 75, began dating his third wife, Marcela, 32, when she was a 19-year-old beauty queen (he was 60 at the time). They married in less than a year. It’s apparently a very loving relationship: A few years ago, Temer told the Brazilian press that she had inspired several poems in a book he wrote titled “Anonymous Intimacy.” But whatever you make of the age difference between Temer and his wife, it would seem that Marcela is being treated very differently than the 68-year-old career politician Rousseff. Last month, one Brazilian magazine published an article about Marcela that described her as “beautiful, demure and of the home.

Bangladesh Bank heist similar to Sony hack; second bank hit by malware

Investigators probing the cyber heist of $81 million from the Bangladesh central bank connected it on Friday to the hack at Sony Corp’s film studio in 2014, while global financial network SWIFT disclosed a previously unreported attack on a commercial bank. SWIFT did not say which commercial bank it was or whether it had lost money, but cyber-security firm BAE Systems said a Vietnamese bank, which it did not name, had been a target. It was not clear if they were referring to the same attack and there was no immediate comment from authorities in Hanoi. SWIFT, the linchpin of the global financial system, said forensic experts believed the second case showed that the Bangladesh heist was not a single occurrence, but part of a wider campaign targeting banks. In both cases, SWIFT said, insiders or cyber attackers had succeeded in penetrating the targeted banks’ systems, obtaining user credentials and submitting fraudulent SWIFT messages that correspond with transfers of money. The cooperative has maintained that its core messaging service has not been compromised. But confirmation of a second attack on a bank will likely increase scrutiny on the security of a network used by 11,000 financial institutions globally. In Bangladesh, cyber-security experts hired by the central bank said in a report that hackers were still inside the bank’s network, monitoring the investigation into one of the biggest cyber heists in the world. Reuters reviewed parts of the report, but the source who shared the document declined to provide access to its full contents, saying the release of some details could hamper a multinational effort to catch the criminals. Asked about the report, a Bangladesh Bank spokesman said: “We have engaged forensic experts to investigate the whole thing, including this.” He did not elaborate. Investigators have determined that one team of hackers, dubbed Group Zero in the report, was responsible for the heist and remained inside the network. Group Zero may be seeking to monitor the ongoing cyber investigations or cause other damage, but is unlikely to be able to order fraudulent fund transfers, the investigators wrote. More:


Big Insurers Send a Wake-Up Call to Hedge Fund Investors

Like many sophisticated investors, the nation’s largest insurers drank the hedge fund Kool-Aid, pouring billions into the high-fee investment funds and helping drive hedge fund assets to over $3 trillion. Now comes the hangover. Steep losses in hedge fund investments during the last quarter damaged many insurance company earnings, reinforcing decisions to rethink the premises that led them to follow the Pied Pipers of finance in the first place. The American International Group said it would cut its hedge fund exposure in half, to $5.5 billion by the end of 2017 from $11 billion at the end of last year. MetLife said it would slash its hedge fund portfolio by two-thirds, to $600 million from $1.8 billion. The pain from the last quarter has shown up most visibly in recent insurers’ results, but it is also spreading to pension funds, endowments and other giant investment funds. Last month, New York City’s largest pension fund said it was abandoning hedge funds entirely, and the Illinois State Board of Investments voted to reduce its hedge fund portfolio by $1 billion. “They’re finally getting the mediocre results they deserve,” said Simon Lack, an early skeptic about hedge funds and author of ”The Hedge Fund Mirage: The Illusion of Big Money and Why It’s Too Good to Be True.” “I imagine you’ll see more and more institutional investors re-examining their commitment to hedge funds,” Mr. Lack added, “as they see what they’re getting for those outrageously high fees they pay.” More:


TruMid wins investment from Thiel, Soros

Electronic bond-trading startup TruMid has attracted investments from tech investor Peter Thiel and a private investment fund managed by George Soros’ Soros Fund Management. The high profile investments draw attention to one of the many electronic bond-trading platforms competing to solve the challenges of a shifting bond market. Thiel, best-known as one of the founders of PayPal and one of the first investors in Facebook, is leading the latest funding round which is expected to raise $27 million and will be fully closed before the end of the year. In addition to investment from the Soros fund, the round will also include investment from Shumway Capital, which led TruMid’s first external financing round earlier this year. TruMid first launched six months ago trading high-yield and distressed bonds. It added investment-grade bond trading in September and plans to launch credit default swap trading in early 2016. The company said it has 191 institutional clients live on the platform and nearly 400 more in the onboarding process. More:


Federal judge strikes down Obamacare payments

WASHINGTON — Republicans won the first round Thursday in a separation of powers battle againstPresident Obama that once again focuses on his most prized achievement: Obamacare. Federal district Judge Rosemary Collyer, a Republican appointee, ruled that the law did not provide for the funds insurers need to make health insurance policies under the program affordable. While the law provides for tax credits, she said, it does not authorize an appropriation for slashing deductibles and copayments. Without those reductions from insurers, many consumers could not afford to buy insurance. “Congress authorized reduced cost-sharing but did not appropriate monies for it,,” Collyer said in her 38-page ruling. “Congress is the only source for such an appropriation, and no public money can be spent without one.” Collyer blocked her own decision from taking effect while awaiting a likely appeal from the administration. Cost-sharing subsidies reduce consumers’ insurance payments — an important feature of the Affordable Care Act, because deductibles are rising. Under the law, subsidies are available to people who earn between 100% and 400% of the federal poverty level, with extra assistance available for those up to 250%.  For a family of four, that’s about $24,000 to $61,000. The Commonwealth Fund estimated up to 7 million people might have plans with cost-sharing reductions this year. The ruling does not represent as big a threat to the health care law as two previous conservative challenges swatted down by the Supreme Court in 2012 and 2015. The first would have gutted the law; the second would have eliminated tax credits in many states. “It’s a setback, and it’s a distraction … but a lot of people think the administration will win on appeal,” said Katherine Hempstead, who heads the insurance coverage team at the Robert Wood Johnson Foundation, a public health philanthropy. House Speaker Paul Ryan heralded the decision as “an historic win for the Constitution … the executive branch is being held accountable.” More:

‘I’ll Never Retire’: Americans Break Record for Working Past 65

Almost 20 percent of Americans 65 and older are now working, according to the latest data from the U.S. Bureau of Labor Statistics. That’s the most older people with a job since the early 1960s, before the U.S. enacted Medicare.Because of the huge baby boom generation that is just now hitting retirement age, the U.S. has the largest number of older workers ever. When asked to describe their plans for retirement, 27 percent of Americans said they will “keep working as long as possible,” a 2015 Federal Reserve study found. Another 12 percent said they don’t plan to retire at all. Why are more people putting off retirement?  Three in five retirees surveyed by the Transamerica Center for Retirement Studies said making money or earning benefits was at least one reason they had retired later than they planned to. Almost half said financial problems were their main reason for working past 65. The financial crisis, and the tech bust before it, devastated many baby boomers’ retirement savings. That’s if they had any to begin with. Today, 60 percent of U.S. households have no money in a 401(k) or similar retirement account, and the benefits of 401(k)s are skewed toward the wealthiest Americans, a recent report by the Government Accountability Office found. The waning of traditional, defined-benefit pensions could also be delaying retirement, even for wealthier Americans. Instead of getting a monthly check, many retirees end up with a pot of 401(k) assets they’re not sure how they should be spending. The ups and downs of the market can heighten their anxiety and keep them going into the office. More:

Charter Communications-Time Warner Cable Deal Clears Final Hurdle

Charter Communications said on Thursday that its proposals to buy Time Warner Cable and Bright House Networks had been approved by the California Public Utilities Commission, overcoming the last hurdle to complete the deals. The Federal Communications Commission confirmed last week that it approved the deals that would turn Charter, based in Stamford, Conn., into the second-largest American broadband provider and third-largest video provider. The Justice Department gave antitrust approval, with conditions, to the acquisitions on April 25, and Charter and Time Warner Cable shareholders have already agreed to the deals. In May 2015, Charter said it would buy Time Warner Cable in a cash-and-stock deal, a move it said would allow it to better compete with Comcast. Charter has valued the deals at $56.7 billion for Time Warner Cable, excluding debt, and $10.4 billion for Bright House. Charter shares closed down about 1.5 percent, and Time Warner Cable shares were down about half a percent. “We look forward to closing these transactions next week and to begin delivering the many benefits of these transactions to consumers,” Charter’s chief executive, Thomas M. Rutledge, said in a statement. “We’re thrilled that the transaction has cleared the final regulatory hurdle, and we look forward to closing the deal quickly,” Time Warner Cable’s chief executive, Robert D. Marcus, said in a statement.

Exclusive: U.S. plans new wave of immigrant deportation raids

U.S. immigration officials are planning a month-long series of raids in May and June to deport hundreds of Central American mothers and children found to have entered the country illegally, according to sources and an internal document seen by Reuters. The operation would likely be the largest deportation sweep targeting immigrant families by the administration of President Barack Obama this year after a similar drive over two days in January that focused on Georgia, Texas, and North Carolina. Those raids, which resulted in the detention of 121 people, mostly women and children, sparked an outcry from immigration advocates and criticism from some Democrats, including the party’s presidential election frontrunner Hillary Clinton. Immigration and Customs Enforcement (ICE) has now told field offices nationwide to launch a 30-day “surge” of arrests focused on mothers and children who have already been told to leave the United States, the document seen by Reuters said. The operation would also cover minors who have entered the country without a guardian and since turned 18 years of age, the document said. Two sources confirmed the details of the plan.  The exact dates of the latest series of raids were not known and the details of the operation could change.  The operation in January marked a departure for ICE, part of the Department of Homeland Security, from one-off deportations to high-profile raids meant to deter migrants from coming to the United States.  An ICE spokeswoman said the agency does not “confirm or deny the existence of specific ongoing or future law enforcement actions.” The spokeswoman said immigrants who arrived illegally after Jan. 1, 2014 are priorities for removal. More:


The controversy over Donald Trump’s tax returns, explained

There’s no law that says a presidential candidate has to release his income tax returns, and Donald Trump says he’s not going to do it. Not, at least, until the completion of an ongoing audit of what he says are all his returns since 2009 — an audit that he doesn’t expect will be done until after November. Every major party nominee for a generation has released tax returns, and so have most serious contenders for their party’s nomination. A candidate’s tax return is rarely a top-tier political issue, but in the case of Trump, it is. The extent to which a President Trump would or would not abide by the norms of American politics is itself a key issue in the 2016 campaign. And for normal candidates, information about financial dealings is a secondary consideration to his or her record in public office and policy plans for the future. But for Trump, his personal finances are his entire campaign.  His record is a record in business, not in politics, and his policy proposals are ridiculous and inconsistent to the extent that it’s almost a category error to critique them. His response to questions about the workability of his plans is always that they are opening bids in a negotiating process and that people ought to have faith in his prowess as a dealmaker. His savvy with money is key to his campaign, in other words, but without the tax forms we really don’t know how savvy he is. What’s the deal with this audit?


Donald Trump’s Chief Fund-Raiser Heads Straight for Las Vegas

LAS VEGAS — Less than a week after being recruited by Donald J. Trump to be his campaign fund-raiser, Steven Mnuchin did not waste any time looking for big-money donors. On Wednesday, Mr. Mnuchin met with hedge fund managers at the Bellagio Hotel in Las Vegas, where the nation’s largest hedge fund conference, the SkyBridge Alternatives Conference, or SALT, is being held. On the sidelines of the conference, Mr. Mnuchin sat with Scott Brown, the former Republican senator from Massachusetts, as he shook hands with prospective Trump donors. Later, Mr. Mnuchin attended a dinner that included the billionaire hedge fund manager Kenneth C. Griffin, David H. Petraeus, the former C.I.A. director and general, and John A. Boehner, the former House speaker. The host of the dinner was Anthony Scaramucci, who runs the investment firm SkyBridge Capital and who last week publicly endorsed Mr. Trump. It is hard to avoid presidential politics this year at SALT, where prominent hedge fund managers weigh in on subjects like the economy and geopolitics and tax policies in the United States. It is the main topic in the speeches delivered on the brightly lit stage and in the closed-door meetings and Champagne-filled after-hours events. Mr. Trump picked Mr. Mnuchin, a former Goldman Sachs executive who is a hedge fund veteran, to be his finance chairman to help him raise as much as $1.5 billion for his campaign. For many on Wall Street, however, publicly supporting Mr. Trump is awkward. The presumptive Republican presidential nominee has been vocal in speaking out against hedge fund managers, talking tough about their pay and saying they “get away with murder.” He has also said he plans to put an end to a tax advantage called carried interest that enables private equity and hedge fund executives to treat their income at the lower capital gains rate, rather than having it taxed as ordinary income.


Secret Service to investigate Trump’s former butler for saying Obama should be killed

The Secret Service said Thursday it will investigate comments made by Donald Trump’s longtime butler calling for President Obama to be killed. “The U.S. Secret Service is aware of this matter and will conduct the appropriate investigation,” agency spokesman Robert Hoback said in a statement. Anthony Senecal, who worked as a butler to the presumptive GOP presidential nominee for 17 years, until 2009, wrote in a recent Facebook post that Obama should be shot by the military as an “enemy agent.” “To all my friends on FB, just a short note to you on our pus headed “president” !!!! This character who I refer to as zero (0) should have been taken out by our military and shot as an enemy agent in his first term !!!!!” Senecal said in a Facebook post, according to Mother Jones. “Instead he still remains in office doing every thing he can to gut the America we all know and love !!!!!” The left-leaning magazine revealed that Senecal, who now works as the in-house historian at Trump’s Mar-a-Lago estate in Florida, has made multiple Facebook posts calling for Obama’s death. Senecal confirmed to Mother Jones that he had written the posts. Last April, he wrote that the president should be hanged. “Looks like that sleezey bastard zero (O) is trying to out maneuver Congress again, if the truth be known this prick needs to be hung for treason!!!” he said. Like Trump, Senecal also argued that Obama is not a United States citizen and is ineligible to serve as president. The White House released Obama’s birth certificate in 2011 proving he was born in Hawaii. Trump’s campaign later Thursday disavowed Senecal’s comments.

Country Club Members Are Bearing the Brunt of the Golf Recession

Across the verdurous fairways of the New Seabury Country Club lies a golfer’s utopia, with stirring ocean views and osprey racing overhead. Inside the clubhouse lurks rebellion. Members are suing the Carl Icahn-owned resort on Cape Cod, accusing managers of scheming to raise fees and call a halt to refunds on millions in initiation payments. The plaintiffs are also angry about what they describe as strong-arm tactics and cold indifference to attempts to broker compromise.  “It is the unprincipled bullying we object to,” said Bruce Lehman, a retired advertising executive who is on the Members Rights Committee. “If we were just to cave, what’s to stop them from doing it again and again?” Well, they’re doing it around the country. In clubs large and small, the rules of belonging are in upheaval for the dimpled-ball set. The popularity of the Masters and other tourneys notwithstanding, courses are closing at the rate of 150 a year. The number of duffers is down to 25 million from 30 million a decade ago. Golf is just not hot, especially since the apparent end of the Tiger Woods glory days, and the old club model doesn’t work so well anymore. “With all respect, everyone who feels the deal is changing on them, that, in fact, is the reality — and it’s based in good business sense,” said Henry DeLozier, partner with Global Golf Advisors in Phoenix. Suing Trump:  Presumptive Republican presidential nominee Donald Trump, hedge-fund manager John Paulson and Chinese developers are among those who’ve been buying up ailing or abandoned clubs, in many cases changing fee structures to lure new members. Their efforts have landed them in the rough on more than a few occasions with a disgruntled old guard. At Trump National Golf Club in Jupiter, Florida, for example, golfers have sued, saying memberships were canceled and deposits not returned as required when fee rules were adjusted.



After hefty campaign donations, Bentley benefactor gets governor’s support to go nuclear

On one end of the money pipe is a Tennessee real estate mogul and financier with a national network of political connections and a plan to turn a half-built nuclear power plant in northeast Alabama into an operational, private, money-making enterprise. On the other end of the pipe is a scandal-plagued Alabama governor under investigation by an alphabet soup of federal and state agencies. In between them is a network of political action committees created to muddle the sources of funds as they move from donors to politicians. But make no mistake, these two men — Franklin Haney and Gov. Robert Bentley — are connected, and each has done favors for the other. Just the traceable donations from Haney’s businesses to Bentley’s last campaigns total about $300,000, much of which moved into Bentley’s campaign account after the last election was over. Again, that’s only what’s easily traceable. That campaign account subsequently paid the salary of Rebekah Caldwell Mason, the governor’s senior political advisor with whom he is accused of having an affair. Meanwhile, the governor has helped Haney, too, finalizing a state lease in Haney’s Birmingham office building which costs the state $5 million a year. And more recently, the governor threw his support publicly behind the sale of a partially built nuclear power plant currently owned by the Tennessee Valley Authority north of Scottsboro. Who is Franklin Haney? If you were putting Haney’s career on the dust jacket of a memoir, it might begin something like this: “He began as a Bible salesman, going door-to-door to put himself through college, and he didn’t stop pitching, selling, wheeling and dealing until he was a billionaire.” After finishing law school, Haney attempted a career in politics, but when he met the cool reception of Tennessee voters, he quickly figured out that there was a much more lucrative life to be lived as a politically connected real estate developer. Haney’s best job description might be “government’s landlord.” Through a network of companies, many of which are difficult if not impossible to identify, Haney has used sophisticated tax-exempt financing, leasebacks and public-private partnerships to build a real estate empire throughout the Southeast, with state and federal government agencies as his biggest tenants. And campaign contributions. Lots and lots of campaign contributions.


Chief Justice Roy Moore supporters plan rally

Some longtime supporters of Chief Justice Roy Moore called on his reinstatement to the Alabama Supreme Court during a news conference in Montgomery Thursday. “I’m telling you, folks, it’s time for Christians and non-Christians and red-blooded Americans to stand up. If we can’t stand up for this, we might as well go home because it can’t get much worse.” Moore ally Dean Young said during a news conference on the Alabama Judicial Building plaza Thursday. Moore has been suspended following a Judicial Inquiry Commission decision to charge him with violating Canons of Judicial Ethics stemming from statements and an order for probate judges following the U.S. Supreme Court ruling on same sex marriage. Representatives of Sanctity of Marriage Alabama and the Foundation for Moral Law took part in the event to announce a rally in support of Moore on May 21 at the judicial building, but it was Young, who has rallied in support of Moore since he was an Etowah County judge in the 1990s, who offered fiery rhetoric in defense of the man often called “The Ten Commandments Judge.” “There is only one guy (Moore) who is standing,” Young said about Moore’s legal stance on the same-sex marriage debate. Young said he had received many calls from people across the country seeking ways to help Moore. “This is ground zero of the culture war in this nation,” Young said. Jennifer Montrose is the president of the Alabama Republican Assembly, a group that calls itself the conscience of the Republican party. Montrose tells WBRC Moore stands for traditional values at a time when the assembly feels many elected officials are failing morally and ethically. “He is standing behind the 10th amendment and he’s standing with the voters of Alabama who elected him to do this job. If we did not want Chief Justice Moore elected then he would have not won twice,” Montrose said.


Alabama Media Group seeks to block Hubbard subpoena seeking commenters’ identities

Alabama Media Group has asked the judge in House Speaker Mike Hubbard’s ethics case to quash a subpoena by Hubbard’s lawyers seeking the identities of two anonymous commenters to news stories on In a motion filed Wednesday, AMG asks Lee County Circuit Judge Jacob Walker to block the subpoena because it violates a right to anonymous free speech under the First Amendment and because it violates Alabama law and rules of criminal procedure. Walker has scheduled a hearing on the matter May 24. The subpoena, issued on April 26, seeks information about the accounts of commenters “Reaganwasbetter” and “noonewouldusethis,” including email addresses, IP addresses and any and all registration information. In its motion to quash, the media group asserts that courts across the country have held that anonymous speakers posting on the Internet are entitled to free speech protection. In the motion, AMG says the right to anonymous free speech is not unlimited and that courts have established guidelines to determine whether a defendant’s subpoena supersedes the right. A key point is whether the information sought by the subpoena is essential to the defense’s case, according to the company’s motion. The media company asserts that posted comments identified by Hubbard’s lawyers do not satisfy the factors that would outweigh the protection of anonymous free speech. The media group also asserts that under Alabama law and criminal procedure rules, subpoenas are used to obtain evidence, not for discovery in hopes of finding something helpful for the defense. Jury selection is scheduled to begin Monday in Hubbard’s trial. A Lee County grand jury indicted him in October 2014 on 23 felony ethics charges. He is accused of using his political offices to benefit his businesses. Hubbard has pleaded not guilty and denied any wrongdoing. Updated at 4:21 p.m. to say that Judge Walker has scheduled a hearing on the matter. AMG Motion to Quash


US Supreme Court blocks Alabama from executing Vernon Madison

The U.S. Supreme Court issued a ruling Thursday night denying a request from the Alabama attorney general, meaning the execution of death row inmate Vernon Madison will not go forward. Vernon Madison was set to be executed at 6 p.m., until a federal appellate court granted a request for a stay of execution. Madison was convicted in the April 1985 slaying of Mobile police Cpl. Julius Schulte, who was responding to a domestic disturbance call. Madison’s attorneys, from the Montgomery-based nonprofit Equal Justice Initiative, have been seeking a stay from state and federal courts since the execution date was set in March. Madison has claimed that he is mentally incompetent to be executed. The case was brought to the Supreme Court on Thursday after the Alabama Attorney General’s office sought to overturn the stay of execution granted by a federal appellate court. The Supreme Court ruled in a 4-4 decision to deny the attorney general’s petition, which was presented to Justice Clarence Thomas and referred to the court. The Attorney General’s Office declined to comment on the decision. On Wednesday, EJI attorneys filed a petition for a stay and a request for oral argument before the 11th Circuit Court of Appeals. The appellate court, in the order granting that request, noted that Madison’s claim of incompetence could not be raised until the execution was imminent, and that only an Alabama trial court and the federal district court had reviewed the claim. The attorney general’s office sought to overturn the decision of the 11th Circuit Court of Appeals by filing a petition before the U.S. Supreme Court. They argued that the appellate court read into the state court order legal conclusions that do not exist and that the issue of Madison’s competency had been “clearly and plainly foreclosed.” In their response, EJI attorneys asked the Supreme Court to deny the request and leave the stay in place, saying Madison’s competency claim has not been reviewed on appeal in either state or federal court. While awaiting the Supreme Court’s decision, Alabama Department of Corrections personnel and witnesses continued preparing for the execution in the event the stay was overturned. The attorney general’s office noted that Madison’s death warrant did not expire until midnight on May 12. Madison is one of Alabama’s longest-serving death row inmates. His was convicted and sentenced to death in both 1985 and 1990, but both times an appellate court sent the case back, first for a violation involving race-based jury selection and then based on improper testimony from an expert witness for the prosecution. In 1994, Madison was tried for a third and final time and convicted. The jury recommended a life sentence, but the judge overrode the recommendation and sentenced him to death.

Former JSU professor writes book on Robert Trent Golf Trail

A former JSU professor this month published a book about the Robert Trent Jones Golf Trail and its link to Alabama’s public employees retirement system. Mark Fagan said his book, “The Robert Trent Jones Golf Trail: Its History and Economic Impact,” is a way to preserve the history of the Retirement Systems of Alabama’s investment in the trail. “This book is more about the economic, political and legal aspect and how a pension fund could invest to create economic development,” Fagan said. According to Fagan, the golf trail was the investment vision of RSA CEO David Bronner. “He would tell you public pension money was used to finance the project,” Fagan said. The RSA oversees four programs, including retirement plans for  educators, judicial workers and state employees, as well as the state’s teacher health insurance program. The trail includes 26 courses across 11 sites in Alabama. One of them is the 25-year-old Silver Lakes Golf Course, outside the Calhoun County line in Etowah County. Fagan graduated from JSU in 1974 with a bachelor’s degree in psychology. After receiving his doctorate in social work from the University of Alabama in 1981, he began his career at JSU as a professor. He served as department head of sociology and social work from 2002-12. “We were researching the economic impact of retirees on an area,” he said in a telephone interview Thursday. “We realized that when they moved to an area, they brought assets to that area.” According to Fagan, the book is a tribute to everyone involved in the development of the golf trail. Fagan said he helped to negotiate three golfing sites. One in Orange Beach, was never built. He worked on the Silver Lakes and The Shoals courses, and helped to secure funding for the access roads for three sites. “I’ve played every golf hole, I’ve stayed in every hotel and eaten in all 20 restaurants,” he said. The book is available on the NewSouth Books website at: for $125.


