This start-up is promising a revolution, and Wall Street is pushing back
NEW YORK — One of the most feared men on Wall Street recently gave a tour of his offices with confident glee. From one window on the 44th floor, there is a view of the Statue of Liberty. On the other side is One World Trade Center. Brad Katsuyama, 38, has the only enclosed office on the floor, but he rarely uses it. Dressed in jeans and wearing a fleece vest, he slides easily among his nearly 70 employees. “This is where the action is,” he says, pointing to a desk in the middle of a crowded room. From here, Katsuyama has drawn the attention of some of the biggest names on Wall Street with his four-year-old company, Investors’ Exchange, or IEX. The idea behind the company is simple: Provide a venue for investors who want to buy or sell stocks where sophisticated high-frequency traders, who can make thousands of trades in a blink of an eye, do not have the advantage. The firm was the hero of Michael Lewis’s 2014 book “Flash Boys: A Wall Street Revolt,” which argued that the markets are rigged against mom-and-pop investors. Stock exchanges once dominated by screaming brokers, scrambling to get the best price on a stock, have been taken over by computers and traders using complex algorithms to find an advantage — measured in fractions of a second. High-frequency traders, Lewis argued, could always stay a step ahead. The book rankled many on Wall Street and thrust IEX into the spotlight. Now, IEX could soon be competing against some of the oldest names on Wall Street, including the New York Stock Exchange, which is more than 200 years old. The Securities and Exchange Commission is expected to approve IEX’s application to become a registered stock exchange as early as Friday, a move that could shake up the institutions that have long dominated the way stocks are bought and sold. IEX operates as a lightly regulated private one now, so investors cannot be forced to use it. That would change with approval, opening it up to a much larger market because traders have a duty to seek out the best price for their clients, be they pension funds or small investors. More:
U.S. strikes back at judge’s decision that MetLife not ‘too big to fail’
The U.S. government laid out its arguments against a federal judge’s decision to strike down the designation of life insurer MetLife Inc as “too big to fail” in a brief filed late on Thursday, showing how it intends to defend a key provision of the Dodd-Frank Wall Street reform law. MetLife sued the U.S. government last year, saying the Financial Stability Oversight Council (FSOC), made up of the chiefs of U.S. financial regulatory agencies, used a flawed process in determining it could hurt the U.S. financial system if it faced financial distress. On March 30, U.S. District Judge Rosemary Collyer rescinded the designation and the federal government appealed in the U.S. District Court of Washington, D.C.
“The district court’s ruling in this case overturned the collective judgment of the heads of every U.S. financial regulatory agency and left one of the largest financial companies in the world subject to even less oversight than before the financial crisis,” a Treasury spokesman said in a statement on Thursday, adding the government plans to “vigorously defend” the FSOC’s work. MetLife, the largest U.S. life insurer, has until August to respond and oral arguments are expected in the autumn. Both sides say the case could reach the U.S. Supreme Court. Collyer’s decision centered on the analysis FSOC conducted to make its 2014 determination that MetLife is a “systemically important financial institution.” Saying that it had failed to review the likelihood that MetLife would fail, and in view of potential losses to counterparties, and costs imposed on MetLife by the label, she called the determination “arbitrary and capricious.”
Passed after the financial crisis of 2008-2009 – which was aggravated by the way in which many large financial institutions were inter-connected – Dodd-Frank created the FSOC and gave it the power to label firms as systemically important, which triggers requirements to hold more capital and abide by other regulations. Collyer’s decision exempts MetLife from the regulations governing systemically important insurers that the Federal Reserve has proposed. In its brief, the government said the council is not required to consider the likelihood of failure or “estimate specific counterparty losses or produce quantitative projections of the harm that would result.” “The 2008-2009 financial crisis demonstrated that the sudden, unforeseen failures of large financial companies can have sweeping, unpredictable ramifications,” it added. It also said Dodd-Frank does not call for a cost-benefit analysis, and instead focuses “on risk to the nation’s financial stability rather than on costs to large financial companies.”
Last Call for Old School Credit Card Fraud in the U.S.
The slow transition to chip credit cards by U.S. retailers hasn’t gone unnoticed by criminals.
Counterfeit-card fraud will rise to $4.5 billion in 2016, up 12.5 percent from last year, as crooks ramp up their thievery before all merchants and banks have moved to accept the more secure chip technology, said Julie Conroy, an analyst at financial-industry researcher Aite Group. The theft is especially hurting retailers that hadn’t equipped their stores to accept chip cards by Oct. 1, when banks stopped footing the bill for fraud committed at non-compliant locations. “There’s a fire sale, to try to burn through all of the stock of card data that they’ve seen,” Conroy said. Criminals are using personal credit-card data stolen during previous breaches at Target Corp., Michaels Cos. Inc. and other retailers. The thieves can use the data to create fake plastic cards with magnetic stripes for shopping at brick-and-mortar stores. Known in industry parlance as EMV, chip cards prevent such duplication, the primary reason for the switch. Fees for fraudulent credit-card charges, called chargebacks, are hitting small and large retailers alike. Recognizing the problem, Visa Inc. on Thursday changed its policies to offer some relief to merchants that haven’t yet installed new chip-card readers. More:
Less than 30 percent of Americans say they have confidence in banks
Less than three in every 10 Americans say they have confidence in banks. That 70-plus percent far overshadows the 27 percent of adult Americans who say they have “a great deal’ or “quite a lot” of confidence in banks. The numbers are from a new Gallup survey taking a fresh look at an old problem. Namely the loss of confidence most Americans say they have in banks after the Great Recession hit in late 2007-8. As the Gallup survey reports, “The current percentage of adults who say they have confidence in banks is just half of what it was in 2004 when 53% expressed confidence in the institution. The record high was 60% in 1979. In addition to those expressing high confidence in banks, nearly half of Americans say they have “some” confidence in them, while about a quarter (26%) have “very little” or no confidence.” Of note, it seems to matter little whether one is a Democrat or a Republican, a liberal or conservative when it comes to the findings in the survey. Gallup found that while “railing against big banks has been the rallying cry of liberal Democrats such as Massachusetts Sen. Elizabeth Warren and presidential candidate Sen. Bernie Sanders, among the general population, conservatives and Republicans are no more likely than liberals and Democrats to have high confidence in banks.”
High court says law requires more contracts for veteran-owned small businesses
The Supreme Court decided Thursday that the Department of Veterans Affairs must set aside more contracts to be filled by veteran-owned small businesses. The court was unanimous that the department has not fulfilled its obligation to steer more business to small companies owned by veterans or service-disabled veterans simply by meeting its annual goal. The decision is likely to help more veteran-owned businesses compete for the billions of dollars in contracts the department awards. The court was considering a law passed by Congress — and then amplified after the legislation failed to produce enough results — to give preference to small businesses owned by veterans. It came up with a “Rule of Two.” That means that competition for contracts should be limited to veteran-owned small businesses when the contracting officer concludes that at least two such businesses would bid on the contract and “the award can be made at a fair and reasonable price that offers best value to the United States.”
A company called Kingdomware Technologies charged that department officials ignored that mandate when they bought a service that sent emergency information to personnel at four medical centers.
The Court of Federal Claims dismissed the suit, and a divided panel of the U.S. Court of Appeals for the Federal Circuit affirmed the decision. The judges did not read the law as requiring the department to use the Rule of Two for all contracts; the judges said this was mandated only to the extent necessary to meet the goal of awarding 12 percent of contracts to veteran-owned businesses. But Justice Clarence Thomas, writing for the court, said that was wrong. The law says the department shall award contracts to the veteran businesses under the Rule of Two process, Thomas wrote. “Unlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes a requirement,” Thomas wrote. That directive does not change just because the department meets its goal, the court decided. “The court’s ruling means that more veterans will have the opportunities that Congress wanted them to have to build their business through competition before the VA,” Luke McLoughlin, who filed briefs on behalf of veteran-owned business associations, said in a statement. More:
A Who’s Who of Financiers Is Expected at Trump’s New York Fund-Raiser
Donald J. Trump is holding a fund-raiser in New York City next week to be hosted by a who’s who of the financial world, including John A. Paulson, whose hedge fund made billions betting on the collapse of the housing market. Joining him are Stephen A. Feinberg, the secretive financier and founder of Cerberus Capital Management, and Peter Kalikow, the politically connected real estate magnate. Neither man had publicly announced his support for the Republican presidential candidate and presumptive party nominee, until now. The joint Republican National Committee and Trump fund-raiser will take place on Tuesday, at an undisclosed location in the city, according to an invitation seen by The New York Times. Tickets are going for $50,000 a person, though the hosts are paying $250,000 a couple. Additional details, the invitation said, will be disclosed when a reservation for a seat is made. It is a sign that a small, but growing, crowd in the financial world is warming up to the idea of backing Mr. Trump. The financial industry represents a crucial group for the presidential candidate as he prepares to face off with Hillary Clinton, his well-financed political rival, before the general election in November. Mrs. Clinton’s donor network includes the former hedge fund star George Soros, who recently warned against the “siren song of the likes of Donald Trump.” She also has the backing of some well-known Wall Street executives.
With enormous coffers, hedge fund and private equity founders have become some of the biggest political donors in this election. More:
NEW SALVO IN FSOC-METLIFE BATTLE — The latest turn in a major legal dispute between insurance giant MetLife and the U.S. government hit a federal appeals court docket late Thursday night, with the federal government detailing the grounds for its appeal to a March decision that dealt a setback to the Treasury Department and top financial regulators.
The Justice Department brief outlined the government’s argument for why U.S. District Court Judge Rosemary Collyer was wrong to strike down the Financial Stability Oversight Council’s decision to subject MetLife to tougher scrutiny because of the systemic risks the company’s potential failure would unleash.
The government is framing its appeal around two points. First, it contends Collyer was “profoundly mistaken” in her claim that FSOC abandoned its own guidance explaining how it would designate companies as “systemically important.” Second, the government believes the judge erred when she argued that FSOC was required to assess the costs to MetLife after tagging it with the systemic risk label.
Collyer’s decision was a blow to Treasury, which chairs FSOC, and the regulatory agency heads who are voting members of the council. The panel is tasked with identifying emerging threats to the financial system.
MetLife, which has several allies on the Hill who agree that FSOC’s designation process is flawed, said it will respond to the government’s brief by Aug. 15.
Reaction from Treasury: “The district court’s ruling in this case overturned the collective judgment of the heads of every U.S. financial regulatory agency and left one of the largest financial companies in the world subject to even less oversight than before the financial crisis,” an agency spokesman said. Read the brief here.
DRIVING THE DAY — U.S. data release on new residential construction, at 8:30 a.m. … SEC deadline for deciding on IEX’s exchange application… (more on that below).
ALSO ON THE FSOC FRONT — Patrick Pinschmidt, Treasury’s deputy assistant secretary for FSOC, is planning to step down. Treasury senior adviser Jonah Crane, a former aide to Sen. Chuck Schumer (D-N.Y.), will take over as acting deputy assistant secretary upon Pinschmidt’s departure.
IEX’S MOMENT OF TRUTH — The winner of a business-vs.-business lobbying fight could be determined today when the Securities and Exchange Commission reaches its self-imposed deadline on whether to approve IEX Group’s stock exchange application. The company’s founders became famous as the protagonists in Michael Lewis’s 2014 book “Flash Boys,” in which the author alleged the financial markets are “rigged” to the benefit of high-frequency traders.
IEX later applied to become a full-fledged stock exchange with a novel feature that would slow trading — a move the company argues will level the playing field between high-frequency traders and slower investors. Incumbent stock exchanges and trading firm Citadel are among those that opposed IEX’s application.
SORRY, DE BLASIO — Senate Banking Committee Chairman Richard Shelby (R-Ala.) has some bad news for a coalition of big banks, labor union leaders and state and local officials — including New York City Mayor Bill de Blasio — who have urged Congress to rewrite liquidity rules that are seen as potential impediments to banks holding municipal debt. In a statement to POLITICO, a Shelby spokeswoman said he “has concerns with Congress determining the quality of a particular asset for the purpose of liquidity risk management.”
At issue are rules that require lenders to hold what bank regulatory agencies deem to be high-quality liquid assets that can be easily turned into cash during a crisis. Regulators have been skeptical about the extent to which municipal bonds should qualify.
Shelby’s unwillingness to second-guess banking regulators in this instance might be the end of the story for legislation that Schumer and Sen. Mark Warner (D-Va.) had been hinting at introducing for months to address the issue. The House has passed its own version. On the Senate side, “the obstacle is the chairman,” an aide to a Senate Banking Committee member said.
WHEW, MORE INSURANCE DRAMA! — A House Financial Services Committee vote Thursday marked the conclusion of a tricky thread-needling exercise for Rep. Blaine Luetkemeyer and his bill to give Congress a stronger hand to rein in federal officials negotiating international regulatory standards for insurance companies. Leading up to the vote, the Missouri Republican faced demands from a range of competing insurance industry interests and fellow GOP subcommittee chairmen.
Luetkemeyer agreed to revise his original bill to put more restrictions on the Fed and Treasury at the request of Reps. Sean Duffy (R-Wis.) and Scott Garrett (R-N.J.). Rep. Ed Royce (R-Calif.) stirred up concerns from state insurance regulators when he pushed for language to narrow the role the National Association of Insurance Commissioners, a non-governmental group that represents state insurance regulators, could play in international talks.
“This was not an easy process,” Duffy said.
Many insurance companies and agents concerned about stricter capital requirements are more comfortable with state-based regulation and were thrilled with the finished product. But some in the industry are less enthusiastic. The American Insurance Association in a letter to the committee said the trade group had concerns about putting additional requirements on negotiators. In contrast, the night before the markup, a lobbyist for Cincinnati Insurance Companies suggested to committee staff that they rewrite the bill because it did not do enough to “protect state insurance regulation from international threats.”
MP’S KILLING ALTERS TONE OF BREXIT DEBATE — The slaying of British MP Jo Cox, who was shot and stabbed on Thursday, has “changed everything” in the country’s fierce debate over whether to leave the EU, POLITICO’s Tom McTague reports from London: “The slurs and abuse of the last few weeks will not be allowed to resume — not for a while at least. The dignified call for unity from Cox’s husband makes it politically impossible for either side to quickly resume the war of words that has tarnished the campaign.” http://politi.co/23fdG9Q
MARKETS MAKE ‘UNSYMPATHETIC BET’ — WSJ’s James Mackintosh: “[T]he pound and euro really took off, and gold fell as much as $23, after police announced Ms. Cox was dead. The unsympathetic bet is that her death will convince more of Britain’s voters to stick with Europe, helping avoid the Brexit investors fear.” http://on.wsj.com/1UZ7Kv2
Mike Hubard, former Speaker of the Alabama House of Representatives, has been convicted, in part, for usurping his position as a public official to solicit and receive investments in various companies.
The securities implications of Mike Hubbard’s conviction with respect to the person he solicited for securities in his firm in Auburn are:
Hubbard was under a duty to disclose to them that the sale of securities by him could be a violation of the Alabama Ethics Act.
Each of the persons that invested in Hubbard’s company has an opportunity to seek to rescind that purchase because he failed to inform them of a material fact which was that the sale could violate the Ethics Act.
Hubbard’s case is a cautionary tale for business owners, public officials and investors who may mix business and politics.
Employee of Panama Papers Law Firm, Mossack Fonseca, Is Arrested in Switzerland
GENEVA — An employee of the law firm at the center of the leaks of thePanama Papers, which have revealed offshore wealth held in secretive accounts worldwide, has been arrested here on charges of data theft, one of the employee’s lawyers, Romain Jordan, said on Wednesday. It was not immediately clear what connection, if any, the person might have had with the Panama Papers, a trove of 11.5 million documents from a Panama-based law firm, Mossack Fonseca. A consortium of news organizations began publishing findings from the documents — some dating to the 1970s — in April, and the disclosures have prompted investigations of politicians and other prominent figures around the world. On Wednesday, the Swiss newspaper Le Temps reported that an information technology employee in the Geneva office of Mossack Fonseca had been arrested on suspicion of stealing confidential information. Computer equipment was seized as part of the inquiry, Le Temps reported. Asked about the report, a spokesman for Claudio Mascotto, the chief prosecutor in Geneva, declined to comment. The spokesman said only that the office had opened a criminal investigation based on a complaint filed by Mossack Fonseca. The employee’s name was not made public, and the lawyer did not give his client’s name or provide any detail about him. Le Temps quoted a lawyer for Mossack Fonseca, Thierry Ulmann, as saying: “What we know is that the data were removed from his computer in Geneva and that this I.T. worker had full access privileges.” The law firm filed a complaint against the worker for illegal removal of data and for violating the confidentiality of the law firm, Mr. Ulmann told Le Temps. Mr. Ulmann could not be reached for comment on Wednesday evening. Mr. Jordan, reached by phone, confirmed that his client had been charged with data theft but said only, “I can confirm that my client is denying all the charges made against him.” More:
New Wall Street Sheriff: I’ll Be a Player, But in My Own Shoes
Maria Vullo was tired of being asked about the last guy to police New York’s banks — whether she would be a “sheriff” like him and if she could fill his boots. “I don’t wear boots,” she told a committee of state senators last week. “I am going to be Maria Vullo.” The state’s senators approved Vullo Wednesday as the superintendent of New York’s Department of Financial Services, a year after the exit of the last permanent superintendent. The job gives Vullo, a 52-year-old lawyer from Brooklyn, oversight of banks and insurers that operate in the U.S. though a New York state charter — a group that includes Goldman Sachs Group Inc., Barclays Plc, BNP Paribas SA, Deutsche Bank AG and Societe Generale SA. That predecessor, of course, was Benjamin Lawsky, a hard-charging enforcer who brought landmark sanctions and benchmark-manipulation cases against international banks chartered in the state, at times breaking from the pack of authorities in the U.S. and Europe to reach his own settlements. Lawsky ultimately levied nearly $6 billion in fines and penalties against big banks, leaving many financial firms grumbling about the need for a less aggressive regulator. Vullo has made few waves since taking over as acting superintendent in February. But with Wednesday’s confirmation behind her, she’ll now have more leeway to act on her own. A seasoned litigator with some enforcement experience, her hallmark cases have been in defense of individual victims, not in pursuit of big institutions. While she promises to keep DFS’s profile high, she also vows to be balanced. So far, at least, the Sheriff of Wall Street is keeping her pistols holstered. Vullo’s resume includes some financial enforcement cases brought during her year overseeing the Economic Justice Division under then-state attorney general Andrew Cuomo, now New York’s governor. Most recently, she was at Paul, Weiss, Rifkind, Wharton and Garrison LLP, where she handled pro-bono litigation focused on the rights and safety of women, including victims of rape in Bosnia.
Disney CEO Bob Iger may be having the most stressful week in the history of CEOs
On Tuesday night, an alligator attacked and killed 2-year-old Lane Graves at a lagoon at a Disney hotel near Orlando. The frantic search that followed dominated news coverage on Wednesday, including an afternoon press conference that revealed that the boy’s body had been found. “As a parent and a grandparent, my heart goes out to the Graves family during this time of devastating loss,” Disney (DIS) Chairman and CEO Bob Iger said in a statement Wednesday. “My thoughts and prayers are with them, and I know everyone at Disney joins me in offering our deepest sympathies.” For Iger, this horrible tragedy is just one of many incredibly stressful matters that seem to be hitting him and his company all at once. The alligator attack came just days after the worst mass shooting in US history, which also took place in the town of the company’s flagship theme park. For many American families, Orlando was almost synonymous to Disney World, a safe and fun place to vacation with your kids. Now, Orlando will also be remembered as home to the tragic shooting at Pulse nightclub, which left 49 dead and 53 wounded. Reports also showed that the shooter scouted a Disney shopping complex in the week before the attack. And that event came just days after the killing of former Voice contestant Christina Grimmie, who was also shot in Orlando. Internally, Disney has already been facing many challenges. More:
Citizens for Responsibility and Ethics in Washington (CREW) filed IRS complaints against 10 “social welfare” groups today for violating their non-profit status by acting as political organizations or for significantly underreporting their political activity. CREW also filed criminal complaints with the Department of Justice against six of the organizations, calling on the FBI and DOJ to investigate whether they lied to the IRS about their political activity. 501(c)(4) social welfare groups are allowed to make political expenditures as long as political activity is not the primary focus of the group and they disclose all political spending to the IRS. These groups failed to meet those simple standards. “The disastrous Citizens United decision opened up the floodgates for dark money groups to spend on politics,” CREW Executive Director Noah Bookbinder said. “But there are still some limits to the amount of spending and secrecy these groups are permitted—and too many brazenly ignore these modest limits.”