Gov. Bentley signs anti-abortion bills; lawsuits likely

Gov. Robert Bentley Thursday signed two bills restricting abortion clinic locations and banning an abortion procedure. The first bill could close two of the state’s abortion clinics, and both will likely land the state in federal court. The clinic bill, sponsored by Sen. Paul Sanford, R-Huntsville, prevents abortions clinics from locating near K-8 schools. The bill would likely lead to the closure of the Alabama Women’s Center for Reproductive Alternatives in Huntsville and could also force the closure of the West Alabama Women’s Center in Tuscaloosa. The two clinics accounted for 72 percent of all the abortion procedures in Alabama in 2014. “It’s targeted directly at access to reproductive choices and a woman’s right to choose,” said Dalton Johnson, the administrator of the Alabama’s Women’s Center in Huntsville. Attempts to reach Sanford for comment were unsuccessful Thursday. After the bill passed the Senate in March, Sanford said he wanted to prevent school children from seeing the protests that occur outside abortion clinics.

“There’s a lot of commotion that tends to pop up on certain days of the week when the clinic’s in operation,” he said at the time. The Alabama Women’s Center moved to its current location in 2013 after the Alabama Legislature passed a law with provisions required abortion clinics to follow ambulatory clinic standards. Johnson said the move cost a total of $1 million. He also dismissed arguments about protests at his clinic, saying he did not invite those. “It’s like starting a fire and then claiming the insurance money,” he said. The American Civil Liberties Union has already promised to challenge the law. “It’s really a shame the legislators keep passing these bills over and over and over and over again when it’s going to cost the taxpayers so much money,” said Susan Watson, executive director of the ACLU of Alabama, in a phone interview Thursday. Bentley also signed a bill sponsored by Sen. Phil Williams, R-Rainbow City, that bans dilation and evacuation, or D&E. Opponents call the measure dismemberment abortion, and Williams in a phone interview Thursday called it a “heinous procedure.” “Alabama law has long held an unborn child can be endangered and feel pain and suffer,” he said. “This particular bill puts an end to something that should not be an elective procedure.” The American College of Obstetricians and Gynecologists (ACOG) says the procedure has fewer complications than medical abortion and is the most common second-trimester procedure. Kansas approved a similar ban last year. The law is before the Kansas Supreme Court after being struck down by lower courts in the state. Passage of the clinic bill on the final day of the 2016 legislative session led members of the Legislative Black Caucus to sing “We Shall Overcome” in a protest on the floor of the House.




What’s behind Ryan’s non-endorsement of Trump?

The breathless coverage of today’s meeting among Donald Trump, House Speaker Paul D. Ryan (R-Wis.) and Republican National Committee Chairman Reince Priebus overstates the significance of one 45-minute meeting for the overall Republican support for the GOP ticket in November. Come Election Day, very few people will remember the maneuverings that took place in Washington in May 2016.

That said, the fact that Ryan delivered a non-endorsement of Trump after their meeting speaks volumes. He and Priebus both referred to the meeting as a “very positive step” and declined to get into specifics. The joint statement from Ryan and Trump was similarly vague. Why is Ryan hesitating? Does he have doubts about Trump as a conservative and as the Republican standard-bearer in 2016? Is he worried Trump will upend the agenda he has worked so hard to craft? And how will his non-endorsement be received by the wider GOP? Will it be a relief for Republican donors and traditional Republican voters, or is it spreading more doubt and anxiety about GOP unity in the general election? Personally, I think Ryan’s hesitation says something positive about the speaker. It’s clear that he doesn’t feel rushed into offering his full support; that he is not just accepting the Trump candidacy with a shrug and ignoring his concerns. I was afraid I might be writing a piece today parsing the words Ryan used in endorsing Trump. I was worried he might have capitulated to the hysteria and said something more definitive and yet less meaningful for the party. Instead, Ryan stuck to his mature “core principles” and made it clear that he needs more time to understand what a Trump candidacy will mean for his caucus and for his country.

And while we’re at it, as a proud family man, Ryan probably wants to get it straight in his mind how he will explain to his three children, age roughly 10 to 13, why he supports Trump, given what they may have observed for themselves and heard in school or elsewhere. As the father of a 14-year-old and a 16-year-old, I can relate. Anyway, while Ryan engages in a deliberative, thoughtful process assessing the Trump campaign, it will be interesting to see if Trump and his team have the patience and discipline to keep a friendly face, or if they are privately seething and Trump will eventually lash out at the speaker and the Trump team will begin to leak hostile, negative stories about Ryan’s leadership. After today’s meeting, CNN’s Dana Bash point-blank asked Priebus if he felt like he was in couples counseling during the meeting with Ryan and Trump. Well, maybe Ryan is engaging in a form of group therapy for Republicans who are not yet coalescing around Trump. Maybe Ryan’s slow process of coming around to “yes” will serve to hand-hold and walk skeptical rank-and-file Republican activists and contributors into the Trump camp. If Ryan appears to jump on board too soon, a lot of Republicans may remain unconvinced. But if he goes through a purposeful process and arrives at a place where he can rationalize supporting Trump to himself, his caucus and his kids, then maybe the message to many Republicans will be, “You can do this, too.”


Morning Money

TRUMP TAKES ON AMAZON — Forgive us for turning the top of this column into the “Trump Files” over the last few days. We promise it won’t be forever. But it’s hard to ignore some of the more outlandish stuff the presumptive GOP nominee and his campaign advisers are saying in the realm of finance and the economy. On Thursday night on Fox News’ “Hannity” show, Trump went after Jeff Bezos and Amazon following reports that the Washington Post (owned by Bezos) is deploying reporters to vet every aspect of Trump’s life. I mean, imagine that! A major newspaper reporting on a would-be president. The outrage!

In any event, Trump’s comments: “[The Washington Post] is owned as a toy by Jeff Bezos who controls Amazon. Amazon is getting away with murder tax wise. He’s using The Washington Post for power so that the politicians in Washington don’t tax Amazon like they should be taxed. … [H]e’s got a huge antitrust problem because he’s controlling so much … What they’ve done is he bought this paper for practically nothing and he’s using that as a tool for political power against me and against other people and I’ll tell you what, we can’t let him get away with it … .

“I just heard, they’re taking these really bad stories, I mean they’re wrong, I wouldn’t even say bad, they’re wrong and in many cases they have no proper information and they’re putting them together, they’re slopping them together and they’re going to do a book and the book is going to be all false stuff up because the stories are so wrong and the reporters, I mean one after another. So what they’re doing is — he’s using that as a political instrument to try and stop antitrust”

THE FACTS — Amazon is not “getting away with murder” on taxes. It now collects sales taxes in many states. And it has lobbied in favor of an Internet sales tax. The company does face anti-trust claims but it’s under no immediate threat. But all of that hardly matters. The Post is doing what the Post has always done (see Gate, Water). As is every other serious news organization. Trump appears to think that aggressive reporting is something that needs to be stopped. This is the kind of rhetoric more associated with a former president taken down by the Post.

QUOTE OF THE DAY — Mark Cuban at the SALT conference in Vegas: “There’s that guy who’ll walk into the bar and say anything to get laid. That’s Donald Trump right now to a T. But it’s all of us who are going to get [expletive],” Cuban said”

CAM FINE DEFENDED — Better Markets’ Dennis Kelleher responding to Thursday’s item complaining about Fine’s criticism of Jamie Dimon: “The anonymous ‘former senior Hill staffer’ attack on ICBA Pres Cam Fine is baseless. Community banks would benefit from targeted reg relief and ending the unfair competition from Wall Street’s TBTF banks.

“He merely called out those TBTF banks for relentlessly using community banks as a Trojan Horse behind which they hide dangerous deregulation provisions for themselves, which also enable them to compete unfairly. There are easily 90 votes in the Senate today for genuine community bank relief and the only reason it hasn’t passed is because of the unrelated provisions inserted for the benefit of the TBTF banks. Fine fighting this hostage taking by the TBTF banks is exactly what he should be doing.”

JUDGE COLLYER STRIKES AGAIN — A former administration official emails on the latest Obamacare ruling: “It is amazing to see the two biggest legislative accomplishments of the Obama presidency under attack from a single judge. Given Collyer’s previous rulings on FSOC’s designation of MetLife and insulating JPM from WaMu liabilities, it is not surprising that she has taken up conservatives’ cause again.

“As she continues to rule against major reforms, the credibility of each decision is diminished. Those who hoped the MetLife ruling was a sea change on the merits of Dodd-Frank, are instead left with a single judge on a mission. It has to hurt the chances of the decision standing on appeal. And how ironic is it that conservatives who loathe activist judges are left defending Collyer’s judicial agenda.”

INSIDE THE TRUMP/RYAN SUMMIT — POLITICO’s Jake Sherman and John Bresnahan: “The rapprochement between the GOP’s presumed standard bearer and its top elected official — assuming that’s what this is — is clearly a work in progress. The two are on separate planets, ideologically and temperamentally, and one much-hyped morning summit was never going to produce some magical mindmeld. … But now — after a get-together that was described by sources as pleasant, productive, even interesting — Trump and Ryan are waltzing toward ‘unity,’ or something approaching it.

“The two teams are beginning a slate of policy discussions to explore their positions on key issues. They might not find agreement on some issues, but they hope they can lock arms on broad principles that will drive the election. Ryan and Trump will meet again themselves. And House Republican Conference Chairman Cathy McMorris Rodgers (R-Wash.) extended an invitation for Trump to speak to the entire House GOP. Trump accepted, but a date hasn’t been set”

TRUMP TRADE COULD SLAM THE POOR — POLITICO’s Doug Palmer: “Donald Trump’s plan to get tough with China, Japan and Mexico could cost the average U.S. household more than $6,000 a year if carried to its logical extreme, with the burden falling hardest on the lowest-income households, according to a new report from the National Foundation for American Policy …

“‘We find that a Trump tariff proposal against all countries would cost U.S. consumers $459 billion annually and $2.29 trillion over five years,’ David Tuerck and Paul Bachman, a pair of economists at Suffolk University in Boston, write in the report. ‘Our analysis finds that the Trump tariffs would manifest themselves as a 30.5 percent increase in the price of competing domestic producer goods and therefore, as a cut in real wages.”

DRIVING THE DAY — President Obama hosts Nordic leaders for a summit and state dinner … Treasury Secretary Jack Lew speaks to reporters at a Christian Science Monitor breakfast in DC … Sen. Sherrod Brown (D-Ohio) speaks at the Economic Club of New York at 7:00 a.m. … Retail Sales at 8:30 a.m. expected to rise 0.8 percent, 0.5 percent ex-autos … Producer Prices at 8:30 a.m. expected to rise 0.3 percent headline and 0.1 percent core … Univ. of Mich. Consumer Sentiment at 8:30 a.m. expected to rise to 89.5 from 89.0.

BIDEN WANTED WARREN FOR VEEP — POLITICO’s Glenn Thrush and Annie Karni report Joe Biden was quickly sold on the populist Massachusetts senator as a running mate – and he has told associates he still thinks Warren would be Hillary Clinton’s best choice to replace him. Biden liked Warren, Thrush and Karni report, because he needed a partner to capture the wave of anti-bank, anti-establishment anger raging to his left. Characteristics that might also serve Hillary Clinton well.”

NOTHING TO LEARN FROM TRUMP’S TAX RETURNS? — WP’s Glenn Kessler: “Trump in 2015 filed a financial disclosure form required of presidential candidates. The 92-page document did list assets and liabilities. But the form is not audited and may not be accurate. For instance, the Guardian newspaper reported that a Trump golf course is listed in the document as being worth $50 million — but in a lawsuit, Trump has claimed it was worth only $1.4 million.

“By contrast, a federal tax return, especially for a business mogul like Trump, is a document that is carefully checked and rechecked by accountants — and it must be accurate, under penalty of law. … First, the tax return reveals a person’s annual income. A person’s net worth is not disclosed, but voters would gain an understanding of a person’s cash flow. Trump is highly sensitive about suggestions that he is not as wealthy as he claims. … Tax returns also might actually help experts make educated guesses about Trump’s true net worth”

WARREN AS HRC VP? — HuffPo’s Sam Stein and Ryan Grim: “Twice this past week, Sen. Elizabeth Warren (D-Mass.) has unleashed a seemingly unprompted tweetstorm on Donald Trump … Dripping with disdain, the 140-character asides got under Trump’s skin … The more important reaction came not from Trump, however, but from Hillary Clinton‘s campaign.

“Multiple sources close to the former secretary of state say that her aides took note of the senator’s ability to rile the real estate tycoon. And they recognize the value of such dart throwing from, say, someone filling out a presidential ticket. One close Clinton confidant said that she and her aides were ‘thrilled to see Warren get under his skin.’ Another senior Clinton adviser, who is advocating internally for Warren as a vice presidential pick, said the senator has ‘very influential people in the campaign pushing for her.”

CGI AIDED CLINTON FRIENDS — WSJ’s James V. Grimaldi: “The Clinton Global Initiative, which arranges donations to help solve the world’s problems, set up a financial commitment that benefited a for-profit company part-owned by people with ties to the Clintons, including a current and a former Democratic official and a close friend of former President Bill Clinton. … The $2 million commitment was placed on the agenda for a September 2010 conference of the Clinton Global Initiative at Mr. Clinton’s urging, according to a document from the period and people familiar with the matter.

“Mr. Clinton also personally endorsed the company, Energy Pioneer Solutions Inc., to then-Energy Secretary Steven Chu for a federal grant that year, said people with knowledge of the endorsement. The company, whose business plan was to insulate people’s homes and let them pay via their utility bills, received an $812,000 Energy Department grant. Mr. Chu, now a professor at Stanford University, said he didn’t remember the conversation”

ANOTHER BANK HACKED — NYT’s Michael Corkery: “Thieves have again found their way into what was thought to be the most secure financial messaging system in the world and stolen money from a bank. The crime appears to be part of a broad online attack on global banking. New details about a second attack involving Swift — the messaging system used by thousands of banks and companies to move money around the world — are emerging as investigators are still trying to solve the $81 million heist from the central bank of Bangladesh in February.

“In that robbery, the attackers were able to compel the Federal Reserve Bank of New York to move money to accounts in the Philippines. The second attack involves a commercial bank, which Swift declined to identify. But in a letter Swift plans to share with its users on Friday, the messaging network warned that the two attacks bore numerous similarities and were very likely part of a ‘wider and highly adaptive campaign targeting banks.’”

APPLE TITLE AT RISK — FT’s Richard Waters: “Apple is still the world’s most valuable company — by the skin of its teeth. But Wall Street has been engaged for months now in a battle for supremacy that could see the iPhone maker lose the position it has held for the past four years in one of the tech industry’s periodic changes of leadership. … A renewed shiver of concern about the outlook for iPhone sales sent Apple’s shares down more than 2 per cent on Thursday, to $90.32, or 32 per cent below the peak they hit almost exactly a year ago.

“The retreat left Apple’s market capitalisation at $494.7bn. That was only some $300m above that of Alphabet, the parent company of Google, effectively putting the two companies neck-and-neck. Investors have been struggling since early this year with whether the rivalry between the world’s biggest consumer products company and its largest internet concern should yield a clear winner. Stripping out their respective net cash positions — the truest measure of the respective value of their businesses — Alphabet surpassed Apple in January. Days later, it also briefly passed it in terms of market cap, or the value of all its outstanding shares, the more widely-followed yardstick. That was shortlived, however, and it is only now that Alphabet is once again vying for the lead.”


HSBC DEFIES KERRY ON IRAN — In a WSJ op-ed, HSBC chief legal officer Stuart Levey said the bank will do no new business with Iran: “U.S. Secretary of State John Kerry met Thursday in London with a group of European financial institutions for a discussion about ‘Iranian banking matters.’ … Washington is pushing non-U.S. banks to do what it is still illegal for American banks to do.

“This is a very odd position for the U.S. government to be taking. … Our decisions will be driven by the financial-crime risks and the underlying conduct. For these reasons, HSBC has no intention of doing any new business involving Iran. Governments can lift sanctions, but the private sector is still responsible for managing its own risk and no doubt will be held accountable if it falls short”

HEDGE FUNDS LOBBY ON GSE’S — WSJ’s Joe Light: “Hedge funds that have bet hundreds of millions of dollars on Fannie Mae and Freddie Mac’s stock aren’t just leaving the fate of their investment to Wall Street. They also are working K Street. A group of hedge funds, including Paulson & Co. and Perry Capital LLC, is helping to finance a lobbying campaign to lift government controls on what happens with the mortgage giants’ profits. …

“Those funds and others bought millions of shares of the companies’ preferred and common stock in hopes of cashing in as they regained their independence following a $187.5 billion taxpayer bailout. But they have been stymied by government policy that for the past four years has sent nearly all the companies’ profits to the U.S. Treasury”

ZUCKERBERG TO PROBE NEWS BIAS CLAIMS — FT: “Mark Zuckerberg, Facebook chief executive, said the group would probe allegations that the social network has excluded conservative news stories from its trending topics section. Facebook has launched a ‘full investigation’ into a claim made by a former news curator that employees were instructed to omit particular stories about Mitt Romney, Rand Paul and other rightwing topics in the sidebar designed to show what is popular on the site.

“Mr Zuckerberg said he took the report ‘very seriously’ but the company is yet to find any evidence that it was true. Writing in a Facebook post, he said he was inviting ‘leading conservatives’ and ‘people from across the political spectrum’ to talk with him and share their points of view. ‘I want to have a direct conversation about what Facebook stands for and how we can be sure our platform stays as open as possible,’ he said.”

POTUS Events

9:00 am || Welcomes the president of Finland and the prime ministers of Norway, Sweden, Denmark and Iceland Grand Foyer
10:15 am || Begins meetings with the Nordic leaders
7:00 pm || Welcomes the Nordic Leaders for a State Dinner; North Portico
9:00 pm || Official State Dinner begins; South Lawn

All times Eastern
Live Stream of White House Briefing at 12:45 pm

Floor Action

The House is in at 9 a.m. with first votes between 10 a.m. to 11 a.m. and last votes from 11:45 a.m. to 12:45 p.m. to finish up work on opioid legislation. It’s Friday, so the Senate is out.

Krebs Daily Briefing 12 May 2016

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


Brazil’s Senate Suspends President Dilma Rousseff

BRASÍLIA — After an all-night debate, Brazil’s Senate voted Thursday morning to suspend President Dilma Rousseff and begin an impeachment trial against her, ousting a deeply unpopular leader whose sagging political fortunes have come to embody widespread public anger over systemic corruption and a battered economy. In a vote of 55 to 22, lawmakers accepted the charges against Ms. Rousseff, accusing her of borrowing from state banks to conceal a looming deficit, a budgetary sleight of hand that critics say was aimed at securing her re-election two years ago. “We could no longer ignore these crimes and thus voted for impeachment,” Álvaro Dias, a senator from the Green Party, said shortly before casting his vote. “Having been assaulted by incompetence and wrongdoing, Brazilians expect punishment.” During her impeachment trial, which could last six months, Ms. Rousseff will be replaced by a onetime ally, Vice President Michel Temer, who has been convicted of violating campaign finance limits and will now be under tremendous pressure to stem Brazil’s worst economic crisis in decades. More:

Quietly, Vietnam hosts arms gathering attended by U.S. companies

Vietnam hosts a defense symposium this week attended by top American arms manufacturers, ahead of a visit by U.S. President Barack Obama and as Washington weighs whether to lift an arms embargo on its former enemy. Secrecy has surrounded the event staged by the communist country and attended by firms including Boeing (BA.N) and Lockheed Martin (LMT.N). It coincides with the biggest arms buildup in the country since the Vietnam War. There has been no mention in state-controlled media and defense reporters are not covering the forum. Efforts by Reuters to gain permission to attend have been unsuccessful and Vietnam’s defense ministry could not be reached for comment. Vietnam has accelerated efforts to build a military deterrent and is the world’s eighth largest weapons importer, as neighbor China intensifies its push to fortify South China Sea islands it has either occupied or built from scratch. According to the Stockholm International Peace Research Institute think-tank, which tracks defense trade over five-year periods, Vietnam’s total arms imports during 2011-2015 represented a 699 percent jump from 2006-2010. The Hanoi symposium comes amid debate within the U.S. administration over whether to respond to Vietnam’s longstanding request to remove an arms embargo that is one of the last major vestiges of the Vietnam War era. Washington eased the embargo in late 2014, but has said any decision to lift it completely would hinge on the extent to which Vietnam has demonstrated progress in improving its human rights record. Its top envoy in that field, Tom Malinowski, was in Hanoi earlier this week. Vietnam has been in talks with Western and U.S. arms manufacturers for several years now to boost its fleets of fighter jets, helicopters and maritime patrol aircraft, although Russia, its traditional supplier, maintains a dominant position. Industry sources say Hanoi is keen on U.S. weapons yet wary of the threat of a future embargo even if the current one ends. The countries do have a common concern in China, however, whose assertiveness in the South China Sea has alarmed Washington.

The Tiny Scottish Village That Spawned Trump

The village of Tong, on the Outer Hebridean island of Lewis, has a calm, unhurried air. On a blustery weekday afternoon, a pair of men in gum boots herd sheep off the grass verges by the side of a narrow country road. The air is thick with the smell of fresh seaweed. The few dozen houses here are silhouetted against fields of peat colored in soft yellows, browns and greens. In the near distance is Stornoway, Lewis’ only town and the main source of jobs on the island. The Scottish mainland is 40 miles, and a two-hour ferry-ride, away. With a population barely in three digits, Tong (pronounced “tongue”) might seem a world away from the glassy opulence of Trump Tower or the gold-leafed walls of Mar-a-Lago, but it is to this flat, marshy land that Donald Trump traces his roots. His mother, Mary Anne MacLeod, was raised in the village, along with generations before her. She spoke almost exclusively in Scots Gaelic before leaving for a new life in the United States at age 18. This is not the part of Trump’s heritage he usually talks about. On the campaign trail, the candidate has by and large avoided telling the immigrant story of his own immediate family, speaking instead of building walls and banning Muslims. When he does bring up the subject, it tends to be in reference to his father, Fred—the original builder of the Trump real estate empire in New York whose parents immigrated from Germany more than a century ago. But in some ways, Trump owes just as much to the side of his family that came over more recently, the MacLeods of Scotland. Local records suggest his ancestors here might be the source of Trump’s first name and the original reddish tint of his hair. One grandfather was also a businessman and a local politician. And Trump himself attributes his flamboyance and penchant for entertainment to his Scottish side. “Looking back, I realize now that I got some of my sense of showmanship from my mother,” he writes in his memoir The Art of the Deal. “She always had a flair for the dramatic and the grand. She was a very traditional housewife, but she also had a sense of the world beyond her.” What is the story of the Scottish origins Trump speaks so rarely about?


Released Emails Show Use of Unclassified Systems Was Routine

WASHINGTON — On the morning of March 13, 2011, the assistant secretary of state for Near Eastern affairs, Jeffrey D. Feltman, wrote an urgent email to more than two dozen colleagues informing them that Saudi Arabia and the United Arab Emirates were sending troops into Bahrain to put down antigovernment protests there. Mr. Feltman’s email prompted a string of 10 replies and forwards over the next 24 hours, including to Secretary of State Hillary Clinton, as the Obama administration debated what was happening and how to respond. The chain contained information now declared classified, including portions of messages written by Mr. Feltman; the former ambassador in Kuwait, Deborah K. Jones; and the current director of the Central Intelligence Agency, John O. Brennan. The top administration officials discussed the Bahrain situation on unclassified government computer networks, except for Mrs. Clinton, who used a private email server while serving as secretary of state. Her server is now the subject of an F.B.I. investigation, which is likely to conclude in the next month, about whether classified information was mishandled. Whatever the disposition of the investigation, the discussion of troops to Bahrain reveals how routinely sensitive information is emailed on unclassified government servers, reflecting what many officials describe as diplomacy in the age of the Internet, especially in urgent, fast-developing situations. A review of the 30,322 emails from Mrs. Clinton’s private server that the State Department has made public under the Freedom of Information Act provides an extensive record of how such sensitive information often looped throughout President Obama’s foreign policy apparatus on unclassified systems, from embassies to the United Nations to the White House.