American Dream Initiative (based in Virginia but active in Texas), the DC based Arizona Future Fund, Jobs and Progress Fund (organized in Ohio but spending in Georgia), Michigan Citizens for Fiscal Responsibility, Ohio’s Mid America Fund (which spent in Rhode Island and Illinois) and the Rule of Law Project (organized in Virginia but active in Wisconsin) all spent hundreds of thousands of dollars on politics in the 2014 election that they hid from the IRS, leading to CREW’s criminal and IRS complaints. Ohio’s Freedom Vote and Moving Ohio Forward, Oklahomans for a Conservative Future and the Iowa based but Nebraska and Arizona spending Legacy Foundation Action Fund all impermissibly spent more than 60% of their spending on political activity—as did many of the groups included in the criminal complaint, leading to today’s IRS complaints. “These groups have demonstrated a clear disregard for the law,” Bookbinder said. “If the government does not act, it will send a signal to dark money groups that no laws or limits apply to them and it is open season for secret money in our elections.” See groups in complaint:
Donald Trump Accused of Using His Charity as a Political Slush Fund
The Trump Foundation, Donald Trump’s nonprofit organization, is under fire for allegedly operating as more of a political slush fund than a charity. The foundation is accused of violating rules prohibiting it from engaging in politics—prompting ethics watchdogs to call for public investigations. On numerous occasions this year, Trump’s campaign work and his foundation work have overlapped—putting himself at risk for penalties and his charity at risk of being shut down. It’s the latest example of Trump courting controversy: not merely through inflammatory rhetoric, but also through private dealings that raise serious legal questions—all of which indicate how he might govern if elected president of the United States. Trump is listed as the president of the foundation in the charity’s annual disclosures, and his children Donald Trump Jr., Eric Trump, and Ivanka Trump are all listed as directors. Foundations like theirs are exempt from paying taxes, and as such are barred from engaging in political causes. “A 501(c)(3) [nonprofit organization], like the Trump Foundation, is strictly prohibited from engaging in political activity. On its tax forms, the Foundation told the IRS that it does not,” said Jordan Libowitz, a spokesman for Citizens for Responsibility and Ethics in Washington (CREW). When the presumptive GOP nominee doled out money to veterans’ groups over the past few months, he did so using the Trump Foundation—which, according to FEC rules, is not allowed. The Trump Foundation, Donald Trump’s nonprofit organization, is under fire for allegedly operating as more of a political slush fund than a charity. The foundation is accused of violating rules prohibiting it from engaging in politics—prompting ethics watchdogs to call for public investigations. On numerous occasions this year, Trump’s campaign work and his foundation work have overlapped—putting himself at risk for penalties and his charity at risk of being shut down. It’s the latest example of Trump courting controversy: not merely through inflammatory rhetoric, but also through private dealings that raise serious legal questions—all of which indicate how he might govern if elected president of the United States. More:
The Hubbard Verdict: Some Initial Thoughts on What Businesses Need to Know by Maynard Cooper
On Friday, June 10 at 8:30 pm, a jury in Lee County, Alabama returned its verdict in the three-week long trial of House Speaker Mike Hubbard (R–Auburn). The Speaker had been indicted in October of 2014 on 23 counts—each alleging a violation of the Alabama Ethics Law (“the Act”). The Speaker and his legal team will no doubt appeal the jury’s verdict. However, until there is a final pronouncement by an appellate court, businesses, associations, and individuals that interact with any of the more than 300,000 public officials and public employees in Alabama should be aware of—and cautious about—several key points. Given the interpretation of the Act by the prosecution, the judge, and the jury, many businesses and individuals may want to consider modifying their behavior in order to avoid possible criminal liability. The points below are subject to change and may evolve as the verdict is analyzed in depth. For now, though, here are five important areas of concern:
YELLEN SAYS GLOBAL UNCERTAINTY ‘LOOMS LARGE’ — The U.K.’s June 23 vote on whether to stay in the European Union weighed heavily on the Federal Reserve when it made its decision not to raise rates Wednesday, POLITICO’s Jon Prior reports.
“Clearly, this is a very important decision for the U.K. and Europe,” Fed Chair Janet Yellen said after the central bank’s policy-setting committee voted. The vote in Britain “could have consequences” in global financial markets, she said.
“It could have consequences in turn for the U.S. economic outlook that could be a factor in deciding the appropriate path for policy,” Yellen added.
Following their meetings this week, Fed officials indicated they would move at a slower pace when tightening their easy-money policies. While officials eyed a slowdown in the U.S. economy when making their decision, there is clearly some concern about uncertainty abroad as well.
“International uncertainty looms large here,” Yellen said.
DRIVING THE DAY — Treasury Secretary Jack Lew speaks on the U.S.-China economic relationship at the American Enterprise Institute in Washington at 8:30 a.m. … House Financial Services Committee completes its markup of capital-formation bills at 10 a.m. … Jubilee USA holds a Hill briefing on the Puerto Rico debt-relief bill at 1:30 p.m. (Rep. Sean Duffy (R-Wis.) and Rep. Pedro Pierluisi, Puerto Rico’s nonvoting delegate, were expected to join Rev. Enrique Camacho and Jubilee Executive Director Eric LeCompte.)
REACTIONS TO ‘CAUTIOUS APPROACH’ FROM THE FED — Bank of Tokyo-Mitsubishi’s Chris Rupkey:
The Fed’s decision “was not unexpected. What was unexpected is that they reduced their forecasts for how quickly they could raise rates over the coming years. And we do mean years. … This pronounced slowdown in the pace of rates normalization has profound implications for fixed income assets. … It looks like the two-month slowdown in payroll jobs has really gotten under their skin. Given them goosebumps such that even the hawks have stopped dissenting for more. The markets are right to ask: ‘What does the Fed see that you don’t see?’ They see a world of increasing risk, make no mistake about it. They are more worried than their words can say. Bet on it.”
Fitch’s chief economist Brian Coulton:
“The Fed doesn’t seem overly concerned about the recent labor market data. There is no change in their 2016 unemployment forecast and 2016 GDP growth has only been shaved down marginally.
“It’s clearly premature to conclude firmly that the weakness in GDP in Q1 has been reversed. So the hurdle for a June rate rise set out in the last minutes had not been cleared. But with the Fed’s near-term inflation forecasts pushed up a little, we still see them hiking in September and December.”
Pantheon Macroeconomics’ Ian Shepherdson:
“In one line: Convictions crumble, again.
“The Fed left rates on hold on a unanimous vote. The dotplot shows a median of two hikes this year, unchanged from March, but next year’s median has dipped to three hikes from four.”
IG TO FANNIE MAE: TONE IT DOWN — In a report released this morning, the Federal Housing Finance Agency’s inspector general found, through an anonymous tip, that Fannie Mae, which is still in conservatorship, will outrun its new headquarters plan budget by $36 million. Part of the rise in cost comes from three glass walkways, to be underwritten by Fannie, that were not included in the original plan for the D.C. site. They cost about $15 million, and seem to have the IG mystified because Fannie “is only a tenant in this commercial space.”
“Documents and other information uncovered by OIG appeared to indicate that certain features of the Midtown Center might be inappropriate for the headquarters of a government-sponsored enterprise in a federal conservatorship and that Fannie Mae planned to underwrite the cost of some of those features.” The information came from a tip to the IG’s hotline.
JOURNALISTIC NAVEL-GAZING ALERT — Fannie’s new headquarters may be the final (albeit symbolic) indignity inflicted on journalism by the indirect economic effects of the housing crisis. The new HQ, set to open next year, will be on the old site of TheWashington Post, where stories about the Watergate scandal and other Pulitzer-Prize-winning work were reported and edited. The Post abandoned the building on 15th Street downtown in December for its new K Street digs.
HENSARLING TIES BOEING, EX-IM BANK TO IRAN — In the latest chapter in the feud between Rep. Jeb Hensarling (R-Texas) and Boeing over Hensarling’s attempt to end the Export-Import Bank, Hensarling issued a statement Wednesday calling Boeing’s multibillion-dollar deal to sell aircraft to Iran, “a perfect example of why taxpayers should not be forced to back the Export-Import Bank.”
“Even as Boeing was lobbying last year for more Export-Import Bank subsidies, it was also pushing the Obama Administration for a carve-out to sell more planes to Iran,” the House Financial Services Committee chair said in the statement. “Sadly, the administration was eager to help on both fronts — and Tehran could not be happier.”
FLESHING OUT DODD-FRANK ALTERNATIVE — We have more for you from Hensarling, and it comes in the form of a detailed summary of his proposed alternative to the 2010 law; the House Financial Services Committee has been circulating it to industry stakeholders. POLITICO’s Zach Warmbrodt reports: “The 18-page document, obtained by POLITICO, provides more details than the executive summary and speech that Hensarling used to outline the proposal last week. The summary goes into more specificity about the capital requirements banks would be required to accept to win exemptions from certain regulations enacted after the 2008 financial crisis.
“In addition, the document has proposals that Hensarling did not provide in last week’s summary, including provisions that would allow states and tribes to request 5-year waivers from the Consumer Financial Protection Bureau’s payday-lending rules, the year-by-year funding schedule for the Securities and Exchange Commission through fiscal 2021, an overhaul of the ‘living will’ process, and a $500,000 increase in potential penalties assessed under the Financial Institutions Reform, Recovery and Enforcement Act.”
IRS COMMISSIONER CENSURE MEASURE APPROVED BY COMMITTEE — The House Oversight and Government Reform Committee voted Wednesday to censure Internal Revenue Service Commissioner John Koskinen. The move is over accusations that he obstructed a Congressional investigation into the IRS’s alleged targeting of conservative political organizations.
“Censure, which would not require Senate action, is widely seen as an off-ramp for (Chairman Jason) Chaffetz and conservatives who want Koskinen’s head. Full impeachment is a long shot even in the House, where many rank-and-file Republicans are leery of the idea, and the Senate would need a two-thirds vote to convict,” writes POLITICO’s Katy O’Donnell.
The resolution seeks to strip Koskinen of his government pension, but there’s doubt as to whether Congress take any step short of impeachment to accomplish that for constitutional reasons.
TODAY IN ALTERNATIVE CURRENCY NEWS — The Bank of Tokyo-Mitsubishi announced a pilot program for its own digital currency using a blockchain system similar to Bitcoin’s.
Meanwhile, the Depository Trust and Clearing Corp. will host a Capitol Hill briefing on blockchain — the distributed ledger that Bitcoin runs off of — on Monday. Featured speakers include DTCC’s Jennifer Peve, Digital Asset Holdings’ Chris Church, and the Deputy Director of the SEC’s Trading & Markets Division Gary Goldsholle.
MORE #FINTECH — On Wednesday the House Financial Services Committee marked up a bill from Rep. Patrick McHenry (R-N.C.) that would raise the maximum offering allowed under the SEC’s equity crowdfunding, from $1 million to $5 million. The bill, along with other capital formation legislation, will receive a committee vote Thursday morning.
HAPPY TRAILS — POLITICO bids adieu to Pro Financial Services’ Jon Prior, who will take over the finance beat for the Dallas Business Journal. He’ll be missed by his colleagues here, and not just for his stellar housing and consumer-finance reporting.
Early condolences on the upcoming Cowboys’ season, Jon.
Obama Administration No Longer Pursuing Executive Order To Shut Down Guantanamo: Report
The Obama administration is not pursuing the use of an executive order to shutter the Guantanamo Bay military prison after officials concluded that it would not be a viable strategy, sources familiar with the deliberations said. The conclusion, reached by administration officials, narrows the already slim chances that President Barack Obama can fulfill his pledge to close the notorious offshore prison before leaving office in January. The White House has said repeatedly that Obama has not ruled out any options on the Guantanamo center, which has been used to house terrorism suspects since it was set up in 2001 following the Sept. 11 attacks on New York and Washington. Obama is eager to fulfill his 2008 campaign pledge to close the prison and could still choose to use his commander-in-chief powers, but the option is not being actively pursued, the sources said. Without executive action, the chances of closing the prison would hinge on convincing a resistant Congress to overturn a long-standing ban on bringing possibly dozens of remaining prisoners to maximum-security prisons in the United States. White House lawyers and other officials studied the option of overriding the ban but did not develop a strong legal position or an effective political sales pitch in an election year, a source familiar with the discussions said. “It was just deemed too difficult to get through all of the hurdles that they would need to get through, and the level of support they were likely to receive on it was thought to be too low to generate such controversy, particularly at a sensitive (time) in an election cycle,” the source said. Republicans in Congress are opposed to bringing Guantanamo detainees to U.S. prisons and have expressed opposition to transfers to other countries over concern that released prisoners will return to militant activities. They have vowed to challenge any potential Obama executive action in court. At its peak, the prison at the U.S. naval base in Cuba housed nearly 800 prisoners, becoming a symbol of the excesses of the “war on terror” and synonymous with criticism of detention without trial and accusations of torture. Obama has called it a recruitment tool for terrorists. More:
Nervous Baltics on war footing as NATO tries to deter Russia
Leaders in the Baltic countries and Poland fear the force NATO plans to deploy on their territory is too small and symbolic to deter an attack by Russia, whose 2014 annexation of Crimea is fresh in the memories of the former Soviet-bloc states. They will this week press other ministers of the western military alliance to help them build an air defense system against Russian aircraft and missiles. But that would be a highly sensitive step, likely to be condemned by Moscow as yet more evidence of a NATO strategy threatening its borders. Asked about the likelihood of Russian aggression in the Baltics, Lithuania’s Defense Minister Juozas Olekas told Reuters: “We cannot exclude it … They might exercise on the borders and then switch to invasion in hours.” Lithuania, Latvia and Estonia see themselves on the front line in any potential conflict with Moscow and say they are putting their armies on a war footing, meaning they can be mobilized almost immediately. NATO defense ministers are set to agree this week on a new multinational force of 4,000 troops for the Baltics and Poland. The United States, Germany and Britain are set to lead battalions of about 1,000 troops each. Canada may lead a fourth. While the Baltic nations welcome the deployments, they say the build-up must go further – pointing to Russia’s efforts to develop an “anti-access” capability in the Kaliningrad exclave bordering Lithuania and Poland, using missiles and submarines to stop NATO moving reinforcements into the Baltics. The Baltics want NATO fighters to protect their skies and are seeking medium-range missile interceptors from Norway’s Kongsberg Gruppen (KOG.OL) and U.S. defense contractor Raytheon (RTN.N). “We need to stop possible air aggression,” said Olekas. “We are discussing creating a regional medium-range air defense system together with the Latvians, the Estonians and the Poles.” Olekas expects to raise the matter with NATO colleagues at the ministers’ meeting on Tuesday and Wednesday in Brussels. More:
Libyan Fund Claims Goldman Sachs Exploited Its Financial Naïveté
LONDON — After years of international isolation under the rule of Col. Muammar el-Qaddafi, Libya sought to emulate its Middle Eastern neighbors by creating a sovereign wealth fund in 2006 to invest the proceeds from its sale of oil. The North African nation soon turned to Goldman Sachs to help it invest some of the more than $35 billion in funds it had available in late 2007. That relationship soured after the Libyan Investment Authority said it was misled by the Wall Street bank in 2008 about a series of derivatives transactions and ultimately lost $1.2 billion when those contracts came to maturity in 2011. Goldman Sachs, by comparison, earned more than $200 million in “eye-watering” profit on the transactions, the sovereign fund asserted in a trial that began on Monday in London. The Libyan Investment Authority, unlike many sovereign wealth funds, said that it was an unsophisticated investor with a staff that had little experience with investment banking and that Goldman Sachs preyed on the naïveté of its staff to persuade the fund to invest in complex transactions that they didn’t understand or desire. On Monday, Roger Masefield, a lawyer for the Libyan Investment Authority, argued that Goldman used training programs; gifts; trips to Dubai, London and Morocco; and an internship for the younger brother of the fund’s deputy executive officer to win favor and convince the fund to engage in the investments. “This is a highly unusual case,” Mr. Masefield said. The trial is being heard in the High Court in London before Justice Vivien Rose and is expected to last about seven weeks. The lawsuit was first filed in London two years ago. Goldman has disputed the claims and says that the Libyan Investment Authority had the financial sophistication to understand the disputed transactions and other similarly complicated transactions it engaged in. The dispute revolves around nine derivatives transactions tied to the stocks of Citigroup, the French utility EDF and other companies. More:
U.K. Moves Closer to Brexit as The Sun Backs ‘Leave’ Vote
Four polls put the “Leave” campaign ahead of “Remain” as The Sun newspaper came out in favor of Britain quitting the European Union, sending stocks and the pound down. Sterling approached a two-month low against the dollar and investors rushed to havens Tuesday after a series of new polls the previous evening put “Leave” ahead with just nine days of campaigning left. The final blow came when The Sun, Britain’s biggest-selling newspaper, backed a so-called Brexit on its front page. Prime Minister David Cameron’s strategy to keep the U.K. in the 28-nation EU is under increasing pressure in the countdown to the June 23 referendum, as the “Leave” campaign’s focus on reducing immigration appears to resonate more with voters than the government’s multiple warnings of economic recession outside the bloc. John Curtice, professor of politics at Strathclyde University in Glasgow and one of Britain’s leading experts on opinion polling and elections, put the likelihood of a Brexit at about 33 percent, up from 25 percent three weeks ago. “This is an issue on which the British public have always demonstrated the potential to vote to leave,” Curtice said in a Bloomberg Television interview Tuesday. Still, Curtice said, the movement in the polls is not large, and often in referendums voters move back to the status quo in the final days of the campaign. “Clearly one of the crucial things between now and June 23 is whether or not the polls do move back towards ‘Remain’ as voters look at the risks of leaving.” The pound dropped 0.7 percent to $1.4169 as of 11:45 a.m. in London after falling as low as $1.4112. Implied volatility for one-month options on the currency climbed to 29.125 percent, more than three times the level at the end of last year. The Stoxx Europe 600 Index was down 1.2 percent. More:
These Super-Rich Syrians Are Waiting to Return If War Ever Ends
The destruction of Syria looks as total as in any civil war of the last century: whole towns have been leveled, road and water links severed, schools and hospitals in ruins, millions of people killed or exiled and the $60 billion economy left for dead. Yet, with the conflict in its sixth year and bombs hitting government-controlled areas that previously were barely touched while airstrikes pound neighborhoods held by rebels, the prospect of rebuilding the country isn’t daunting Syrian real estate investor Waleed Zaabi. If only a peace settlement weren’t so elusive, he said. “Everything is easy once you have stability,” said Zaabi, 51, sipping Arabic coffee at the hotel he owns in Dubai. He described the negotiations taking place in Geneva, in which he’s been involved, as just “a movie.” “Once you start having growth and people start to work, you’re on the right track.” Only the most optimistic diplomats see an imminent end to the war in Syria. But when it happens, the country will need wealthy Syrian emigres to bolster the reconstruction effort and jump-start the economy before foreign businesses consider any investment. With close to $200 billion estimated to restore the economy to its prewar size, the rewards could be huge, though so could the potential losses. Several names come up as possibly playing a role in shaping the country, financially and even politically. Zaabi, a member of the High Negotiations Committee meeting with the United Nations and opposed to President Bashar al-Assad, is among them. There’s also Ayman Asfari, 57, the chief executive officer of London-based oil services group Petrofac Ltd., and Vienna-based paper-manufacturing magnate Nabil Kuzbari, 79. Asfari has been an outspoken critic of Assad while Kuzbari once had business ties to the ruling family. Asfari declined requests for an interview, while Kuzbari said he stands ready to invest in the “humanitarian aspect” of rebuilding Syria. “Those investors would lend a tremendous amount of legitimacy to the reconstruction process,” said Samer Abboud, associate professor of history and political studies at Arcadia University near Philadelphia. “There are lots of opportunities. Certainly there’s money to be made.” Their wealth and potential influence draw comparisons to the late billionaire prime minister of Lebanon, Rafiq Hariri, who drove the rebuilding of Beirut and the rest of the country after the 15-year civil war ended in 1990. While Syria is complicated by the interests of Iran and Russia on Assad’s side and the Saudis and U.S. on the other, there are similarities at least with the task ahead. More:
There may be no more fertile ground for obtaining damaging information in an investigation than from a lawyer about a client. People tend to be more open with their lawyers, or perhaps worse, try to lie to them to use legal advice to keep from getting caught. The issue about how far prosecutors can go in requiring a lawyer to testify against a client was on display last week in two cases that show how tempting it can be to get evidence from lawyers in white-collar crime investigations. The New York Times described how two lawyers were called to produce documents and testify before a federal grand jury investigating their client, Morris E. Zukerman, for tax evasion. They represented him in filing a “tax protest letter” with the Internal Revenue Service, appealing a determination made in an audit that he failed to report income from the sale of an oil company. The lawyers were required to disclose information about their interactions with Mr. Zukerman because the communications were no longer protected by the attorney-client privilege under a doctrine known as the crime-fraud exception. If the government can show a client sought a lawyer’s advice to engage in a current or future crime or fraud, then the protections normally afforded to those communications fall by the wayside. The Federal District Court in Manhattan concluded that Mr. Zukerman used his lawyers to mislead the I.R.S. An appeals court upheld that decision last October in a terse order that is typical in such cases. The appeals court provided few details about the case, with nothing identifying Mr. Zukerman or his lawyers, because the investigation may not develop into a prosecution, so anonymity must be maintained. The Justice Department did later file charges that gave a more detailed description of how Mr. Zukerman used his lawyers to try to dupe the I.R.S. According to the indictment, he lied to the lawyers about the existence of documentation for the oil company transaction, which they in turn described in their filing with the I.R.S. A letter from federal prosecutors to the court indicates that Mr. Zukerman intends to plead guilty in the case, and he agreed in a hearing to continued representation by the two lawyers despite the fact that the lawyers were called to testify, creating the potential for a conflict of interest. Because the case is likely to end with a plea bargain, the court allowed the lawyers to represent him. More:
The brokerage industry’s overseer, the Financial Industry Regulatory Authority, on Monday named a former markets regulator, Robert W. Cook, as its president and chief executive officer. Mr. Cook had been a partner in the Washington offices of the law firm Cleary Gottlieb Steen & Hamilton since 2013. Before that, he was director of the Securities and Exchange Commission’s division of trading and markets, where he oversaw the staff’s review and analysis of the “flash crash” in May 2010. He also oversaw the carrying out of new rules for Wall Street arising from the 2010 Dodd-Frank financial regulation overhaul and the 2012 JOBS Act. He had been at Cleary Gottlieb for 18 years before joining the S.E.C. in 2010. Finra is splitting the roles of chairman and chief executive now that Richard Ketchum is scheduled to retire later this year. Mr. Ketchum has held both titles since 2009, and he announced last fall his intention to retire in the second half of 2016. The regulator said in a statement on Monday that its board, which is led by the former Vanguard Group chief, Jack Brennan, would name a new chairman in the coming months. As a lawyer at Cleary Gottlieb, Mr. Cook focused on the regulation of the securities markets as well as broker-dealers, exchanges, alternative trading systems and clearing firms. He will join Finra as the agency is in the middle of a review of cultural values in the brokerage industry, asking more than a dozen brokerage firms earlier this year to answer questions about their own practices, including how executives identify rogue employees whose actions contradict company policy. Finra said the appointment would take effect in the second half of 2016.
Survey: Android Pay tops in small U.S. market for mobile payments
Android Pay is the most popular proximity mobile payments system in the U.S., according to fresh data from Walker Sands Communications. But the high-tech space remains a very small sliver of the overall payments market. Walker Sands, which specializes in media services for technology companies, surveyed more than 1,400 U.S. consumers and found that 36 percent reported using a mobile payment app in a store in the past year, up slightly from 34 percent in last year’s study. Android Pay was the top mobile payments app, with 19 percent of respondents saying they had used Google’s (NASDAQ: GOOG) offering, followed by a retailer’s branded mobile app (with 12 percent) and Apple (NASDAQ: AAPL) Pay (11 percent). And precious few respondents said mobile was their preferred payment method for specific use cases. Only 1 percent of those surveyed said they prefer to use mobile to pay at the retail counter; the same percentage said they prefer to use mobile payments at a bar, restaurant or grocery store. Household bills were the most popular payment method for mobile, with 6 percent saying they like to use their phones for such transactions. Sixty-one percent of consumers cited security concerns as the primary factor they’re hesitant to use mobile payments, and 58 percent of users said privacy was a major reason. Only 14 percent of those polled said they had no hesitations about using mobile payments offerings. Predictably, millennials were the most likely age group to report using any payment app, with 64 percent of 18- to 25-year-olds making a mobile purchase in the last year. Those younger users will be crucial if mobile payments are ever to gain real traction and become a mainstream alternative to cash and credit cards. “For now… consumers remain hesitant to give up the payments methods they’ve been using for years to embrace unproven technology,” according to the Walker Sands report. “Led by millennials, however, mobile payments are rising in popularity for POS and P2P payments. Because many of these younger consumers are more likely to blame retailers for the slow adoption rate, it’s important for companies to accept as many payment forms as possible.”