Google to ban payday loan advertisements

Google announced Wednesday that it will ban all payday loan ads from its site, bowing to concerns by advocates who say the lending practice exploits the poor and vulnerable by offering them immediate cash that must be paid back under sky-high interest rates. The decision is the first time Google has announced a global ban on ads for a broad category of financial products. To this point, the search giant has prohibited ads for largely illicit activities such as selling guns, explosives and drugs, and limited those that are sexually explicit or graphic in nature, for example. Critics of payday lenders say they hope the move by Google and other tech companies might undercut the business which finds huge numbers of willing customers on the internet. The move also shows the willingness of big tech companies to weigh in on critical policy issues — and exert their power as the gateways for the internet. Facebook also does not display ads for payday loans. But others, such as Yahoo, still do. More:


Justice Inquiry Reveals Wall Street’s Dirty Secret

A Justice Department investigation is shedding light on one of Wall Street’s dirtiest secrets.Among the most reliably lucrative trades on the Street is selling and buying stock and options orders of individual investors. This practice happens in essentially private markets operated by major trading and brokerage firms. Many exchanges, including the Intercontinental Exchange’s (ticker: ICE ) New York Stock Exchange, administratively coordinate payment for order flow, or PFOF, in the options market.Now, the Justice Department is investigating major trading firms, including Citadel Securities and KCG Holdings, to see if they violated the civil rights of John and Jane Investor. This approach may mark the first time the federal government has pursued civil rights claims against trading firms. The Wall Street Journal reported that Justice is investigating firms under the Financial Institutions Reform, Recovery and Enforcement Act, or Firrea, that encompasses fraudulent activities with federally insured financial institutions. Most people are unaware that when John Q. Investor wants to trade Apple ( AAPL ), for example, there is always someone on Wall Street who will pay his broker for the right to take the opposite side. The payment can be cash, or it can even be a dinner. This is the essence of payment for order flow, and it is a huge business that involves many major market-making firms, and discount brokers – think E*Trade Financial ( ETFC) and TD Ameritrade ( AMTD ). Not all firms sell their customers orders, but many do and they set prices for specific stock tickers, and even options strike prices and expirations. Fees are also affected by the size of the orders. A “five lot,” or 500 shares, might be more expensive to buy than a 2,000 lot trade. Why? The assumption is that an investor who trades in smaller sizes has no informational advantage, and is likely to personify “dumb money.” Someone who trades large orders is more likely to have non-commoditized insights, and therefore taking the other side of the trade has a lower probability of paying off. PFOF fees vary between the stock and options market. The fees are thought to be about 25 cents for the most actively traded stocks and options that have penny-wide spreads, and 75 cents to $1 for tickers with wider spreads. Exact fees are hard to know because PFOF is essentially conducted in secret. It’s useful to shine a light on this practice because it reveals an ugly truth: Market-making firms love retail order flow because they consider it to be as dumb as a rock. Those are the “muppets.” In a business that is capital intensive, where it is increasingly difficult to make money, these firms can, and often do, make easy money trading against individual investors who routinely buy and sell at the worst times.

25 hedge fund managers earned more last year than every kindergarten teacher in America

The 25 highest-earning hedge fund managers in America brought home a collective $12.94 billion in 2015, according to the latest “rich list” from Institutional Investor’s Alpha. This is, as I’ve written previously, more than the collective earnings of every kindergarten teacher in America combined (about $8.6 billion, according to the Bureau of Labor Statistics). Five of the 25 people on the list earned above the $135 million threshold needed for inclusion even though the funds they managed lost money. This works because hedge fund managers are typically compensated on the basis of a “2 and 20” system, in which they earn a 20 percent share of the fund’s profits but also charge a management fee equal to 2 percent of the total assets under management. That 2 percent fee makes it possible to earn a hefty sum even if the fund loses money — though in the long run a fund that consistently loses money will presumably lose customers. The hedge fund industry is often a subject of political controversy because some managers benefit from a tax loophole known as “carried interest” that lets them pay taxes at the preferential capital gains tax rate. Bernie Sanders, Donald Trump, and Hillary Clinton (and Barack Obama, for that matter) have all in one way or another proposed closing this loophole, though actual hedge fund managers note that fewer of them benefit from carried interest than politicians seem to believe and it’s in many ways a bigger deal for the venture capital industry. More:

Hedge Funds Look for Hard Hats in a Year of Collapsing Mergers

While last year set a record for the amount of money spent on corporate mergers — $4.7 trillion — this year is so far setting a very different record: the dollar amount of deals that have come undone. Since the beginning of January, $400 billion worth of corporate mergers have been withdrawn in the United States, almost three times the previous record for the same period, set in 2007, according to Dealogic, which analyzes such data. On Tuesday, the retailers Staples and Office Depot called off their $6.3 billion deal. The collapse came about a week after the dismantling of the proposed $35 billion merger of the oil services companies Halliburton and Baker Hughes, and one month after the death of the drug giant Pfizer’s proposed $152 billion merger with Allergan — all canceled because regulators raised concerns. Broken deals have whipsawed hedge funds that focus on merger arbitrage, a type of trading that places bets on the likelihood that deals will be completed. As one “arb,” as traders in merger arbitrage are known, described the current mood of the industry: Every day is like showing up unsure of whether to wear a helmet or a diaper. “You’re definitely seeing a hangover from the M.&A. party from 2015,” said Aly El Hamamsy, a partner in Cadwalader, Wickersham & Taft’s mergers-and-acquisitions group, which occasionally advises arbs. “Things will stay interesting for a few months at least.”

1980s Riots Is Still Fueling Fights Today

 For those who weren’t around for the great Cabbage Patch Kids craze of the 1980s, it’s hard to convey the intensity of it. There were fistfights between parents, near riots outside stores and endless shrieks of hysterical children desperate to get their hands on the dolls. Yet all that looks somewhat tame compared with the fight going on today. The wholesome playthings are at the center of a nasty legal spat pitting Jakks Pacific Inc. against a startup run by former executives who allege the toymaker retaliated after losing a license to make the dolls. The drama includes accusations of sabotage, choke holds, gay slurs and vendettas, according to court documents. The battle underscores once again the importance of brands in the $19 billion U.S. toy industry—even one that only retains a sliver of its old popularity. A $600 million seller at its 1985 peak, the Cabbage Patch line now produces revenue of about $50 million a year, according to estimates. Jakks’s sales declined by about 8 percent last year, the first without the Cabbage Patch Kids license. “It won’t ever be what it was, but it still can be valuable,” said Sean McGowan, who runs consultant SMG Leisure. “Because it’s so well known, you get that running start, not just with the consumer, but perhaps even more important with retailers.” Cabbage Patch Kids weren’t particularly cute—that’s being nice—and they didn’t talk or wet the bed. What they did possess was a story. Each doll had a unique name (Eunice Clover and Simon Abraham, for example), adoption papers and birth certificate. In 1983, demand surged before Christmas, leading to the scuffles and a frenzied re-sale market. The national media dubbed it “dollmania,” with Newsweek dedicating a cover story to the craze.

Over the years, the brand’s owner, Original Appalachian Artworks Inc., has awarded the marketing license to various companies including industry heavyweights Mattel Inc. and Hasbro Inc. Then, after a decade with Jakks, Original Appalachian decided in 2014 to move the license to Wicked Cool Toys, started two years earlier by former senior Jakks executive Michael Rinzler. That’s when litigation hell broke out. Jakks sued Wicked Cool and Jeremy Padawer in New York state court in September. Padawer had worked on Cabbage Patch Kids while at Jakks, later leaving to join Rinzler at the new company. The suit alleges that while Padawer was employed at Jakks in 2013, he disparaged the company and leaked proprietary information on profits and strategies. The goal: to get Original Appalachian to give the Cabbage Patch license to Wicked Cool Toys, the suit claims. Jakks is seeking about $20 million in damages.


In Trump-Ryan Standoff, Republicans See No Quick Resolution

U.S. House Speaker Paul Ryan came under pressure Wednesday from a few Republicans to endorse Donald Trump quickly, saying that the party’s unity should be paramount, but most say any reconciliation will likely take some time. Ryan, who is scheduled to meet with the presumptive Republican presidential nominee on Thursday morning, is finding plenty of support from other lawmakers who said they share the speaker’s goal of binding Trump to conservative policy stances. Representative Raul Labrador of Idaho, a member of the ultra-conservative House Freedom Caucus, said he believes Ryan has made a mistake by withholding his endorsement. “He needs to find a way to bring the party together. He’s the leader of the party right now and you have a presumptive nominee. They have to work together,” Labrador said Wednesday after a Republican caucus meeting. “You don’t have to agree with Trump on everything. I sure don’t.” But Peter King, a New York Republican, said that even behind closed doors, Republicans weren’t putting Ryan on the defensive. “He didn’t take any heat at all,” King said. “By doing that, Paul showed that there are real questions. He brought it out.” More:

How a bill becomes a wall

(CNN)Donald Trump has made building a wall along the entire border with Mexico a centerpiece of his presidential campaign. It’s a project he insists won’t require much hassle. “Building a wall is easy, and it can be done inexpensively,” Trump told The Washington Post last summer. “It’s not even a difficult project if you know what you’re doing.” Sure, humans have been building walls for thousands of years. The mere act of constructing one is pretty simple. But Trump is only half right; his wall will be a construction project borne of the United States federal government, a massive undertaking that will span thousands of miles, take years to build and require an incredible amount of political willpower and bureaucratic maneuvering. The red tape alone will be like nothing Trump — master builder he may be — has ever faced. In an effort to discover just how much work it would require a Trump Administration to get his controversial wall project off the ground, CNN Politics spoke to experts on the federal bureaucracy and burrowed through the labyrinth of agencies that played a role in constructing the U.S.-Mexico border fence that former President George W. Bush set in motion in 2006. That was a project that has been beset with setbacks, lack of congressional interest and funding problems. More:

Good News: Americans Like Nickelback More Than They Like Donald Trump

Rachel Maddow broke the news yesterday that Donald Trump polls lower than Nickelback among American voters, according to a new study from Public Policy Polling. Remember, this is the band that brought you the lyrics, sex is always the answer, never a question. Trump also polls lower than used car salesmen, the DMV, root canals, traffic jams, hipsters, and jury duty. But the biggest upset against Trump? When PPP asked Americans which they had a higher opinion of, Donald Trump or lice, almost twice as many Americans had a higher opinion of lice (54 percent to 28 percent). The real takeaway, though, is that all three remaining presidential contenders are viewed more unfavorably than favorably—Bernie Sanders is 3 points under, Hillary Clinton 19 points under, and Donald Trump 27 points under. Both Sanders and Clinton win in a hypothetical general election matchup against Trump, but only 21 percent of Republicans polled would not be comfortable with Trump as their nominee. That’s the same percentage of Democrats who would feel uncomfortable with Hillary Clinton as their nominee.  As Maddow points out, that doesn’t exactly sound like a Republican Party in crisis. The voters may not like Trump, but they will get behind him. Just like they got behind Nickelback’s chart-topping number one hit, “How You Remind Me,” in 2001.


The World’s Smallest Ukelele – It’s playing for the mere millionaires being humiliated by billionaires in paradise.



Gov. Bentley talks Hubbard trial, possible impeachment in Birmingham

Gov. Robert Bentley said he is considering calling a special session of the legislature, weighing whether he can make enough cuts to support the Alabama Medicaid Agency’s budget, which he said needs another $85 million. “I have not made a decision on that yet. I met yesterday with my commissioner for Medicaid. You know, there’s some real problems there,” the governor said during a brief media availability in Birmingham on Wednesday, where he addressed BioAlabama’s annual meeting. Bentley spoke about the biotech industry’s investments in the state in his address.  Bentley said he would have a decision on whether to call a special session “in the next couple of months.” “Calling the special session is always an option,” the governor said, adding that the state could also look at using funds from the BP oil spill. Bentley also said he is confident that his ambitious prison construction plan, which died on the last day of the legislative session, would pass if he called a special session. “We were very close on that. I think if we had another hour” there would’ve been a compromise, he said. “I did not have the time to explain to the House members what I was trying to do,” Bentley said. Bentley, who is facing allegations that he had an affair with his former senior political adviser, Rebekah Caldwell Mason, and that he misused his office, also said he wasn’t concerned about possible impeachment proceedings against him. “I have no apprehensions because I’ve done nothing wrong,” he said. The governor declined to speak about the suspension of controversial Alabama Chief Justice Roy Moore, who is facing ethics charges before the Alabama Judicial Inquiry Commission. “That’s in a process right now,” he said. Bentley also didn’t share his thoughts on the upcoming trial of House Speaker Mike Hubbard. The governor is among a list of possible witnesses who could be called to testify in the case.

Alabama Republican Assembly Backs Moore

Wednesday, May 11 the Alabama Republican Assembly responded to the charges of judicial ethics violations made by the Alabama Judicial Inquiry Commission against Alabama Chief Justice Roy Moore. The conservative group announced that they were firmly behind Chief Justice Moore and demanded that the charges against Judge Moore be dropped. The President of the Assembly, Jennifer Montrose said in a statement, “Chief Justice Moore was elected by the people of this state for his solid, consistent conservative values and morals. At a time when many of our elected officials are failing morally, ethically, and otherwise, Judge Roy Moore has stood strong for the traditional values that made America great. The Alabama Republican Assembly stands firmly in support of Judge Moore and asks the Court of the Judiciary to drop these politically motivated charges immediately.” The Republican Assembly calls itself the “Reagan wing” of the Republican Party, the Republican Assembly supports the right to keep and bear arms, lower taxes through less government, the right to life, and a strong national defense. Chief Justice Roy Moore asserts that the JIC has exceeded its authority: “The Judicial Inquiry Commission has no authority over the Administrative Orders of the Chief Justice of Alabama or the legal injunction of the Alabama Supreme Court prohibiting probate judges from issuing same-sex marriage licenses. More:

No changes this year to state’s retirement system

MONTGOMERY — There were no significant changes to the state’s retirement system this legislative session, despite talk of possible major and minor reforms. Some north Alabama lawmakers are discouraged, while at least one said he’s not sure change is needed at this point. “I’m disappointed that we didn’t get any bills passed,” Sen. Larry Stutts, R-Tuscumbia, said. He said a trio of bills recommended by the pension study committee, which he was a part of, were common-sense approaches for change. But Rep. Randall Shedd, R-Cullman, said Wednesday he was upset about the time spent by the committee of lawmakers that began meeting in August to gather information on the Retirement Systems of Alabama. “I felt like we were just being spoon fed information from the national organizations who are intent on phasing out pension plans across America,” Shedd said Wednesday. He questioned whether all the information received was credible. “I was just disappointed in the entire process,” he said. The pension study commission’s charter has expired, and the group won’t meet again, at least not in its previous form. But legislation could be revived next year, co-chairman Sen. Arthur Orr, R-Decatur, said recently. “We’ll just have to evaluate where we are when we start focusing on the 2017 session,” he said. The commission pledged early on not to do anything to impact current employees or retirees, but Rep. Lynn Greer, R-Rogersville, said he was inundated with calls and emails from people telling him to leave their retirements alone. “The ones we are trying to help are the ones hating us, and there’s nothing we can do to educate them,” Greer said Wednesday. He’s been one of the main advocates for pension plan restructuring. In March, he drafted legislation to create for new employees a cash balance plan instead of RSA’s current defined benefit plan. RSA leadership opposed that idea, and legislation was never filed.

Some states have gone from a defined benefit plan, where retirees have a fixed monthly income benefit based on their age at retirement, years of service and salary, to a hybrid plan. Hybrids include a reduced defined benefit plan, along with a 401(k)-type plan. A cash balance plan, like Greer suggested, is one in which the employer credits a participant’s account with a set percentage of their yearly compensation, plus interest. Greer’s concern has been the system’s billions in unfunded liability and the state’s annual allocation. According to RSA’s recently released 2015 annual report, the system had $2.2 billion in total revenue last year. It paid out a total of $2.6 billion in benefits. More:




Who is Gary Johnson?

All the attention is on the prospect of a Clinton-Trump race, but it is underreported that there may be a Libertarian entrant in this election: Gary Johnson. Who is Gary Johnson? Well, he served as the Republican governor of New Mexico from 1995 to 2003. He’s not a nut and he’s not manifestly dishonest, and that sets him apart from the field. He may not exactly hit the sweet spot as a third-party candidate, and I say he could never win the general election, but be on the lookout for the growing potential of the Johnson campaign after the Libertarian National Convention in Orlando in just more than two weeks. It wouldn’t take much for his candidacy to make a difference in a close race. Johnson was also the Libertarian candidate for president in 2012, and received 1.27 million votes, or almost 1 percent of the popular vote. Keep in mind that in 2012, there was not as much widespread dissatisfaction with the Democratic and Republican parties’ nominees. In 2016, Johnson could benefit from Republicans, Democrats and independents who find they cannot vote for either Hillary Clinton or Donald Trump. Some of the young, left-wing Bernie Sanders supporters may be attracted by Johnson’s advocacy for legalized marijuana, military non-interventionism and pro-choice stance.  Republicans could be attracted by his credible experience as governor, his rational commitment to balancing the federal budget and his pro-Second Amendment views. Many middle-of-the-road voters might simply be reassured by his calm demeanor, mature presence and credibility. In a race between Shouting Hillary and Insulting Trump, his lucidity may offer a vivid contrast. Anyway, the Johnson campaign will certainly be worth watching — again, not because he could ultimately win, but because he could add another element of uncertainty to this election. Polling is obviously fluid and unreliable at this point in the race, but in a poll with a hypothetical Trump-Clinton-Johnson matchup released yesterday, he is already at 4 percent. And in a poll from late March, Johnson had 11 percent. I’m not sure if he would take votes from Clinton or Trump, but Johnson’s Libertarian campaign for president has some disruptive potential.


Legislators dictate health care choices of women

It’s easy to be magnanimous with what belongs to someone else. Some people who don’t want the government interfering with their health care still want the government dictating healthcare choices for pregnant women. The price of freedom is that other people will use it in ways you wouldn’t. World health surveys tell us thousands of women worldwide die each year due to complications of pregnancy. In my family and others, I know of people here today only because a woman survived an earlier pregnancy. Health care decisions should be made by someone whose life is at risk. Maybe the legislature needs to work on seeing the mother as a person, and not just a container for the unborn. Childbirth should be a gift a woman, through her own heroic efforts, generously gives to the world, not a sentence imposed on her by the government. E.B. Hill:  Montgomery – How corrupt are Alabama politicians? Just how corrupt are Alabama politicians? We have a governor on the verge of impeachment and House Speaker Mike Hubbard, who needs to go to jail. I believe some of our legislators should be investigated as well. Is corruption so blatant they can accept out-of-state money to destroy Alabama’s retirees bank accounts? Who stops these crooks? Apparently, no one! The Retirement Systems of Alabama membership consists of 339,000 retired teachers, municipal employees and judges and our financial retirement stability is seriously being threatened with possibly our lifetime savings being stolen by Wall Street bandits. Haven’t they done enough damage? The Arnold Foundation and its money, Pew Charitable Trust, billionaire Koch Brothers and the Alabama Policy Institute are some of the “outside vested interests” controlling certain members of the Legislature. It is reported that when Enron collapsed, Executive John Arnold of the Arnold Foundation walked away with $8 million wiping out their public pension funds. The Koch Brothers funded over $298,000 to certain Troy University college professors to bash public pension programs and mislead the public and the Alabama Policy Institute has taken over $180,000 from the Arnold Foundation. Arnold money supports Pew’s misleading reports and promotion of cash balance plans. These greedy people, from outside the state, are trying to promote their “cash balance plans” and replace the Retirement Systems of Alabama’s (RSA) current Tier 11 plans threatening thousands of Alabamians retirement payment plans – money we personally saved during our working years. It’s called stealing. Myrt Jones.


See how council president punished those who opposed him

Birmingham City Council President Johnathan Austin won the day Tuesday. And then the carnage began. Austin, after claiming a contentious 5-4 victory to remain council president, looked on the four people who voted against him as the conquered. He would not be merciful. He razed their village and burned their crops. He mounted their heads on pikes for all to see. Or at least he did the political equivalent. Within hours of the council meeting Austin issued an order describing how the lives of those who voted against him would change. Councilwoman Kim Rafferty, who opposed him, would have to move out of her office. Councilwoman Sheila Tyson, an ally, would move in. Councilwoman Valerie Abbott – the councilwoman with the longest tenure – also has been told she must abandon her office so Austin bestie Lashunda Scales can claim it. Councilman William Parker, who ran against Austin for president, managed to keep his office. But councilman and former president pro tem Jay Roberson – another no-vote for Austin – was told to move out of his space pronto so new pro tem Steven Hoyt could move in. Roberson was told to be out of that office by close of business Tuesday. He got about four hours to clear out. To the victors go the spoils. But that wasn’t all. Austin immediately reassigned council parking spaces. Rafferty got to keep her parking space – she says nobody else wants it because it is hard to get into – “but the others (who voted against Austin) were moved farther away.” And then there were the committee assignments. Austin went to work there, too, making switches that removed Parker from the administration committee and the park and rec committee, which he had chaired. There were other shifts. He even changed the seating on the dais. It was, all in all, a reaping. Austin took the city, slew those who opposed him and sowed their districts with salt. But Austin doesn’t see it that way. It’s not retaliation, he says. Not punishment or dominance. “Reshuffling the deck is always good,” he said. “People need to get out of their comfort zone.” Austin believes Mayor William Bell – who backed legislation that forced the new vote on the presidency and took other powers from the council – wanted to see him ousted. And he is insistent that the council will not be run by the mayor. But he vowed this council will stick together. “The council speaks as one voice,” he said. “The council spoke with one voice yesterday. I’m not going to stop working to build relationships.” But that is laughable to council members on the business end of his ire. Rafferty said Tuesday that she had “never been so humiliated” as she was on that day. She said there will be costs — and not just political ones. The changes will cost city money. Another member wrote of Austin’s  actions as “the straw that broke the camel’s back,” and that “all hell is about to break loose.” It was a heckuva statement. On a heckuva day. It is just happenstance that it all happened on March 10 – on that day in Birmingham history when protests ended in 1963, a day of compromise that became known as The Birmingham Truce. There would be no truce Tuesday. Just more acrimony and discord, more vengefulness and retribution. More petty displays of power that can result only in more ill will, more division and more political disappointment. A pro-Austin council member did dismiss it all, arguing that Austin’s actions were just politics, like you’d find in Montgomery or Washington. Which is no comfort at all.


Morning Money

TRUMP’S MAGICAL THINKING TAX PLAN — In one of the more inexplicably bizarre statements of an already bizarre campaign, Donald Trump economic adviser Sam Clovis suggested the real estate magnate’s tax cut plan could generate a government surplus of as much as $7 trillion over 10 years. This is, to put it mildly, complete nonsense. “Our proposals, what we think will happen, will lead us in fact to about a $4.5 to $7 trillion surplus at the end of 10 years, if all of our initiatives are put in place,” Clovis said at the Peterson Foundation fiscal summit.

The conservative Tax Foundation scored Trump’s current plan (now subject to possibly endless revision) as adding $10 trillion to the debt over ten years. Clovis complained that the Foundation did not use “dynamic scoring” which takes into account the potential growth effects of tax reductions. The only problem with this: They DID use dynamic scoring to get to the $10 trillion figure. When scoring on a static basis, the group said Trump’s plan would cost $12 trillion. There is simply no way to get to Clovis’ estimate without massive tax hikes.

TREASURY DEPARTURE LOUNGE — Anne Wall, Assistant Secretary for Legislative Affairs, is headed out. Treasury Secretary Jack Lew on Wall’s tenure: “For five years, including for the last two years at Treasury, I have relied on the sound advice and strategic judgment of Anne Wall, who brought a special combination of determination, humor and a comprehensive understanding of policy and Congress to her role as Assistant Secretary for Legislative Affairs.

“Anne played a pivotal role in securing some of Treasury’s signature policy accomplishments, including Trade Promotion Authority, IMF quota reform, and the Joint Comprehensive Plan of Action with Iran, as well as in protecting key administration priorities, including the Affordable Care Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

TRUMP WON’T RELEASE RETURNS — POLITICO’s Nolan D. McCaskill: “Donald Trump has no plans to release his tax returns before November. Despite pressure from his now-vanquished Republican rivals and even 2012 GOP presidential nominee Mitt Romney, Trump has refused to oblige. ‘There’s nothing to learn from them,’ the presumptive nominee told The Associated Press in an interview conducted Tuesday and published Wednesday. …

“The real estate mogul has said voters aren’t interested in his tax returns but that he would release them after the conclusion of an audit. Trump surrogate Ben Carson said last week that Trump would release his tax returns before the general election.”

HARD TO SEE how Trump gets away without releasing his returns, a tradition though not a requirement for presidential candidates. He would be the first major party candidate to not release returns since Gerald Ford in 1976. Trump has said he cannot release returns because they are under IRS audit. This, of course, is entirely untrue. There is nothing stopping him from releasing the returns.

As CNN Money reported on Wednesday even Richard Nixon released returns that were under IRS audit. The only conclusion that can be drawn is that Trump is hiding damaging information in his tax returns. He is likely to come under intense pressure both from Democrats (Hillary Clinton jumped on it Wednesday) and members of his own party (Mitt Romney, Rep. Darrell Issa among others so far) to release the returns.

BUT WAIT MAYBE HE WILL! — Trump on Wednesday night on Fox denied he told the AP he wouldn’t release his returns: “I didn’t say that. I said I’m being audited … So, the answer is, I’ll release. Hopefully before the election I’ll release.”

TRUMP OPPONENTS are already circulating lists of reasons they think Trump might be hiding his returns. Among them: “Trump’s taxes could show that he doesn’t make nearly as much money as he suggests … Trump probably reports relatively little taxable income … Trump may lower his taxes by deducting parts of his lifestyle as business expenses and borrowing against his assets … Trump’s tax returns may show that his most valuable asset – his name – belongs to an offshore shell company.

“Old tax filings show that Trump had negative income due to depreciation in 1978. Trump may be using real estate depreciation to lower his income — possibly to below zero … Sen. Ted Cruz has speculated that Trump’s tax returns may contain evidence of his ties to organized crime. … Cruz suggested Trump’s tax returns may show significant donations to left-wing organizations, including Planned Parenthood … Trump’s returns may show his unwillingness to give to charity, already evinced by his paltry support of his own foundation”

TRUMP-CLINTON TIED — Reuters: “Trump pulled even with Democratic rival Hillary Clinton in a Reuters/Ipsos opinion poll released on Wednesday, in a dramatic early sign that the Nov. 8 presidential election might be more hotly contested than first thought. … Trump’s numbers surged after he effectively won the Republican nomination last week by knocking out his two remaining rivals, according to the poll.

“The national survey found 41 percent of likely voters supporting Clinton and 40 percent backing Trump, with 19 percent undecided. The survey of 1,289 people was conducted over five days and has a credibility interval of 3 percentage points”

FIRST LOOK: IS SECULAR STAGNATION REAL? — Bloomberg Businessweek cover features Larry Summers and Janet Yellen: “The world economy is acting weird. Growth is paltry and uneven. It might not a cyclical thing. We may be stuck in secular stagnation.”

Cover: “Larry Summers has something to say: The economy is really sick. Is he right?” by Peter Coy; Cover image:

DRIVING THE DAY — Trump meets on Capitol Hill with House Speaker Paul Ryan and other GOP leaders … House Financial Services subcommittee has a hearing at 10:00 a.m. on “The Future of Housing in America: A Comparison of the United Kingdom and United States Models for Affordable Housing” … Jobless claims at 8:30 a.m. expected to dip to 270K from 274K … Import prices at 8:30 a.m. expected to rise 0.6 percent.

TRUMP TWEAKS TAXES — POLITICO’s Shane Goldmacher: “Conservative economists Larry Kudlow and Steve Moore, tasked by Donald Trump’s campaign to revise his tax plan, have called their changes ‘tweaks’ but what they submitted to the nonprofit Tax Foundation for a new deficit score amounts to a dramatic rewrite of Trump’s original plan. …

“The new plan, compared against Trump’s initial proposal, would increase tax rates across all income levels, dramatically reduce the number of people who would pay no income taxes at all and impose a new cap on charitable deductions for the wealthy. It was described to POLITICO by Tax Foundation analyst Alan Cole. Trump himself has not yet approved the revisions being drafted by Kudlow, a CNBC host, and Moore, a fellow at the Heritage Foundation”

IS TRUMP REALLY THE KING OF DEBT? — Bloomberg View’s Timothy L. O’Brien reviews the record and finds the answer is a great big no.

REAL TALK ON DEBT — Committee for a Responsible Federal Budget’s Maya MacGuineas: “First the presumptive Republican nominee suggested in March that he would pay off the national debt in eight years. He later backed away from that proposal, which was good because such an aggressive goal would be both politically challenging and probably economically devastating …

“More ideal is a plan that keeps the debt from growing faster than the economy and achieves balance down the road, on a timetable consistent with helping the economy to grow, not shrink. … An important point in this debate is that the U.S. does not need to ever pay off the debt completely; the goal is to keep it at a manageable level. National debt is desirable in that it provides the U.S. Treasury market”

JAMIE DIMON VS CAM FINE — CNN Money’s Patrick Gillespie: “Jamie Dimon wants to be friends with small banks on Main Street. But the JPMorgan chief wasn’t exactly extending the olive branch on Wednesday when he responded to criticism from a small bank lobbyist by calling him ‘a jerk.’ … Camden Fine, a long time community banker and head of a group that represents small banks, had rejected Dimon’s op-ed last month in The Wall Street Journal titled ‘Large Banks and Small Banks Are Allies, Not Enemies.’

Fine argued that Dimon is trying to use small banks as cover in Congress to help get his agenda passed. ‘Just because Jamie Dimon says ‘let’s sing kumbaya’ doesn’t mean community banks are going to just line-up like a Greek chorus,’ Fine told Bloomberg.Speaking on CNBC Wednesday, this was what Dimon had to say about Fine. ‘I think the guy who wrote that is a jerk,’ Dimon said in a phone interview.

“Fine fired back at Dimon in a phone interview with CNNMoney on Wednesday. ‘What is this, junior high school?’ said Fine, who is president of the Independent Community Bankers of America. ‘To be called a jerk by Jamie Dimon — I take as a badge of honor. It means he has no good argument to our response. So he resorts to name calling, and in my view that is the last refuge of small minds.’”

A former senior Hill staffer emails: “Help me understand how Cam’s belligerence is good for his members? The deals he has cut cost his guys millions of dollars every year — the Durbin Amdt, CFPB. Dodd Frank wouldn’t have happened without Camden Fine cutting a deal with Barney Frank, a fact Barney highlighted in his book”

WALL STREET NIGHTMARE: DEALS GONE BUST — WSJ’s Liz Hoffman: “In the world of mergers and acquisitions, 2015 was a year of record-breaking deals. This year is one of broken-deal records. More than $395.4 billion in U.S. mergers, including, most recently, Staples Inc.’s combination with Office Depot, have fallen apart in 2016, according to data provider Dealogic, felled by exacting regulators, rocky markets or reluctant targets. That will be a record even if no other deals stumble for the rest of the year.

“That is bad news for the banks that stood to make billions of dollars in fees on the M&A feast of 2015, a record-setting year of more than $4.6 trillion in announced deals. Financial advisers pocket most of their money only when deals close, which means that when deals go bust, the work they have already done goes largely unpaid. Three of the largest collapsed deals this year — Pfizer Inc.’s takeover of Allergan PLC, Halliburton Co.’s purchase of Baker Hughes and Staples’ merger with Office Depot — will cost banks more than $300 million in advisory fees”

GOP CRACK-UP PART I — NYT’s Jennifer Steinhauer and Jonathan Martin: “As his party splinters and his policy agenda faces peril, Speaker Paul D. Ryan will enter his meeting with Donald J. Trump on Thursday increasingly at odds with a growing, if grudging, Republican congressional majority willing to embrace Mr. Trump as their candidate. … The decision of Mr. Ryan, the party’s most prominent skeptic of its polarizing new standard-bearer, will echo well beyond this campaign season when he anticipates rebuilding his party’s post-Trump brand, …

“But Mr. Trump has said he has no intention of reinventing himself for the general election — a declaration that could force Mr. Ryan to acquiesce in the name of Republican unity or establish himself as the leading voice of opposition within the party. While Mr. Ryan has repeatedly cited his desire to unify his party and to reject the nasty tone of the Republican primary campaign, he appears to have complex motivations. … He and his staff play down talk of a 2020 run for the White House, but how Mr. Ryan manages Mr. Trump over the next six months will play a major role in shaping Mr. Ryan’s future.”

GOP CRACK-UP PART II — WP’s Dan Balz: “Trump will come to … to hasten the process of unifying a fractured party. The reality is that, nice words to the contrary, Trump and those party leaders are likely never to fully achieve that result. Trump is an unpredictable presidential candidate, predictable only in the sense that what he says one day can change the next. Whatever reassurances he might try to offer in the face-to-face meetings — and Trump knows how to be charming in his personal encounters — could easily be washed away …

“For months, Ryan has been establishing himself as the keeper of Republican values and an advocate of positive messaging in the face of a hostile takeover by the renegade Trump, whose candidacy has been buoyed by the politics of anger. The presumptive nominee has made it clear that he will brook only minimal dissent from GOP officials and has sent conflicting signals about his desire to find true unity with party leaders … One of the first questions about Thursday is: Which Trump will show up in Washington?”

ELECTION BACKDROP: CRUMMY INCOMES — FT’s Sam Fleming and Shawn Donnan in Washington: “More than four-fifths of America’s metropolitan areas have seen household incomes decline this century, according to new research that exposes the politically charged reality of middle-class decline at the heart of this year’s presidential election. The research on urban centres that are home to three-quarters of the US population shows that median household incomes, adjusted for the cost of living in the area, grew in just 39 out of 229 metro areas between 1999 and 2014. …

“The figures, prepared by the non-partisan Pew Research Center and shared with the Financial Times, cast light on the drivers of the economic discontent that have fueled the rise of … Trump … and Bernie Sanders … Both men’s campaigns have tapped into deep-seated concerns among middle class voters on the right and the left. Pew’s research illuminates one source of that anxiety and raises questions about even some of America’s most celebrated economic success stories”

BOONE PICKENS ALL IN FOR TRUMP — POLITICO’s Alex Isenstadt: “Oil tycoon Boone Pickens is slated to host a reception for a pro-Donald Trump super PAC at his Texas ranch next month. … Pickens, a prolific giver to Republican candidates and causes who on Wednesday announced his support for Trump, is scheduled to host an event at his North Amarillo, Texas, ranch on the weekend of June 11-13 … The event will be sponsored by Great America PAC, a super PAC that is devoted to supporting Trump.

‘The event is not a fundraiser per se, but rather a reception aimed at cultivating new potential givers to the super PAC. Pickens, who helped to finance the Swift Boat Veterans for Truth campaign against John Kerry in 2004, is expected to be joined by Ed Rollins, a veteran Republican strategist and 1984 Ronald Reagan campaign manager. Great America PAC has invited a group of major GOP donors to the event.”

ROUSEFF COULD BE GONE — Bloomberg: “This Wednesday may be the last day in office for President Dilma Rousseff, as Brazil’s Senate gears up for a vote that would force her out and into an impeachment trial she appears unlikely to survive. The Senate debate is scheduled to last 10 hours and end by 10 p.m. local time, the chamber’s speaker Renan Calheiros said before opening the session. Surveys by the country’s major newspapers show the opposition has 50 or 51 votes, more than the simple majority of the 81 seats necessary to put her on impeachment trial

“Following more than five months of political turmoil that have exacerbated the worst economic recession in over a century and all but sidelined Rousseff’s economic agenda in Congress, her departure may make Brazil’s investment climate a bit more predictable, at least temporarily. The question is to what extent her replacement, Vice President Michel Temer, can live up to investor expectations of slashing a near-record budget deficit”

POTUS Events

11:00 am || Receives the Presidential Daily Briefing

All times Eastern
Live Stream of White House Briefing at 12:30 pm

Floor Action

The House is in at 10 a.m. with first and last votes around 3:15 p.m to 4:15 p.m., and lawmakers are continuing to work on opioids legislation. The Senate is in at 9:30 a.m. No votes yet, but post-cloture time on the substitute amendment on the energy and water appropriations bill expires at 6:30 p.m., teeing up a vote.


Why Employers Need to Count Employees

It’s important to know how many full-time employees you have because two provisions of the Affordable Care Act – employer shared responsibility and employer information reporting for offers of minimum essential coverage – apply only to applicable large employers. Employers average the number of their full-time employees, including full-time equivalents, for the months from the previous year to see whether they are considered an applicable large employer.

Whether your organization is an ALE for a particular calendar year depends on the size of your workforce in the preceding calendar year. To be an ALE, you must have had an average of at least 50 full-time employees – including full-time-equivalent employees – during the preceding calendar year. So, for example, you will use information about the size of your workforce during 2016 to determine if your organization is an ALE for 2017.

In general:

  • A full-time employee is an employee who is employed on average, per month, at least 30 hours of service per week, or at least 130 hours of service in a calendar month.
  • A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.
  • An aggregated group is commonly owned or otherwise related or affiliated employers, which must combine their employees to determine their workforce size.

There are many additional rules on determining who is a full-time employee, including what counts as hours of service.

For more information, see the Information Reporting by Applicable Large Employers and the Employer Shared Responsibility Provisions pages on

Krebs Daily Briefing 11 May 2016


Reports: ISIL car bombing in Baghdad kills at least 64

At least 64 people were killed and dozens injured in a car bombing in a market in a mainly Shiite neighborhood of Baghdad on Wednesday, according to media reports. The Islamic State, also known as ISIL or ISIS, claimed responsibility for the attack, which it said targeted Shiite militiamen. The vehicle detonated at the crowded market in Sadr City, an eastern area of the Iraqi capital. ISIL has carried out a number of attacks in the area. Reuters reported that an SUV was packed with explosives before exploding near a beauty salon at rush hour. Most of the victims were women, it said. Reports on the death toll vary — the BBC and CNN reported that at least 64 people were killed while the Associated Press said at least 45 people were dead. Reuters reported that 50 people were killed. Karim Salih, a 45-year old grocer, told the Associated Press that the bomb was in a pickup truck loaded with fruits and vegetables. He said a man parked it before quickly disappearing into the crowds. “It was such a thunderous explosion that jolted the ground,” Salih was quoted by the AP as saying. He added: “The force of the explosion threw me for meters (yards) away and I lost conscious for a few minutes.” He said he was uninjured, but two of his workers were wounded. ISIL also claimed a February twin suicide bombing in Sadr City that killed 70 people, Reuters reported. The Sunni extemist group considers Shiites apostates who have forsaken their religion.

Turkey has killed 3,000 Islamic State fighters in Syria, Iraq: Erdogan

Turkey has killed 3,000 Islamic State fighters in Syria and Iraq, President Tayyip Erdogan said on Wednesday, adding that no other country is fighting Islamic State as Ankara is. NATO member Turkey was initially a reluctant partner in the U.S.-led coalition against Islamic State and faced criticism in the earlier stages of the Syrian war for failing to stop foreign fighters crossing its borders and joining the radical group. Turkey has meanwhile said it needs more help from Western allies in the fight against Islamic State, particularly near the Syrian border, where the Turkish town of Kilis has been hit for weeks by repeated rocket fire.


Recession May Loom for Next U.S. President No Matter Who That Is

Talk about a poisoned chalice. No matter who is elected to the White House in November, the next president will probably face a recession. The 83-month-old expansion is already the fourth-longest in more than 150 years and starting to show some signs of aging as corporate profits peak and wage pressures build. It also remains vulnerable to a shock because growth has been so feeble, averaging just about 2 percent since the last downturn ended in June 2009. “If the next president is not going to have a recession, it will be a U.S. record,” said Gad Levanon, chief economist for North America at the Conference Board in New York. “The longest expansion we ever had was 10 years,” beginning in 1991. The history of cyclical fluctuations suggests that the “odds are significantly better than 50-50 that we will have a recession within the next three years,” according to former Treasury Secretary Lawrence Summers. Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. in New York, puts the probability of a downturn during that time frame at about two in three. The U.S. doesn’t look all that well-equipped to handle a contraction should one occur during the next president’s term, former Federal Reserve Vice Chairman Alan Blinder said. Monetary policy is stretched near its limit while fiscal policy is hamstrung by ideological battles.

Clayton Assessed as First Deal Agent for Non-Agency MBS

Efforts to revive/improve the non-agency mortgage-backed securities market took another step forward this week as Morningstar Credit Ratings assessed Clayton Holdings as a deal agent. Investors working with the Structured Finance Industry Group and the Treasury Department have pushed for creating a deal agent as one of the ways to convince firms to buy non-agency MBS backed by new originations. “While the concept of a deal agent in the mortgage securitization industry is not a new one, the need for an independent third party to protect investors’ interests is viewed as vital to the re-emergence of the private-label securitization market,” Morningstar said. The rating service assigned Clayton “‘MOR RV2” ratings as both a deal agent and representations-and-warranty reviewer. “Clayton is uniquely positioned to fulfill the roles of a deal agent and a representations-and-warranty reviewer,” the rating service said, noting that Clayton has reviewed more than 12 million loans since 1989. Even with the assessment of Clayton, the functions that a deal agent perform remain nebulous. “The specifics of the deal-agent role and its accompanying responsibilities continue to be discussed by industry stakeholders and may require a variety of different services based on investor preference and transaction type,” Morningstar said.


Puerto Rico’s Fiscal Fiasco Is a Harbinger of Mainland Woes

To tourists, Puerto Rico means piña coladas and sunbathing. To Puerto Ricans, it looks very different: The unemployment rate is 45 percent, schools and hospitals are closing, and the government debt is so huge it makes Detroit’s look modest. Puerto Rico is now supposed to pay an unfathomable $2 billion to bondholders on July 1 — which it cannot do — even as it accrues pension obligations to its workers and lets public works lapse. A relief bill is expected to be introduced in Congress on Wednesday, but even if it passes and works, the island will not be able to pull out of its financial tailspin for years. But mainland residents should not look smugly at Puerto Rico. Across America, dozens of cities, counties and states may be heading down the same financial rabbit hole. Illinois, New Jersey, Philadelphia, St. Louis and Jacksonville, Fla., to name just a few, are all facing their own slowly unspooling financial disasters. The blame lies with what economists call “deferred costs.” Generous pension promises made decades ago, without enough funding, are now coming due as baby boomers retire. Bonds issued in the distant past to build bridges, highways and other projects also must be paid — even as the projects themselves could by now use expensive makeovers. You cannot necessarily see deferred costs, lurking in a shadowy realm known as “off the balance sheet.” But deferring them doesn’t make them go away. They actually compound. “New York City has $85 billion of retiree health obligations all by itself,” said Richard Ravitch, the former lieutenant governor of New York State and an informal adviser to Detroit’s financial control board. He helped New York City resolve its financial crisis in 1975; today he worries about possible replays across America. More:


Crooks, terrorists, tax evaders: Can new shell company rule stop them?

The U.S. Treasury Department wants to go after money launderers, tax evaders and terrorists by cracking open the shell companies they use to hide cash flows, but critics say a new agency effort to identify them could be easily evaded. Treasury last week issued a new rule, effective in 2018, requiring financial institutions to obtain the identities of “beneficial owners” of their client companies and at least one senior manager. Financial firms will have to verify their identities through documents such as passports – but will not have to confirm their ownership stakes in the companies. That could allow criminals to provide false information with little risk of getting caught, critics say. “If a company has criminal intent, they are probably not going to file that their beneficial owner is ISIS,” said Anders Rodenberg, who oversees relationships with financial firms in North America at Bureau van Dijk, a beneficial-ownership data provider. The Treasury Department says its rule – along with separate but related legislation it proposed to Congress – strikes the right balance between rooting out corruption and avoiding burdensome requirements on financial firms and legitimate clients. But what if a customer lies? “Then they are committing fraud,” said Steve Hudak, spokesman for Treasury’s Financial Crimes Enforcement Network. Treasury and law enforcement officials can contact the person a company names as a senior manager if they want to investigate further, Hudak said. The regulation – called the Customer Due Diligence rule – has been in the works since 2012. It comes at a time when President Obama and other world leaders are under pressure to respond to a string of recent reports known as the Panama Papers.


Contract for Deed’ Lending Gets Federal Scrutiny

A revival in seller-financed home sales aimed at people who cannot qualify for a mortgage has started to attract scrutiny from the nation’s top consumer watchdog. The Consumer Financial Protection Bureau recently assigned two enforcement lawyers to investigate the prevalence of seller-financed home transactions and determine whether the terms of some deals may violate federal truth in lending laws, said two people with direct knowledge of the matter but who were not authorized to speak publicly at the request of federal officials. The regulator’s interest in seller financing was prompted by discussions between members of the commission staff and one of its advisory boards, the people said. The advisory board began raising questions about seller-financed home transactions in the wake of reports on the subject, including a front-page article in The New York Times on abuses in a marketplace that targets lower-income buyers. Such contracts proliferated in recent years as banks retrenched from lending to low-income families and private investment firms like hedge funds stepped in to fill the void. Sam Gilford, a consumer bureau spokesman, confirmed that staff members had conversations with members of the consumer advisory board about seller financing, specifically a type of arrangement called a contract for deed or a land contract. “We want all consumers to be treated fairly, and we monitor the marketplace to stay apprised of emerging developments in consumer finance,” Mr. Gilford said in an emailed statement. “As part of that work, staff from our research, markets and regulations division have had conversations with members of our consumer advisory board about land contracts.” He declined to comment on whether the agency had assigned two enforcement lawyers. A contract for deed is a long-term, high-interest installment financing deal. More:


Office Depot and Staples Call Off Merger After Judge Blocks It

A federal judge on Tuesday blocked a $6.3 billion proposed merger of Staples and Office Depot, dashing another huge deal and handing the Obama administration one more antitrust victory. The decision is a setback for the beleaguered retailers, which have each endured years of slumping sales and increased competition from Amazon and other rivals. The Federal Trade Commission had sued the two companies late last year, arguing that combining them would effectively create just one dominant retailer focused on pens, paper clips and Post-it notes. In a three-page order, Judge Emmet G. Sullivan of the Federal District Court for the District of Columbia agreed, writing that the pairing of the two would “substantially impair” competition in the business of selling office supplies. Both companies said after the ruling that they planned to end their merger plans. Once fierce competitors, the office supply giants have struggled to compete as more people shop online. The growth of e-commerce has eroded the sales and customer base for many traditional brick-and-mortar retailers.


Donald Trump is now threatening the 401k’s of ordinary Americans

Who owns the most U.S. Treasury bonds? China? Japan? Saudi Arabia? The answer: None of the above. It’s us. We Americans own almost $5 trillion in Treasury bonds, all told. That’s more than twice as much as China, Japan and all the oil exporting countries put together. And so when Donald Trump monkeys with the U.S. government debt, as he has in two interviews in the past few days, this isn’t just a matter of abstract economics or of sticking it to foreigners. It’s about threatening to take your personal 401(k) out into the back yard and beat it like, as they say, “a rented mule.” According to official data, we collectively own about $2.6 trillion in Treasury bonds directly or through mutual funds. Our pension plans own another $2.2 trillion. And our insurance policies, such as the life insurance contracts that will pay out if we fall under a bus, are backed by another $300 billion in Treasury’s. According to the Investment Company Institute, a mutual fund industry trade group, the average 401(k) plan is about 25% invested in bonds, both through bond funds themselves and through “balanced” funds. (Balanced funds are typically 60% stocks, 40% bonds). The older you are, the more you are likely to have in bonds. For “safety.”

Trump last week said if U.S. debt levels got too high he’d “make a deal” with creditors. That means a default. That means you. Trump on Monday denied that his words had meant what they (sic) said. “I said if we can buy back government debt at a discount, in other words, if interest rates go up and we can buy bonds back at a discount,” he told CNN’s Chris Cuomo. Sure. He added that the U.S. can never default on its debt, “because you print the money.” He’s right on the second point. You can just print the money. You could, ultimately, pursue the “Zimbabwe” route and print ad infinitum. How this represents the new monetary policy of the Republican Party is anyone’s guess. The one thing that’s certain: Anyone who thinks Treasury bonds are still completely “risk free” is dreaming. More:


As Lending Club Stumbles, Its Entire Industry Faces Skepticism

Renaud Laplanche and his crew steered a 105-foot racing boat through New York Harbor one day last spring, its towering sails ripping across the water at 30 knots. An accomplished sailor and founder of Lending Club, Mr. Laplanche was hosting executives from hedge funds, Goldman Sachs and other banks — part of his effort to win over Wall Street on his plans to upend traditional banking with a faster, more democratic form of lending. He already had endorsements from Lawrence H. Summers, the former Treasury secretary, and John Mack, the former chief of Morgan Stanley, who joined his board. At Lending Club’s initial public offering in December 2014, the company was valued at over $8 billion. But on Monday, Lending Club announced that Mr. Laplanche had resigned after an internal investigation found improprieties in its lending process, including the altering of millions of dollars’ worth of loans. The company’s stock price, already reeling in recent months, fell 34 percent. The company’s woes are part of a broader reckoning in the online money-lending industry. Last week, Prosper, another online lender that focuses on consumers, laid off more than a quarter of its work force, and the chief executive said he was forgoing his salary for the year. The problems at Lending Club, in particular, threaten to confirm some of Wall Street’s worst fears: that as favorable economic conditions begin to turn, they will reveal many upstart companies with weak internal controls that have been feeding inaccurate information to starry-eyed investors. “It is clear this is bad news not just for Lending Club, but for our entire industry,” Peter Renton, who founded Lendit, a leading industry conference, wrote in a blog post on Monday. “Really bad.”