This Guy Just Made $1 Billion Off LINKEDIN’S Sale To Microsoft
Whether Microsoft’s $26.2 billion bet on LinkedIn will pay off will take months, perhaps years, to determine. But it has already delivered for LinkedIn co-founder Reid Hoffman. Hoffman added nearly $1 billion to his fortune on Monday after news of the acquisition broke, according to Bloomberg’s Billionaire Index, as the company’s stock leaped around 50 percent within the morning. Bloomberg puts his net worth at $3.8 billion, up nearly 60 percent since early February. This may be chump change for a Mark Zuckerberg or a Jeff Bezos, who this year have bothearned in one day more than what Hoffman has amassed in his entire life. But nine zeros in a few hours is still nine zeros in a few hours, and increasing one’s net worth by a third in a single day is still something both Zuckerberg and Bezos have yet to do (it would make them both close to being the richest men in the universe). What will Hoffman buy with his fortune-ier fortune? Perhaps he will finally bring his Silicon Valley spin on the Settlers of Catan, called Startups of Silicon Valley, to the masses. It’s a game in which men can make $1 billion in a day and still be dwarfed by competitors. Imagine that!
Director Provides Update on Orlando Shootings Investigation
FBI Director James B. Comey said today that the FBI is working non-stop to understand what led a man to commit a mass shooting in Orlando, Florida that left 49 people dead and dozens more injured. In a televised news briefing at FBI Headquarters, Comey said FBI investigators—working closely with state and local law enforcement agencies—are trying to understand “every moment of the killer’s path” leading up to the shooting early Sunday morning at a popular nightclub. Comey said the shooter, who was killed in a gunfight with police responders, made three 911 phone calls from the club during the attack, beginning at about 2:30 a.m. In the calls, he claimed allegiance to the leader of the so-called Islamic State (ISIL) as well as the perpetrators of the 2013 Boston Marathon attack and a Florida man who died as a suicide bomber in Syria for a terrorist group in conflict with ISIL. “There are strong indications of radicalization by this killer and of potential inspiration by foreign terrorism organizations,” Comey said, adding that the FBI is the lead investigative agency on this case because it is a terrorism investigation.
Director Comey also described the FBI’s prior contacts with the killer, beginning in May 2013. The FBI opened an investigation when the shooter, then working as a contract security guard, made some inflammatory comments to co-workers and claimed a family connection to Al Qaeda. The shooter was interviewed twice during the preliminary investigation, where he admitted making the statements but said he had done so in anger at his co-workers, who he believed were discriminating against him. The case was closed after 10 months. Two months later, the shooter’s name surfaced as a casual acquaintance of the Florida man who blew himself up in Syria for the terrorist group al Nusra Front. “Our investigation turned up no ties of any consequence between the two of them,” Comey said. “We will continue to look forward in this investigation, and backward. We will leave no stone unturned.” Comey said the Bureau is reviewing those cases to see if anything was missed. “We’re also going to look hard at our own work to see whether there is something we should have done differently. So far, the honest answer is: I don’t think so. I don’t see anything in reviewing our own work that our agents should have done differently.”
The Director, who was joined at the press briefing by Deputy Attorney General Sally Yates, expressed sorrow for the victims and their families. “Our hearts are broken and ache for the people who are lost in Orlando, those wounded, and their families,” he said. Comey also thanked first responders for their heroic work. “They showed professionalism and extraordinary bravery that saved lives,” he said. “We are very lucky that such good people choose lives of service in law enforcement.”
Study Calls Snub of Obama’s Supreme Court Pick Unprecedented
WASHINGTON — How unusual is the Republican blockade of the nomination of Judge Merrick B. Garland, President Obama’s pick for the Supreme Court? After a comprehensive look at every past Supreme Court vacancy, two law professors have concluded that it is an unprecedented development.
Senate Republicans say they will not consider any nominee offered by Mr. Obama to replace Justice Antonin Scalia, who died in February. The power to appoint Justice Scalia’s successor, they say, should belong to the next president. That categorical stance is new in the nation’s history, the professors, Robin Bradley Kar and Jason Mazzone, wrote in a study published online by The New York University Law Review. The Senate has never before transferred a president’s appointment power in comparable circumstances to an unknown successor, they said — an argument that many Democratic lawmakers have also made. In every one of the 103 earlier Supreme Court vacancies, the professors wrote, the president was able to both nominate and appoint a replacement with the Senate’s advice and consent. This did not always happen on the first try, they wrote, but it always happened. “There really is something unique about the position Republican senators are taking with respect to the Scalia vacancy,” said Professor Mazzone, who teaches at the University of Illinois. “You really cannot find any single comparable case,” he said. “We really did not find any precedent for the idea, notwithstanding the Senate’s very broad powers in this area, that a sitting president could be denied outright the authority to offer up a nominee who would receive evaluation through normal Senate processes.” The study was the subject of a thorough critique by Edward Whelan, a prominent conservative legal blogger, who said Professors Kar and Mazzone had to perform semantic gymnastics to discern a consistent historical practice. The study considered only nominations to the Supreme Court, though the Senate must also confirm other federal judges and senior executive branch officials. “It is nonsensical to read into the Constitution one rule governing Supreme Court justices and another rule for everyone else,” Mr. Whelan wrote in a series of posts on National Review’s Bench Memos blog. The professors also excluded nominations from three presidents who gained office by succession rather than election, saying that the constitutional status of unelected presidents was contested until the adoption of the 25th Amendment in 1967. In addition, they excluded three presidents who started the nomination process after their successors had already been elected. More:
Washington Post Is Latest News Outlet Barred by Trump
Donald J. Trump on Monday said his campaign would revoke the press credentials of The Washington Post, effectively prohibiting journalists from one of the nation’s largest newspapers from joining the traveling press corps of the presumptive Republican nominee. Barring journalists is an almost unheard-of practice for a modern presidential candidate. The Post is the latest major news organization that Mr. Trump has barred from his rallies and events this year, following Politico, BuzzFeed News, The Huffington Post and others. In a Facebook post on Monday, Mr. Trump accused The Post of “incredibly inaccurate coverage and reporting” and deemed it “phony and dishonest,” although he has granted frequent interviews to the paper’s editors and reporters in the past. It was not immediately clear if Mr. Trump’s announcement meant he would end all his communications with Post journalists. Mr. Trump has a propensity to attack the news media, but he is also a keen cultivator of journalists, and he has been known to criticize reporters, then meet with them cordially shortly afterward. Combined with Mr. Trump’s promise to “open up” the nation’s libel laws, his punitive attitude toward the press has prompted concern among media and free-speech advocates. Martin Baron, the executive editor of The Post, issued a statement on Monday calling Mr. Trump’s action “nothing less than a repudiation of the role of a free and independent press.” “When coverage doesn’t correspond to what the candidate wants it to be, then a news organization is banished,” Mr. Baron wrote, referring to Mr. Trump’s practice. “The Post will continue to cover Donald Trump as it has all along — honorably, honestly, accurately, energetically and unflinchingly.” Mr. Trump’s pique stemmed from a Post headline on Monday that suggested that the Republican candidate had linked President Obama to the Orlando, Fla., shooting massacre. The article, published on Monday, cited vague but insinuating comments made by Mr. Trump in a Fox News interview, in which he said Mr. Obama’s response to the shooting meant “he doesn’t get it or he gets it better than anybody understands.” More:
How do you hedge against a Donald Trump presidency? It’s a question Wall Street traders are increasingly asking.
Citigroup Inc. and Barclays Plc say they have figured out at least one part of the answer: Short the Mexican peso. For any number of reasons, the currency would fall and fall quickly following a Trump victory in November, analysts at the banks say. From seizing remittances to pay for a wall on the U.S.’s southern border to renegotiating the North American Free Trade Agreement to stepping up deportations, the presumptive Republican candidate’s proposals would hit Mexico’s economy hard if enacted and curb the steady flow of money into the country that supports the peso’s value. Even some of Trump’s policy flirtations that are wholly unrelated to Mexico — such as restructuring U.S. debt if needed and re-examining trade with China — would hit the peso because of the Latin American nation’s close ties to its northern neighbor and the way traders use the currency as a proxy for global risk. “The only thing you are certain of is that if Trump wins, the Mexican peso will be weaker,” said Dirk Willer, a strategist at Citigroup in New York. Five months before Americans go to the polls, there are nascent signs that Trump’s ascent may already be hitting the peso. Since Ted Cruz dropped out of the race in early May, giving Trump a virtual lock on the Republican Party’s nomination, the peso is the worst performing currency in emerging markets. Expectations for swings in the peso, as measured by a gauge called implied volatility, have surged while large speculators boost their wagers in the futures market on further declines. More:
Trump was accused of destroying email evidence in lawsuit 10 years ago
In 2006, when a judge ordered Donald Trump’s casino operation to hand over several years’ worth of emails, the answer surprised him: The Trump Organization routinely erased emails and had no records from 1996 to 2001. The defendants in a case that Trump brought said this amounted to destruction of evidence, a charge never resolved. At that time, a Trump IT director testified that until 2001, executives in Trump Tower relied on personal email accounts using dial-up Internet services, despite the fact that Trump had launched a high-speed Internet provider in 1998 and announced he would wire his whole building with it. Another said Trump had no routine process for preserving emails before 2005.
Judge Jeffrey Streitfeld was stunned. “He has a house up in Palm Beach County listed for $125 million, but he doesn’t keep emails. That’s a tough one,” he said, according to transcripts obtained by USA TODAY. “If somebody starts to put forth as a fact something that doesn’t make any sense to me and causes me to have a concern about their credibility in the discovery process, that’s not a good direction to go, and I am really having a hard time with this.” Now, a decade later, Trump regularly hammers Hillary Clinton, the presumptive Democratic presidential nominee, for using her own email server while she was secretary of State and deleting emails from that server that she deemed to be private. In a war of tweets with Clinton a week ago, Trump wrote, “And where are your 33,000 emails that you deleted?” On the CBS News program Face the Nation earlier this month, Trump said, “What she did is a criminal situation. She wasn’t supposed to do that with the server and the emails.”
John Oliver explains the big 401(k) scam: Fees are eating up your retirement “like termites”
“Last Week Tonight” host John Oliver last night devoted his investigatory main segment to retirement plans. “If you are lucky, your job offers a 401(k) retirement plan,” Oliver said. “And if it does, you should probably take advantage of it. But you should also know they can be a goldmine for financial service companies.” Oliver explained that financial services companies charge various fees (e.g. stewardship, bookkeeping, finders’) that compound and “really mount up.” “Compound interest works both way, meaning, while your money adds up, your fees can really add up too,” he continued. “So think of fees like termites: they’re tiny, they’re barely noticeable, and they can eat away your f*ing future.” Watch the full segment below:
Here’s What Happens To All Those Coins Tossed Into Fountains
Besides bringing wishes to fruition (obviously), have you ever wondered what happens to the coins that are tossed into fountains? While it seems an unlucky move for the person charged with removing the cash, coins can clog a fountain’s filtration system and need to be cleared out on a regular basis.
Here’s how a few different places around the world clear their fountains of coins and what they do with the money: New York City: In New York City, according to The Atlantic, “entrepreneurial New Yorkers” are responsible for scooping out many of the coins tossed into fountains there. Parks staff is responsible for clearing out the remaining coins every few weeks, and the money collected often goes toward maintaining the fountain’s upkeep. Rome: The Trevi Fountain, in Rome, is a famous coin collector. Tourists are supposed to toss a coin over their shoulder into the fountain in order to ensure they return one day. Officials pull as much as $4,000 a day in coins from the Trevi Fountain, and the majority of it goes to a supermarket for the needy, according to the BBC. Mall of America: Mall of America in Bloomington, Minn., collects about $24,000 a year from its fountains and ponds. Nonprofits can submit applications to receive a cut of the funds collected. Walt Disney World: The thousands of dollars in coins that are collected from fountains and waterways around Disney World go to support foster children living in Florida. Now there’s a cause worth tossing a coin for.
MONTGOMERY—When asked if there would be more indictments, Acting Attorney General W. Van Davis said, “No Comment.” That statement should strike fear in the heart of anyone named in the counts on which Mike Hubbard was found guilty. Hubbard was found guilty on seven counts of receiving a thing of value from a lobbyist or a principal under Section 36-25-5.1 (a) which forbids “[a] public employee or public official or family member of the public employee or family member of the public official shall solicit or receive a thing of value from a lobbyist, subordinate of a lobbyist, or principal.” The same section of code also makes it illegal for a lobbyist or principal to give a thing of value to lawmaker. “No lobbyist, subordinate of a lobbyist, or principal shall offer or provide a thing of value to a public employee or public official or to a family member of the public employee or family member of the public official.” This places Tim Hamrick, Chief Executive Officer of American Pharmacy Cooperative Inc., Edgenuity’s V.P. Michael Humphrey, Will Brooke, Rob Burton, Jimmy Rane, and James Holbrook squarely into the crosshairs of the law. Lead Prosecutor in the Hubbard case, Matt Hart, made it clear to former State Sen. Steve French during his testimony that he had broken his immunity with the Attorney General’s Office. French violated the “revolving door” act that prohibits lawmakers from lobbying their former legislative branch for two years. Hart also warned that the French immunity agreement kept him free from indictment because of his quid pro quo arrangement with Hubbard. The State claims French asked Hubbard to act favorably toward legislation that was of interest to his Sternes Agee boss, James Holbrooke. It is also alleged that Hubbard asked French to solicit an investment in Craftmaster Printer, which the company did. Others who may be targeted could be APCI lobbyists Bill Ely and Ferrell Patrick. Former State Health Officers and current CEO of the Alabama Hospital Association, Dr. Don Williamson, could also face a perjury charge. Hart accused him of significantly changing his testimony during the Hubbard trial from what he had sworn to before the Lee County Special Grand Jury that indicted Hubbard. The Lee County Special Grand Jury is still empaneled, which would seem to indicate more indictments are coming.
MONTGOMERY—There is a very real possibility, that former Deputy Attorney General, Henry T. “Sonny” Regan, will be indicted, due to his alleged role in trying to hinder the investigation into the crimes of former Speaker of the House, Mike Hubbard. Hubbard has been found guilty of twelve felony counts of public corruption, Reagan has been accused of participating in a scheme to thwart the Attorney General’s Special Prosecution Unit, from ever bringing Hubbard to justice. December 11, 2014, Attorney General issued a memo concerning Reagan saying, “During his employment with this Office, Mr. Reagan forged relationships with persons, outside the Office of Attorney General, who had an interest in undermining the Lee County Special Grand Jury’s investigation. In October, it was alleged that Mr. Reagan had engaged in misconduct related to the Special Grand Jury, and I removed him from his appointed position as a Deputy Attorney General, pending investigation into those matters.” General Strange further stated, “In November, after considering all the evidence, including Mr. Regan’s response, I notified Mr. Reagan that I intended to terminate him from his Merit System position with the Office. On December 2, 2014, I accepted Mr. Reagan’s resignation in lieu of termination.” It was discovered that Reagan had shared an attorney with Rep. Barry Moore, who was charged with perjury (but later acquitted). Both men, at that time, were answering questions before the Lee County Special Grand Jury. Their attorney was Bill Baxley, who would go on to represent Hubbard at his criminal trial. More:
Alabama congressman slammed for defending gun sales to terrorist watch list
U.S. Rep. Robert Aderholt, R-Haleyville, is being slammed on social media for his ties to the NRA and his stance against banning people on the no-fly list from purchasing guns in wake of this weekend’s Orlando nightclub shooting. Aderholt could not immediately be reached for comment, but a spokesman for the congressman said neither his Washington nor district office received complaints over his position. A few weeks ago, Aderholt explained why he was against the proposed ban by President Barack Obama and Democrats — which included in a bill funding the Justice Department –, saying that the list is flawed and includes law-abiding Americans. Omar Mateen, the Orlando gunman, was a U.S. citizen and was being eyed by the FBI but was taken off the no-fly list. “The reality is many people find themselves on the terrorist watch list by mistake. Something as simple as a mix up of a birth date can put someone on the list and the process to remove a name can take months or even years,” Aderholt said, contending that most people who are rightfully on the list are illegally in the county and can’t legally purchase guns anyway. “My fear is that this is an attempt by Democrats to restrict gun sales to law-abiding citizens under the veil of protecting national security,” he added. “Chipping away at our Second Amendment rights is no way to fight the terrorists who mean us real harm.” Aderholt called out Obama and the media for pushing “any type of political agenda relating to gun control.” “Terrorists by their very definition are criminals and will find a way get their hands on guns. What the president is proposing would take guns away from the very people who would defend themselves,” the congressman said in a statement Sunday night. “That said, it is too soon to inject politics into the discussion. The White House and Congress should focus on the task at hand – protecting the homeland.” Aderholt’s position drew national attention after his views were published in a Raw Story article on Monday, which pointed out that the Alabama congressman received a $2,500 contribution from the NRA in 2014. That led some on social media to criticize Aderholt. Below is a sampling of their tweets:
University of Alabama student tests positive for Zika
A University of Alabama student who recently studied abroad has tested positive for Zika virus, according to a spokesman for the school. “Federal privacy laws prevent us from commenting on the student’s condition; however, in the majority of Zika cases, individuals make a full recovery within a week,” wrote University of Alabama spokesman Chris Bryant in an email. The school was notified Friday that the student had tested positive for Zika virus, Bryant wrote. It is the state’s sixth case of Zika virus, and all have been related to travel to affected areas. Students who recently returned or are currently on study abroad programs in Central and South America, Mexico and the Caribbean have been notified, Bryant wrote. “We recommended, as precaution, these students visit the Student Health Center or their healthcare provider to be tested if they are experiencing symptoms,” he wrote. So far, no locally-transmitted cases of Zika virus have been reported in the United States, according to the Centers for Disease Control and Prevention. Out of 691 cases identified in the United States, 11 have been transmitted through sex with infected people, according to the CDC. Most adults infected with Zika virus have mild symptoms or none at all. Symptoms include fever, joint pain, rash and red eyes. Everyone who has symptoms and a history of travel to an affected area should ask to be tested for Zika virus, according to the Alabama Department of Public Health. The spread of Zika has been linked to an increase in severe birth defects that affect the brain and skull, so pregnant women and women who are planning to become pregnant have been advised to take precautions. Officials with the Alabama Department of Public Health recommend that pregnant women postpone travel to Zika-affected areas in Central and South America, Mexico and Puerto Rico. Men who have traveled to those areas should use condoms or avoid sex with pregnant partners. Bryant said students have been directed to public health websites for more information on Zika symptoms and prevention.
“I need lunch money,’ Alabama school stamps on child’s arm
When Jon Bivens’ son came home with a stamp on his hand during the last week of school, Bivens didn’t think much of it. “I thought it was a good job stamp,” he said. Upon another glance, Bivens saw that it wasn’t a good job stamp. There was a smiley face, and under it a note saying, “I need lunch money.”
Bivens’ son attends Gardendale Elementary School and just completed third grade. Typically, Bivens said, he or his wife receives an email when their son’s lunch money account is running low. While he mostly brings his lunch from home, the 8-year-old likes to buy ice cream or other treats from the lunchroom. Bivens said that, on the last week of school, his son had a positive balance in his account. After he bought his ice cream, the child still had a balance of $1.38. “They herd these kids like cattle,” Bivens said. The father said that his son was “branded.” “When you start stamping a message on a child’s body instead of calling…it’s not okay.” Bivens’ son did not return to school for the last few days of the academic year. Gardendale Elementary School Principal Laura Ware said that she was not aware of the incident, but that the lunchroom department uses different methods of alerting parents of their child’s balance. She said those notices include emails, notes, stickers, and stamps. She said that the school first sends emails when a child’s account balance is low or negative. If parents do not respond, she said that lunchroom workers use the stickers, or stamps, like Bivens’ son received. “It’s a form of bullying and shaming the kids,” Bivens said. He said that he had not received an email, and that he wasn’t planning to add more money to the account because there were only a few days left of school. Even if the child had a negative balance and did need money, Bivens thought the stamp was unacceptable. “I don’t care if my son has a -$100 balance… I don’t care. Send me a note home or an email…Where can I draw the line regarding my parental rights?” Ware, who said that her greatest desire as a principal is to communicate with the parents, said, “we want to communicate in a way that our parents are happy with.” “That’s a part of our jobs.” She said that the school would be happy to only send emails and exclude stamps for Bivens’ son, and for any other parent that wishes to do so.
BREXIT RISK RISING — Time to stop ignoring Brexit. Multiple polls now show U.K. voters might vote next week to leave the European Union, setting off a potential market meltdown that could bleed into the United States and impact the 2016 presidential race. Polls now show the “leave” side either winning or coming very close.
The polls, of course, could be wrong. Surveys also tightened ahead of the Scottish independence vote in 2014 and the “no” side won comfortably, 55 percent to 45 percent. Markets are not yet fully buying it. The wagering site “Betfair” still puts the odds of Britain leaving at around 35 percent. The pound is mostly holding up, though volatility is at levels not seen since the financial crisis of 2008.
The thinking behind the disparity between polls and market reaction is that while a significant numbers of voters say they want to leave the EU, when it comes time to actually cast their vote, fear over the potential political and economic impact will cause them to take the safer course. Scores of international political leaders — including President Obama in a visit to Britain — have warned that the U.K. economy will suffer if the leave side wins.
Among the risks cited: The U.K. would go to the back line for trade deals and could take a decade or more to strike new bargains with the United States and other top trading partners; pensions and health care spending could take a hit; London could lose its place as an international financial hub; GDP could shrink to the point of recession, costing a large loss of jobs.
For the United States, a vote by the UK to leave the EU could lead to a global fall in equity prices as investors fear the impact the vote could have on Britain’s economy as well as the possibility that the entire European integration project could begin to fall apart on a rising tide of nationalist, anti-immigrant sentiment. The United States economy is already fragile, growing at just 0.8 percent in the first quarter with job growth slowing, and a stock market plunge spurred by a surprise Brexit vote could weigh heavily on the rest of the year.