CDC labs repeatedly faced secret sanctions for mishandling bioterror germs

A laboratory operated by the Centers for Disease Control and Prevention is among the handful of facilities that have secretly had their permits suspended in recent years for serious safety violations while working with bioterror pathogens, according to documents obtained by USA TODAY after winning a Freedom of Information Act appeal. The CDC’s own labs also have been referred for additional secret federal enforcement actions six times because of serious or repeated violations in how they’ve handled certain viruses, bacteria and toxins that are heavily regulated because of their potential use as bioweapons, the CDC admitted for the first time on Tuesday. Before USA TODAY won access to records of the lab suspension, the CDC had repeatedly refused to answer questions about its own labs’ enforcement histories. The revelations show the CDC’s facilities are among a small group of biolab operators that have the worst regulatory histories in the country, receiving repeated sanctions under federal regulations. Citing security reasons and a federal bioterrorism law, the names of labs that have been suspended or faced other enforcement actions have been a closely guarded secret by the CDC and the U.S. Department of Agriculture. The two agencies not only operate high-security biolabs, but they also co-run the Federal Select Agent Program that regulates government, university, military and private labs that work with bioterror pathogens such as anthrax, plague and Ebola. The government calls these kinds of pathogens “select agents.” Only five labs have been suspended from the Federal Select Agent Program since 2003, and another five labs have faced repeated referrals for enforcement actions, according to information the CDC provided last year to USA TODAY and later to congressional investigators. The revelation that CDC’s own labs are among these small groups that have faced serious and repeated sanctions raised questions among some lab safety watchdogs about the agency’s secrecy motives. “There is no security rationale for withholding the identities of the suspended labs,” said Richard Ebright, a biosafety expert at Rutgers University in New Jersey who has testified before Congress. “The sole rationale is a CYA rationale, in which the CDC seeks to cover its derriere by covering up violations and shielding staff and management responsible from accountability for violations.” A heavily redacted USDA letter obtained by USA TODAY shows a CDC-operated lab was suspended from doing select agent research around 2007 and reinstated in 2010 because of federal violations in the handling and transfer of a virus. The USDA blacked out the name of the virus. More:


Flower Fight: the Scandalous $45 Million Little Petunia Case

Forget for a minute that the flower industry sells beauty and fragrance. Underneath its elegance is a business as cutthroat as Game of Thrones with mulch. Take the case of the Candy Bouquet, a pretty, magenta-and-yellow flower that resembles a petunia. It was developed by a German grower, Westhoff Vertriebsgesellschaft MBH, that says it was on the verge of selling the variety to Home Depot Inc. when a rival swooped in, copied the plant and spread lies about Westhoff in order to win the business of the world’s largest home-improvement chain. The allegations are contained in a May 4 lawsuit that both reveals the dark side of the garden supply industry and the growing importance of big retailers like Home Depot, Lowe’s Cos. and Wal-Mart Stores Inc. to growers. Consumers are increasingly migrating there from small mom-and-pop greenhouses, raising the stakes — as it were — for growers to win space on their shelves. “People are not gardening the way they use to,” said Marvin Miller, market research manager of Ball Horticultural Co. in West Chicago, Illinois, a global horticultural company not involved in the case.

Outdoor garden products, which include flowers, mulch and trees, generated $6.6 billion in sales for the fiscal year ended Jan. 31 for Home Depot — or about 7.4 percent of the 2,200-store company’s revenue. For Lowe’s, lawn and garden sales were $4.8 billion, about 8 percent of revenue last year. Wal-Mart doesn’t break out those sales. More:


Cruz and Senate Face Choices as ‘Lucifer in the Flesh’ Returns

Texas Senator Ted Cruz returns to the Senate this week, and he shouldn’t expect a warm embrace from one of the world’s most exclusive clubs. But to get much of anything done, they’re going to need him.

The freshman Texas senator, who came in second to Donald Trump in the epic fight for the Republican presidential nomination, returns with a higher profile, significant fundraising clout and, many Republicans believe, his eye on another race in 2020. So if the Cruz of old could gum up the works, they know what a nomination runner-up could do if he doesn’t change his approach — especially one that former House Speaker John Boehner called “Lucifer in the flesh.” “I think a lot of people here will always consider Ted an outsider,” Senator Lindsey Graham, who endorsed Cruz as a last-ditch ploy to defeat Trump, said Monday, adding it would be “up to Ted” if he wants to change his tactics. “He didn’t come here to remain in the Senate. He came here to run for president,” John Cornyn of Texas, the No. 2 Republican in the Senate, recently told a Texas radio station. The Puerto Rico debt crisis, a raft of spending bills and a criminal justice overhaul are on the docket — all requiring delicate and bipartisan compromises at a moment when Republicans want to look like they can get things done ahead of the November election.

And Republican leaders would be far better off finding a way to accommodate Cruz, if possible, than have him resume plotting against them over pizza with members of the ultra-conservative House Freedom Caucus. More:


Judge Orders Feds to Release List of Bridgegate Conspirators

 A federal judge ordered New Jersey prosecutors Tuesday to release their list of suspected Bridgegate conspirators. The ruling was a victory for a consortium of media outfits that had been pushing the feds to publicly identify the “unindicted co-conspirators” who allegedly conspired to snarl traffic on the George Washington Bridge three years ago to punish a New Jersey mayor for not endorsing the re-election of Gov. Chris Christie. “My clients are pleased that the Court has ordered the turnover of the list,” said attorney Bruce Rosen, who represented the media groups, which includes NBC Universal.  U.S. Attorney Paul Fishman of New Jersey could appeal Judge Susan Wigenton’s ruling. Rosen said he hopes Fishman doesn’t. “We are hopeful that U.S. Attorney Paul Fishman will heed Judge Wigenton’s findings and agree that the public’s right of access to this list must prevail, rather than prolonging the lack of transparency in this matter by seeking a stay,” Rosen said. There was no immediate comment from Fishman or his office. Prosecutors had argued that releasing the names could tar the reputations of innocent individuals. But the judge noted in court papers that the names on the list belonged to people for “whom the Government has sufficient evidence to designate as having joined the conspiracy.” “Although privacy for third-parties is indeed important, the Court is satisfied that the privacy interests of uncharged third parties are insufficiently compelling to outweigh the public’s right to access,” the judge wrote.

Study Calls On Obama to Withdraw Legal Memo That Allows Faith-based Charities to Discriminate

The Obama administration has roundly criticized states such as North Carolina and Mississippi for passing laws that allow discrimination in the name of religious freedom. But at the same time, the administration has left in place a 2007 memo from the Bush White House that allows religious charities with federal contracts to discriminate in hiring for federally funded programs. Now, as Obama prepares to leave office, a group of prominent constitutional lawyers is calling on the Obama White House to revoke the legal memo, which they argue has been used by religious groups to refuse to provide services, including emergency contraception for human trafficking victims, that conflict with their beliefs. Their arguments are detailed in a legal analysis published this morning by Columbia Law School’s Public Rights/Private Conscience Project, which includes contributions of scholars from George Washington, Emory and Brigham Young universities, among others. The 16-page paper is, in part, an effort to put pressure on Obama to rescind the memo, an action that does not require Congress to act. As a presidential candidate in 2008, Obama criticized the Bush Justice Department for drafting it, but as president failed to follow through. “For this administration that has been so strong in so many ways on important civil rights questions and in opposition to similar efforts at the state level to sanction discrimination — to allow this memo to remain in place — is really very unfortunate,” said Ian Thompson, a legislative representative in the American Civil Liberties Union’s Washington, D.C. office. The Columbia paper, he said, is groundbreaking in terms of both its signatories and its scope. “They cover the waterfront in terms of pointing out the dangers and the harms of the memo being in place,” he said. Bush administration lawyers wrote the memo after the Christian charity World Vision, which serves the poor in nearly 100 countries, objected to a nondiscrimination clause in a $1.5 million Department of Justice grant to fund a mentoring program for at-risk children. World Vision argued that it should be allowed to hire only Christian employees for the program and that not allowing the group to do so would put a “substantial burden” on it. More:

Super PAC coffers swell with more than $700 million

A burst of giving by liberal donors and a last-ditch effort to fend off GOP presidential front-runner Donald Trump helped super PACs pick up nearly $100 million in new donations by the end of March, pushing the total raised by such groups this cycle to more than $700 million, according to a Washington Post analysis of Federal Election Commission reports. At this pace, super PACs will raise $1 billion by the end of June. In the entire 2012 cycle, such groups brought in $853 million, according to FEC filings. The Post is keeping a running tally of the largest contributors of the 2016 cycle, whose six- and seven-figure checks have allowed super PACs to spend $278 million so far on ads and voter outreach.  Already, nine mega-donors have each given at least $10 million to such groups, which can take unlimited sums from individuals and corporations. Together, that tiny cadre has provided 17 percent of the money raised through March 31, The Post found. Now topping the list of mega-donors: conservative hedge-fund magnate Robert Mercer. His total giving reached $17.2 million after he put $2 million more into a super PAC supporting Sen. Ted Cruz (Tex.) in March. The Renaissance Technologies co-chief-executive moves up from fourth place, bumping liberal San Francisco environmentalist Tom Steyer out of the No. 1 slot.  Another Renaissance Technologies figure joins the top 10 list this month: James Simons, an elite mathematician who founded the hedge-fund giant. Together, he and his wife, Marilyn, have given $10.13 million to super PACs this cycle, the vast majority to Democratic groups. The bulk of James Simons’s donations — $7 million — have gone to Priorities USA Action, a super PAC backing former secretary of state Hillary Clinton.

A D.C. lawmaker jokes: Let’s build a ‘YUUUUGE wall around the new Trump’ hotel

If only real government budgets were as interesting to read as this fake one. Every year around this time, an official-looking memo begins circulating around the District’s headquarters on Pennsylvania Avenue under the official-sounding title of Council member Mary M. Cheh’s “Fiscal Year Budget Priorities.” For those who think they know the Ward 3 Democrat (and George Washington University law professor), what follows can be a jaw-dropping surprise. At least, that is, until it becomes so ridiculous that it’s clearly satire. And this year in D.C. politics, that happens pretty quickly. Cheh, it turns out, had a lot of material for her annual roast. With Democrats on the D.C. Council apoplectic about Donald Trump putting his name on a luxury hotel blocks from the White House — let alone that he might live in the latter — Cheh proposes that the city order a wall to be built around the Trump hotel to mock the expected Republican presidential nominee’s controversial plans to keep immigrants out of country. “A YUUUUGE wall around the new Trump International Hotel,” Cheh writes. “ . . . It’ll be fantastic. We’re going to do a wall; we’re going to have a big, fat beautiful door on the wall. And we’re gonna make Donald pay for it. Let’s make Pennsylvania Avenue Great Again.” More:

As United Methodists meet, 111 clergy come out as gay, defy church ban


As the United Methodist Church today begins its national meeting, held once every four years, the stage was set for a showdown over the church’s long-standing opposition to homosexuality. On the eve of the first decision-making General Conference since the U.S. Supreme Court legalized same-sex marriage in 2015, 111 clergy signed and released a letter saying they identified as lesbian, gay or transgender. About 80 percent of the pastors, deacons, elders and ministry candidates who signed the letter say they are coming out publicly to their bishops and district superintendents for the first time. That puts them in direct conflict with the denomination’s ban on “self-avowed practicing homosexuals” in ordained ministry.

“While some of us have been lucky to serve in places where we could serve honestly and openly, there are others in places far more hostile, who continue to serve faithfully even at tremendous cost to  themselves, their families, and yes, even the communities they serve, who do not receive the fullness of their pastor’s gifts because a core part must remain hidden,” the letter says. A similar letter was released by 15 clergy in New York on May 1. More:




Bentley, Riley, Marsh could take stand in Hubbard trial

A list of potential witnesses who have been served subpoenas reads like a who’s who of state politics and includes Gov. Robert Bentley and former Gov. Bob Riley. Their names are not a surprise. Two of the charges against Hubbard allege that he was paid to represent companies before the governor’s office. One charge alleges that Hubbard sought help in obtaining business clients from Riley, a registered lobbyist. Other potential witnesses include at least 18 legislators, including Sen. President Pro Tem Del Marsh. Among others on the list are Retirement Systems of Alabama CEO David Bronner, former Republican Party Chairman Bill Armistead, Public Service Commission President Twinkle Andress Cavanaugh, Great Southern Wood President Jimmy Rane, Business Council of Alabama President and CEO William Canary, former Lt. Gov. Steve Windom and former state Rep. Greg Wren. Wren pleaded guilty to a misdemeanor ethics charge as part of an investigation by the special grand jury in Lee County two years ago. He resigned from office and agreed to cooperate with prosecutors. The trial is expected to last about three weeks. The grand jury indicted Hubbard in October 2014 on 23 ethics charges, all Class B felonies, which could carry prison sentences of two to 20 years. Hubbard is accused of using his House office to gain clients and investments for his businesses and of steering Republican Party money to his businesses when he was state GOP chairman. Hubbard has pleaded not guilty and denied any wrongdoing. Jenny Carroll, a criminal defense professor at the University of Alabama School of Law, expects lawyers on both sides to place heavy emphasis on the jury selection process that starts Monday. Carroll, a public defender for 12 years in Washington, D.C., and in Seattle, said prosecutors have to be concerned about trying Hubbard in his home county, which he has represented in the Legislature since 1998 and where he won reelection even after his indictment. “It’s his home jurisdiction and these are the folks who elected him and supported him,” Carroll said. “So whenever you have a case like that there is always a risk that there is going to be a hometown bias that you have to contend with.” Familiarity could cut both ways, Carroll said. Some potential jurors might be disappointed that an official they voted for faces charges of abusing power. “I think you should expect to see both the defense and the prosecution push hard for a very extensive and careful jury selection because it’s going to make a huge difference in this case,” Carroll said. The trial is expected to last about three weeks. More:


Childcare advocates warn of unlicensed day cares

Childcare advocates are warning parents about the dangers of putting their children in the hands of unlicensed day cares. A new public awareness campaign, hopes to shed light on the need to have regular oversight, and inspection, of all childcare programs. Joan Wright is the executive director of Childcare Resources. Her organization works to promote quality childcare, by providing information and education for parents. “We do know there are some cases where people are creating a faith-based organization. It can be the ‘mom and pop church of god’ for example,” said Wright. She says there are ways for parents to make sure a faith-based daycare is legit. “Check and make sure what’s the ‘DBA’ name of the program? — (doing business as),” she explains. However, Wright knows many faith-based day cares go by the book. “There are several faith-based organizations do choose to be licensed anyway. And there are organizations that while they may not be licensed, they adhere to the licensing standards or sometimes go above and beyond and may be adhering to national childcare standards,” said Wright. But for childcare organizations that do not follow state or national standards, several risks come into play. These include a lack of background checks, lack of training and an improper caregiver ratio. “If you don’t have to abide by those standard ratios of caregiver to children, you could be jeopardizing the reaction and response time to your child’s needs,” Wright explains. Wright says every parent should ask these questions — “If you’re not licensed, why not? If you are not licensed, what standards and regulations are you abiding by?” A new public awareness campaign by the Alabama Partnership for Children, called “Don’t Be in the Dark” emphasizes the need for regular oversight and inspections of all childcare programs. Click here for more information. You can also learn more from Childcare Resources here.

Dothan drag queen is suspended chief justice’s nightmare


BIRMINGHAM, Ala. (AP) — A small-town drag queen who goes by the name Ambrosia Starling is the new worst nightmare of suspended Alabama Chief Justice Roy Moore. Moore has called out Starling of Dothan twice by name recently while defending himself against allegations of violating judicial canons with his opposition to same-sex marriage. Moore cites the cross-dressing entertainer as a reason he’s at risk of losing his job for the second time since 2003. That’s fine with Starling, who helped lead an anti-Moore rally on the steps of the Alabama Supreme Court building in January. Opponents that day filled out more than 40 complaints against Moore, who already faced other complaints. He could be removed from office if he is found to have violated judicial ethics. Moore calls the charges unfounded and politically motivated.

How 60 men ate free last night at one of Alabama’s best restaurants

Café Dupont, a downtown Birmingham restaurant known for fine dining, is normally closed on Mondays.

But owner Chef Chris Dupont opened up last night for a free private dinner for the staff, residents and program participants of Brother Bryan Mission. Although Café Dupont was recently included in’s list of “Alabama’s Most Expensive Restaurants,” the tab for Brother Bryan Mission was zero. “They offered to prepare the meal and serve it to us,” said Jim Etheredge, executive director of Brother Bryan Mission. “We’re all serving people in some form,” Dupont said. “They’re right down the street. They’re in our community. It’s a great gift for a local group trying to do good. It’s been a good relationship.”

Dupont served a gourmet meal with beignets for dessert to a group of about 60 people. “It was easily a $50 meal,” Etheredge said. “I would have hated to pick up the tip tab. I couldn’t put a price on it. If we had to pay for it, we couldn’t have.” Brother Bryan Mission through most of its history has been a shelter for homeless men, but now focuses on addiction rehabilitation programs. Dupont first invited Brother Bryan Mission to dine at his restaurant last year. Since then, he’s hired two residents who have been through the mission’s rehabilitation program as dishwashers, Etheredge said. The mission has a 9-month drug and alcohol rehabilitation program, and a back-to-work follow-up program. Residents can continue to live at the mission for two years during the work program. Etheredge said that more than just a great meal from a prestigious restaurant, the men got a full serving of dignity from Dupont.

State May Face Sanctions, Penalties Over STAARS Failure

The Chief Examiner of the State’s Department of Public Examiner has warned Gov. Robert Bentley and Acting Finance Director Bill Newton that the failures of the STARRS accounting program will likely cause the State to be delinquent on its federally-required Comprehensive Annual Financial Report (CAFR). In a letter dated May 4, Chief Examiner Ron Jones wrote, “As you may be aware, the State has experienced significant issues in implementing the new accounting system, STAARS. These issues have impacted the State’s ability to generate financial statements and to prepare the State’s Comprehensive Annual Financial Report (CAFR).” SEE LETTER He also warned, “Please be aware that federal agencies do not currently grant audit extension requests and may issue sanctions or other penalties for failures to submit timely single audit packages. We will make every effort to complete the State-Wide Single Audit as soon as practical after the completion of the State’s CAFR.” Jones points out that not only were there problems with the system, the failure continues to plague the State with threats of federal fines or sanctions. More:


Chief Justice Roy Moore’s attorneys will move to dismiss charges


Alabama’s top judge is currently suspended, but is working to change that. Chief Justice Roy Moore’s attorneys say they will push for the charges to be dismissed, and that the charges are politically motivated and without merit. Last week, the Judicial Inquiry Commission brought six charges against Moore, which resulted in his suspension. The charges are a result of a January order in which Moore reportedly told the state’s probate judges to not issue marriage licenses to same-sex couples. Mat Staver, Moore’s attorney, says the JIC went outside their jurisdiction and leaked the information to the press.

On Monday, Southern Poverty Law Center President Richard Cohen called Moore ‘dangerous, egotistical and a religious zealot.’ “Well that kind of language can be sanctioned, you know. One attorney should not have that kind of language towards any judge,” Staver said. “They are free to have their own opinions. They are free to disagree with rulings, but they are not free to degrade an individual; that is wrong. If anything he [Cohen] should be brought up before the JIC.” Staver says he will move to have the charges dismissed, and also challenge the constitutionality of a suspending a judge before any court hearing.




Just say ‘no’ to Republicans’ pension reform

In the Sat., April 30, 2016, edition of the Andalusia Star-News there were two articles of significant interest. One is titled “Pension reform will come to Alabama” by Katherine Robertson, Vice President for the Alabama Policy Institute (API) and Alabama Representative Lynn Greer, District 2. The second article is titled “So-called Alabama pension crisis is a myth” by Dr. David Bronner, CEO of the Retirement Systems of Alabama (RSA). Robertson and Greer, along with the Republican legislature are under the impression that they know how to better manage the RSA than Bronner. To better understand this, let’s compare and contrast API, Greer, and Bronner. The Alabama Policy Institute is a conservative “think tank.” (If you think about it, that’s the best oxymoron ever!) The API is a member of the State Policy Network whose sole purpose is “hijacking state politics and government and changing both to a corporate agenda in state houses nationwide.” In other words more accumulated wealth for the richest of the rich. If there’s any doubt, the Koch brothers, and other unknown national right-wing zealots fund the SPN. Greer represents the currently failed Alabama legislature. Because Republican legislators don’t have the courage to shore up Alabama’s decreasing tax base, for every dollar cut, Medicaid loses three dollars in federal funding. Eight hospitals have closed since 2011. Physicians are leaving the state. Health care costs will skyrocket. People will die. How’s this for leadership? Under David Bonner’s tenure, RSA assets have grown from $500 million to $37 billion. RSA ranked in the top 12 percent of the nation’s largest pension funds at the end of the 2015 fiscal year. After George W. Bush (R) crashed the economy in 2008 more than two trillion’s dollars were lost in pension funds. During this same period, RSA members saw a 1 percent return. Rather than addressing real problems, Republicans are always trying to solve a problem that doesn’t exist. So who knows best, an organization hell-bent on destroying the middle class, a failed legislature or a renowned economist? The RSA is the envy of many other states. The Alabama legislature is not. Let’s be clear. The Alabama Republican legislature is salivating over a big pile of money. They know other sources of revenue (tax reform) are desperatly needed to solve the state’s escalating problems. However getting elected the next time is far more important. So under the guise of “pension reform” is a calculated effort to weaken and drain the RSA of its resources. If you’re a teacher, fireman, or other public worker call Rep. Lynn Greer at 334-242-7576 or send an email to and tell him thank you, but no thank you. We don’t need your “help.” Say NO to Republican “pension reform.”

The ascension and suspension of Roy Moore … again

Roy Moore is pretty handy at using the Lord’s name to levitate himself above the law. Moore’s ego can’t help itself. He gets elected to a position of power – chief justice of the Alabama Supreme Court, for instance. Power goes to his head. He uses God’s name and his position to rise above the law, fuel his ego and dramatically break the law. His two-and-a-half ton ego won’t let it happen without drama. His latest ascension has led to suspension from the bench. Again. He will face a trial before the Alabama Court of the Judiciary and he could be removed from office. Again. No skimping on the limelight, no ‘humble servant’ act with Roy Moore. Dude sops up attention like a cat-head biscuit sops up gravy.

My colleague Kyle Whitmire writes: “But here’s the most important thing to know about Moore: He autographs Bibles. He’ll put his signature on the Constitution or the Declaration of Independence like he wrote the things.” Moore gets kicked out of office for breaking the law he was elected to uphold. He fires up his rabid followers with fiery rhetoric. Makes money for his foundation. Cha-Ching. Lather, rinse, repeat. What’s his next ego-driven move?


Morning Money

MORE ON TRUMP’S DEBT COMMENTS — From a top financial services executive: “It doesn’t make sense to buy back debt at lower prices because you would have to borrow money to do it and you would be paying higher rates on that money. There would be no economic gain in making such a move.

“The whole thing is so absurd. If you are running annual deficits like we are you wouldn’t be adding any economic value. … And we borrow every single day. The moment we give anyone the idea that we would not pay it back one hundred percent, they would stop lending to us or they would charge us a lot more.”

Per a former senior Treasury official: “I think Trump may have finally figured out how to pay for The Wall — Mexico will build it to keep out Americans fleeing the effects of the Trump default!”

Mohamed A. El-Erian on Bloomberg View: “Given the other ailments of the post-recession economy, it isn’t easy to argue that a sharp reduction in the national debt should be an immediate standalone and overwhelming priority, and it does not belong among the top three upfront economic goals of the next administration.

“Although the longer-term trajectory of debt should be kept under close scrutiny and contained, there is no evidence that the U.S.’s existing stock of federal debt is a major problem. Borrowing costs are extremely low. The U.S. has access to abundant financing. And unlike many developing countries, the U.S. has historically issued almost no debt that is denominated in a foreign currency”

JOIN ME NEXT WEEK! — POLITICO’s Ben White takes Morning Money live for a lunch briefing with President and CEO of the Federal Reserve Bank of Atlanta, Dennis Lockhart and President and CEO of the Federal Reserve Bank of San Francisco, John C. Williams. Tuesday, May 17 — Doors at 12:00 p.m.; The W Hotel – 515 15th St NW. RSVP:

NO SLACK IN THE LABOR MARKET — MUFG Union Bank’s Chris Rupkey: “Job openings soared to just short of the record in March. 5.757 million jobs available out there in March dispels the myth that there is any slack remaining in the labor markets. The recession ended years ago and this expansion of economic activity will turn 8 years old in July. How could there possibly be any material slack left out there in the economy?”