That in turn could present a challenge for presumptive Democratic nominee Hillary Clinton who is counting on a strengthening economy to help her defeat Donald Trump this fall. Trump has spoken favorably about Britain leaving the European Union. The “leave” side echoes Trump’s sharp warnings about the impact of immigration from Syria and other Middle Eastern nations, saying it risks more terror attacks like that ones that hit Paris in November of last year.
People close to the Clinton campaign say they are confident they can defeat Trump even if Britain leaves the UK and the global economy suffers. But they recognize it would be a much easier task without a potentially dislocating surprise out of the UK.
THE POLLS — Via CNBCs Wilfred Frost: “On Friday, a poll for the Independent newspaper gave a massive 10-point lead to the British voting public that want to leave … Over the weekend, another poll for The Times newspaper gave leave vote a small lead. A Financial Times Poll of Polls gives leave a lead as well — 46 percent, versus stay at 44 percent. And yet, the British pound is still above its 2016 lows, which were hit in late February shortly after David Cameron set the date for the in/out referendum at June 23 of this year.” http://cnb.cx/1sD3JGi
LEAVE CAMP CITES ORLANDO — Times of London’s Sam Coates: “A pro-Brexit campaign has sparked a furious reaction after drawing a link between the killing of at least 50 people in a Orlando nightclub and the EU referendum debate. The post, on the official Twitter account of the Leave.EU campaign, was denounced as shameful by Nicky Morgan, the education minister and cowardly by Hilary Benn, the shadow foreign secretary. …
“It contained an image of what appeared to be Islamic State militants brandishing guns in a desert, with the warning: ‘Islamist terrorism is a real threat to our way of life. Act now before we see an Orlando-style atrocity here” http://bit.ly/1YokL7l
Times of London front-page: “Britain on course for Brexit after poll surge” http://bit.ly/1PZr9An (h/t Mike Allen)
MARKETS RATTLED — WSJ’s Riva Gold: “The growing possibility that the U.K. might leave the European Union shook markets globally … reflecting broad concern that next week’s referendum could slow down the world’s economy … Stocks slumped, Japan’s yen surged and bond yields tumbled to fresh lows in a broad flight to safety. Monday’s biggest losses were in Asia, where major stock indexes dropped 3.2 percent in Shanghai and 3.5 percent in Japan.
“In the U.S., the S&P 500 dropped 0.8 percent and the yield on the 10-year U.S. Treasury note slumped to 1.616 percent, its lowest since December 2012. The selling signified that the market is now taking seriously an issue that has been brushed aside by many traders and portfolio managers during a sharp 2016 bounce-back rally, even as concerns about vote-related uncertainty vexed policy makers.” http://on.wsj.com/236n67j
BROWN URGES LABOR TO VOTE “STAY” — FT’s Henry Mance: “Gordon Brown has invoked Britain’s history of leadership in Europe, as the former prime minister tried to rally Labour supporters behind the faltering Remain campaign. But the former prime minister’s pro-EU message was thrown into confusion when his one-time adviser Ed Balls called for further controls on immigration. …
“Anxiety on the Remain side intensified on Monday night as the Sun newspaper urged its readers to ‘BeLEAVE in Britain’ in a front-page editorial, and opinion polls showed growing support for Brexit. An ICM/Guardian poll gave Leave a 53-47 point lead, while YouGov for the Times put Leave ahead by 46-39 excluding don’t knows and those saying they would not vote; ORB for the Telegraph gave Leave a one-point lead. Betfair made a Brexit vote a 37 per cent chance” http://on.ft.com/25UdlhO
STOCKS SLIDE AGAIN TUESDAY — Reuters: “Asian stocks slipped on Tuesday amid growing worries this month’s referendum in Britain could see it exit the European Union, while markets were also nervous ahead of the U.S. Federal Reserve’s two-day meeting that begins later in the day. … The pound and euro have suffered in recent sessions as economists fear that the so-called Brexit would tip Europe back into recession.” http://reut.rs/25UdCBh
FIRST LOOK: WALL STREET PICKS HILLARY — CNBC’s Steve Liesman: “Wall Street is nearly united in forecasting that Hillary Clinton will be the next president of the United States but divided over which candidate is best for the economy and the stock market. … By a margin of 80 percent to 15 percent, respondents to the June CNBC Fed Survey think Clinton will win the election, virtually unchanged from the April survey.
“When it comes to whose policies are best for the stock market, Clinton bests Donald Trump 38 percent to 25 percent. A large group, totaling 38 percent of respondents, say they don’t know or are unsure. But 45 percent of the 41 respondents, who include economists, fund managers and analysts, say Trump’s policies are best for the economy, compared to just 30 percent for Clinton
THE DAILY DONALD — For those who scold our fixation on all things Trump we will be mercifully brief and simply recap a few things the presumptive GOP nominee did on Monday: said President Obama should resign; suggested on Fox that Obama was a secret Muslim in league with terrorists; revoked the Washington Post’s press credentials over stories he didn’t like (POLITICO and other news orgs are already banned); repeated the long-since debunked theory that thousands of Muslims publicly celebrated 9/11; suggested in a speech that all law abiding Muslims are complicit in terrorist attacks by refusing to turn in people they know to be terrorists.
NEW HOUSE GOP PLAN — House Republicans on Tuesday are releasing a plan to boost the economy through regulatory reform. From the executive summary: “The federal government has taken very few outdated regulations off the books, while constantly adding new ones: 3,408 in 2015 alone. The American people now spend $1.89 trillion every year just to comply with Washington’s rules — approximately $15,000 per household. …
“Clearly, it is time for serious and fundamental reform. Every step in the process needs to be revamped: whether to regulate, how to regulate, and follow-up review of regulations. Agencies should write regulations only when necessary, make them minimally intrusive, stay within the legal mandate, and avoid creating barriers for new and small businesses.” Full report: http://politico.pro/1tnAxTV
DRIVING THE DAY — President Obama convenes a National Security Council meeting at Treasury “where he will receive an update on the investigation into the attack in Orlando, Florida and review our efforts to degrade and destroy ISIL.” Obama will deliver a statement at Treasury after the meeting … Hillary Clinton and Bernie Sanders are scheduled to meet after DC concludes the Democratic primary voting. Will Sanders finally concede? … Senate Banking has an SEC oversight hearing at 9:00 a.m. with SEC chair Mary Jo White … Senate Finance has a hearing on energy tax policy at 10:00 a.m. … House Ag subcommittee has a hearing at 10:00 a.m. on “the impact of G-20 clearing and trade execution requirements” … NFIB survey at 6:00 a.m. expected to dip to 93.5 from 93.6 … Retail Sales at 8:30 a.m. expected to rise 0.3 percent headline and 0.4 percent ex-autos.
POLITICO AT THE CONVENTIONS — Live programming originating from the POLITICO Hub during both the Republican and Democratic National Conventions this July will feature a range of conversations from headline interviews and policy discussions to watch parties and performances. Sign up to receive notifications about live programming: http://politi.co/1Ulse19
TRUMP FACT CHECK — Some of what he got wrong on terrorism on Monday via POLITICO’s Louis Nelson: http://politi.co/1UMKNOs
WP edit page: “IT had not seemed possible, but Donald Trump descended this week to a new low of bigotry, fear-mongering and conspiracy-peddling … As the country mourned the wanton slaughter of 49 people early Sunday, the presumptive Republican presidential nominee took a victory lap, hinted darkly that President Obama is an enemy of the nation, libeled American Muslims and, in grotesque punctuation, finished up with a vindictive attack on the media” http://wapo.st/28AuZ9e
WSJ edit page: “Mr. Trump’s remarks, on various TV shows and in a speech in New Hampshire Monday, gave little evidence he has talked to anyone in the intelligence or foreign-policy communities about the substantive details of addressing the threat” http://on.wsj.com/1sDrOwV
CENTRAL BANK PREP — Mohamed A. El-Erian on Bloomberg View: “The central bank policy meetings this week in advanced economies — including those of the Bank of England, the Bank of Japan, the Swiss National Bank and the U.S. Federal Reserve — will all confront tricky questions about the management of national liquidity and cross-border influences. …
“Of them all, however, the most fascinating will be the Bank of Japan, which has an additional challenge: It has moved closest to the line that separates effective policy measures from ineffective and counterproductive ones, and it may even have already crossed that line. Unconventional central bank policies are overstretched and near exhaustion, having carried the bulk of the burden of promoting economic growth in the last few years.”
INVERTED COMPANIES STILL GET U.S. BENEFITS — WSJ’s Richard Rubin: “Companies that lowered their tax bills after turning in their American passports are still finding perks from their former citizenship. One company was celebrated at a U.S. embassy. Some traveled the world with U.S. officials, promoting products with the imprimatur of the American government despite moving their legal headquarters outside the U.S. and cutting their taxes. Still others continue to receive U.S. government contracts.
“Medtronic PLC, which moved its address from Minnesota to Ireland in January 2015, sent executives on Commerce Department trade missions to Brazil in August and to Peru in March of this year. Ingersoll Rand PLC participated in a trade mission to Turkey, years after it put its address in Ireland. Aon PLC, the insurance broker and human-resources firm that moved from Chicago to London in April 2012, celebrated its success in the Romanian market at the U.S. Embassy in Bucharest later that year at a reception hosted by the U.S. ambassador” http://on.wsj.com/1rmWOjg
MICROSOFT BETS ON LINKEDIN — NYT’s Nick Wingfield: “Microsoft has made its most ambitious move in years to reassert itself in a technology market it once dominated. The software giant said Monday morning that it would acquire LinkedIn in a $26.2 billion cash deal. The acquisition, by far the largest in Microsoft’s history, unites two companies in different businesses: one a big maker of software tools, the other the largest business-oriented social networking site, with more than 400 million members globally.
“The deal is Microsoft’s biggest bet yet that the traditional software business is shifting quickly to cloud computing, a model in which customers rent software and other services delivered over the Internet. While LinkedIn does not have the household name of Facebook, a much larger and more lucrative social network, it is the most widely used site for people to advertise their professional skills and work history.” http://nyti.ms/1UMLPtZ
GUN STOCKS RISE AFTER ORLANDO — Mamta Badkar in New York: “Shares in US gun manufacturers advanced on Monday, a day after a gunman killed 49 people when he stormed a gay nightclub in Orlando, Florida. Sturm, Ruger & Co shares rose 8.5 per cent to $62.29 while shares in Smith & Wesson gained 6.9 per cent to $22.88. … Shares in gunmakers typically advance after mass shootings as investors speculate that the threat of gun control legislation could prompt firearm sales to rise in the near-term.
“Following the Paris terror attack in November last year and the San Bernardino shooting in early December, the Federal Bureau of Investigation’s National Instant Criminal Background Check System , a proxy for gun sales, jumped 44 per cent in December from the year-ago period to 3.3m. That was the first month with more than 3m background checks since the FBI began recording the data in 1998.” http://on.ft.com/1XmrkHQ
ALSO FOR YOUR RADAR —
COMING NEXT WEEK: BIG BANK BOOK — Public Citizen’s Bart Naylor emails: “Volcker Rule author Sen. Jeff Merkley will bring his authentic duck tape to our Too Big event June 22.” http://bit.ly/1ZMWUwE
MALLOY SHIELDS HEALTHCARE GIANTS FROM FOIA — IBT’s David Sirota: “With his state at the center of a national review of healthcare megamergers, Connecticut Gov. Dannel Malloy quietly signed legislation that could empower state officials to conceal key documents about health insurers.
“The secrecy bill was attached to unrelated dental health legislation, passed by lawmakers in the middle of the night and then signed by Malloy on Friday with no public statement. The move comes days after Malloy’s administration rejected an open records request for information about its review of Anthem’s proposed acquisition of Cigna.” http://bit.ly/1UQ2FVW
RATING THE ONLINE FINANCE PLATFORMS — Milken Institute’s Jackson Mueller profiled over 70 US-based online finance sites: http://bit.ly/24NtTlz
NEW TODAY: WELLS REPORT ON HOME OWNERSHIP — Per release out today ahead of a 12:30 p.m. event at the Nat’l Press Club: “58 percent of millennials, 51 percent of African Americans, 47 percent of Hispanics and 38 percent of the general population are considering purchasing a home in the next two years. … Most people believe qualifying for home financing should be rigorous: 91 percent say getting a home loan should be a thorough enough process to ensure the borrower understands what they’re getting into” Full release: http://politico.pro/1PqpA8K
President Obama will convene his National Security Council at the Department of the Treasury to review efforts to “degrade and destroy” ISIS. In the afternoon, Obama will deliver remarks at the first-ever “United State of Women Summit” to “mark the progress made by and for women and girls domestically and internationally over the course of this administration and to discuss solutions to the challenges they still face.”
Tuesday evening, he will host a picnic for Members of Congress at the White House.
The Senate is in at 10 a.m. and will vote at 11 a.m. on NDAA and proceeding to CJS approps. The House is in at 10 a.m. and will be working on defense approps and an IRS crackdown bill, with votes skedded at 1:15 p.m. and around 4 p.m.
AROUND THE HILL – At 9:15 a.m. the Senate Foreign Relations Committee will receive the Dalai Lama and Dr. Lobsang Sangay, PM of the Tibetan government, at S-116. At 10 a.m. House Democratic caucus chair Xavier Becerra leads a presser on gun safety in the HVC-210 alcove and in the RNC lobby House Speaker Paul Ryan holds a media availability. At 10:30 a.m. House Minority Leader Nancy Pelosi appears with the Dalai Lama in H-204. At 11 a.m. on the House Triangle Reps. Tim Murphy and Fred Upton talk mental health reform and House Minority Whip Steny Hoyer will hold his pen and pad in H-144. At 2:30 p.m. Rep. Mike Quigley will urge an end to the blood ban on gay and bisexual men on the House Triangle.
The big one: At 3 p.m. the House will receive an all-members briefing on the Orlando shootings outside CVC-217. (The Senate’s briefing is tomorrow).
CIA chief expects release of 9/11 documents to clear Saudi Arabia
CIA chief John Brennan said on Sunday he expects 28 classified pages of a U.S. congressional report into the Sept. 11, 2001 attacks on the United States to be published, absolving Saudi Arabia of any responsibility. “So these 28 pages I believe are going to come out and I think it’s good that they come out. People shouldn’t take them as evidence of Saudi complicity in the attacks,” Brennan said in an interview with Saudi-owned Arabiya TV, according to a transcript provided by the network. The withheld section of the 2002 report is central to a dispute over whether Americans should be able to sue the Saudi government, a key U.S. ally, for damages. The U.S. Senate passed a bill on May 17 allowing the families of Sept. 11 victims to do so, setting up a potential showdown with the White House, which has threatened a veto. Saudi Arabia denies providing any support for the 19 hijackers – most of whom were Saudi citizens – who killed nearly 3,000 people in the Sept. 11 attacks. Riyadh strongly objects to the bill. It has said it might sell up to $750 billion in U.S. securities and other American assets if it became law. Brennan called the 28-page section merely a “preliminary review.” “The 9/11 commission looked very thoroughly at these allegations of Saudi involvement … their conclusion was that there was no evidence to indicate that the Saudi government as an institution or senior Saudi officials individually had supported the 9/11 attacks,” he added. The Office of the U.S. Director of National Intelligence is reviewing the material to see whether it can be declassified. Former U.S. Senator Bob Graham, who co-chaired the congressional inquiry into the attacks, said in April that the White House will likely make a decision by June on whether it would release the classified pages.
Israel—at least the largely secular and progressive version of Israel that once captured the world’s imagination—is over. Although that Israel was always in some ways a fantasy, the myth was at least grounded in reality. Today that reality has changed, and the country that has replaced it is profoundly different from the one its founders imagined almost 70 years ago. Since the last elections, in March 2015, a number of slow-moving trends have accelerated dramatically. Should they continue, they could soon render the country unrecognizable. Already, the transformation has been dramatic. Israel’s current leaders—headed by Prime Minister Benjamin Netanyahu, who metamorphosed after the election from a risk-averse conservative into a right-wing radical—see democracy as synonymous with unchecked majority rule and have no patience for restraints such as judicial review or the protection of minorities. In their view, Israel is a Jewish state and a democratic state—in that order. Only Jews should enjoy full rights, while gentiles should be treated with suspicion. Extreme as it sounds, this belief is now widely held: a Pew public opinion survey published in March found that 79 percent of Jewish Israelis supported “preferential treatment” for Jews—a thinly veiled euphemism for discrimination against non-Jews. Meanwhile, the two-state solution to the conflict with the Palestinians has been taken off the table, and Israel is steadily making its occupation of East Jerusalem and the West Bank permanent. Human rights groups and dissidents who dare criticize the occupation and expose its abuses are denounced by officials, and the government has sought to pass new laws restricting their activities. Arab-Jewish relations within the country have hit a low point, and Israel’s society is breaking down into its constituent tribes. Netanyahu thrives on such tribalism, which serves his lifelong goal of replacing Israel’s traditional elite with one more in tune with his philosophy. The origins of all these changes predate the current prime minister, however. To truly understand them, one must look much further back in Israel’s history: to the country’s founding, in 1948.
Germany Waves ‘Auf Wiedersehen’ to Costly Wall Street Tax Scheme
The German Parliament voted Thursday to end a trading strategy that helps foreign investors, many of them Americans,avoid an estimated $1 billion or more a year in taxes on dividends paid by German companies. The trades were exposed in a joint ProPublica investigation last month with The Washington Post and German news outlets Handelsblatt and Bayerischer Rundfunk. The report prompted widespread outrage among German lawmakers, some of whom called the maneuver “criminal.” This week’s vote effectively shuts down the transactions in Germany, which had been the biggest market for such trades. They live on in more than 20 other countries across Europe and other nations where authorities attempt to collect taxes on dividends. While German lawmakers closed the spigot on future tax losses, it remains unclear if tax officials there will be able to recoup billions of lost revenues from previous years. Prior to Thursday’s vote, experts in Germany were divided over whether the transactions — engineered by large multinational banks to benefit institutional investors at the expense of German taxpayers — were illegal under existing law. The new legislation does not ban the transactions but it makes them impossible to execute the way they’ve been traditionally done — as a riskless short-term transaction to avoid taxes. The trades, known as dividend arbitrage, help foreign investors avoid taxes on dividend payments by lending out their German stock holdings so they do not appear on their books at dividend time. The borrowers are German banks or funds that don’t have to pay the 15 percent tax that typically applies to foreign investors. These so-called “div-arb” loans usually last just a few days around dividend time. The shares are then returned and the the short-term borrowers apply to German authorities for a refund of the taxes withheld. The tax savings are then split among the investors and middlemen who arranged the deals, giving them an extra slice of dividend payments that would otherwise go to German taxpayers. More:
Was Orlando Shooter Really Acting for ISIS? For ISIS, It’s All the Same
PARIS — The revelation that the 29-year-old man who opened fire on Sunday in a gay nightclub had dedicated the killing to the Islamic State has prompted a now-familiar question: Was the killer truly acting under orders from the Islamic State, or just seeking publicity and the group’s approval for a personal act of hate? For the terror planners of the Islamic State, the difference is mostly irrelevant. Influencing distant attackers to pledge allegiance to the Islamic State and then carry out mass murder has become a core part of the group’s propaganda over the past two years. It is a purposeful blurring of the line between operations that are planned and carried out by the terror group’s core fighters and those carried out by its sympathizers. The attacker, Omar Mateen, told a 911 operator that he was pledging allegiance to the Islamic State. In the group’s nomenclature, that pledge is a central part of the ISIS protocol. The Orlando killing was the third time the loyalty pledge was known to be invoked in the United States. In December when a couple in San Bernardino, Calif., left their home armed with assault rifles, they made sure to post their oath of allegiance on Facebook, where law enforcement agents later found it. And just minutes before he opened fire on a cartoon exhibit featuring images of the Prophet Muhammad in Texas in May 2015, Elton Simpson sent out a series of Twitter messages making clear where his allegiances lay. This public oath is about the only requirement that the Islamic State imposes on followers who wish to carry out acts of terror in its name. In an annual speech, the terror group’s spokesman, Abu Muhammad al-Adnani, last month incited its supporters to carry out killings abroad during the holy month of Ramadan. No attack is too small, he advised, specifically naming the United States as a target. “The smallest action you do in the heart of their land is dearer to us than the largest action by us,” he said, “and more effective and more damaging to them.” As early as September 2014, Mr. Adnani made clear that anyone and everyone could, and should, carry out acts of terror in the group’s name. “Do not ask for anyone’s permission,” he said, and suggested that sympathizers who could not buy weapons should instead use rocks, knives or even cars to kill infidels.
Here’s why Obama does not refer to ‘radical Islamic terrorism’
Donald Trump demanded Sunday on Twitter that President Obama “finally mention the words radical Islamic terrorism” in connection to the massacre in Orlando or “immediately resign in disgrace.” Obama didn’t use that language, and almost certainly won’t in the future. Obama called the slaughter “an act of terror and an act of hate” but said authorities have “reached no definitive judgment on the precise motivations of the killer.” “I’ve directed that we must spare no effort to determine what — if any — inspiration or association this killer may have had with terrorist groups,” he said Sunday afternoon from the podium of the White House. Trump responded to Obama’s speech with a lengthy statement that, among other things, again called for the president’s resignation. “In his remarks today, President Obama disgracefully refused to even say the words ‘Radical Islam,’” Trump wrote. “For that reason alone, he should step down. If Hillary Clinton, after this attack, still cannot say the two words ‘Radical Islam’ she should get out of this race for the Presidency.” Amid news reports indicating that the alleged shooter pledged loyalty to ISIS, as the terrorist army is also known, in a 911 call, Obama’s remarks sounded like authorities were looking into whether the group inspired or directed the attack — even though the president did not mention it by name or as “ISIL,” as the U.S. government tends to call it. A close look at Obama’s rhetoric shows he has not referred to the “Islamic State” by that name since he plunged the U.S. military into an undeclared but escalating war against the group two years ago. Obama, who tends to stick with “ISIL,” explained his thinking roughly one month after the first U.S. airstrikes against the group. “ISIL is not ‘Islamic.’ No religion condones the killing of innocents. And the vast majority of ISIL’s victims have been Muslim,” he said on Sept. 10, 2014. “And ISIL is certainly not a state. “ Obama went on, “it is recognized by no government, nor by the people it subjugates. ISIL is a terrorist organization, pure and simple. And it has no vision other than the slaughter of all who stand in its way.” Senior administration officials say the president’s reasoning has not changed: Why needlessly alienate Muslim partners in the war on ISIS? Why lend any credence to the group’s claim to uphold Islamic tenets, helping it cloak violence in religion? Obama’s critics — mostly Republicans, but also some Democrats — have charged that his refusal to describe the threat as originating in extremist Islam reflects politically correct naiveté that risks hampering the war effort. There’s a political dimension too. In the aftermath of the Brussels attacks, Trump suggested on NBC’s “Today” in March that his own rhetoric on terrorism, including his call for a halt to Muslim immigration and tourism to the United States, was “why I’m probably No. 1 in the polls.” He may not have been wrong. A February 2016 poll by the nonpartisan Pew Research Center found that 65 percent of Republicans and independents who lean toward the GOP wanted the next president to “speak bluntly even if critical of Islam as a whole.” For Democrats and independents who lean left, it was just 22 percent. Presumptive Democratic nominee Hillary Clinton’s reaction to the attack in Orlando roughly tracked with Obama’s: She called it an act of terror but stopped short of explicitly diagnosing a direct connection to ISIS. Still, the former secretary of state said in a written statement, keeping America safe “means defeating international terror groups, working with allies and partners to go after them wherever they are, countering their attempts to recruit people here and everywhere, and hardening our defenses at home.” It’s not just an argument about words. Obama asked Congress last year to explicitly authorize him to use military force against ISIS and loosely defined “associated forces.” How those forces are defined — whether by name, geography, allegiances, tactics or goals — may shape the war on terrorism’s global battlefield for years. Defining the global conflict, America’s enemies and victory (or at least progress) carries enormous weight in that sense because it will determine how, when and where young Americans will fight, and against whom.