SIFMA ON THE DOL RULE — SIFMA is hosting a full-day DOL Fiduciary Seminar in NYC. A preview from SIFMA president and CEO Kenneth E. Bentsen’s speech: “The record of the industry’s support for a best interest standard is quite clear and well documented, and pre-dates the Department’s initial rule proposal.

“We recognized that it was in our clients’ best interest to streamline an otherwise confusing regulatory framework, and instead of streamlining the regulatory construct, we may now find it to be more convoluted and most certainly more costly to clients and firms alike.”

IMAGINING TRUMP POST-BREXIT — Reuters BreakingViews’ Rob Cox imagines Donald Trump’s speech on June 24, the day after Britain votes to leave the EU, calling for a similar referendum on NAFTA and TPP”

GOP UNFRIENDS FACEBOOK — POLITICO’s Tony Romm: “Washington’s leading Republicans mounted an aggressive campaign on Tuesday targeting Facebook for the way it handles news stories, the latest front in the party’s fight to highlight perceived liberal bias. … In a presidential election year marked by the growing importance of social media — especially in helping fuel the rise of Donald Trump — Republicans found themselves seething in response to allegations that Facebook’s employees had excluded news stories by conservative outlets from appearing in the Trending section of its users’ daily news feeds.

“Facebook, which has an estimated 1.5 billion users worldwide, stressed it never condoned any such practice. But Sen. John Thune, chairman of the Commerce Committee, escalated the confrontation on Tuesday by demanding that CEO Mark Zuckerberg explain how the company curates news, while Republican National Committee leader Reince Priebus railed on Twitter: ‘Facebook must answer for conservative censorship.’”

DRIVING THE DAY — JPMorganChase CEO Jamie Dimon will be on CNBC’s “Squawk Box” at 8:40 a.m. … President Obama meets with Treasury Secretary Jack Lew this afternoon … House Republicans expected to roll out another Puerto Rico assistance bill. Unclear if the White House will support it … Treasury budget at 2:00 p.m. expected to show a tax season surplus of $113 billion, down from $157 billion last year …

ALSO TODAY: FISCAL SUMMIT — Per release: “Peterson Foundation’s Fiscal Summit Convenes Nation’s Leaders To Discuss Fiscal and Economic Priorities for Next President Democratic Leader Pelosi; Senators Enzi, Graham, Whitehouse, and Manchin; Secretary Hagel; Economic Advisors to Hillary Clinton and Donald Trump; CBO Director Hall; Former CBO Directors Holtz-Eakin and Reischauer; Admiral Mike Mullen, and More”

SANDERS WINS WEST VIRGINIA — POLITICO’s Nick Gass: “Bernie Sanders has defeated Hillary Clinton in West Virginia’s Democratic primary. … May has all the markings of a pleasant month for Sanders, with favorable contests in Oregon and Kentucky next Tuesday coming after his upset victory in Indiana on May 3. At this point in the primary, however, Sanders needs more than wins, he needs superdelegate miracles.

“Entering Tuesday night, Clinton leads Sanders 1,705 to 1,415 in pledged delegates and 523 to 39 in superdelegates, an overall lead of 2,228 to 1,454. With only 926 pledged delegates remaining, Sanders’ hopes rest with superdelegates deciding to abandon Clinton in large numbers. The Clinton campaign is confident enough that that won’t happen that, in recent weeks, it has turned its attention largely to Donald Trump, the presumptive Republican nominee”

DEMS GET WORRIED — POLITICO’s Gabriel Debenedetti: “This wasn’t the way the Democratic primary was supposed to end. … Deep into the primary schedule, Clinton is forced to reckon with almost weekly results highlighting her relative weaknesses with white men and young voters, and she’s only gradually been able to increase her swing state travel. All the while, Trump sharpens his day-to-day critiques of her. Some Democrats are now growing uneasy over a rocky finish that has Clinton spending resources and political capital so late in the process.

“Clinton is still on track to pass the threshold to clinch the nomination at some point in June using a combination of pledged delegates and superdelegates, and her lead among pledged delegates remains above 275. That makes it extremely difficult for Sanders to catch up to her unless he can win over a large number of the party elites who vote regardless of their state’s decision. Yet the Clinton campaign, cognizant of the need to show respect to Sanders’ legion of devoted supporters, is unable to initiate the call to unite behind her candidacy”

RYAN/TRUMP MEETING SET — POLITICO’s Rachel Bade: “Donald Trump will meet face-to-face with Speaker Paul Ryan at 9 a.m. on Thursday at the RNC, according to a GOP leadership source familiar with the schedule. RNC Chairman Reince Priebus will sit in the meeting, too. A second meeting including Ryan, Trump and a larger roster of GOP leadership will follow.

“Attendees will include Majority Leader Kevin McCarthy (R-Calif.), Whip Steve Scalise (R-La.), Conference Chair Cathy McMorris Rodgers (R-Wash.), and Deputy Whip Patrick McHenry (R-N.C.) There will be no press availability after, but Ryan will do an on-camera availability later that morning”

THE TRUMP DOCTRINE (SUCH AS IT IS) — Bloomberg View’s Paula Dwyer: “When it comes to policy ideas, Donald Trump is hard to pin down. Now, though, the outline of a Trump economic theory has started to emerge. It isn’t pretty. He doesn’t place much faith in markets. He doesn’t want an independent central bank. His views on currencies and sovereign debt rest on the principle that everything is negotiable, even contracts between creditors and borrowers. His main weapon wouldn’t be the rule of law but bullying, especially of corporations that move outside the U.S. for competitive reasons.”

MORE ON MNUCHIN — WSJ’s Rebecca Ballhaus, Rachel Louise Ensign and Ben Fritz: “Presumptive Republican nominee Donald Trump, who is facing a general-election tab that could exceed $1 billion, has tapped to raise that money a businessman with ties to two industries traditionally important in campaign finance, Wall Street and Hollywood, but with uncertain loyalties to Mr. Trump.

“Steven Mnuchin … is an unorthodox choice. He isn’t an experienced political fundraiser, an attribute typically coveted by a presidential campaign; he has donated to more Democrats than Republicans; and his Rolodex includes current and former colleagues who might prove reluctant to donate to Mr. Trump … Mr. Mnuchin’s decision to work for Mr. Trump also appears out of step with his immediate family. His father and stepmother each gave the maximum $2,700 to Democratic front-runner Hillary Clinton’s campaign in March”

CLINTON SON-IN-LAW DUMPS GREEK HEDGE FUND — NYT’s Alexandra Stevenson and Matthew Goldstein: “It was a hedge fund portfolio pitched by Hillary Clinton’s son-in-law, Marc Mezvinsky, as an opportunity to bet on a Greek economic revival. Now, two years later, the Greece-focused fund is shutting down, after losing nearly 90 percent of its value, … Investors were told last month that the fund would close. The fund, Eaglevale Hellenic Opportunity, had raised $25 million from investors to buy Greek bank stocks and government debt.

“Eaglevale Partners, a Manhattan hedge fund firm founded by Mr. Mezvinsky and two former Goldman Sachs colleagues, raised money for the Hellenic fund at a time when some on Wall Street had hopes for a revival in the Greek economy. For a time, Mr. Mezvinsky appeared at hedge fund conferences promoting the Greece investment thesis. … Betting on Greece has proved to be tricky — some investors have made huge gains while others have had their fingers burned, depending on the timing of their bets.”

LEW ESCALATES PUERTO RICO PRESSURE — POLITICO’s Colin Wilhelm: “Treasury Secretary Jack Lew flew to San Juan, Puerto Rico, with a group of journalists Monday to ramp up pressure on Congress to allow the commonwealth to restructure its debt before a looming $2 billion default in July. … Lew toured a hospital and school and met with business leaders in a neighborhood filled with closed stores. He cited crumbling infrastructure, insufficient funding for adequate infant care, and hospitals around the island closing entire floors as reasons to act now before the island spirals into what could be to be years of litigation with creditors.

“‘It will at some point be a case of whether you can pay the police or the fire department,’ Lew said. But while he stressed that it’s urgent for Congress to act, Lew declined to say whether the Obama administration will support a bill House Republicans are planning to introduce on Wednesday that would create a fiscal oversight board for the island and allow some debt restructuring.”

HEDGE FUND BOSSES CASH IN — NYT’s Alexandra Stevenson: “JPMorgan Chase paid its chief executive, Jamie Dimon, $27 million in 2015. In another Wall Street universe, the hedge fund manager Kenneth C. Griffin made $1.7 billion over the same year. Even as regulators push to rein in compensation at Wall Street banks, top hedge fund managers earn more than 50 times what the top executives at banks are paid. The 25 best-paid hedge fund managers took home a collective $12.94 billion in income last year, according to an annual ranking published on Tuesday by Institutional Investor’s Alpha magazine.

“Those riches came during a year of tremendous market volatility that was so bad for some Wall Street investors that the billionaire manager Daniel S. Loeb called it a ‘hedge fund killing field.’ A few hedge funds flamed out; others simply closed down. Some of the biggest names in the industry lost their investors billions of dollars. Yet for the biggest hedge fund managers, these men (and the occasional woman) have more money and more influence than ever before.”

TREASURY WARNS ON ONLINE LENDERS — FT’s Ben McLannahan: “The US Treasury Department has warned of the fragility of the business models of a new crop of online lenders, a day after revelations of alleged mis-selling of loans at Lending Club shook confidence in the sector. A white paper released on Tuesday represented the first attempt by a US regulator to produce a framework for supervising an industry which sprang up in the wake of the financial crisis.

“Operating under a patchwork of state and federal rules, online lenders such as SoFi and OnDeck Capital have grown rapidly. … In the paper, more than nine months in the making, the Treasury noted that much of the innovation from the upstarts had been positive. But it added that many of the new platforms — some 400 or so in the US, at the latest estimate — had no experience of operating ‘through a complete credit cycle’. It warned of deterioration in the loans they are selling on to individual and institutional investors.”

POTUS Events

10:00 am || Receives the Presidential Daily Briefing
2:30 pm || Meets with Secretary of State Lew
3:55 pm || Signs S. 1890 – Defend Trade Secrets Act of 2016

All times Eastern
Live Stream of White House Briefing at 12:45 pm

Floor Action

The House is in at noon and will hold votes on suspension bills at 6:30 p.m. The Senate is in session at 2:15 p.m.

Krebs Daily Briefing 4 May 2016

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


Owner of New York Stock Exchange Says It Will Not Bid for London Rival

LONDON — Intercontinental Exchange, the owner of the New York Stock Exchange, said on Wednesday that it had no plans to make an offer for the London Stock Exchange Group. The announcement removes one potential rival to a planned merger between the London Stock Exchange and Deutsche Börse, which confirmed they were in discussions in February and agreed to merge in an all-stock deal in March. Deutsche Börse and the London Stock Exchange are aiming to create a European champion in a rapidly consolidating industry, but analysts have speculated that the deal could be undone by a rival bid from Intercontinental Exchange, also known as ICE, or from another exchange operator. ICE said in March that it was considering its own move for the London exchange. The CME Group — which operates the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange — and Hong Kong Exchanges and Clearing have also been seen as potential bidders. “Following due diligence on the information made available, ICE determined that there was insufficient engagement to confirm the potential market and shareholder benefits of a strategic combination,” ICE said on Wednesday. Shares of the London Stock Exchange dropped nearly 8 percent in trading on Wednesday afternoon after the announcement.

Coming Soon: ICIJ to Release Panama Papers Offshore Companies Data

The International Consortium of Investigative Journalists will release on May 9 a searchable database with information on more than 200,000 offshore entities that are part of the Panama Papers investigation. The database will likely be the largest ever release of secret offshore companies and the people behind them. The data comes from the Panamanian law firm Mossack Fonseca, one of the top players in the offshore world, and includes information about companies, trusts, foundations and funds incorporated in 21 tax havens, from Hong Kong to Nevada in the United States. It links to people in more than 200 countries and territories. When the data is released, users will be able to search through the data and visualize the networks around thousands of offshore entities, including, when available, Mossack Fonseca’s internal records of the company’s true owners. The interactive database will also include information about more than 100,000 additional companies that were part of the 2013 ICIJ Offshore Leaks investigation. While the database opens up a world that has never been revealed on such a massive scale, the application will not be a “data dump” of the original documents – it will be a careful release of basic corporate information. ICIJ won’t release personal data en masse; the database will not include records of bank accounts and financial transactions, emails and other correspondence, passports and telephone numbers. The selected and limited information is being published in the public interest. Meanwhile ICIJ, the German newspaper Süddeutsche Zeitung which received the leak, and other global media partners, including several new outlets in countries where ICIJ has not yet been able to report, will continue to investigate and publish stories in the weeks and months to come. The Panama Papers investigation revealed the secret offshore dealings of world leaders and other politicians as well as criminals and celebrities. It exposed the role of big banks in facilitating secrecy and tax evasion and avoidance. And it showed how companies and individuals blacklisted in the U.S. and elsewhere for their links to terrorism, drug trafficking and other crimes were able to do business through offshore jurisdictions. More:

Wall Street Stock Loans Drain $1 Billion a Year From German Taxpayers

German companies are known for paying some of the heftiest dividends among world stocks, one reason U.S. investment giants such as BlackRock and Vanguard are among the biggest holders of German shares. But Wall Street has figured out a way to squeeze some extra income from these stocks. And German taxpayers pay for it. A cache of confidential documents obtained by ProPublica and analyzed in collaboration with The Washington Post, German broadcaster ARD and the Handelsblatt newspaper in Düsseldorf details how Wall Street puts together complex stock-lending deals that drain an estimated $1 billion a year from the German treasury. Similar deals extend beyond Germany, siphoning revenue from at least 20 other countries across four continents, according to the documents, which show how “dividend-arbitrage” transactions — known in the trade as “div-arb” — are structured and marketed as tax-avoidance vehicles. The trove of transaction logs, emails, marketing materials, chat messages and other communications among deal participants involves a who’s who of the world’s big banks and institutional investors. In deals like these, some of America’s largest money managers briefly lend out some of their German holdings each year. Those shares are temporarily held by German investment funds and banks that by law pay no tax on German dividends or can claim refunds for tax withheld. The borrowed shares are returned shortly after the dividend is paid. The banks or funds that borrowed the shares receive the dividends tax-free and then transfer that money to the stocks’ original owner, minus fees for middlemen. The foreign investors typically end up with added income equivalent to about half the dividend tax that would have been owed. Some firms, like BlackRock, run their own security lending programs, while others lend through big global banks that package the deals. Vanguard, BlackRock and Fidelity said their securities lending follows applicable laws and is designed to help investors. Mike McNamee, a spokesman for the Investment Company Institute, which represents large money managers, said “funds have an obligation to maximize returns for shareholders.” Div-arb has been an open secret on Wall Street for years. It faces new scrutiny in Germany amid questions about its legality and a government push to end it. The practice — sometimes called “dividend washing,” “dividend stripping” or “yield enhancement” — is the latest version of a long-running game in which creative bankers exploit gaps and inconsistencies in foreign tax systems to benefit wealthy clients. As with corporate inversions and schemes to hide money in offshore accounts, governments lose billions and the tax burden shifts to others. Some say governments have no one but themselves to blame. “Unless governments are going to get serious about harmonizing and standardizing tax rates, then governments leave themselves open to this loophole,” said Josh Galper, managing principal of Finadium, a financial consulting firm in Concord, Mass. Legal experts who reviewed trades detailed in the documents said they might cross the line because German law forbids transactions whose sole purpose is to avoid taxes — a standard that is extremely difficult to meet. Germany’s highest tax court recently invalidated one div-arb transaction that it called an “empty shell.” In the United States, Congress put an end to div-arb in 2010 after a scathing report by the Senate Permanent Subcommittee on Investigations two years earlier. Shown some of the German transactions in the cache, Reuven Avi-Yonah, a University of Michigan Law School professor who helped Senate investigators in 2008, said he believes they were “pretty clearly tax-motivated.” “Regardless of whether you have an obligation to your shareholders, that does not extend to things that you know have no motivation other than reducing taxes,” Avi-Yonah said. “That’s illegal under current German law.” In one email exchange, a manager of Norway’s sovereign wealth fund wrote to intermediaries to confirm his understanding of a lending transaction. The purpose of the loan, he wrote, was to “avoid” a 15 percent withholding tax on shares of international companies by agreeing to a 50–50 split of the taxes saved. “We do not necessarily know the motivation for borrowing, or who the end user is, but are aware that tax considerations are one of several drivers for pricing these transactions,” a spokesman for the fund said in an email. Sovereign wealth funds in Saudi Arabia, Kuwait and Singapore also lend shares for div-arb deals, the documents show. So do other investment managers in the United States, including Franklin Templeton and T. Rowe Price, both of which declined to comment. Banks playing a role in such trades include Barclays, Goldman Sachs, UBS, Morgan Stanley, Citigroup, Merrill Lynch, JPMorgan, Deutsche Bank and Swedish bank SEB, among others, the documents show. More:

Prince Harry and the Queen Dropped the Social-Media Mic on Barack and Michelle Obama

It’s not the first time the Queen has shown the world she has a sense of humor, but it’s definitely one of the funniest moments we can recall. In a video destined to go viral, Prince Harry convinced his grandmother to watch a message from the president and First Lady ahead of the much anticipated Invictus Games in Orlando—on camera! In what has been dubbed a “Prince Harry Production” by Kensington Palace, the prince arranged for the cameras to be allowed into Windsor Castle last Wednesday, and, being the good sport that she is, the Queen agreed. Harry and his 90-year-old grandmother were filmed in a sitting room at Windsor Castle looking through the Invictus Games brochure when Harry’s iPhone goes off.  As a message from Michelle Obama pops onto his screen, the Queen, in a cardigan and pearls, leans in for a better look. The Obamas, who last week visited the Queen at Windsor Castle for lunch, ping into view. “Hey Prince Harry,” says a stern looking Michelle, arms crossed standing next to her husband. “Remember when you told us to bring it at the Invictus Games?” “Careful what you wish for,” interjects the president waving his finger as a team of serviceman joke around in the background and one says “boom.” “Boom, really, please,” remarks the Queen, deadpan. Yes, it’s definitely Her Majesty and, yes, it’s almost as good as the time the Queen allowed James Bond (a.k.a. Daniel Craig) into Buckingham Palace to film a secret cameo for the Olympics Opening ceremony. We can’t stop playing it. And it’s great to see Prince Harry on Twitter. The prince has said he isn’t a fan, but perhaps he’ll be as hooked as the rest of the world now he’s sent his first tweet. See video at link below:


U.S. rule would shield failed banks from hedge funds in future crisis

Big U.S. banks will have greater protection from hedge funds in a future financial crisis under a Federal Reserve proposal released on Tuesday that would require some investors to wait 48 hours before cutting ties with failing lenders. The two-day pause is meant to prevent a chaotic unraveling of investments like what was seen during the 2008 financial crisis and failure of Lehman Brothers Holdings Inc. At that time, desperate investors tried to void ties to Lehman after it sought bankruptcy protection, helping to spread panic in global financial markets. The scene of derivatives investors desperate to unwind contracts could spur a modern-day run on a bank, Federal Reserve Chair Janet Yellen said on Tuesday, leading to “asset fire sales that may consume many firms.”  Tuesday’s proposal envisions a cooling-off period that may give banks time to transfer securities like derivatives to a healthy bank before bankruptcy, Yellen said. Derivatives investors would have to acknowledge the 48-hour cooling offer period in new financial contracts and the rule could come into force next year, according to the proposal. Existing financial contracts would also be captured if the investment fund and bank continue to do business once the rule is in place, according to Federal Reserve officials. Wall Street has until Aug. 5 to comment on the plan. The new rule was envisioned as part of the Dodd Frank reform legislation and has backing from the Financial Stability Board, a global standard-setting panel for financial markets. The Managed Funds Association, a voice for the hedge fund industry, opposes the Fed’s move and argues that it strips investors of rights.

Freddie Books $4.56 Billion Hedging Loss for 1Q. But Net Loss is Just $354 Million. No Assistance From Uncle Sam (At This Time)

Freddie Mac posted a net loss of $354 million for the first quarter of 2016 after taking a huge $4.56 billion accounting markdown on the value of its hedging instruments. In a statement, the GSE stressed it will not need any capital assistance from the U.S. Treasury Department, which controls its senior preferred stock. Despite the loss, the government-controlled secondary market giant measured its net worth at $1 billion at the close of the first quarter. (At the beginning of 2018, its capital buffer falls to zero, as mandated by regulation.)  The $4.56 billion hedging loss compared to a hedging gain of $744 million in 4Q15. The “mark” against its derivatives positions in 1Q was caused by an unexpected dive in interest rates that occurred early in the year. At March 31, the yield on the benchmark 10-year Treasury was 1.78 percent compared to 2.27 percent at Dec. 31, a difference of 49 basis points. For the past several weeks, speculation was rife that if the yield on the 10-year bond remained under 2.0 percent at March 31 Freddie might book a large hedging loss, which could – in theory – wipe out its thin capital buffer. However, although the GSE did take a loss, it was not enough to wipe out its remaining net worth. In 1Q16 Freddie took in $3.41 billion of net interest income, a slight decline from the $3.58 billion registered in the previous quarter. Net interest income rose 5.8 percent compared to the same period a year earlier. In the fourth quarter of 2015, Freddie earned $2.16 billion with hedging losses a non-event because of rising interest rates during that period.


Bank of America to offer cross-border merchant services

Bank of America Merchant Services is expanding its U.S. electronic payments processing services to Europe to better serve global customers. The company has opened a European unit, BofA Merrill Lynch Merchant Services (Europe) Limited, in London to support the expansion. The European unit will support e-commerce, card-present and card-not-present transactions for clients looking for international payment services, along with other existing services offering through BofAML’s transaction banking platform. “Bank of America Merchant Services’ largest clients have complex global payments needs, and our presence in Europe will enable them to work with a consistent platform and team to help simplify their experience,” said Tim Tynan, chief executive of Bank of America Merchant Services. The new European unit currently supports online transactions covering more than 130 currencies. It leverages security features such as address verification and 3D Secure, which is an XML-based protocol designed to be an additional security layer for online credit and debit card transactions. It also provides other BofAML services for helping large enterprises manage complex cash flows, including services aimed at reducing receivables, improving liquidity and streamlining payments between countries and regions. The new European unit is headed by Michael Reed, executive vice president and segment manager, based in London, who previously served as chief operating officer and general manager of Bank of America Merchant Services’ client sales group. “Our clients have been requesting the same value and service they get in the United States,” Reed said. “We want to deliver custom solutions for our cross-border clients that meet their complex needs.” Bank of America’s European expansion comes as digital fintech firms have increasingly targeted the payments space. “We welcome any competition that these technology firms bring to the market,” Tynan told news website City A.M.

Deferred-Interest Promotions Are Back Under Scrutiny

Nearly seven years after a landmark overhaul of the credit card industry, regulators are renewing their scrutiny of a popular type of loan that can pack a big punch for consumers who don’t use it as intended. Deferred-interest promotions, commonly offered on store-brand credit cards, give consumers a chance to buy big-ticket items like appliances, furniture or even medical procedures and put off paying any interest charges often for the first six to 12 months. Critics warn that the deals can be misleading and costly, because shoppers do not always realize they will be hit with interest charges for the entire period if they fail to pay off their balances by the end of the promotion. In March, Richard Cordray, the head of the Consumer Financial Protection Bureau, told Congress that regulators had “significant concerns” about deferred-interest promotions, repeating a warning he has made for several months. In December, the agency issued a report that said the number of purchases using deferred-payment promotions had increased 21 percent between 2010 and 2013. The report singled out such promotions as “the most glaring exception” to the trend toward “upfront” pricing after the passage of the 2009 Credit Card Accountability Responsibility and Disclosure Act. That act was a sweeping reform of card industry practices that aimed to eliminate hidden fees and curb abusive policies, particularly those affecting borrowers with poor credit. Consumer advocates say stamping out potentially deceptive behavior is a constant challenge. As certain avenues for profit are cut off, the credit card industry moves to other permitted products.