Nightclub gunman worked for security firm with nuclear contracts
WASHINGTON (Sinclair Broadcast Group) — Omar Sidiq Mateen, the terrorist shooter who killed 50 at an Orlando nightclub, continued working as a guard for a security firm with extensive federal contracts protecting sensitive nuclear sites and deporting illegal aliens even after the FBI twice investigated him for possible terror ties. Congressional investigators are likely to raise questions this week about what if anything the FBI did to alert the federal contractor, G4S Secure Solutions, the U.S. Energy Department or the Homeland Security Department about their counter-terrorism probes into Mateen in 2013 and 2015, sources told Circa News. G4S acknowledged Sunday evening that Mateen worked for the firm as a guard since 2007. Law enforcement sources said Mateen was not working on the federal contracts but rather served as a security guard at a Florida courthouse. “We are cooperating fully with all law enforcement authorities, including the FBI, as they conduct their investigation,” G4S Secure Solutions said in a statement to media. “Our thoughts and prayers are with all of the friends, families and people affected by this unspeakable tragedy.” G4S is a respected government contract and holds extremely sensitive federal contracts worth tens of millions of dollars, including helping the Homeland Security Department, the Customs and Border Protection and the U.S. Immigration and Customs Enforcement to transport illegal immigrants in selected urban areas. The company says in a marketing document that its “fortified buses log millions of miles and transport hundreds of thousands of illegal immigrants, while freeing up front line CPB and ICE personnel for other essential services.” G4S subsidiaries also provide security at some of the Energy Department’s most sensitive nuclear research and storage facilities, such as the 310squaremile Savannah River Site in South Carolina, according to federal records. Sources told Circa that Mateen, the son of Afghan immigrants who was born in New York but worked in Florida, called 911 shortly before he began his attack at the gay nightclub called Pulse Orlando to pledge allegiance to ISIS. His apparent allegiance to extremist Islamist ideology shook nerves in several federal quarters because he was tied to the security firm and twice had been probed by the FBI for terror ties. And he was licensed in Florida to carry firearms as a security contractor. This episode is likely to raise a debate about “having a better way to alert federal agencies and contractors about someone who we suspect has terrorist sympathies and yet has sensitive job access and a license to carry,” a senior congressional investigator told Circa, speaking only on condition of anonymity. The investigator said multiple committees on Capitol Hill are likely to review the apparent lack of communication. FBI officials acknowledge they twice extensively investigated Mateen for possible terror ties but ultimately closed those investigations. More:
Texas lieutenant gov. deletes tweet with Bible verse after shooting
AUSTIN, Texas — Texas Lt. Gov. Dan Patrick has deleted a tweet quoting the New Testament that he posted after the deadly Orlando nightclub shooting. Hours after the early Sunday morning shooting at a gay nightclub that left at least 50 people dead, Patrick sent a tweet from his personal account: “Do not be deceived. God cannot be mocked. A man reaps what he sows.” The tweet received harsh criticism online and Texas’ Democratic Party has called on the Republican Patrick to apologize. The tweet was sent at around 7 a.m. and deleted four hours later. Patrick’s campaign spokesman, Allen Blakemore, strongly denied the tweet was in any way related to the Orlando shooting. He said Patrick is out of the country and often pre-schedules social media postings quoting Scripture. Patrick is a staunch social conservative who opposes gay marriage and anti-gay discrimination protections
U.S. court to weigh lawmakers’ immunity in trading investigations
A federal appeals court will consider on Monday whether a U.S. congressional committee and one of its former staff are immune from having to cooperate with an insider-trading investigation. A three-judge panel of the 2nd U.S. Circuit Court of Appeals plans to hear arguments on enforcing two subpoenas that the U.S. Securities and Exchange Commission (SEC) sent to Congress as part of its investigation. The arguments are scheduled for about 11 a.m. (1500 GMT) in New York City. The case is a test of how far securities enforcers may go as they try to police the murky world of so-called “political intelligence,” in which firms seek to gather and sell information for traders. The SEC is investigating the trading of Humana Inc stock in 2013 ahead of a government announcement about physician reimbursement rates, which affect the revenue of Humana and other health insurers. No charges have been brought in the insider-trading probe. The SEC said in court papers that it believes a congressional staff member at the time, Brian Sutter, “may have been a source” of an early leak to a lobbyist at the firm Greenberg Traurig who then passed the information to a Height Securities analyst, who in turn alerted clients. Sutter and his lawyer could not be reached for comment on Friday. A spokesman for Humana also could not be reached, and a spokeswoman for Greenberg Traurig had no immediate comment. Height Securities said in a statement it has never received a subpoena from, or been the subject of a formal order of investigation by, the SEC. Members of Congress and their staff are not immune from prosecution under insider-trading laws. But Sutter and his former employer, the U.S. House of Representatives’ Ways and Means Committee, are refusing to comply with the SEC subpoenas for documents and testimony. Their lawyers argue they are immune from such investigative tactics because under the legal principles of sovereign immunity and legislative independence they cannot be questioned without their consent.
“The SEC remains free to investigate any alleged congressional insider trading in a host of ways,” such as obtaining materials from investment funds, the lawyers wrote in court papers. SEC lawyers argue a ruling in favor of congressional immunity could be abused by corrupt lawmakers. That would “defeat the right of the public to honest representation,” the lawyers wrote. A lower court ruling, now under review, said in November that the committee and Sutter were required to generally comply with the SEC subpoenas.
SEATTLE — Microsoft said on Monday it was acquiring LinkedIn in a $26.2 billion cash deal.
The companies said that Microsoft had agreed to pay $196 a share to buy LinkedIn, a business social networking site that has more than 400 million members globally. “The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals,” Satya Nadella, Microsoft’s chief executive, said in a statement. The companies said Reid Hoffman, a founder of LinkedIn and its controlling shareholder, had approved the deal, as did Jeff Weiner, the chief executive of LinkedIn. Mr. Weiner will remain chief executive of LinkedIn, which will operate as an independent brand, the companies said. LinkedIn shares had fallen by almost half since a peak of almost $260 a share last fall and ended trading on Friday at $131.08.
Getting a Reverse Mortgage, but Not From a Celebrity
PITTSBURGH — If you don’t have a reverse mortgage and don’t know anyone who does, your familiarity with the product probably comes from television commercials. There, often late at night, Pat Boone and Henry Winkler have peddled themwith great sincerity. Sound sketchy? The loans, which allow people age 62 and older to pull some of the money from their home equity without having to make any monthly payments on the debt, have a pockmarked history. Financial con artists have persuaded borrowers to put the proceeds in inappropriate investments, and some spouses who weren’t on the mortgage have lost their homes. So it may surprise you to learn that some community bankers are quietly offering the loans, too, bringing a kind of Main Street respectability to a product that has long lacked it. Recently, I took a quick swing through the wood-paneled, green-carpeted bank offices of Pennsylvania, where lending executives still wear paisley ties and measure their tenure in decades. And I asked them this: Why risk your reputation on a product like this one? I walked into their headquarters with my own strong feeling that reverse mortgages are an increasingly necessary evil. In an ideal world, everyone pays for their expenses in old age from Social Security and retirement savings and keeps any home equity intact for their heirs or for nursing home care. But nearly every week brings new signs that many millions of Americans will not have enough money to retire comfortably — or at all — in the coming decades. One recent Federal Reserve survey of people whose employers offer a retirement plan but who do not participate shows that 27 percent of them say they cannot afford to save any money. Another 18 percent are too confused by their choices, 18 percent more are not eligible to participate at all and another 16 percent have not gotten around to signing up. Many of those people do manage to buy a home, however, and they may have paid off much of their mortgage by the time they retire. So yes, our retirement savings vehicles ought to be better. Until they are, however, home equity may end up being the biggest asset that many people have to draw on in retirement. More:
The Securities and Exchange Commission today announced fraud charges and an asset freeze obtained against a Connecticut man accused of misleading people into investing in his company and then taking their money for his personal use. His victims include several women he met through an online dating website. The SEC alleges that Thomas J. Connerton told investors that his company Safety Technologies LLC was developing a material to make surgical gloves better resistant to cuts or punctures. He claimed that several major glove manufacturers wanted the technology and Safety Technologies was on the brink of imminent deals that would result in large payouts for investors in his company. But no deals have ever been anywhere close to materializing, and Connerton has emptied the company’s bank account by writing a series of checks to himself and using investor funds for his own expenses. According to court documents filed by the SEC, among Connerton’s improper spending of investor funds was $20,000 for an engagement ring for his latest online date turned investor. There are more than 50 investors in Safety Technologies, including six women Connerton met through online dating and 14 others who are family or friends of those women. “We charge Connerton with lying about the state of his business and exploiting personal connections to lure in investors,” said Paul G. Levenson, Director of the SEC’s Boston Regional Office. “Investors beware: a rosy picture of a business that’s about to take off could still lead to a total loss of investment.” According to the SEC’s complaint, Connerton failed to comply with the requirements for private offerings exempt from registration under the federal securities laws, such as providing investors with appropriate financial information and confirming that they have sufficient knowledge and experience to evaluate the merits and risks of the investment. Connerton also is not registered to sell investments. Investors can quickly and easily check whether people selling investments are registered by using the SEC’s investor.gov website. The SEC has obtained a court order freezing the assets of Connerton and Safety Technologies. The SEC’s complaint seeks a permanent injunction as well as the return of allegedly ill-gotten gains plus interest and a penalty. The SEC’s investigation was conducted by Jonathan R. Allen, Sofia Hussain, Alfred Day, and Amy Gwiazda of the Boston office.
Sanders says he will meet with Hillary Clinton on Tuesday
U.S. Democratic presidential candidate Bernie Sanders said he will meet with his rival Hillary Clinton on Tuesday to press her to embrace his progressive agenda, saying he wants to know what she will stand for if she becomes president. Speaking on ABC’s “This Week” program on Sunday, Sanders did not concede he had lost the Democratic presidential nomination to Clinton, who is leading in Democratic primaries and is the party’s presumed nominee. Sanders said he and Clinton would discuss “if she wins, what kind of administration she will have.” “What I need to see (is) a commitment that there will be progressive taxation,” he said, saying corporations and billionaires should pay higher tax rates.
He repeated his stance that he would do “everything I can” to ensure Donald Trump, the presumptive Republican nominee, will not become president. Sanders said he wanted to see Clinton embrace his view that healthcare should be a universal right in America and public universities should offer education for free. “Will she go as far as I would like her to go? No, she won’t,” he said. “But I think millions of people want to understand and see is what kind of commitment she has to addressing the real crises in the country.”
Alabama joins 21 state coalition suing Delaware over abandoned money orders
A coalition of 21 states, including Alabama, are suing Delaware to give back more than $150 million in uncashed money orders. The lawsuit alleges that Delaware has, at a minimum, $200 million that rightfully belongs to its sister states under the federal Disposition of Abandoned Money Orders and Traveler’s Checks Act. The ultimate dollar figure that Delaware owes other states may be much higher. The dispute between the 21 plaintiff states and Delaware is about which state is entitled to abandoned and unclaimed “official checks” sold by MoneyGram, a money transfer services company that operates in all 50 states and internationally. With Delaware’s acquiescence, guidance and direction, millions of dollars in unclaimed “official checks” have been wrongfully escheated, or turned over, to the State of Delaware. This error was based on the mistaken belief that such abandoned and unclaimed property is supposed to be turned over to the issuing company’s state of incorporation, in this case Delaware. Federal law and the law in each of the plaintiff states is clear that such abandoned and unclaimed property should be turned over to the state where the official check was purchased. The coalition is asking the U.S. Supreme Court to declare that the plaintiff states, and not Delaware, are entitled to the hundreds of millions of dollars improperly turned over to Delaware, and to all future similar abandoned and unclaimed property. The coalition also is asking the Court to order the appropriate repayment to plaintiff states by Delaware.
“Quite simply, these funds are not the property of Delaware,” said Alabama Attorney General Luther Strange. “Under state and federal law, the money from these unclaimed and abandoned ‘official checks’ is due to be returned to the states where they were purchased.” On Feb. 10, 2015, an independent auditor completed an examination of abandoned “official checks” from MoneyGram in a select group of states and concluded that nearly $200 million was owed to those states. The State of Alabama may be owed $15 million in unclaimed “official checks.” In addition to Alabama, states filing the action include: Arkansas, Texas, Arizona, Colorado, Florida, Idaho, Indiana, Kansas, Kentucky, Louisiana, Michigan, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Carolina, Utah and West Virginia.
Late Friday night, June 10, 2016 the Alabama Speaker of the House, state Representative Mike Hubbard (R from Auburn) was guilty of twelve felony counts for ethics violations. The secret grand jury investigation that many politicos denied even existed turned into the 23 indictments they said would get thrown out of court, became the historical legacy of the first Republican to be the Speaker of the House in over 135 years. Hubbard, the author of ‘Storming the Statehouse,’ ran the 2010 GOP campaign on a platform of historic ethics reforms. Ironically it was the ethics law reforms that were his first achievements as Speaker that ultimately brought him to ruin. Many state officials released statements following the announcement. Alabama Governor Robert Bentley (R) said in a statement, “Alabama is strong because our people are strong. As leaders we were placed here to serve our people and that is exactly what we are going to continue to do. God has assigned us to this task, and we will work hard to honor Him. I have the utmost confidence in the men and women of the Alabama Legislature. We will all continue working together to solve the real problems facing our state and to help Alabamians. We will pass a balanced budget that funds essential state services, create well-paying jobs and care for our sick, our elderly and our children. No matter how difficult the challenge, the people of this state will know we are working hard every day to serve them.” Lt. Gov. Kay Ivey (R) released her own statement, “The verdict reached by twelve Lee County jurors brings finality to a lengthy legal process that has impacted our state government and public trust. I pray that Mike, his wife Susan, and their sons will be strengthened and supported through the uncertainties of this difficult time. I respect the jury’s hard work and accept their findings. It is not easy to sit in judgment and these jurors did their duty as citizens of Alabama. One of our basic founding principles is the safeguard that due process affords to protect individual freedoms when justice is administered. The rule of Law and the right to a trial by jury has helped maintain our democracy for more than two centuries. The consistency of our legal system in treating everyone as an equal before the Law will continue to sustain us now and in the future. I believe in the rule of law, Alabama and her people. I know that our best days are ahead of us.” Attorney General Luther Strange (R) said on social media, “Yesterday was a good day for the rule of law in our state. Our office has been committed to putting together the finest public corruption unit in the country, and I am extremely proud of their work. A clear message has been sent — Alabama holds public official accountable for their actions.”
The former speaker of the Alabama House of Representative said he is leaving politics with his head held high and working to come to terms with the ethics conviction that removed him from office. The statement to The Associated Press was Mike Hubbard’s first public comment since his conviction Friday on ethics charges. He also maintained his innocence. “My family and I are working to come to terms with the disappointing verdicts, and I continue to steadfastly maintain my innocence. We have every confidence that the coming appeals process will be successful,” Hubbard said. A jury found Hubbard guilty on 12 charges that he wrongly solicited consulting contracts and investments and used his office to benefit his businesses and clients. Each count is punishable by up to 20 years in prison. The convictions resulted in Hubbard’s automatic removal from office. The former speaker thanked the people of his Auburn district for allowing him to represent them for the last 18 years. “It has been an honor that I will always remember and hold close to my heart no matter what the future may hold,” Hubbard said. Hubbard’s removal from office adds to ongoing political turmoil in Alabama involving GOP leaders in all three branches of government. A House Judiciary Committee holds its first meeting Wednesday on calls to impeach Gov. Robert Bentley following a sex-tinged scandal involving a former aide. Chief Supreme Court Justice Roy Moore is suspended from office and faces possible ouster over accusations that he violated judicial ethics during the fight about same-sex marriage. Hubbard was elected to the Alabama House of Representatives in 1998. As state GOP chairman, he spearheaded Republicans’ 2010 successful offensive to win control of the Legislature for the first time in 136 years. The Auburn Republican said he hoped the accomplishments of the Alabama Legislature during the six years under his leadership would not be overshadowed. Hubbard said he was proud of the legislature’s record on education, job creation and other issues. Prosecutors in closing arguments to the jury depicted Hubbard as a politician who put a “For Sale” sign on his office and used the power and prestige of his position to make money and benefit his businesses. Defense lawyers argued the transactions involved legitimate business dealings or requests to longtime friends, and members of the Legislature must be able to earn a living. Hubbard in his statement said it is “a scary and dangerous” precedent if it is, “impossible for citizen-legislators to serve in public office.” “I now take leave of the political arena with my head held high and with eternal thanks for the unconditional love of my wife, Susan, and Clayte and Riley, the two fine young men we have raised together,” Hubbard said.
The shortlist of who could replace ousted House Speaker Mike Hubbard
After seven hours of deliberation and a 13-day trial, a Lee County jury found Alabama House Speaker Mike Hubbardguilty of 12 felony charges of using his government position for personal gain. A verdict that automatically removes him from office and paves the way for a special Speaker election.
In the interim, while the seat remains vacant, Mobile Republican and Speaker Pro Tem Rep. Victor Gaston becomes acting speaker under state law and House rules. He will serve in this role for the “foreseeable future,” until a new Speaker is elected, according to a release from the Speaker’s office.
Here are five Republicans who could ultimately replace Hubbard:
Montgomery to be headquarters for new regional passenger train system
MONTGOMERY, AL (WSFA) – A rail developer has set its sights on the Capital City for a new state-wide network of passenger trains. It’s a project that’s been talked about for years, but now it’s taking shape in the form of a public-private partnership and officials say it will have a major economic impact. J. William McFarland Jr., the Governor’s Designee to the Southern Rail Commission, says the new system will usher in a new era of train travel in Alabama. He’s been working for years to find a way to make rail travel available to more people throughout the state, including the rural areas. McFarland Jr. thinks the formation of the new system, called Alabama Corridor Rail, will improve transportation and fuel major growth and investment. “We feel that this is a major step forward for passenger rail but also for economic development, transportation and jobs for the people of our state and particularly in the Montgomery, River Region area,” McFarland said. Montgomery will be the southeastern headquarters for the new system. The developer, Corridor Capital Rail, is also looking at two different possible locations for a train depot in the heart of downtown, near the Biscuits stadium and restaurants. Amtrak’s Crescent Route currently serves Birmingham, Tuscaloosa and Anniston running once per day, but the rest of the state has been without passenger train service for many years. “One of the first of many routes that they hope to launch is the old Gulf Breeze route but instead of going from Mobile to Montgomery to Birmingham, they want to link Mobile to Montgomery to Birmingham all the way up to Huntsville with intermittent stops in smaller communities such as Atmore and also provide multiple frequencies each day to give the traveler more options instead of only one train per day,” McFarland explained. Corridor Capital’s chairman, James Coston, issued the following statement Friday regarding the new Alabama based, Gulf Coast Region system: “Corridor Capital understands Alabama is the heart of the South, and historically has been the center of Southern passenger train service. By developing a modern, robust network of passenger trains routes, Alabama can vastly expand mobility options for travelers to, from and within the state, and make passenger trains a giant economic development engine throughout Alabama. Utilizing a public-private partnership that brings aboard private capital and entrepreneurship will enable Alabama to maximize the use of all available resources to create a superior transportation product. Corridor’s goal is to implement routes serving Mobile-Atmore-Montgomery-Birmingham-Huntsville, New Orleans-Mobile-Atmore-Jacksonville-Orlando-Tampa with multiple daily trains, and expanding frequencies on the existing but underutilized Atlanta-Anniston-Birmingham-Tuscaloosa-New Orleans route. This will allow the citizens of and travelers to Alabama to make use of a new and efficient corridor rail system in a far shorter time, and at the fraction of the cost, of a government agency project.” The first train is expected to roll out in 18 months, using existing CSX rails. Alabama Corridor Rail is designed to be created and operated independent of any involvement with Amtrak. “We fill very confident that the people of Alabama will have some additional options when it comes to taking family vacations, traveling for business or any other need that they would have involving rail travel,” McFarland said. “It’s one that doesn’t rely on taxpayer bailouts and ballooning annual operating subsidies from the government…We feel like it’s a good value for the state and a true private-public partnership that will create jobs and help Alabama grow.” Robert Smith, Montgomery’s Director of Planning, says a study is underway to determine the feasibility of returning passenger rail service from Birmingham to Montgomery to Mobile. The first phase is complete and the second phase is underway. “It’s a good strategic move for Corridor Capital Rail to have a headquarters in Montgomery where a lot of decisions are made. This will be a great resource we can tap into to move the project forward from the feasibility stage to the implementation phase,” he said. Corridor Capital Rail will open its Montgomery office by July 1st. Former state representative Perry O. Hooper Jr. lobbied to make sure that the corporate headquarters within Alabama would be located in Montgomery. The average Alabama Corridor Rail job will pay $60,000 annually. The network will employ hundreds of Alabamians. Terminals and maintenance facilities will be built using private capital. Construction costs are estimated at $40 million. By year five, the rail system is expected to have $25 million in annual contracts and purchases in Alabama.