U.S. oil industry bankruptcy wave nears size of telecom bust

The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week’s filings for creditor protection by Midstates Petroleum MPOY.PK and Ultra Petroleum UPL.NL. The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and Charles Gibbs, a restructuring partner at Akin Gump in Texas, said the U.S. oil industry is not even halfway through its wave of bankruptcies. “I think we’ll see more filings in the second quarter than in the first quarter,” he said. Fifteen oil and gas companies filed for bankruptcy in the first quarter. Some oil producers appear to be holding on, hoping the price of crude stabilizes at a higher level. In February, oil slumped as low as $27 a barrel from peaks above $100 a barrel nearly two years ago. U.S. crude has recovered somewhat, and on Tuesday was trading a little below $44 a barrel. [O/R] Until recently, banks had been willing to offer leeway to borrowers in the shale sector, but lately some lenders have tightened their purse strings. A widely predicted wave of mergers in the shale space has yet to materialize as oil price volatility makes valuations difficult, and buyers balk at taking on debt loads until target companies exit bankruptcy. The telecom and energy boom-and-bust cycles have notable parallels. Pioneering technology brought an influx of investment to each industry, a plethora of new, small companies issued high levels of debt, and a subsequent supply glut sapped pricing just as demand fell sharply. Neither this crash nor the telecom crack-up in the early 2000s rival the housing and financial bust in 2007-2009 in terms of magnitude and economic impact. But losses for energy investors in the stock and bond markets in the last two years are significant. It remains unclear how long it will take to get through the worst of the declines, and who will be left standing when it is over. A 60 percent slide in oil prices since mid-2014 erased as much as $1.02 trillion from the valuations of U.S. energy companies, according to the Dow Jones U.S. Oil and Gas Index .DJUSEN, which tracks about 80 stocks. This has already surpassed the $882.5 billion peak-to-trough loss in market capitalization from the Dow Jones U.S. Telecommunications Sector Index in the early 2000s. In the debt market, there are also signs that lots of money could be lost this time around, especially in high-yield bonds. During its boom, U.S. oil and gas companies issued twice as much in bonds as telecom companies did in the latter part of the 1990s through the early 2000s. More:

MetLife to pay record Finra fine for misleading annuity customers

MetLife Inc. agreed to pay $25 million to settle a probe of abuses tied to variable annuities, the highest-ever penalty for those products by the Financial Industry Regulatory Authority. The sum includes a $20 million fine and $5 million to be paid to customers for “negligent” misrepresentation and omissions, according to a statement Tuesday from Finra, a brokerage regulator funded by the finance industry. The largest U.S. life insurer neither admitted nor denied wrongdoing. “Variable annuities are complex and expensive products that are routinely pitched to vulnerable investors as a key component of their retirement planning,” Brad Bennett, Finra’s chief of enforcement, said in the statement. “Firms engaging in this business must ensure that the information on the costs and benefits of these products provided to customers is accurate.” Watchdogs have been increasing scrutiny of variable annuities, which can combine securities investments with guaranteed income, an arrangement that may generate attractive fees for insurers. The U.S. Labor Department announced a new fiduciary rule in April to protect retirement savers from conflicted investment advice, presenting a particular obstacle to companies that create the products and also have sales forces to distribute them. “I wouldn’t say I’m surprised [by the Finra action], given the pressure we’ve seen on variable annuity sales from the regulatory environment in general,” said Judson Forner, vice president of investment marketing at ValMark Securities Inc. More:

Google, Fiat ink deal to make 100 self-driving minivans

SAN FRANCISCO – Google will collaborate with Fiat Chrysler Automobiles to put its self-driving car technology into 100 Pacifica minivans, the CEOs of both companies told USA TODAY. The vehicles will be used to turbocharge Google’s seven-year-old autonomous car program. For Fiat Chrysler, the agreement provides a technological crash course in what it takes to transform a standard vehicle into an autonomous one. Google and other tech companies “are not my enemy, these are people who will help us shape the next phase of the automotive industry,” Fiat Chrysler CEO Sergio Marchionne said by phone. Fiat shares (FCAU) gained 3% to $8.20 after USA TODAY reported on the deal late Tuesday. The partnership represents the first time Google’s team will be sharing with a major automaker information on how to integrate some of its secretive self-driving-car technology. Its existing fleet consists of a few dozen Lexus SUVs modified by Google staffers as well as a few two-person prototypes built in-house. The two companies don’t as yet have a plan to put the self-driving technology into new Chrysler vehicles. John Krafcik, head of Google’s car project, said his company liked the “nimble and focused” nature of Fiat Chrysler’s engineering team, as well as “the fact that they’re totally aligned with what we need to do at this stage, which is build more vehicles and get more testing miles under our belt.” Fiat’s Marchionne has been vocal about the need for car manufacturers to embrace partnerships in order to survive the ongoing pivot in the transportation space. The company has achieved some sales success after exiting bankruptcy. But in the car technology research race, seen as the next big differentiator for automakers, rivals Ford, Audi, and BMW have made quick progress with driver-assist technology while Fiat Chrysler has kept a lower profile. More:

The Showman

As the United States Attorney for the Southern District of New York, Preet Bharara runs one of the largest and most respected offices of federal prosecutors in the country. Under his leadership, the office has charged dozens of Wall Street figures with insider trading, and has upended the politics of New York State, by convicting the leaders of both houses of the state legislature. Last week, Bharara announced charges against a hundred and twenty alleged street-gang members in the Bronx, in what was said to be the largest gang takedown in New York history. The turning point in Bharara’s own career, though, took place not when he triumphed in a courtroom but when he masterminded a dramatic congressional hearing. Bharara, who is now forty-seven, graduated from Columbia Law School in 1993, spent several years at private firms, and then, from 2000 to 2005, served as an Assistant U.S. Attorney, in Manhattan. On leaving his A.U.S.A. post, he made an unusual choice for a promising young lawyer. Instead of becoming a partner at a law firm, he went to Washington to work for Senator Charles Schumer, the New York Democrat. Schumer chaired the Judiciary Committee’s oversight subcommittee, and Bharara was the top aide on his staff. He organized hearings and prepared Schumer for conducting them. Schumer is famous for cultivating media attention, and his aides are responsible for making sure that he gets it. “When Chuck approaches a hearing, he wants to elicit something, leave a mark, unearth something that the A.P. will file a story on,” a Schumer staffer from this era told me. “Preet knew this, and he would take the pen and make the first draft of questions that made Chuck’s round of questioning stand out. He would draft them with sound bites in mind. He learned to think that way and write that way.” In early 2007, Bharara, under Schumer’s supervision, was investigating the firing of several U.S. Attorneys by Alberto Gonzales, the Attorney General in President George W. Bush’s second term. For a hearing on May 15th, the issue was whether the firings had been politically motivated. Bharara prepared James Comey, who had been Deputy Attorney General in the Bush Administration, to testify. “That was my hearing, chaired by Senator Schumer,” Bharara told me. He knew the witness well, because Comey had been the U.S. Attorney for the Southern District when Bharara was an A.U.S.A. there. “I talked to Jim the week before and said, ‘We’re going to have you come testify.’ ” In debriefing Comey before his testimony, Bharara heard a more extraordinary tale than he had expected. On the night of March 10, 2004, Comey had learned that Gonzales, then the White House counsel, and Andrew Card, the White House chief of staff, were heading to a Washington hospital, where John Ashcroft, the Attorney General, suffering from gallstone pancreatitis, was in intensive care. Gonzales and Card wanted Ashcroft to reauthorize a government surveillance program that Comey and his staff had concluded was unlawful. Comey and Robert Mueller III, the F.B.I. director, raced, sirens blaring, to beat Gonzales and Card to Ashcroft’s bedside. In a tense confrontation at the hospital, Ashcroft told Gonzales and Card that, since Comey was Acting Attorney General, the decision was his to make. As Bharara recalled, “Jim told me the whole story on the phone, and the hair stood up on the back of my neck, because I realized what a significant story this was, and I was sworn to secrecy and nobody knew about it. I told Chuck. He was, like, ‘Whoa!’ ” In the days leading up to the hearing, Bharara and Schumer told no one about the revelation that was coming. “I was afraid that if the story got out of what Jim was going to say the Bush Administration would figure out a way to prevent him from testifying,” Bharara said. “We needed to preserve the element of surprise.” More:

Sheldon Silver, Ex-New York Assembly Speaker, Gets 12-Year Prison Sentence

Sheldon Silver, who rose from the Lower East Side of Manhattan to become one of the state’s most powerful and feared politicians as speaker of the New York Assembly, was sentenced on Tuesday to 12 years in prison in a case that came to symbolize Albany’s culture of graft. The conviction of Mr. Silver, 72, served as a capstone to a campaignagainst public corruption by Preet Bharara, the United States attorney for the Southern District of New York, which has led to more than a dozen state lawmakers’ being convicted or pleading guilty. But none had the power, cachet or longevity that Mr. Silver, a Democrat, had enjoyed, and prosecutors sought to make an example of him. They asked that he receive a sentence greater than the terms that had been “imposed on other New York State legislators convicted of public corruption offenses.” The longest such sentence cited by the government was 14 years, the term imposed last year in the case of another former Democratic assemblyman, William F. Boyland Jr., who was tried and convicted in federal court in Brooklyn. Judge Valerie E. Caproni of Federal District Court in Manhattan noted that even before Mr. Silver’s arrest, when some of his fellow legislators had been arrested on corruption charges, he remained undeterred. “One would think that the image of Mr. Silver’s colleagues being arrested and led off to jail would have caused someone who was basically honest to reappraise what was going on,” Judge Caproni said. More:

Lawsuit challenges Senate inaction on Garland

A citizen gadfly in Maryland has filed a federal lawsuit challenging Senate leaders’ decision not to act on President Barack Obama’s nomination of Judge Merrick Garland to the Supreme Court. Liberal activist Brett Kimberlin filed the suit against Senate Majority Leader Mitch McConnell and Senate Judiciary Committee Chairman Chuck Grassley late last month in U.S. District Court in Greenbelt. “Defendants have waived their right to advice and consent by (a) stating publicly and on the Senate floor that they refuse to advise and consent on the nomination of Merrick Garland, (2) putting pressure on other Republicans not to advise and consent, and (3) refusing to advise and consent,” the suit asserts. “Plaintiff is entitled to a declaratory judgment against Defendants stating that they have waived their right to advise and consent.” The suit seems to be a longshot, in part because courts are often reluctant to wade into disputes between Congress and the White House and in part because there is debate about whether the Constitution really does obligate the Senate to act on Obama’s nominee or whether the Republicans’ current refusal to act is one of the responses the Constitution contemplates. Spokespeople for Garland and Grassley did not respond to requests for comment on the case. The White House declined to comment, but White House Counsel Neil Eggleston has publicly endorsed one of the central contentions of the new suit: that the Senate is required by the Constitution to respond to Obama’s nomination of Garland. “It’s our view that the Constitution is worded in a way, I think, that makes it mandatory,” Eggleston said at a POLITICO Playbook Breakfast last month. “I know the Republicans say it’s not mandatory and they can do whatever they want. But it says the president shall nominate and with the advice and consent of the Senate shall appoint…I read that as saying he nominates and they have an obligation to give their advice and consent.” “We think the Constitution obligates them to provide advice and consent as the language says,” Eggleston added. More:

As States Expand Gun Rights, the Police Object

GULFPORT, Miss. — Guns in bars. Guns in airports. Guns in day care centers and sports arenas. Conservative state lawmakers around the country are pressing to weaken an array of gun regulations, in some cases greatly expanding where owners can carry their weapons. But the legislators are encountering stiff opposition from what has been a trusted ally: law enforcement. In more than a dozen states with traditions of robust support for gun ownership rights, and where legislatures have moved to relax gun laws during the past year, the local police have become increasingly vocal in denouncing the measures. They say the new laws expose officers to greater danger and prevent them from doing their jobs effectively. “We are a gun society and we recognize that, but we should be writing gun laws that make us safer,” said Leonard Papania, the police chief in Gulfport, who opposes part of a new state law that creates exceptions to the rules for concealed-carry permits. “Do you want every incident on your street to escalate to acts of gun violence?” Mississippi’s measure, signed into law in April and pushed mainly as an effort to allow worshipers in church to arm themselves, is one of several that have passed in recent months. West Virginia and Idaho have approved laws allowing people to carry concealed handguns without a permit or firearm training — and, in many cases, without a background check. Texas has given residents the right to carry handguns openly.Oklahoma appears set to pass a similar measure in the next several weeks. More:

Donald Trump’s War on Truth

Brace yourselves for shock, but Donald Trump said something ridiculous and baseless Tuesday morning. The subject was Rafael Cruz, Cuban-born father of his primary remaining rival, Senator Ted Cruz. “His father was with Lee Harvey Oswald prior to Oswald’s being—you know, shot. I mean, the whole thing is ridiculous,” Trump said during a phone interview with Fox News. “What is this, right prior to his being shot, and nobody even brings it up. I mean, they don’t even talk about that. That was reported, and nobody talks about it.” Let’s clear a few things up: It has been reported, which is why Trump knows about it, but it was reported in the National Enquirer. Also there is no evidence for it; it’s bogus. Yes, the National Enquirer has been right about some things in the past, most notably John Edwards’s affair; no, that does not prove that it is right about this. (Here’s a thought experiment: If there was a story this damaging about Rafael Cruz, would the mainstream and liberal media protect Ted Cruz by leaving such a juicy scoop alone? And if Rafael Cruz were involved in the Kennedy assassination, perhaps the most scrutinized and studied event in the last century of American history, why would the evidence only appear now, in a grainy photo, on the cover of a supermarket tabloid?) But although patently absurd, the incident is interesting as an example of how Trump manipulates false stories from unreliable sources. The entertainer has no hesitations about spreading blatant falsehoods—just take a look at his Politifact track record—but this case is interesting because it shows the symbiotic relationship between Trump and the National Enquirer. It turns out that Trump is close friends with the immaculately named David Pecker, CEO of the National Enquirer. And the Enquirer has run a whole slate of stories that are awfully unflattering for Trump’s Republican rivals. The one that got the most attention—in part because Trump’s surrogates eagerly talked about it in the national media—was a claim that Ted Cruz had several mistresses. (Like the JFK story, that one appears to be entirely baseless.) But Slate rounded up a few more of the many stories the tabloid has run, from the vaguely truth-adjacent (a claim that Ben Carson left a sponge in a patient’s brain was traced to actual lawsuits, but an allegation in a lawsuit is far different from a claim being proven true) to the bogus (love children, hookers, etc.). More:

“Pathological Liar”: Ted Cruz Unloads in Epic Rant After Trump Accuses His Father of Helping J.F.K.’s Assassin

On the morning of the Indiana Republican primary, Ted Cruz unleashed a torrent of insults at Donald Trump after the Republican front-runner accused Cruz’s father, Rafael, of being connected to Lee Harvey Oswald, who assassinated President John F. Kennedy. “I’m going to do something I haven’t done for the entire campaign, for those of you all who have traveled with me, all across the country,” Cruz said during a press conference Tuesday. “I’m going to tell you what I really think of Donald Trump.” With that, Cruz spewed forth all of the feelings he has presumably been bottling up since the beginning of the Republican primary race, when he was still playing nice with Trump in a transparent bid to win over his supporters:  This man is a pathological liar. He doesn’t know the difference between truth and lies. He lies practically every word that comes out of his mouth. And he had a pattern that I think is straight out of a psychology textbook. His response is to accuse everybody else of lying. He accuses everybody on that debate stage of lying, and it’s simply a mindless yell. Whatever he does, he accuses everyone else of doing. The man cannot tell the truth, but he combines it with being a narcissist. A narcissist at a level I don’t think this country has ever seen. Donald Trump is such a narcissist, that Barack Obama looks at him and goes, ‘Dude, what’s your problem?’ Everything in Donald’s world is about Donald. And he combines being a pathological liar, and I say pathological because I actually think Donald—if you hooked him up to a lie-detector pass, he could say one thing in the morning, one thing at noon, and one thing in the evening, all contradictory, and he’d pass the lie-detector test each time. Whatever lie he’s telling, at that minute he believes it, but the man is utterly a moron. Cruz’s tirade came just hours after Trump accused Cruz’s father of being connected to the plot to assassinate J.F.K., citing a report from the tabloid magazine National Enquirer. “What is this, right prior to his being shot, and nobody even brings it up. They don’t even talk about that. That was reported, and nobody talks about it,” Trump told the hosts of Fox & Friends on Tuesday morning. “I mean, what was he doing—what was he doing with Lee Harvey Oswald shortly before the death? Before the shooting?” Cruz, who had to spend the weekend refuting impossible rumors that he was the Zodiac killer, convened a press conference to shoot down the story. “Now, let’s be clear, this is nuts. This is not a reasonable position. This is just kooky. And while I’m at it I guess I should admit my dad is J.F.K., he’s secretly Elvis and Jimmy is buried in his backyard,” he told reporters, adding that the Enquirer’s C.E.O., David Pecker, was an ardent Trump supporter whose paper previously published unsubstantiated rumors that Cruz repeatedly cheated on his wife, Heidi(whose looks Trump previously mocked). “They just spread lies, blatant lies, but I guess Donald was dismayed because it was a couple weeks ago they wrote this story about JFK and Donald was dismayed that the folks in the media weren’t repeating this latest idiocy, so he figured he’d have to do it himself.” “Morality does not exist for him,” he continued, calling Trump a “bully” for suggesting that Heidi was ugly. “Bullies come from a deep, yawning cavern of insecurity. There is a reason Donald builds giant buildings and puts his name on them everywhere he goes.” More:

Only a Democrat can stop Trump now

Donald Trump’s ongoing evisceration of the Republican Party establishment has earned him a reputation in some circles as a Teflon-coated magician, a politician whose mind meld with the American people is so strong it makes him immune to attack. He’s not. Of course, liberals should not be complacent about Trump’s ability to win a general election. Winning a primary is harder than winning a general, and anyone who’s secured either major party’s nomination is just a bit of good luck away from taking the White House. But the antidote to complacency is not panic. The fact is that Trump has triumphed in Republican Party primaries because the Republican Party is incapable of mounting effective resistance to him, not because effective resistance is impossible. Their strategies have failed because highlighting his real weaknesses cuts against too much of what the GOP base believes. The plain, obvious truth is that Trump is running a racist campaign based on an unimpressive record in business and bad public policy ideas. The Republican Party can’t mount this argument in an effective way because to do so involves stepping over too many GOP taboos. That’s why to stop Trump, his opponent is going to have to be a Democrat — realistically, Hillary Clinton though in principle Bernie Sanders or someone else would work. A Democrat will happily hammer Trump over his weaknesses and bury a candidate who’s already held in very low regard by the mass public. More:

This Bar-Brawling Lawyer Might Just Take Down Led Zeppelin

In a cramped suburban Philadelphia office piled high with file folders and documents, Francis Malofiy grabs a steel-stringed acoustic guitar from the corner and places it on his knee. As the 38-year-old lawyer starts to play, the first few notes sound unmistakably like those in Stairway to Heaven. Or do they? Malofiy claims Led Zeppelin filched the iconic arpeggio from a long-forgotten band named Spirit. According to his copyright infringement suit, the tune he’s playing is actually called Taurus, and it was used by one of the biggest rock bands ever in its most famous song—without credit to a guitarist who died in obscurity. That’s what Malofiy plans to tell a Los Angeles jury next month in a case that arguably threatens Led Zeppelin’s place in the rock ‘n’ roll firmament and to dent the half-billion dollars the song has earned. Malofiy, like many his age, grew up with Led Zeppelin posters tacked to his bedroom wall. That teen adulation has since dissipated, due to what he says is a lack of originality. “They’re the greatest cover band of all history,” Malofiy contends. Short on time, he puts down the guitar and returns to digging out papers and assembling last-minute filings, trying not to miss a flight to Los Angeles for a pretrial hearing. His ramshackle digs, located in a two-story brick building he shares with a few doctors, are the unlikely staging ground for a David-and-Goliath battle worthy of, well, a Led Zeppelin song. (He uses his middle name for his practice, Francis Alexander LLC.) Early last month, a federal judge ruled that Jimmy Page, the band’s guitarist, and singer Robert Plant, the credited writers of Stairway to Heaven, should face trial over the song’s provenance, putting tens of millions of dollars on the line. To get this far, Malofiy has survived an onslaught of legal pokes, pivots, and frontal assaults from well-funded opposing counsel, led by Helene Freeman of New York’s Phillips Nizer and Peter J. Anderson of Santa Monica, Calif., who have represented Sony Corp., Madonna, and even the band *NSYNC. (The attorneys declined to comment on the Stairway to Heaven case.) More:


Baldwin official: Removal of wall around governor’s house ‘not about politics’

The Baldwin County Commission isn’t looking for a political opportunity “pile on” to Gov. Robert Bentley by insisting that the state remove a wall at the gubernatorial beach house, one of its members said Tuesday. Bentley, said Chris Elliott, “has a myriad of other problems he has to deal with.” “This is about treating the governor of the state of Alabama just like we treat every other citizen,” said Elliott, who vocally opposes the wall that encroaches onto county right-of-way at the Fort Morgan peninsula, west of Gulf Shores. Elliott said, “He puts his pants on one leg at a time.” The decorative wall’s construction is part of a $1.8 million rehabilitation of the sprawling but dilapidated beach house. Elliott said, “The commission, in past positions, has been abundantly clear we do not vacate right-of-way except in a few exceptional conditions and especially not around water access.” Elliott and Commissioner Tucker Dorsey are scheduled to meet with two officials from Bentley’s office at 10 a.m. Friday to discuss the matter. Bentley is not slated to attend. Elliott said the county remains firm in its position: The wall must go. “We’re going to do everything we can to help them figure out where the state’s property line is and where it is not,” he said. County officials have said they have not had any direct contact with Bentley since the discovery, last week, that the wall intruded onto county property. Bentley, during comments to the media late last week, shrugged off the situation as “not a serious problem.” His spokeswoman, Jennifer Ardis, said there were no new developments in the matter. Elliott said that County Engineer Cal Markert’s staff will be providing himself and Dorsey with a recently completed survey of the property ahead of Friday’s meeting. “I’m not exactly sure where the governor’s office and the state, frankly, are coming from,” Elliott said. “We can take them at their face value that they are confused. I find that a little hard to believe.” Said Dorsey, “I think there has been a lack of communication on this. We’ll come up with some sort of resolution.”  The county isn’t the only governmental entity that Bentley’s office must confer with. The U.S. Fish and Wildlife Service, late last week, informed the governor’s office that the wall construction never should have gone forward without the appropriate permit to build on protected land. Construction and expansion of properties on Fort Morgan’s beaches require that the developer submit a Habitat Conservation Plan with the agency. The permit is needed because the land is inhabited by the Alabama beach mouse, an endangered species. The beach house, severely damaged by Hurricane Danny in 1997, has long sat vacant. But thanks to an influx of BP grant money in 2010, the governor’s office opted to rebuild it for future uses. Construction was supposed to be completed later this month.

BP, Medicaid bill imperiled over road funding fight

A bill that could provide major support for Medicaid appeared to be on its deathbed Tuesday afternoon due to a fight over the allocation of road money. The legislation, which would split an estimated $639 million between state debt and road projects in coastal Alabama, passed the House Thursday and needed to pass a Senate committee to stay alive. But Finance and Taxation General Fund chairman Trip Pittman, R-Montrose, abruptly adjourned a committee meeting Tuesday afternoon after members refused to table a substitute that would have increased the state debt repayment and distributed a smaller amount of money around the state. “This is the state claim,” said Sen. Arthur Orr, R-Decatur. “This is money lost by the state, not just one region of the state.” The move imperils a proposed solution for the state’s Medicaid program, which says it needs an extra $85 million to meet its obligations and install regional care organizations (RCOs), aimed at reining in costs in the program. As passed by the House, the bill, sponsored by House Ways and Means General Fund chairman Steve Clouse, R-Ozark, would have allocated $448 million to paying outstanding state debts. $161 million would go to repay a proration prevention account in the General Fund, emptied in 2009 to address a shortfall. The remaining $287 million would go to pay off money borrowed from the Alabama Trust Fund – a repository for oil and gas lease revenue – in 2012 to address similar shortfalls. The bill would pay off a significant amount of the outstanding debt, but not all. Mobile and Baldwin counties would get $191 million for road projects. The debt repayments would have helped free up to $70 million to assist the Medicaid program. Orr’s proposed substitute would have fully paid off the state’s debts; allocated the remaining money to road projects around the state, with coastal Alabama getting a double share and specifically directed any savings from the legislation to go to Medicaid. The Senate had previously passed a bill that allocated less money to debt repayment but gave money for road projects in the coast and around the state. Sen. Bill Hightower, R-Mobile, who sponsored the Senate version, said coastal members had worked with Clouse and pulled back from their initial positions on the legislation. But he said many members did not “empathize” with the effect the spill had on the coast. “We’re not made whole,” he said. “We won’t know the full implications of the oil spill for 25 years.” Sen. Linda Coleman-Madison, D-Birmingham, said she was reluctant to accept changes “at the 11th hour with 58 minutes” left. More:


How Alabama lawmakers slowed Fort Morgan’s incorporation push

Locals on Fort Morgan peninsula have long sought independence. But it’s not going to happen anytime soon. The Legislature, despite a push by hundreds of Fort Morgan families, won’t consider a bill this spring that would let them vote on whether to incorporate as a city. “We’ll have to figure out, some way, to protect ourselves,” said Paul Barefield, president of the Fort Morgan Civic Association that has about 430 family members. “There is only a limited amount of waterfront available and we don’t want any more high rises or monstrosities down here.” The long and lovely peninsula has lately been in the news because of Gov. Robert Bentley’s $1.8 million investment in renovating the state’s rundown beach house there. But for many residents, the bigger issue is protecting peace and quiet – and keeping Gulf Shores and Orange Beach at arm’s length. Fort Morgan’s sandy landscape is dotted with beach-front properties, many located near protected wildlife habitats. Cottages — not large condos — are the common sight. Barefield has led residents in pushing back against the kind of development that has transformed much of Alabama’s beach into a string of glimmering towers. “Our primary concern down here is we don’t want to look like Orange Beach and Gulf Shores with all of the density and the height,” Barefield said.