Friday was an average day in Alabama. Oh, I know you’ve heard that it was a “dark day,” that former House Speaker, former state Representative and former non-felon Mike Hubbard’s conviction on 12 felony charges in the county where he resides was somehow an additional black mark on a state that’s running out of space for additional black marks. But the truth is, it wasn’t dark. Friday was just another day in a state where our politicians continue to give us all the middle finger, as they pilfer taxpayer dollars to pay their friends, their businesses and themselves. Most don’t do it as blatantly as Hubbard. But most do it. Republican, Democrat, Independent – the label is unimportant. They accept consulting contracts from businesses they later pass legislation to help. They draw up and push through legislation to help their own businesses and friends. They take dark money from sources so their conflicts and hypocrisy stay hidden from public view. And it’s not just our legislators. Our judges are sometimes just as bad, if not worse. Multiple justices on the Alabama Supreme Court have taken campaign money from corporations and then presided over cases involving those companies. There are campaign functions for judges held at or hosted by law firms, some of which have numerous cases go before that judge. And then there are the local politicians, like the Birmingham City Council, which would be better off if run by dogs than the petty, immature, greedy people who currently sit as council members. And if you’d really like a depressing few minutes, Google up “Alabama county commissioner arrested” sometime. Honestly, it’s as if the state and local governments and the justice system in Alabama were all established not to aid the greater good or protect citizens from crime and unfair practices, but as a cover for those elected to get away with doing whatever in the hell they want. That’s why Friday wasn’t a dark day. If anything, a sliver of light slipped through for a brief moment. But never fear, the shade is already pulled tight. The darkness is back. Because the truly dark days in Alabama aren’t the ones like Friday, when the speaker is convicted or the governor gets mired in scandal or the chief justice is on the verge of his second removal from the bench. The dark days are the one that led us all to this point. And like it or not, those days are on Alabama voters, who continue to buy snake oil, continue to think this time Charlie Brown’s gonna kick that football and continue to vote on raw emotion instead of facts. Look around, y’all. The family values governor who has done everything possible to block same-sex couples from marrying was caught in a sex scandal. The anti-welfare, anti-Medicaid, anti-Obamacare, austerity-loving speaker, who never met a welfare recipient he couldn’t demean, has turned out to be the biggest welfare cheat of them all, accused of taking more than $2.3 million in taxpayer funds. And the anti-federal government Alabama Chief Justice, who ordered other judges to ignore a federal court order and claimed a U.S. Supreme Court order didn’t apply to Alabama, is now begging that federal government for help fighting the state and keep him on the bench. These are – or were – the heads of Alabama’s three branches of government. And quite honestly, they are perfect representations of the bodies they lead. Each one of them, and all those like them, landed in power in this state in exactly the same manner: They played you.They played upon your irrational fears of those who are different – the blacks, the Mexicans, the gays – and upon your pride in religion and all things Christian holy. They toyed with your sense of fairness, explaining that a poor man who accepts $200 per month to feed and clothe himself (but really to buy spinning rims and menthol cigarettes) is a moocher but a millionaire who takes in millions in tax breaks and aid is a provider of jobs, even when he doesn’t provide a single one. They twisted your Christian beliefs to somehow trick a population of believers into thinking Christ valued the capitalist, the wealthy and the successful-from-birth more than he valued kindness, giving, charity and aiding the sick. They played you so badly that you’ve consistently voted against your own interests, like when former Gov. Bob Riley, for all of his faults, asked you to fundamentally change the tax collection structure in Alabama, moving it from a regressive tax system to one that ensured the wealthiest bore the largest responsibility. It was the lack of support from the poor and middle class, which vastly outnumber the wealthy, that killed it. Currently, this state ranks within a few spots of the bottom in economic development, job growth, child health in almost any measure, public education, hospital availability, doctor availability, broadband access, clean air and water, infant mortality, women’s health, pregnant mother care, pay equality, women in the workforce, minority employment and infrastructure. But it’s tops in scandal and dudes who have made sacks of cash by manipulating bidding laws and proper process. This is the government you have voted for. These are the government leaders you have elected, and continue to elect. Until that stops, until this state, as a whole, realizes that what occurs in that house on Union Street is more important than what goes down on football fields in Tuscaloosa and Auburn, and until a whole bunch of people start voting for their interests, this will never change. And the days will continue to be dark.
ORLANDO IMPACT — Partisan reaction to the worst mass shooting in U.S. history broke down along depressingly familiar lines. Hillary Clinton cited the need for more gun control and described the brutal attack that took 50 lives as an “act of hate” against the gay community. Donald Trump immediately made the attack about himself saying “[I] appreciate the congrats for being right on radical Islamic terrorism” and calling for “toughness and vigilance.”
Of course, MM can’t remember anyone denying the danger of radical Islamic terrorism, though for diplomatic reasons, some Democrats including President Obama refrain from using the phrase “Islamic terrorism” to describe attacks carried out in the name of terror groups like ISIS.
On a purely political level, it’s hard to see the mass shooting in Orlando changing the dynamic of the presidential race too greatly. It’s simply too muddled and crosses too many different issues. But it will change the focus away from Trump’s recent comments about federal judge Gonzalo Curiel and onto ground where he feels more comfortable: talking tough about Muslims.
That last WSJ/NBC poll showed Clinton with a 10-point edge on who would be better as commander in chief. Will Trump’s braggadocio and renewed calls for a ban on Muslim immigration (which would have done nothing to stop the Orlando attack) materially change that? It’s possible but not likely. He could, however, get a near term bump in the polls from Americans frustrated by the refusal of Clinton and Obama to call the attacks Islamic terror. Trump may not have answers but he has an emotional approach that resonates in times of fear.
OBAMA ON THE SHOOTING — “Today marks the most deadly shooting in American history. The shooter was apparently armed with a handgun and a powerful assault rifle. This massacre is therefore a further reminder of how easy it is for someone to get their hands on a weapon that lets them shoot people in a school, or in a house of worship, or a movie theater, or in a nightclub. And we have to decide if that’s the kind of country we want to be. And to actively do nothing is a decision as well.”
TRUMP TREASURY PICKS — Lots of responses to MM’s request on Friday for picks for Treasury Secretary under a potential Trump administration, some serious, some not.
One anonymous emailer: “Congressman French Hill. Worked at Treasury under Bush, ran a bank and understands these issues more than 99 percent of this town. He is over qualified to be in Congress and could be a dark horse Treasury Secretary in a Trump Administration — IF he would accept the job.”
Columbia Business School grad David Leith on Glenn Hubbard: “I think not. I attended one of CBS’s Centennial programs in Boston last month. Dean Hubbard addressed the crowd. He told of his exasperation at touring Japan the week before and being asked about nothing but Trump. His only consolation, he said, was telling his hosts that at least Trump was a Wharton graduate.’ I don’t think he was very enamored with the Donald.
Per a DC insider: “In the crazy event that a Trump Presidency happens, my dream team would be a Kevin Warsh Treasury Secretary and Glenn Hubbard Fed Chair duo (recall Trump has vowed to replace Yellen — not exactly something I would approve of as appropriate election banter).”
J.W. Verret, former chief economist to the House Financial Services Committee: “The top three list of candidates are all named Glenn Hubbard. Tax reform will be job one in the next Republican Administration. CEA Chairman is usually the White House posting for an in-house ivory tower type. When Glenn was Bush CEA Chairman he took leadership of tax reform and was an unstoppable force, which is uncommon among academics who come to Washington.”
Not happening, per Univ. of Chicago’s Austan Goolsbee: “Glenn Hubbard hates Trump. Through the primary said he would never vote for him and would support HRC if Trump were picked.”
Other picks: Henry Kravis … Mr. Peanut … Colonel Sanders … Thurston Howell III … Ritchie Rich’s father … Goldfinger … Dr Evil
SPEAKING OF KRAVIS … Bloomberg Markets cover overnight features an interview with the private equity titan. Kravis on the current status of financial regulation: “Some regulation is really important. I don’t know what the exact right amount of regulation is.
“Don’t forget, until the financial crisis, which certainly was not created by the private equity industry, there was no oversight of us at all. Zero. Today, all of us in the private equity industry … you come under the regulation of the SEC. … I just think in certain areas maybe that pendulum has swung too far.” http://bloom.bg/1UdjVau
MM TV — For early risers, MM will be on CNBC’s “Squawk Box” at around 6:20 a.m.
DRIVING THE WEEK — D.C. concludes the primary process on Tuesday. Bernie Sanders meets with Hillary Clinton that day. Have to think he gets out though he reiterated on Sunday that he plans to take his campaign all the way to the convention … Obama and Clinton have postponed their joint campaign appearance this week following the Orlando attacks. Donald Trump is also pairing down his campaign schedule … Senate Banking has a hearing Tuesday at 10:00 a.m. Tuesday on “Oversight of the U.S. Securities and Exchange Commission” … Fed announcement and Yellen news conference at 2:30 p.m. Wednesday not expected to include a rate hike but could offer insight into current thinking on the economy and when the next increase might come.
RYAN WON’T RULE OUT PULLING TRUMP ENDORSEMENT — Asked about it on “Meet the Press,” House Speaker Paul Ryan said: “Well, I’m not going to speak about what’s happening in the future. But I believe and hope that he’s going to change and improve his campaign. We’ll see.”
WALGREENS DROPS THERANOS — WSJ’s Michael Siconolfi, Christopher Weaver and John Carreyrou: “Drugstore operator Walgreen Co. formally ended a strained alliance with Theranos Inc. as regulators near a decision on whether to impose sanctions against the embattled Silicon Valley firm. … Some officials at the Walgreens Boots Alliance Inc. unit had grown frustrated at not getting more details and documentation from Theranos after learning it had corrected tens of thousands of blood tests, including many performed on samples collected from patients at Walgreens pharmacies …
“In a news release late Sunday, Walgreens said it had told Theranos it was terminating their nearly three-year-old partnership, effective immediately, and that it was shutting down Theranos lab-testing services in Walgreens locations. It said it would work over the next several days to help transition its customers. … The move is a significant blow to Theranos. The 40 Theranos blood-draw sites inside Walgreens stores in Arizona … have been the primary source of revenue for Theranos and its conduit to consumers” http://on.wsj.com/1U8ptGn
HEDGE FUNDS SCRAMBLE TO KEEP CLIENTS — NYT’s Alexandra Stevenson: “Hedge fund titans once ran their firms like elite private clubs, picking who made it past the velvet rope and how much they would pay for access to supercharged performance. Years of poor performance have now led a number of funds to consider something more like general admission. Some big-name investors — MetLife, American International Group and the New York City pension plan, among them — have recently begun to withdraw their money from hedge funds in larger numbers.
“And the investors who stay are getting a chance to sit at the negotiating table and dictate lower fees and better terms … It’s an unusual position for many hedge fund managers, who as a group are not known for sharing well with others. … [I]n a bid to persuade investors to stay, some managers are sweetening the deal by lowering fees in return for locking up investor money for a longer period of time and setting certain performance targets that if exceeded, investors would pay a fee. For newcomers, managers are even offering the favorable terms once exclusively offered to longtime loyal clients” http://nyti.ms/1S1HPB8
BREAKING DOWN 2016 DEMOGRAPHICS — FT’s Sam Fleming and Barney Jopson: “Trump’s racially charged attacks on a US-born judge of Mexican heritage have put a spotlight on the important role Latinos will play in the forthcoming election … Latinos could comprise more than 27m eligible voters in November and Hillary Clinton is aggressively courting them in swing states including Florida and Colorado, hoping to capitalise on Mr Trump’s hostile language towards immigrants from Mexico and elsewhere. … But Mrs Clinton also needs to boost her appeal to younger female voters, who have shown more enthusiasm for her Democratic challenger Bernie Sanders. Mr Trump, meanwhile, is counting on his popularity among white men to dislodge the Democrats in parts of the Midwest.
“In a number of other so-called battleground states, however, America’s Latino community has the potential to wield significant political clout. The critical one is Florida, where 18 per cent of eligible voters are expected to be Latino … Recent polling shows the majority of Latinos supporting Mrs Clinton … But in [Trump’s] favour is a New York Times analysis that found millions more older, white, working class people voted in 2012 than exit polls had suggested, a sign he has a bigger pool of potential voters than thought” http://on.ft.com/1S1H2Ai
MORE TURMP GRIFT — WP’s Drew Harwell: “It was promoted as the chance of a lifetime: Mom-and-pop investors could buy shares in celebrity businessman Donald Trump’s first public company, Trump Hotels and Casino Resorts. Their investments were quickly depleted. The company known by Trump’s initials, DJT, crumbled into a penny stock and filed for bankruptcy after less than a decade, costing shareholders millions of dollars, even as other casino companies soared.
“In its short life, Trump the company greatly enriched Trump the businessman, paying to have his personal jet piloted and buying heaps of Trump-brand merchandise. Despite losing money every year under Trump’s leadership, the company paid Trump handsomely, including a $5 million bonus in the year the company’s stock plummeted 70 percent.” http://wapo.st/1UuL6e9
ASIA TANKS — Reuters: “Asian stocks fell the most in over two months and the Japanese yen soared on Monday as riskier assets took a hammering before key central bank meetings this week and as nervous investors awaited a referendum that could see Britain exiting the European Union. … Sapping confidence further over recent days has been a steady drip of economic data that has highlighted an underpowered world economy despite years of massive easings delivered by global central banks.
“The U.S. Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan will meet this week. All are expected to hold monetary policy steady against a backdrop of caution heightened by the global impact from a possible Brexit. … Latest data showed China’s fixed-asset investment growth cooling to 9.6 percent in January-May from the same period a year earlier, below market expectations, while the statistics bureau said downward pressures still exist in the economy” http://reut.rs/21hbRHA
NEW TODAY — The Managed Funds Assoc. this morning is releasing a new video series and Web site to help explain hedge funds: http://bit.ly/1Ymhsxr
10:30 am || Receives the Presidential Daily Briefing with FBI Director Comey, DHS Secretary Johnson, NCTC Director Rasmussen, and Deputy Attorney General Yates
All times Eastern
Live stream of White House briefing 12:45 pm
A week in Congress that was already slated to have lawmakers promoting the national defense will be further colored by this weekend’s massacre in Orlando that authorities say constituted both a terrorist attack and a hate crime.
The House is expected to consider the annual spending bill for the Defense Department, this time with a limited amendment process to allow GOP leaders more control over the outcome.
Yet Democrats may try to frame the events that led to House Republicans’s decision to start clamping down on the amendments offered to appropriations bills in an even harsher light in the aftermath of the attack on the gay nightclub in Orlando that killed 50 people and wounded 53 more.
GOP leaders decided to begin cherry-picking which amendments to annual appropriations bills will get votes after Democrats repeatedly forced votes on proposals last month that enforced a 2014 executive order prohibiting federal contractors from discriminating on the basis of sexual orientation or gender.
An Energy Department spending bill collapsed on the House floor last month after an amendment from Rep. Sean Patrick Maloney (D-N.Y.), who is gay, enforcing the prohibition against LGBT discrimination was adopted. Many conservatives who objected to Maloney’s amendment on the basis of concerns about conflicts with religious freedom subsequently voted against the underlying appropriations legislation.
Democrats are sure to try to file that lesbian, gay, bisexual and transgender anti-discrimination amendment again, even though GOP leaders are all but certain to deny it a vote so that they can avoid letting another culture war erupt on the House floor and threaten the appropriations process.
Still, the optics couldn’t come at a worse time after the Orlando massacre, which has been deemed the deadliest mass shooting in American history and happened during Pride month.
Lawmakers of both parties will likely also try to submit amendments requiring Congress to enact a formal war authorization against the Islamic State of Iraq and Syria (ISIS) instead of relying on statute passed for the wars in Afghanistan and Iraq more than a decade ago. Debate over such measures would come after the FBI said Sunday it suspected the Orland attack was ISIS-linked, which lawmakers will argue should heighten the urgency.
House Democrats have decried GOP leaders’s decision to do away with allowing unlimited amendments to appropriations bills. But before the GOP brought back the practice upon taking the House majority in 2011, Democrats had also instituted a limited amendment process for appropriations bills.
The House so far has passed two of the 12 annual appropriations bills: measures to fund legislative branch operations and the Department of Veterans Affairs.
Even with the limited amendment process, the House and Senate are unlikely to finish work on all 12 bills before departing in mid-July for the party conventions.
Next up in the Senate is the Commerce, Justice and Science spending bill, which was passed out of the Appropriations Committee in April.
With an initial procedural vote not expected until Tuesday, the legislation will likely eat up the rest of the Senate’s work week.
The $56.3-billion proposal funds the Departments of Commerce and Justice, as well as NASA, the National Science Foundation and the National Oceanic and Atmospheric Administration.
Similar to other appropriations bills, the legislation includes restrictions on President Obama’s ability to house Guantanamo Bay detainees in the United States.
The Senate is poised to pass a wide-ranging defense policy bill, despite opposition from the White House and conservative groups.
Senators are scheduled to take a final vote on the National Defense Authorization Act (NDAA) Tuesday. The $602 billion bill broadly lays out policy and spending guidelines for the Pentagon and the military service branches.
Wrapping up work on the bill comes after the Senate held a rare Friday vote, ending debate on the NDAA.
The move divided Democrats, with Minority Leader Harry Reid (D-Nev.) urging his colleagues to deny cloture and allow more time to hash out a deal on amendments.
While hundreds of amendments have been filed to the “must-pass” legislation, the Senate’s only had a roll call vote on three of them and approved more than a dozen others by voice vote.
“In Mike Lee’s world, he has to get what he wants,” Graham told reporters. “I think a lot of us are tired of, you know, one member of the Senate saying, ‘This is so important you can’t anything else unless I get this.’ … It’s out of bounds in the third grade. It should be out of bounds in the Senate.”
Conn Carroll, a spokesman for Lee, confirmed that the Utah Republican is currently blocking any amendment votes unless he gets a vote on his amendment.
He added Graham is the only senator currently blocking Lee from getting a vote on banning indefinite detention of U.S. citizens on U.S. soil.
Graham said he offered Lee a vote on his amendment if he could get a separate vote on an Export-Import Bank amendment, but Sen. Richard Shelby (R-Ala.) objected.
If the Senate passes its bill it will still have to hash out differences with House lawmakers, who have passed their own proposal.
Two areas of expected contention will be an extra $18 billion in defense money included in the House bill, and a requirement that women register for the draft included in the Senate version.
Heritage Action, an influential conservative group, cited the changes to the Selective Service as a reason for senators to vote against the Senate’s NDAA, which it will count as “key vote” in its legislative scorecard.
“Regardless of whatever merits the bill may have, it deserves to be defeated because lawmakers should not force young women into military services through the Selective Service,” the group said in a release.
The White House is threatening to veto the legislation over a myriad of policy issues, including restrictions on Guantánamo Bay transfers and a cap on the size of the National Security Council staff.
Obama has threatened to veto the policy bill every year since coming into office, but only done so once, in 2015.
In addition to moving forward with the appropriations process this week, the House is expected to consider legislation authored by Rep. Peter Roskam (R-Ill.) to prohibit the IRS from requiring tax-exempt organizations to include the identifying information of contributors in annual tax returns.
A vote on the bill comes as GOP leaders grapple with potentially allowing a House floor vote before the summer recess to impeach IRS Commissioner John Koskinen.
Hard-line conservatives in the House Freedom Caucus have been pushing for a vote to impeach Koskinen for months. They pressured Speaker Paul Ryan (R-Wis.) to either hold hearings on impeaching Koskinen or else force a vote on the House floor.
The House Judiciary Committee held its first hearing last month on potential impeachment and is expected to hold another hearing this month on the issue.
In the meantime, House GOP leaders can use the vote on the legislation this week as a way to show conservatives they’re taking action on punishing the IRS over the targeting of conservative groups.
Tighter Rules on Remittances Put Squeeze on Go-Betweens
For years, Fernando Lopez’s storefront money-transfer business in Atlantic City was a place where local residents could wire money to family and friends abroad. But that business, Interamericana Express, which handled a lot of transmittals to Mexico, is dwindling as banks and regulators take a stricter view of cross-border money transfers. Mr. Lopez’s business accounts have been closed several times in recent years by three different banks over money-laundering concerns despite his state license, hours of compliance training and binders full of rules and regulations. Since being dropped by the banks, he has operated his money transfer business as an agent of MoneyGram International and Ria Money Transfer, depositing transfers in accounts at those companies. Banks will not take any of his money-transfer business directly. Frustrated, he is trying to convert his shop, which also offers notary and bill payment services, into a by-the-pound parcel shipping center. The banks don’t see a small business with a money transfer operation “in a good way,” Mr. Lopez said. “We comply with all the regulations. We have to follow the rules,” he said. “But they don’t want to deal with us.” Mexico is the biggest destination for money transfers from the United States, according to estimates by the World Bank. About $24.3 billion was remitted there from the United States last year, practically all of the cross-border money that flowed to Mexico from around the world, and nearly one-fifth of all remittances sent abroad from the United States. But what was once viewed as a big consumer business opportunity for American banks is now seen as a liability. Banks are refusing to do business with money transmitters, closing or freezing their accounts over concerns about money laundering and extra regulatory scrutiny.
Taliban gains in Afghanistan threaten costly U.S. reconstruction effort
The United States has wasted billions of dollars in reconstruction aid to Afghanistan over the past decade, and now a renewed Taliban insurgency is threatening the gains that have been made, the U.S government’s top watchdog on Afghanistan said. “The bottom line is too much has been wasted in Afghanistan. Too much money was spent in too small a country with too little oversight,” John Sopko told Reuters. “And if the security situation continues to deteriorate, even areas where money was spent wisely and gains were made, could be jeopardized.” The nearly $113 billion Congress has appropriated for reconstruction since 2001, when U.S.-led forces invaded the country and toppled the Taliban regime, has long been plagued by corruption, waste and mismanagement, according to a series of reports from Sopko, the Special Inspector General for Afghanistan Reconstruction (SIGAR).Appointed by President Barack Obama, Sopko has led the watchdog agency for nearly four years. He said the planned drawdown of U.S. troops could compound the reconstruction effort’s problems and add to the amount that already has been wasted, which he estimated is in the billions of dollars. More:
Paul Manafort’s Wild and Lucrative Philippine Adventure
When Paul Manafort met Ferdinand Marcos in the 1980s, each had something the other wanted.
Marcos, then in his third decade as leader of the Philippines, had developed a reputation in Washington as a stalwart ally in the fight against communism. But he was facing rising concerns about rampant corruption, plundering of public resources and human rights violations under his increasingly despotic leadership, during which Amnesty International now estimates 34,000 people were tortured and 3,240 killed. Meanwhile, Marcos amassed a fortune estimated at $10 billion, spending big on paintings by Pissarro and Manet, a fleet of private planes and helicopters and Mercedes-Benzes. Manafort, then in his 30s, was a hotshot Republican operative who had made his name helping Gerald Ford and Ronald Reagan, and was pioneering a new form of international political consulting. The model, which allowed him to indulge his taste for the high-life, parlayed his clout with the emergent conservative ruling class into lucrative gigs representing foreign leaders looking to buff their reputations in Washington.
A Marcos front group would eventually hire Manafort to try to help him retain his grip on power, agreeing to pay Manafort’s firm $950,000 a year — one of the first big foreign gigs landed by the firm. But back then, during the Wild West days of the international political industry, there was more buzz in Washington and Manila about Manafort’s proximity to Marcos during a period of epic spending to support a lavish lifestyle and to curry favor with influential Americans. One example, according to documents, including some published here for the first time: Marcos earmarked huge sums of cash for Reagan’s 1980 and 1984 campaigns — as much as $57 million, according to one claim made to Philippine investigators. There’s no evidence that any cash ever made it into Reagan’s coffers, which would have been illegal since U.S. election laws ban donations from foreigners. And, despite extensive government investigations on both sides of the Pacific into the freewheeling spending of the Marcos regime, there’s never before been much serious inquiry of what ultimately happened to the cash intended for political contributions. The lack of a transparent paper trail — combined with the larger than life personas of Marcos and Manafort — spawned a swirl of theories. In a phone interview this month, Manafort, now 67, acknowledged that for the better part of 30 years, he’s been dealing with speculation that he accepted millions of dollars in Marcos’s cash — either as a bonus or as a donation intended for Reagan. More:
Obama’s historic visit was a smash hit in Havana. Fidel Castro wasn’t going to take that lying down. HAVANA—These days Fidel Castro doesn’t often leave his comfortable home in Siboney, a leafy suburb west of this city. But on April 19, the 89-year-old Cuban leader emerged, aides at his side, wearing a royal blue Adidas sports jacket over a blue plaid shirt, and was driven two miles to the immense Palacio de Convenciones. Inside he was greeted by a thousand members of the Communist Party, the ruling body that has been Cuba’s sole political party for half a century. They were wrapping up their four-day conference, generally held twice a decade. Fidel is ailing and officially retired, having incrementally handed the reins of power to his brother Raul over the past decade. But he remains a history buff, a news junkie, and a man keenly concerned with his legacy. And he was not pleased with what he had been hearing. President Barack Obama had spent three high-profile days in Havana at the invitation of Raul. And the visit, to Fidel’s dismay, had been an immense public success, generating as much excitement and buzz on the island as the arrival of The Rolling Stones for a free concert a few days later. While state media treated Obama with cautious distance, there was no mistaking the thrill of ordinary Cubans as the president toured local sights, watched a baseball game, and drove through Havana with his family and entourage. They dubbed the president Santo Obama. “He’s more popular than the Pope!” one exultant habanera told me. More:
Period. Full Stop. Point. Whatever It’s Called, It’s Going Out of Style
LONDON — One of the oldest forms of punctuation may be dying The period — the full-stop signal we all learn as children, whose use stretches back at least to the Middle Ages — is gradually being felled in the barrage of instant messaging that has become synonymous with the digital age So says David Crystal, who has written more than 100 books on language and is a former master of original pronunciation at Shakespeare’s Globe theater in London — a man who understands the power of tradition in language
The conspicuous omission of the period in text messages and in instant messaging on social media, he says, is a product of the punctuation-free staccato sentences favored by millennials — and increasingly their elders — a trend fueled by the freewheeling style of Facebook, WhatsApp and Twitter
“We are at a momentous moment in the history of the full stop,” Professor Crystal, an honorary professor of linguistics at the University of Wales, Bangor, said in an interview after he expounded on his view recently at the Hay Festival in Wales “In an instant message, it is pretty obvious a sentence has come to an end, and none will have a full stop,” he added “So why use it?” In fact, the understated period — the punctuation equivalent of stagehands who dress in black to be less conspicuous — may have suddenly taken on meanings all its own Increasingly, says Professor Crystal, whose books include “Making a Point: The Persnickety Story of English Punctuation,” the period is being deployed as a weapon to show irony, syntactic snark, insincerity, even aggression If the love of your life just canceled the candlelit, six-course, home-cooked dinner you have prepared, you are best advised to include a period when you respond “Fine.” to show annoyance “Fine” or “Fine!,” in contrast, could denote acquiescence or blithe acceptance
“The period now has an emotional charge and has become an emoticon of sorts,” Professor Crystal said “In the 1990s the internet created an ethos of linguistic free love where breaking the rules was encouraged and punctuation was one of the ways this could be done” More:
The Securities and Exchange Commission today announced a whistleblower award of more than $17 million to a former company employee whose detailed tip substantially advanced the agency’s investigation and ultimate enforcement action. The award is the second-largest issued by the SEC since its whistleblower program began nearly five years ago. The SEC issued a $30 million award in September 2014 and a $14 million award in October 2013. “Company insiders are uniquely positioned to protect investors and blow the whistle on a company’s wrongdoing by providing key information to the SEC so we can investigate the full extent of the violations,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “The information and assistance provided by this whistleblower enabled our enforcement staff to conserve time and resources and gather strong evidence supporting our case.”
Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “In the past month, five whistleblowers have received a total of more than $26 million, and we hope these substantial awards encourage other individuals with knowledge of potential federal securities law violations to make the right choice to come forward and report the wrongdoing to the SEC.” By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. The SEC’s whistleblower program has now awarded more than $85 million to 32 whistleblowers since the program’s inception in 2011. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. For more information about the whistleblower program and how to report a tip: www.sec.gov/whistleblower.
Lone Star’s Nonprime MBS Receives ‘A’ Rating with Strong Underwriting, Weak Reps and Warrants
DBRS and Fitch Ratings assigned an A rating to the $161.71 million nonprime mortgage-backed security planned by Lone Star Funds. The deal is the first post-crisis nonprime MBS to receive a credit rating and it will be the largest post-crisis nonprime MBS issued to date. All of the mortgages to be included in the planned COLT 2016-1 Mortgage Loan Trust were originated by Caliber Home Loans, which will also service the mortgages. More than half of the loans are non-qualified mortgages and many of the rest are rebuttable presumption QMs (which have higher interest rates than safe harbor QMs). DBRS stressed that the mortgages had strong underwriting standards, including full documentation of income, employment and borrowers’ assets. The rating service said Caliber has originated 1,349 mortgages in its non-agency programs since the fourth quarter of 2014 and only 14 of the loans have gone 30-days delinquent. However, DBRS said the representation and warranty framework on the planned MBS is “considerably weaker” than the reps and warrants for jumbo MBS issued in recent years. Most of the mortgage won’t be subject to automatic reviews for breaches of reps and warrants after a serious delinquency and reviews can be performed in-house instead of by a third-party firm.
Exclusive: Charles Koch and his company launch ‘end the divide’ ad campaign
WICHITA, Kan. — Working to soften his partisan image, conservative billionaire Charles Koch’s industrial conglomerate this week will launch a television and digital advertising campaign that calls for Americans of all political stripes to “end the divide” as he seeks broader support for his free-market ideas and defends his corporate brand. The advertising, which starts Friday, aims to “get a national conversation going,” Koch told USA TODAY. “Let’s stop attacking people we disagree with and trying to silence them. Let’s instead try to find common ground and learn from each other so we can innovate.” The campaign comes as Koch and his aides work to retool parts of his vast policy and political empire and direct more money and effort toward public policy and social change. The network recently launched a new arm, dubbed Stand Together, which has set attacking poverty and boosting educational quality as early goals. And Koch officials have disbanded an opposition-research unit that gathered information about liberal groups, Democratic candidates and others. Koch expressed skepticism this week about Republican Donald Trump’s presidential bid, but said he’s not retreating from national and state politics. He calls the changes part of the “normal review” that his network and company alike undergo periodically to remain nimble and competitive. ‘“The world is changing,” he said. “We’ve got to change at least as fast as the world, hopefully faster.” The new 60-second commercial initially will air on news programs and expand to sports and entertainment shows, said Steve Lombardo, who oversees communications and marketing at Koch Industries. It opens with images contrasting a stately white mansion with a trash-strewn neighborhood as a narrator talks of a country “divided between success and failure, with government and corporations picking winners and losers.” It goes on to hit themes Koch has pursued for years, arguing that the criminal-justice system is rigged against the poor and that government regulation thwarts business growth. Print versions of the ads will appear in several national newspapers Monday. A new website, EndTheDivide.com, highlights what company officials say are their efforts to “promote equal justice and a free and open society,” such as the company’s decision to stop asking potential employees about their criminal histories on job applications. Koch officials say they also are expanding a range of efforts, including a “principled entrepreneurship” program that encourages high school students to start small businesses. That project will expand to more than 50 additional schools this fall in cities from Phoenix to Detroit. More:
Ask the Headhunter: Which industries are being too greedy to pay you fairly?
Nick Corcodilos started headhunting in Silicon Valley in 1979 and has answered over 30,000 questions from the Ask The Headhunter community. In this special Making Sen$e edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards or salary negotiations. No guarantees — just a promise to do his best to offer useful advice. You see it in many aspects of your life: While the price of fuel has dropped and airlines and their shareholders run to the bank with higher returns, you pay more to sit in smaller airline seats and to arrive at your destination later. Your stock broker gets rich off the higher fees you pay on your investments, while the value of your portfolio stagnates or declines. Yes, you’re getting screwed. The trend is hardly worth debating — you pay more to get less. And now we know for sure that it’s hitting your paycheck, too: As corporate profits soar, you get paid less for your work. I believe in capitalism, but this isn’t capitalism — it’s greed, and it’s putting our economy and our society at risk because it’s devaluing the work you do and killing your motivation to be more productive. More:
Meet the Banking Caucus, Wall Street’s secret weapon in Washington
The lawmakers were at an impasse. More than two hours into a meeting of the House Financial Services Committee last month, the members were bickering over two versions of a bill designed to ease a new regulation that affected banks, part of the sweeping 2010 overhaul of financial laws known as the Dodd-Frank Act. The dispute? Whether to give the banks everything they asked for, or whether to give them even more. Rep. Scott Garrett, R-N.J., asked to postpone a final vote so he could contact “stakeholders,” code for the bankers who wanted the change. Then Rep. Jeb Hensarling, R-Texas, the committee’s ambitious chairman, attempted to retake the discussion with what passes for a joke in the oxygen-starved air of the wood-paneled hearing room in the Rayburn House Office Building on Capitol Hill. “Occasionally we have been accused of trying to undermine aspects of Dodd-Frank,” Hensarling said with a chuckle. “I hope we’re guilty of it.” Hensarling was being modest. With a 29-person committee staff, dozens of congressional colleagues and legions of lobbyists lined up to beat back any attempt to impose new discipline on the industry, the 56-year-old from Dallas is well on his way to achieving that goal. Every business sector has its friends in Washington. Financial companies — from the biggest megabanks to small payday lenders — have some of the best. Less than six years after a massive financial crisis drove the U.S. banking system to the edge of collapse, leading to a $700 billion government bailout and a recession that destroyed as much as $34 trillion in wealth, bankers and lawmakers are working in concert to undermine Dodd-Frank, an 849-page law designed to prevent another failure. There are more than 2,000 lobbyists for financial firms and trade groups and many are spreading money around Washington, enlisting like-minded members of Congress to write letters, propose legislation, hold hearings and threaten agency budgets as they pressure regulators to ease up on banks. Regulators say they try to treat input from lawmakers like that from anyone else. However, “there are all these other factors, like the budget, like the fact that they can call you up to testify, and they can make your life pretty miserable,” said the former head of one regulatory agency who asked not to be identified, as did many of those contacted for this story.The campaign is working. While Hensarling’s committee can’t move legislation on its own — the Senate Banking Committee supports Dodd-Frank — the House panel can work its will in other ways. And it has. Almost four years after Dodd-Frank became law, community banks face lower capital standards than originally proposed and are therefore more likely to fail; fewer derivatives traders have to register with regulators and they face lower hurdles in booking trades than they otherwise would have, partly undermining the law’s aim to make this corner of the financial system more transparent; and big banks may soon have a green light to keep investing in potentially risky securities that regulators tried to limit. More:
Goldman Sachs just got a $1 billion dollar break on its financial crisis settlement
Goldman Sachs is the last of the major banks to reach a settlement with the government for its role in the 2008 financial crisis. You may remember that it was one of several financial institutions accused of repackaging subprime mortgages (sold by companies like Countrywide) to investors who sustained massive losses when the housing bubble burst. According to the New York Times, the settlement amounts to $5.1 billion dollars – which pales in comparison to the agreement reached by mortgage industry titan Morgan Stanley which was forced to pay $13.3 billion dollars. And unlike other banks, Goldman’s settlement provides it a variety of credits applied to policies such as loan forgiveness and low-income housing that could save it up to $1 billion dollars. Now of course all banks are different, and each played a different role in the 2008 crisis. But what’s also different is the extent to which the major US banks give to politicians in Washington. Up next is the breakdown on which of these banks wields the most influence in Congress. More:
How Keeping Up Appearances Ruined a Former Dallas Banker
At age 67, Thomas C. Davis should be enjoying all the perks of a long and distinguished career at the pinnacle of Wall Street and the Texas business elite. These include golfing at the prestigious Dallas Country Club and Preston Trail Golf Club, where he was a member; trips to Las Vegas and golf tournaments on the private jet he co-owned; and fractional ownership of two professional sports teams, the Texas Rangers and the Dallas Stars. What he faces instead is the prospect of 20 years or more in federal prison and millions of dollars in fines. Last month, Mr. Davis pleaded guilty to 12 felonies for a brazen insider trading scheme in which he leaked a stream of confidential information about the Dallas-based Dean Foods while he served as the company’s chairman. When questioned by agents from the Federal Bureau of Investigation in 2014 and lawyers from the Securities and Exchange Commission last year, he lied, compounding his securities fraud by committing perjury. And after the F.B.I. agents left, he took a prepaid cellular phone he had used to leak the information and threw it into a creek near his Dallas home, destroying evidence and obstructing justice. Mr. Davis’s crimes have received relatively little attention, in part because of the blaze of publicity that accompanied the flamboyant professional sports gambler William T. Walters, who was accused of being his co-conspirator, and the three-time Masters golf champion Phil Mickelson. (Mr. Mickelson wasn’t charged but netted nearly $1 million from the Dean Foods tips and agreed to forfeit the proceeds plus interest.) Mr. Walters pleaded not guilty last week to 10 felony counts. What led to Mr. Davis’s actions? His plea hearing, coupled with the S.E.C. and criminal complaints, and interviews with people who know him, offer some clues. More:
Wendy’s says it finds more unusual card activity at restaurants
U.S. burger chain operator Wendy’s Co (WEN.O) said it had discovered additional instances of unusual credit card activity at some of its franchise-operated restaurants, widening the scope of an earlier cyber attack on the company. The company in January said it was investigating reports of unusual activity with payment cards used at some of its restaurants. Wendy’s said it recently discovered a variant of a malware that was discovered and reported in May. The new malware was used to target a point-of-sales system that was earlier believed to be unaffected. The company said the new variant of the malware had been disabled in cases where it was detected. Wendy’s expects the number of franchise restaurants that will be impacted by the cybersecurity attacks is now “considerably higher” than the 300 restaurants already affected. “To date, there has been no indication in the ongoing investigation that any company-operated restaurants were impacted by this activity,” Wendy’s said on Thursday. The new discoveries are a result of the company’s continuing investigation into unusual credit card activity at its restaurants. Large retailers such as Target Corp (TGT.N) and Home Depot Inc (HD.N) have been victims of security breaches in recent years.
Identity Fraud: Back with a Vengeance, Harder to Stop
New-account fraud is growing fast and forcing banks and their data brokers to rethink the way they verify the identities of new customers. The opening of fake accounts using stolen or made-up (aka synthetic) identities more than doubled in 2015, according to aJavelin Strategy & Research report. Crooks stole the identities of, or appropriated personal information from, 1.5 million consumers — up from 700,000 in 2014 — to create fraudulent checking, credit card, loan and other accounts. “I can tell you with 100% conviction that identity proofing is the biggest fraud problem out there,” said Avivah Litan, a vice president at the research and advisory firm Gartner. “Fraud has become an identity problem.” The U.S. migration to EMV chip cards is one factor, as it is forcing criminals who used to create counterfeit cards to change their MOs. “The impetus for identity thieves has increased generally because the chip card has created a situation where you can’t mass produce counterfeit plastic with compromised data,” said Richard Parry, principal at Parry Advisory. “That has got a lot of criminals thinking, if I can’t manufacture one, why don’t I get a real one?” Data that can be used to create synthetic identities or set up new accounts based on stolen identities is plentiful. According to the Javelin study, 7 million individuals last year reported having their Social Security numbers breached within the prior 12 months, 63% more than in 2014. Since Social Security numbers maintain their value for the entire life of the associated individual, these represent lasting vulnerabilities. “There are staggering amounts of data available about people that enables me to impersonate them for the purpose of fraudulent applications,” Parry observed. “So fraudulent applications will go up until the financial services industry comes up with better ways to” verify identity. To be sure, consumer surveys are an imperfect measure of new-account fraud because consumers often do not realize they are the victims. Fraudsters could use stolen identities to open and use credit cards for months before the victims notice something is wrong — such as, they cannot get loans or their credit scores drop precipitously. In the case of synthetic identities, consumers may never find out a piece of their information was used to build a fictitious yet realistic identity. Banks often do not detect these rogue accounts, either. They tend to mislabel synthetic ID fraud as loan losses. “When we talk to our bank clients about application fraud and identifying true-name fraud versus synthetic IDs, they have a hard time even distinguishing if they’re dealing with fraud in the first place, much less whether it’s a synthetic ID,” said Al Pascual, research director and head of fraud and security at Javelin. “Often, banks and issuers will charge off these accounts and label them as a credit risk issue. Unless that consumer or law enforcement calls them and says that wasn’t me and can prove it, they’re not going to stamp it as fraud.” In synthetic ID, where bits and pieces of real identities are cobbled together to create an identity Frankenstein, it is hard for issuers to get a hold of the true owners of those pieces of ID information, Pascual said. “It confounds banks’ ability to know how much of a problem they’re really facing.” Another caveat to the survey results is that the 700,000 victim number for 2014 was a record low. That year, fraudsters were able to take advantage of massive card data breaches (1,107 in the U.S. alone) and conduct card fraud at the point of sale. They did not have to go to the trouble of opening fake accounts. By 2015 a huge wave of reissued cards made card fraud less tenable. “We’ve have had so many breaches lately with very sensitive information being stolen that this trend line will continue, if not accelerate, and become more of a problem,” Pascual said. “I predict we’re going to go from 1.5 million to well over 2 million new account-fraud victims next year.” Bankers are worried. In a recent American Banker survey of bank chief information security officers, almost a third said the overall increase in identity theft was one of their top five challenges. More:
USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills
Donald Trump casts himself as a protector of workers and jobs, but a USA TODAY NETWORK investigation found hundreds of people – carpenters, dishwashers, painters, even his own lawyers – who say he didn’t pay them for their work. During the Atlantic City casino boom in the 1980s, Philadelphia cabinet-builder Edward Friel Jr. landed a $400,000 contract to build the bases for slot machines, registration desks, bars and other cabinets at Harrah’s at Trump Plaza. The family cabinetry business, founded in the 1940s by Edward’s father, finished its work in 1984 and submitted its final bill to the general contractor for the Trump Organization, the resort’s builder. Edward’s son, Paul, who was the firm’s accountant, still remembers the amount of that bill more than 30 years later: $83,600. The reason: the money never came. “That began the demise of the Edward J. Friel Company… which has been around since my grandfather,” he said. Donald Trump often portrays himself as a savior of the working class who will “protect your job.” But a USA TODAY NETWORK analysis found he has been involved in more than 3,500 lawsuits over the past three decades – and a large number of those involve ordinary Americans, like the Friels, who say Trump or his companies have refused to pay them. At least 60 lawsuits, along with hundreds of liens, judgments, and other government filings reviewed by the USA TODAY NETWORK, document people who have accused Trump and his businesses of failing to pay them for their work. Among them: a dishwasher in Florida. A glass company in New Jersey. A carpet company. A plumber. Painters. Forty-eight waiters. Dozens of bartenders and other hourly workers at his resorts and clubs, coast to coast. Real estate brokers who sold his properties. And, ironically, several law firms that once represented him in these suits and others. Trump’s companies have also been cited for 24 violations of the Fair Labor Standards Act since 2005 for failing to pay overtime or minimum wage, according to U.S. Department of Labor data. That includes 21 citations against the defunct Trump Plaza in Atlantic City and three against the also out-of-business Trump Mortgage LLC in New York. Both cases were resolved by the companies agreeing to pay back wages. In addition to the lawsuits, the review found more than 200 mechanic’s liens – filed by contractors and employees against Trump, his companies or his properties claiming they were owed money for their work – since the 1980s. The liens range from a $75,000 claim by a Plainview, N.Y., air conditioning and heating company to a $1 million claim from the president of a New York City real estate banking firm. On just one project, Trump’s Taj Mahal casino in Atlantic City, records released by the New Jersey Casino Control Commission in 1990 show that at least 253 subcontractors weren’t paid in full or on time, including workers who installed walls, chandeliers and plumbing. More:
Obama endorses Hillary Clinton for president following Sanders meeting
President Obama formally endorsed Hillary Clintonvia video Thursday, less than two hours after meeting with second-place primary finisher Bernie Sanders. The Clinton campaign released the video in which the president says, “I don’t think there’s ever been someone so qualified to hold this office.” The president said Clinton is “making history” as the first female presidential nominee of a major party, and “I’m with her.” The video — filmed earlier this week — surfaced after Sanders capped his Oval Office meeting with Obama by saying he plans to take his issues to the Democratic convention next month, though he will also speak soon with presumptive Democratic nominee Hillary Clinton about the best way to defeat Republican Donald Trump in the fall election. “I look forward to meeting with her in the near future,” Sanders told reporters at the White House. Obama, who aides say has been itching to hit the campaign trail, says in the video that, “I’m with her, I am fired up, and I cannot wait to get out there to campaign for Hillary.” Praising Clinton’s “courage” and “compassion,” Obama says: “Look, I know how hard this job can be — that’s why I know Hillary will be so good at it.” Sanders, after speaking with Obama for about an hour, Sanders did not indicate that he withdraw from the race anytime soon, and plans to contest Tuesday’s Democratic primary in Washington, D.C., by promoting the idea of statehood for the district.