With time running out, BP settlement bill stalls in Senate

An effort to create a plan for spending a $1 billion oil spill settlement from BP stalled in a Senate committee today. That put the bill in jeopardy because only one day remains in the legislative session after today. The stakes are high because the bill offered a chance to resolve much of the state’s Medicaid funding problem. The disagreement between competing versions of the bill concerns how much money should go to repaying state debts and how much should go to road projects in Mobile and Baldwin counties, the coastal counties on the front lines of the 2010 Deepwater Horizon disaster. Both versions would make available $70 million for the Alabama Medicaid Agency next year, erasing most of what the agency says is an $85 million shortfall. BP is scheduled to pay the state $1 billion over 18 years to compensate for economic damages from the oil spill. Last week, the House passed a bill by Rep. Steve Clouse, R-Ozark, that would have authorized issuing about $640 million in bonds and using the annual BP payments to pay off the bond debt. It would apply $448 million of the bond money to repaying the Alabama Trust Fund for money transferred since 2010 to balance the state budget. The remainder, an estimated $191 million, would go to road projects in Mobile and Baldwin counties. In the Senate budget committee today, Sen. Arthur Orr, R-Decatur, proposed a substitute bill that use the bond money differently. Orr’s substitute would repay all the remaining debt to the ATF, leaving an estimated $90 million to $100 million for roads. Orr’s plan would also spread the road money statewide, with eight of the state’s nine Department of Transportation districts getting 10 percent and the Mobile and Baldwin county districts getting 20 percent.


Lawyers, Lobbyists and College Cronyism

MONTGOMERY—The State’s Community College system has once again invited controversy, with the push to combine colleges under the guidance of the Alabama Community College Board of Trustees, formed in 2015. As John Archibald pointed out recently, sex isn’t the only scandal happening in Alabama.

Most recently, the merger of the successful Southern Union State Community College with two failing colleges (Central Alabama Community College, and Chattahootchie Valley Community College) has raised concerns, not only in the communities where the colleges are located, but with some in the State Legislature. Each school has had interim presidents for years, until recently, when Dr. Susan L. Burrow, CACC president, was tapped to lead the proposed merger. Burrow’s reportedly has a close relationship with Roger Bates, of the law firm of Hand Arendall and Jimmy Baker. Baker is the former assistant superintendent of education, deputy superintendent of education, and finance director for the State of Alabama under Fob James. In 2015, Bates and Baker were listed with the Secretary of State, as lobbyists for the Alabama two-year college system, but have not registered in 2016. For over a decade, The State Board of Education has prohibited, “any institution under its authority, direction, and control from paying with State funds for the services of a lobbyist on a contract or consulting basis,” according to its own Board policies. This prohibition has included, the Alabama two-year college system, which, until recently, was under the direct control of the State Board of Education. State records show that since 2014, the two-year college system has held a professional services contract with the law firm, Hand Arendall, which has been paid over half a million dollars since 2014. “This is beyond the level of Roy Johnson,” said a confidential source with close ties the community college system, referring to a former College Chancellor who pled guilty to using his position for personal gain, and is now serving six years in prison. “These people are just being a lot smarter. Roy was blatant. These people are using a law firm to channel everything through, so it can’t be questioned.” It is believed that consolidation is more about who gets paid and who gains power, than what is good for the colleges. “If you can pull all that power and money under one umbrella, look at what kind of power and control you have in those communities,” said a former college official speaking on background. “Jimmy Baker is the de facto chancellor and [Chancellor] Heinrich, has no clue and neither does the Governor.” Hundreds of thousands of taxpayer funds are being spent on “research” to support the mergers, with very little accountability, according to several lawmakers. Also serious question have been raised about Burrow’s leadership at CACC. More:


Turbulence between Boeing-Alabama Sen. Shelby could mean job loss

HUNTSVILLE, AL (WAFF) – Boeing is feuding with Alabama Senator Richard Shelby and the aerospace giant said it could cost jobs in Huntsville. Boeing wants a competitive playing field with Airbus and said Shelby is stalling that international process and the job loss could be just weeks away. Boeing said Airbus has three international lenders and they rely on one, the now-closed Ex-Im Bank. The company wants it re-opened. This is our first look inside Boeing’s future. It’s in its seven Jetplex and Gateway Composites Labs that just opened in the last year. Visioneers work here, dreaming up what materials they’ll need to build Boeing’s best jets. “We look how we can tweak materials and try it out,” said Robbie Harris, Boeing Composites Lab Manager. Boeing’s goal is to build faster, cheaper more energy efficient commercial jetliners with bigger passenger windows and comfier seats. It all starts with engineering brains, advanced materials, composite boards and cutting-edge autoclaves. But Steve Swaine said Boeing can’t continue to manufacture these jetliners, like its massive 787 Dreamliner, if it can’t sell them. He said Shelby has basically grounded the company because international buyers can’t borrow money from a common lender, the Export-Import Bank, because Shelby is not making a final appointment to the bank’s board. This has halted progress and sales. Swaine who is Boeing’s Director of  Research and Technology said, “We need Senator Shelby to get behind the EX-IM Bank, make the appointment and make the bank, fully operational.” Swaine said 70 percent of Boeing’s commercial sales are to international customers. No sales means no jobs. 4,000 positions tied to commercial airplanes are on the line around the country and that includes Huntsville.  “We are working every angle we can think of to avoid layoffs. We are looking at retirements, and taking into account voluntary reductions. We are looking at how we can do a better job operating more effectively in order to make our products continue to be high quality at lower cost. The EX-IM bank  is one of the things that we need in order to continue to provide a pipeline of revenue into our company to protect those jobs in the future,” said Swaine. An aerospace future that Swaine said could hit rough air if Boeing’s playing field with Airbus isn’t leveled soon. Shelby’s office sent a statement Monday afternoon saying, “Senator Shelby fundamentally opposes the Export-Import Bank and believes his actions are in the best interest of the American taxpayer. Nearly 99 percent of all American exports are financed without the Ex-Im Bank, which demonstrates that the Bank is more about corporate welfare than advancing our economy”. Boeing provided this additional information regarding its need for a fully operational Ex-Im Bank for its international customers:



Wringing my hands before slinking toward Trump by Ed Rogers

 It looks as though the 2016 GOP nomination contest is reaching a turning point, and a lot of hand-wringing is underway among many Republicans as they contemplate the inevitable. It’s not premature to start thinking about the dynamics of a Clinton-Trump race, where the most unpopular Democrat will face the most unpopular Republican. Some Republicans say that of course they will be for Donald Trump if he wins the nomination, because they can’t possibly be for Hillary Clinton. Every day, I talk to good Republicans who are in the early stages of Trump Acceptance Syndrome (TAS), and they all say the same things: “Trump is on to something,” “Trump has hit a nerve,” and probably the most common, “Trump tells it like it is.”  Many say, “Well, we’ve all been wrong about Trump so far, so maybe …” No one ever finishes that sentence. Anyway, none of these Republicans say Trump will do what he says, and no one really defends him — they only exclaim that Clinton will be worse and shrug their shoulders. Well, is the prospect of a Hillary Clinton presidency enough of a reason to support Trump? I ask the question not to make a point, but because I don’t know the answer. What if I were the deciding vote between Hillary and the Donald? I’m certainly not going to vote for Clinton, but as for supporting Trump, I think more hand-wringing is in order. Clinton’s weaknesses are well-known. All her preexisting conditions — including being a uninspiring campaigner; a stale, corrupt, nepotistic relic of a bygone era; and a living symbol of business as usual — are vulnerabilities in the 2016 campaign atmosphere. In fact, it’s a great year to be the one person in the race who isn’t Hillary Clinton – unless you’re Donald Trump. He performs worse in the polls than anybody, but here we are. Even if Trump does win the Republican nomination, he’ll have to work hard to persuade Republican rank-and-file voters to back him. After all, the first step to winning as a Republican is to secure votes from Republicans. Trump is not there yet. In a speech recently, he said that although he wants party unity, he is convinced that he can win without it — not exactly a unifying message. And, just to reinforce how steep Trump’s climb will be, his unfavorable rating is at about 65 percent. Plenty of Republicans I know are finding some peace in the notion that they will matter-of-factly accept Trump as our nominee because they are convinced of the calamities that will arise from a Clinton presidency. But in his weekend column, Post opinion writer George F. Will put it perfectly when he wrote about conservatives coming to grips with the reality of a Clinton-vs.-Trump race. Will said, “Donald Trump’s damage to the Republican Party, although already extensive, has barely begun. Republican quislings will multiply, slinking into support of the most anti-conservative presidential aspirant in their party’s history.” I don’t want to be one of those who slinks toward Trump without being honest with myself about what a Trump presidency could mean, both for our party and for our country. Nothing about what Trump has done so far in this campaign has convinced me that he is capable of doing a good job leading the nation or even adequately representing those things that inspire America. I haven’t heard even one Republican make the affirmative case that he is. But elections are relative: All Trump needs to do is beat Clinton on one day in November. Maybe anything is better than Clinton. But for the time being, I will stick with the hand-wringing Republicans who aren’t there yet.


Bentley scandal: Legislators hit wall in pursuit of ‘Wanda’s desk’ by John Archibald

One thing is clearer every day in the soap opera that is the administration of Gov. Robert Bentley:

You can’t make this stuff up. And you wouldn’t if you could. So there I am today, standing in the hallowed halls of the State Capitol, reminding myself that it’s only a block from Ripley Street, and maybe that’s why I don’t know whether to believe it or not. On one side is Rep. Ed Henry, a Republican from Hartselle, and on the other is Rep. Johnny Mack Morrow, a Democrat from Red Bay. And they have about as much in common as an eggplant and a particle accelerator. But they have the same goal and the same purpose today: To get inside the governor’s office. And to see the place where the infamous Wanda’s Desk used to sit. And all I can think is the issues of state are hard(wood). And the matters of government are knobby. And you always know more about politics when you find people who’ve been in the drawers in the governor’s office. “I feel like we need a moment of silence for Wanda’s desk,” Morrow said. And I feel like we need a moment of silence, period. So take one now. OK. Henry, who has led the effort to impeach Bentley, and Morrow, who became the necessary 21st vote to move the letters of impeachment forward, signed a letter asking for the inspection, but were stopped by governor’s security. They were told, eventually, that the governor’s office was unavailable for inspection today. “That’s unacceptable,” Morrow said. “But we will accept it for now.” Bentley mentioned “Wanda’s desk” in recorded conversations revealed in March. Bentley has acknowledges saying sexually explicit things to former adviser Rebekah Caldwell Mason, but has denied taking the affair beyond that. On the recording, he is heard saying they would need to start locking the office door and move Wanda’s desk for more privacy if the two planned to do what they had done before. “‘Do’ is an action verb,” Morrow said today. “The verb implies something took place in there. The people of Alabama have a right to know. What did you ‘do?'” There is hope that the key lies in Wanda’s drawers, but the legislators they didn’t get to see the office. Or the desk. Or the layout of the land. They saw a wall. And a door. A trooper who looked like he’d rather be facing down thugs with assault rifles and a gubernatorial staffer who could not stop the nervous laughter at the mention of Wanda’s office. It might just be too late anyway. As Morrow’s letter to the governor today read:

“I was informed  yesterday, by an attorney, that he had reasons to believe that a massive cleanup had already taken place and that evidence had already been stripped from the scene which would prevent us from ever determining what really happened. I certainly hope that a cover-up like this did not occur. However, there have been too many lies already.” Lord. You almost hope there was a cleanup. And that it involved bleach. Morrow said he is investigating whether it is illegal to move furniture out of a historic building like the Capitol. Like I said. You can’t make it up. And you wouldn’t want to. But hey. If the Judiciary Committee or the Ethics Commission or the feds really want to know what Wanda might have heard in that office, they don’t need a forensic examination of the governor’s office. They just need to call Wanda. And you know what? They know where to find her. Morrow and Henry have sent the governor letters asking to see the layout of the office formerly occupied by Wanda Kelly, the governor’s now-retired executive assistant. They wanted to go all CSI on the place, to look for evidence of an improper relationships or lies – or a cover-up that could seal the governor’s fate.


Morning Money

TRUMP IS THE GOP NOMINEE — As predicted in this space yesterday, Donald Trump rolled to a big win in Indiana and Ted Cruz dropped out of the GOP presidential race. Trump is now on track to hit the 1,237 delegates he needs to win the nomination on the first ballot in Cleveland in July. The focus now shifts to how Republicans will deal with the fact that Trump — who is neither a fiscal nor a social conservative — is their standard bearer. Some began on Tuesday to line up behind the Manhattan-based brand manager. The RNC officially acknowledged Trump as the victor. But there are plenty of big names — including Cruz — who have not lined up behind Trump and may never do so.

How could Cruz possibly back Trump now? The Texas senator just called Trump a “pathological liar,” “utterly amoral,” “a narcissist at a level I don’t think this country’s ever seen” and “a serial philanderer.” That’s a tough bell to unring. And what of Jeb Bush, Mitt Romney, Marco Rubio and all the rest? On Wall Street the question now becomes whether Republicans grudgingly get in line or sit the race out and quietly (or perhaps not so quietly) hope Clinton wins.

MM’s money is on the latter. Trump represents a major tail risk for markets and the economy. He could wind up being OK as president. But he could also create massive disruption through trade wars, mass deportations and destabilized relations with traditional allies. Wall Street usually shies away from that kind of risk.


DEMS PREPARE TO DESTROY TRUMP — Via POLITICO: “Hillary Clinton’s campaign signaled on Tuesday that it will paint Donald Trump as an unstable, dangerous bully with no interest in helping ordinary Americans, judging from comments made by campaign chairman John Podesta. Trump is ‘too divisive’ and ‘lacks the temperament’ to be president, Podesta wrote in a statement issued after the real estate mogul won the Indiana Republican presidential primary …

“Fundamentally, our next president will need to do two things: keep our nation safe in a dangerous world and help working families get ahead here at home,’ Podesta said. ‘Donald Trump is not prepared to do either.’”

WARREN COMES OUT BLAZING — Sen. Elizabeth Warren continues to show she will be a powerful weapon for Clinton in the fall. Her response to Trump’s win on Tuesday night, via Twitter: “There’s more enthusiasm for @realDonaldTrump among leaders of the KKK than leaders of the political party he now controls”

RNC Chair Reince Priebus declared on Twitter: “@realDonaldTrump will be presumptive @GOP nominee, we all need to unite and focus on defeating @HillaryClinton #NeverClinton”

“NEVER TRUMP” VOWS TO FIGHT ON — Via Katie Packer: “While tonight’s Indiana primary results increased Donald Trump’s delegate count, Trump remains short of the 1,237 delegates needed to win the GOP nomination. A substantial number of delegates remain up for grabs in this highly unpredictable year. In addition, there is more than a month before the California primary — more time for Trump to continue to disqualify himself in the eyes of voters, as he did yet again today spreading absurd tabloid lies about Ted Cruz’s father and the JFK assassination.”

BERNIE WINS INDIANA, PLEDGES TO FIGHT ON — POLITICO’s Matthew Nussbaum: “Sen. Bernie Sanders, fresh off a surprise victory in the Indiana primary, is confident that he is only helping the Democratic Party by remaining in the race against Hillary Clinton. ‘The Clinton campaign thinks this is over. They’re wrong,’ Sanders told the Associated Press. ‘We are bringing literally millions of people into the political process,’ Sanders said of his campaign.

“He argued that, by remaining in the race, he is energizing the Democratic Party in a way that will increase voter turnout in the general election. High turnout, he said, will be crucial for Democratic victory. ‘I am going to do everything that I can to make sure that in November we have a very high voter turnout,’ Sanders said. The pressure on Sanders to bow out is expected to increase now that Trump is the presumptive nominee on the Republican side”

BUT SANDERS CAN’T WIN — POLITICO’s Gabriel Debenedetti: “There’s one more reason for Bernie Sanders focus his energy on winning over super delegates — it’s now mathematically impossible for him to reach the magic number for the Democratic nomination by winning the remaining pledged delegates alone. Here’s how it works: After winning Indiana, Sanders has 1,399 pledged delegates and super delegates to his name, according to the Associated Press’ count. That means he needs 984 more to reach the threshold of 2,383 needed to win.

“The remaining contests, however — Guam, West Virginia, Kentucky, Oregon, Virgin Islands, Puerto Rico, California, Montana, New Jersey, New Mexico, North Dakota, South Dakota, and the District of Columbia — only have 933 pledged delegates to offer. So even if Sanders were to win 100 percent of the pledged delegates in each of those states, he wouldn’t make it past the mark”

NEW POLLS SHOW STATE OF DISCONTENT — Per a survey coming out this a.m. from Stan Greenberg and the Roosevelt Institute: “Likely voters have very unfavorable views of CEOs, Wall Street and Trickle-down economics with only 15 percent (CEOs), 20 percent (Wall Street) and 19 percent (Trickle-down) holding a favorable view of each. … 82 percent of voters believe the economy ‘is rigged in favor of the wealthy and political elites’ with 62 percent of respondents blaming politicians”

DRIVING THE DAY — Lot of conversations will be happening in corporate America about what the heck to do about the 2016 race … President Obama heads to Flint, Michigan to receive an update on the water crisis and offer remarks … ADP employment report at 8:15 a.m. expected to show a gain of 198K … ISM non-manufacturing at 10:00 a.m. expected to rise from 54.5 to 54.7

DOLLAR KEEPS SINKING — FT’s Roger Blitz in London and Robin Wigglesworth in New York: “The US dollar touched a 15-month low on Tuesday, reflecting growing market doubts that the US economy can grow fast enough for the Fed … to meet even its own modest interest rates target. The ‘DXY’ index that measures the greenback against a basket of its major peers has fallen for seven straight days — its longest losing streak in over a year. On Tuesday it fell as much as 0.8 per cent to below 92, a level last plumbed in January 2015.

“Although the gauge later clawed back its losses to trade at 92.83, currency strategists said the trend pointed to further declines. … Only four of the 32 largest currencies in the world have failed to gain against the dollar this year, complicating the landscape for economic policy globally. Policymakers in the eurozone and Japan are seeking to increase stimulus to raise growth levels and inflation, but instead find their strengthening currencies having the opposite effect. In the US … the dollar’s fall may increase inflationary pressures and boost growth”

METLIFE HIT WITH $25M FINE — WSJ’s Aruna Viswanatha and Leslie Scism: “MetLife Inc. … misled tens of thousands of customers about a product that retirees seek out for safety, according to regulators, who levied a near-record $25 million fine against the company. In a rare black eye … a brokerage industry regulator said MetLife failed to help customers properly compare old and new versions of variable annuities, leading some clients to give up versions of products that were cheaper and had more-generous features than new ones.

“The $25 million MetLife agreed to pay to settle the allegations with the Financial Industry Regulatory Authority is the second-largest fine Finra has ever levied. The largest, a $50 million penalty against Credit Suisse First Boston Corp. over allegedly inflated commissions for hot initial public offerings, was in 2002. MetLife neither admitted nor denied the Wall Street watchdog’s findings”

COULD TRUMP WIN? PROBABLY NOT — NYT’s Nate Cohn: “A general election matchup between Donald J. Trump and Hillary Clinton became all but certain on Tuesday … He would begin that matchup at a significant disadvantage. … [T]his is when early horse-race polls start to give a rough sense of the November election, and Mr. Trump trails Mrs. Clinton by around 10 percentage points in early general election surveys, both nationally and in key battleground states. He even trails in some polls of several states where Mitt Romney won in 2012, like North Carolina, Arizona, Missouri and Utah.

“Could Mr. Trump overtake Mrs. Clinton? Sure. Mrs. Clinton is very unpopular herself. Her polling lead is a snapshot in time, before the barrage of attack ads that are sure to come her way. There have been 10-point shifts over the general election season before, even if it’s uncommon. But there isn’t much of a precedent for huge swings in races with candidates as well known as Mr. Trump and Mrs. Clinton. A majority of Americans may not like her, but they say they’re scared of him. To have a chance, he’ll need to change that.”

GOOGLE SEALS DRIVERLESS CAR DEAL — FT’s Robert Wright: “Alphabet’s search for an automotive partner to develop self-driving vehicles finally bore fruit on Tuesday when Google’s parent company said it would work with Fiat Chrysler to trial its systems in a new minivan. … The deal marks the culmination of months of work by the technology company, which has acknowledged that it needs more automotive industry expertise to work out how to integrate its autonomous systems with a vehicle.

“Other carmakers — including Ford — have been wary of co-operating with Alphabet, for fear of ending up like makers of Android smartphones. Many observers believe that hardware makers such as Samsung and Sony have lost control over their relationship with customers, who now relate mainly to Google’s popular Android software. The two companies said they would work together to integrate Alphabet’s self-driving technology into 100 Chrysler Pacifica minivans for its test fleet”

BANKS SETTLE RATE RIGGING SUIT — Reuters: “Seven of the world’s biggest banks have agreed to pay $324 million to settle a private U.S. lawsuit accusing them of rigging an interest rate benchmark used in the $553 trillion derivatives market. The settlement made public on Tuesday, which requires court approval, resolves antitrust claims against Bank of America, Citigroup, Credit Suisse, Deutsche Bank, JPMorgan Chase and Royal Bank of Scotland … Several pension funds and municipalities accused 14 banks, including those that settled, of conspiring to rig the ‘ISDAfix’ benchmark for their own gain from at least 2009 to 2012.

“Companies and investors use ISDAfix to price swaps transactions, commercial real estate mortgages and structured debt securities. The alleged illegal activity included the execution of rapid trades just before the rate was set each day, called ‘banging the close,’ causing the British brokerage ICAP Plc to delay trades until they moved ISDAfix where they wanted, and posting rates that did not reflect market activity.”


REGULATORY COST REPORT — CEI this a.m. is release its 9th annual “10,000 Commandments” report which the group says “tallies the 2015 cost to the American public of federal regulations at $1.885 trillion”

KIT BOND ON INVERSION RULES — Former senator Christopher S. Kit Bond in The Hill: “The Administration’s move to prevent companies from merging with corporations based in lower-tax countries, called inversions, is just the latest anti-business hammer. More worrying, the Administration’s anti-merger rule underscores many on the left’s lack of understanding or interest in basic economics. In a global economy, American businesses are competing with foreign companies. Saddled with a 35 percent U.S. corporate tax rate, the highest among all industrialized nations, our businesses are starting with a heavy disadvantage”

TAKATA FACES 35 MILLION MORE AIR BAG RECALLS — NYT’s Hiroko Tabuchi: “Regulators are expected to announce as early as Wednesday that at least 35 million additional airbags made by Takata will need to be fixed … This would more than double what is already the largest automotive recall in American history. The airbags can unexpectedly explode, sending metal parts hurtling into the cabin. At least 11 deaths worldwide have been linked to the defect.

“The expansion would bring the total of recalled Takata airbags to at least 63 million in the United States — possibly affecting nearly one in four of the 250 million vehicles on America’s roads. At issue is Takata’s use of a compound called ammonium nitrate, which can become unstable over time or when it is exposed to moisture. Takata has wrestled with the makeup of the compound over the years, eventually adding a drying agent to make it more stable”

POTUS Events

10:05 am || Departs White House
11:50 am || Arrives Flint, Michigan
12:40 pm || Receives a briefing on the response and recovery effort by the Unified Command Group; Food Bank of Eastern Michigan, Flint
2:30 pm || Participates in a roundtable meeting with Flint community members; Northwestern High School, Flint
4:00 pm || Delivers remarks; Northwestern High School, Flint
5:00 pm || Departs Flint
6:40 pm || Arrives White House
8:25 pm || Delivers remarks at the Asian Pacific American Institute for Congressional Studies 22nd Annual Awards Gala Dinner; Washington

All times Eastern

Floor Action

A whole lot of nothing.