The Vermont senator also said he plans to maintain his movement in an effort to change a political system in which “a handful of billionaires exercise enormous power.” He also cited campaign plans ranging from health care to anti-poverty programs. “These are the issues we will take to the Democratic convention,” he said. More:
The GOP’s nuclear option: how Trump could be denied the nomination even with a majority
It’s that time again — Donald Trump is at the center of a firestorm, and some GOP elites are speculating about blocking his nomination, according to a new report by Jon Ward of Yahoo! News. But wait, you say — hasn’t Trump already locked up the majority of delegates he needs to win? Indeed he has. All along, though, there’s been a “nuclear option” that could deny him the nomination nevertheless. To block Trump, a majority of delegates at the convention would simply have to vote to change their rules, to free themselves up to vote for whichever candidate they want. And then they’d just … nominate someone who’s not Donald Trump. This may seem shockingly undemocratic, but it’s completely possible given how the convention works. The delegates get to set their own rules, and no higher body can overrule them. So they’re perfectly free to change those rules at the last minute — even if those changes are obviously meant to alter the outcome of the race. Now, few people currently believe anywhere even close to enough delegates would actually be willing to take such an extreme measure, because so blatantly overturning the results of the primaries would obviously provoke a massive uproar. Furthermore, state law relating to delegate binding is complicated — some delegates may have obligations to vote for certain candidates under their state’s laws even if that national-level binding rule is removed. Still, if a die-hard anti-Trump movement were to gain sufficient strength among the delegates — and felt confident enough to defy the apparent will of the voters — nobody could step in and stop them from using the nuclear option. Even if pressing that button could destroy the Republican Party. One of the reasons a nuclear option scenario isn’t completely implausible is that many supposed “Donald Trump delegates” headed to the convention might not truly support Trump at all. By the current rules of the party, about 95 percent of delegates will go to the convention “bound” to cast their ballots for a particular presidential candidate. The primary and caucus results in their states determine which candidate they’re bound to. But these delegates are also actual people. And while in a few states the candidates get to pick which people will be their bound delegates, in many others they have little or no say in the process. Indeed, it’s common for states to select their delegates through obscure or arcane processes that have absolutely no connection to the primaries. One common method is through a series of caucuses or conventions, often at the county or state level. Depending on the political situation and particular delegate selection rules in each state, these processes could end up being dominated by the states’ political establishment, or by highly motivated and organized conservative activists. They could also be influenced by the candidates themselves — but by most accounts, Ted Cruz’s campaign was much more organized and tuned in to this stage of the process than Trump’s has been. So many of Trump’s delegates could actually be what GOP operative (and would-be uncommitted Virgin Islands delegate) John Yob has dubbed “SINOs,” or “supporters in name only.” Though bound to vote for Trump on the first ballot, these people could in fact hope to deny him the nomination. And here’s the crucial point: Delegates are only “bound” for the final nomination vote. They have no obligation to vote in their candidate’s interests on rules votes. More:
Trump donors meet amid concerns about disarray in White House campaign, fundraising
Donald Trump’s national finance team held its first official meeting on Thursday amid growing concerns about the Republican presidential candidate’s lack of a campaign infrastructure, his attacks on a Mexican-American judge, and the realization that Trump’s flame-throwing instincts have yet to be reined in. The meeting at New York City’s Four Seasons Hotel took place two years after such a gathering would normally occur in the traditional realm of U.S. politicking. Presidential contenders typically organize their fundraising operations long before they declare their candidacies. Trump, a wealthy celebrity businessman, became the Republicans’ presumptive nominee for the Nov. 8 presidential election last month after seeing off 16 rivals in a largely self-funded primary campaign. His late start on fundraising is widely considered a steep structural handicap among top Republican donors, who question whether Trump can achieve his previously stated aim of raising $1 billion before November. On the Democratic side, presumptive nominee Hillary Clinton’s well-oiled operation is well ahead of schedule. With Trump at the meeting were his chief strategist, Paul Manafort, Republican National Committee Chairman Reince Priebus and Republican fund-raisers Ray Washburne and Lew Eisenberg. Already, top donors are saying Trump is unlikely to hit $1 billion. Trump is also pulling back from his earlier statements on his fundraising goal. His campaign manager, Corey Lewandowski, told Reuters on Wednesday he sees no reason why Trump would have to raise that sum and that Trump may very well be able to continue his low-cost style of campaigning. That includes garnering free media – which is estimated to reach a value of $5 billion by November, according to media analytics firm mediaQuant. That is more than double the amount Clinton is likely to get, mediaQuant says. Thursday’s meeting kicked off the Trump Victory Fund – his joint fundraising operation with the Republican National Committee that aims to raise money both for his candidacy and for candidates further down the ballot in the November election, whose efforts could be impaired by anemic fundraising by Trump.
Even Christopher Hitchens’s detractors would concede him two great qualities: honesty and bravery. Hitchens spoke the truth as he understood the truth, without regard to whom he might please and whom he might offend. What Hitchens wrote of his intellectual hero, George Orwell, was the epitaph he would have wished for himself: By his determination to seek elusive but verifiable truth, he showed how much can be accomplished by an individual who unites the qualities of intellectual honesty and moral courage. Yet this is the epitaph that a new book about Hitchens seeks to deny him. Larry Taunton is an evangelical publicist and promoter who became friendly with Hitchens during the writer’s final three years of life. Earlier this spring, Taunton published a new book that alleged that Hitchens was not as committed to his atheism as Hitchens publicly insisted—that, indeed, Hitchens had approached the verge of a Christian conversion. Taunton based this astounding claim on two conversations with Hitchens during car drives to speaking events sponsored by Taunton’s foundation. During the longer of those drives (13 hours from Hitchens’s home in Washington, D.C., to Taunton’s in Birmingham, Alabama), the two men read aloud and discussed the Gospel of St. John. Taunton directed Hitchens’s attention to the Gospelist’s promise of eternal life, which Hitchens—according to Taunton—described as “not without its appeal to a dying man.” More:
Speaker Mike Hubbard testifies ‘friend’ died, but he didn’t
Alabama House Speaker Mike Hubbard testified today that a “long-time friend” he sought help from for a consulting client had died from an aneurysm. After a short break in the trial, prosecutor Matt Hart surprised Hubbard. “We just spoke to him a few days ago,” Hart told Hubbard, still on the witness stand. “How close were y’all?” Hubbard said, “I must have him confused with somebody else.” Today is Hubbard’s third day on the witness stand in his ethics trial. A special grand jury in Lee County indicted Hubbard is October 2014 on 23 felony ethics charges. Hubbard has denied all the charges. The defense rested this morning after Hubbard’s testimony. Hubbard was the only witness the defense called. The state has also rested and closing arguments are expected this afternoon. The exchange over Hubbard’s friend concerned an email he sent to try to help Capitol Cups, which was paying Hubbard’s Auburn Network $10,000 a month to help market its products. Hart showed the jury an email from Hubbard to Michael Mitchell to try to set up a meeting for Capitol Cups to pitch its products to Publix. A few minutes later, Hubbard lawyer David McKnight asked Hubbard more about the email to Mitchell. It was at that point that Hubbard referred to Mitchell as a “longtime friend” who had died since the email exchange. Hubbard was still on the stand for cross-examination by Hart this morning. Hart tried to show the jury that some of Hubbard’s testimony during the trial has differed from what he had earlier told investigators under oath. Trial testimony from Hubbard and his former chief of staff, Josh Blades, has indicated that Hubbard told Blades to try to help get final approval of a patent for Robert Abrams, an Auburn manufacturer and that Blades made calls on Hubbard’s behalf. In court today, Hart asked Hubbard if he remembered what he told investigators earlier about the help with the patent. Hubbard said he did not remember what he told investigators. Hart gave Hubbard a transcript of Hubbard’s interview with investigators. After reading the transcript, Hubbard acknowledged telling investigators that he made calls to help Abrams with the patent, but did not mention that Blades had also made calls. “I guess I didn’t have that on the top of my mind at the time,” Hubbard said. One of the charges against Hubbard is that he used state personnel to help Capitol Cups. Hubbard testified that he was helping Abrams with the patent because Abrams employed about 500 people in his legislative district, not because of the Capitol Cups contract. The patent was for another Abrams company. Hubbard has denied violating the ethics law on the charges involving others and all the others in the 23-count indictment.
People don’t know who to trust in Alabama’s water crisis
“I’m not going to drink it,” Billie Mason of Courtland said Wednesday about his county’s public water. “I’m going to abide by what they said, even though I don’t believe what they said.” Mason was talking about the West Morgan and East Lawrence County Water and Sewer Authority’s recent warning not to drink its water. He spoke while picking up a free case of donated bottled water at a Courtland city park. Mason’s view was one of a wide range of thoughts and emotions at the park where almost 100 people picked up water on Wednesday. People said they are afraid, frustrated and mad. And some even expressed a kind of dark hope that maybe the water could explain their health problems and what locals say has been “a lot” of sickness in the area in recent years. Mason said he was “inclined to” believe Gov. Robert Bentley that the water is OK. Monty Brown, also of Courtland, wasn’t. “I think the governor’s full of crap,” Brown said. “I mean, I have respect for all elected officials, and I try to be respectful, but (the water is) coming from a place where you have to wear PPE (Personal Protective Equipment) to work around it, and then it gets in the water and you’re telling us it’s OK to drink it? I think that’s B.S.” More:
Alabama AG denounces ruling denying right to carry concealed guns in public
Alabama’s attorney general today denounced a federal appeals court ruling today effectively denying residents of one California county the right of possession of a handgun for self-defense outside the home.
“The U.S. Ninth Circuit Court of Appeals held today that residents have no Second Amendment right to carry a firearm outside their home for self-defense,” Alabama AG Luther Strange stated in a press release. “In effect the appeals court ruled that San Diego County can outlaw guns outside the home by declining to issue anyone a permit. This court’s decision is a direct challenge to the Second Amendment and is unconstitutional,” Strange stated. The court ruled in a 7-4 opinion in the case. “We hold that the Second Amendment does not preserve or protect a right of a member of the general public to carry concealed firearms in public,” the court ruled. According to Strange’s statement one of the 9th Circuit judges, Consuelo Callahan wrote in a dissenting opinion that: “a prohibition on carrying concealed handguns in conjunction with a prohibition of open carry of handguns would destroy the right to bear and carry arms.” Strange stated he filed an amicus brief on April 30, 2015, on behalf of Alabama and 20 other states, in the case of Peruta v County of San Diego challenging San Diego County’s effective prohibition of both open and concealed carry of firearms. Alabama’s amicus brief asserted that “San Diego County sheriff’s prohibition on the possession of a handgun outside the home, with limited exceptions, makes it impossible for citizens to use them for the core lawful purpose of self-defense and is hence unconstitutional.” The brief continues, according to Strange, by saying “the sheriff’s department admits that, under this system, the typical person cannot qualify for a concealed carry permit for personal protection. In fact, an applicant must specifically demonstrate ‘a set of circumstances that distinguish the applicant from the mainstream and causes him or her to be placed in harm’s way. Simply fearing for one’s personal safety alone is not considered good cause.'” The brief added under San Diego County’s gun restrictions “bearing arms in self-defense is not a right, but a privilege granted by the government to those it deems most in danger from a specific, previously documented threat.”
Roy Moore lawyer: Federal judge’s gay marriage order helps chief justice’s ethics case
The attorney for Alabama Supreme Court Chief Justice Roy Moore, who is suspended on judicial ethics charges related to his stances against gay marriage, says a federal judge’s order this week actually bolsters Moore’s case. U.S. District Judge Callie Granade, citing the unwillingness of Moore and others to go along with the U.S. Supreme Court’s ruling last year making same-sex marriage legal nationwide, this week entered a permanent injunction barring state officials from enforcing laws banning gay marriage. Judge Granade notes that Moore and other Alabama Supreme Court Justices issued concurring opinions in March 2016 in which they take issue with the U.S. Supreme Court marriage opinion. “While it was not her intent to help the case of Chief Justice Roy Moore, federal Judge Granade’s order proves our argument that the charges against the Chief have no foundation,” said Mat Staver, Founder and Chairman of Liberty Counsel and Moore’s attorney. “Following the 2015 orders of the Alabama Supreme Court and the U.S. Supreme Court, probate judges sought clarity as to what they should do,” Staver stated. “In January 2016, Chief Justice Moore issued an Administrative Order advising the judges that the 2015 orders remained in effect and the Alabama Supreme Court would be issuing an opinion on their final disposition.” In March 2016, the Alabama Supreme Court dismissed the petitions from two groups that oppose same-sex marriage that led to its March 2015 orders but left the 2015 orders in place. “How then can the Judicial Inquiry Commission (JIC) single out Chief Justice Moore when he issued an accurate order regarding the status of the case and when the Court as a whole agreed with him?” Staver stated. “The JIC is not a court of law, is wrong on the law, and has no business wading into legal disputes. The JIC charge is politically motivated and must be dismissed,” he stated. “Moreover, Judge Granade has no authority over the Alabama Supreme Court but she is acting as if she is the top appellate court in the state,” Staver stated. “The only Court that has authority over the Alabama Supreme Court is the U.S. Supreme Court. The other parties are free to ask the U.S. Supreme Court to review the case but they have refused to do so.” “Judge Granade is not the U.S. Supreme Court,” Staver stated.
“This order only validates the case that Justice Moore needed to address these conflicting orders. This is what we have said from the beginning. It clearly states the Alabama Supreme Court left the 2015 orders in place,” said Staver.
Sessions amendment to email privacy bill blasted by retired detective, security expert
An amendment to an email privacy bill introduced by Sen. Jeff Sessions, R-Ala., that provides an emergency exception allowing law enforcement to obtain emails, browsing histories, IP addresses and other information without a warrant is being assailed by privacy advocates and a retired D.C. detective who say the provision is unnecessary and threatens the rights of Internet users. The amendment was set to be considered today, but sponsors of the main bill urged the Senate Judiciary Committee to table the legislation. It was unclear why the sponsors asked to delay the bill, but a committee spokeswoman told AL.com that the legislation is on hold for at least a week. Sessions could not immediately be reached for comment. The Email Privacy Act, which passed the House in April, has been criticized by civil liberties groups and tech companies, including Facebook, Google and Yahoo, who expressed concern that law enforcement could access electronic information without the oversight of a court. Under current law – the Electronic Communications Privacy Act of 1986 – authorities need to obtain a subpoena to access such information, while the updated bill would require a warrant, which is easier to get. Sessions’ amendment would bypass those rules if “a representative of the governmental entity reasonably certifies under penalty of perjury that an emergency involving the danger of death or serious physical injury requires disclosure without delay.” Albert Gidari, director of privacy at the Stanford Center for Internet and Society, a public interest technology law and policy program at Stanford Law School, argued that Internet service providers already cooperate with authorities in most emergency cases and that it would be dangerous to leave the definition of “emergency” to law enforcement. “Law enforcement plainly receives cooperation from providers in response to emergency requests,” Gidari wrote, pointing out that tech companies receive far fewer requests than traditional telecommunications companies. “Well, to a hammer, everything looks like a nail. To law enforcement, most criminal investigations look like ’emergencies,’ especially if there is any delay engendered by the requirement of getting legal process. Therein lies the biggest problem with the mandatory emergency disclosure exception to the Email Privacy Act being pushed in the Senate.” That view was also shared by James Trainum, a retired D.C. homicide detective and co-chairman of the Constitution Project Committee on Policing Reform, which studies how to use new technologies in policing. “Judicial authorization for law enforcement access to private communications is a critical safeguard for a democratic society. Yes, it’s an obstacle for law enforcement investigations, but we know that obstacle is there for good reason – it makes sure that government focuses on the bad guys, and prevents improper invasions of privacy. Of course, law enforcement and civil libertarians alike understand that emergencies are a necessary exception. When a life is on the line and there isn’t time to go to a court, police should be able to immediately ask for access to private communications that could stop a heinous crime,” he wrote in the Hill newspaper. “However, some now say that we should go farther, and not only allow police to ask communication providers for private records, but to demand them, with mandatory compliance whenever law enforcement asserts an emergency situation. The goal of this measure is laudable, but the policy is not. Creating a mandatory emergency exception rule would not reap significant benefits, and would actually risk security harm.”
How Trump University ran the scam: Attorney General Eric Schneiderman explains why he’s prosecuting Donald Trump’s real estate ‘education’ operation for fraud
The allegations in my office’s case against Donald Trump and Trump University have me thinking back to the 1893 World’s Fair in Chicago. Back then, hundreds of fairgoers crowded around a stage to see “The Rattlesnake King,” a former cowboy-turned-salesman named Clark Stanley. As the crowd looked on, Stanley pulled out a two-foot rattlesnake from a sack beside him, slit it open and plunged it into a boiling pot of water. The crowd cheered as Stanley skimmed the fat off the top of the water and appeared to ladle it into a series of small glass bottles. Stanley boasted that his concoction — “Stanley’s Snake Oil” — would cure “all pain and lameness.” Of course, the snake oil wasn’t a cure-all. In fact, it wasn’t even snake oil. Stanley had mixed together some turpentine, beef fat and red pepper to fill the bottles — and scam consumers who were desperate for help. Using false promises to prey on desperate people has long been a hallmark of “snake-oil salesmen.” A lawsuit by my office alleges that Donald Trump was basically doing the same thing with Trump University — swindling desperate people with phony promises. In a lengthy written statement about the case this week, Donald Trump sought to deflect attention away from the core facts in the lawsuits against him. Trump claims he is unable to get a fair trial from the judge in two California lawsuits , Gonzalo Curiel — whom Trump has repeatedly attacked and said could not be impartial due to the Indiana native’s Mexican heritage, because Trump’s campaign is focused on “illegal immigration.” That is absurd and offensive. And nearly as absurd is the statement’s claim that Trump University offered a “substantive, valuable education.” The facts, as set forth in our complaint, are quite different. We allege that the fraud ran from beginning to end, starting with the name of the scheme. New York law prevents people from operating an unlicensed university. Trump’s venture never qualified or registered as a university under state law. Trump University was nothing more than an unlicensed scheme that promised students could get rich quick by learning Trump’s “secret” real estate tips from his “handpicked” experts. Students were told that they would get “apprenticeship” support, access to private funding sources and even a chance to meet Trump himself. Instead, our lawsuit shows, they got a high-pressure sales pitch. The three-day seminar started at $1,495, and recently released documents confirm that students were pressured to increase their credit card limits to enable them to pay as much as $35,000 for supposed special mentorship programs. Those “secret” Trump sales tips were just generic strategies available in any Real Estate 101 book. Trump had nothing to do with the curriculum. He didn’t “handpick” the instructors — he never even met them. In total, we allege that Trump University students were defrauded of $40 million, with about $5 million going to Trump himself. Falling victim to a fraud like this is a crippling economic hit at any time, but it was an especially difficult one to endure during the depths of the recession. Many students left the “university” with little more than a mountain of credit card debt and a photo with a cardboard cutout of Trump. Trump has, unsurprisingly, responded to these serious allegations with juvenile taunts and misdirection. He has called into question my office’s integrity and accused me of everything from accepting a bribe to personally conspiring with the President of the United States to take him down. He has done everything he can to distract from the straight-up fraud we allege in this case — and the thousands of families that have suffered because of his phony promises.
It goes without saying that Trump’s attacks on me pale in comparison to the racist attacks he has lobbed at Curiel. But this is about more than one judge doing his job. As Trump wrote in his recent statement: “The American justice system relies on fair and impartial judges.” I agree with that sentiment wholeheartedly. All told, five fair and impartial judges across three different suits have now allowed litigation against Trump University to proceed to trial — including a four-judge panel that unanimously affirmed all of New York’s legal arguments in March. The pattern is clear: Trump will say anything, use any tactic and create any distraction to avoid the real issues at the heart of this case. More:
Earlier this month, the world’s most battle-scarred cable news network did something extraordinary in this year of vaporous political contrails. While Donald Trump was delivering one of his easily debunked lies, CNN fact-checked him — in near real time at the bottom of the screen. “Trump: I never said Japan should have nukes (he did).” Thus read the chyron that shook the television world — maybe. I no more expect CNN to set Wolf Blitzer’s beard on fire than to instantly call out the Mount Everest of liars. Trump lies about big things (there is no drought in California) and small things (his hair spray could not affect the ozone layer because it’s sealed within Trump Tower). He lies about himself, and the fake self he invented to talk about himself. He’s been shown to lie more than 70 times in a single event. Given the scale of Trump’s mendacity and the stakes for the free world, it’s time that we go into the fall debates with a new rule — an instant fact-check on statements made by the candidates onstage. The Presidential Debate Commission should do what any first-grader with Google access can do, and call out lies before the words hit the floor. Setting up a truth referee is not difficult. And while doing such a thing is unlikely to ensure that the debates would be substantive, it could at least guarantee a reality foundation at a time when fact-free speech is the language of the political class. How can we discuss the economy when Trump suggests that the unemployment rate, just under 5 percent, is actually 42 percent? Or debate the Paris climate accord, when Trump falsely claims it “gives foreign bureaucrats control over how much energy we use on our land”? Or deal with terrorism, after Trump said he knows “more about ISIS than the generals.” The debates are meaningless without a neutral party screening the garbage. Professional truth-seekers have never seen anything like Trump, surely the most compulsive liar to seek high office. To date, the nonpartisan PolitiFact has rated 76 percent of his statements lies — 57 percent false or mostly false, and another 19 percent “Pants on Fire” fabrications. Only 2 percent — 2 percent! — of his assertions were rated true, and another 6 percent mostly true. Hillary Clinton, who is not exactly known for fealty to the facts, had a 28 percent total lie score, including a mere 1 percent Pants on Fire.
The Washington Post’s Fact Checker has dinged Trump with 30 of its Four Pinocchio ratings — lying 70 percent of the time. Trump cares so little about the truth that when the Fact Checker reaches out to him for an explanation, he never responds, the paper noted. Much more:
A witness who takes the stand in his own defense is like … Like a doctor who treats himself. Like a dentist who drills his own root canals. Ouch. For Alabama House Speaker Mike Hubbard, the choice to testify in his own corruption trial has been the single biggest shock in an already shocking case. He might as well have picked up a sledgehammer, handed it to prosecutor Matt Hart, and said “swing away, Mr. Hart. Swing Away.” It’s the kind of thing that makes people say “what was he thinking?” How can Hubbard – after being painted by evidence as the picture of hubris and arrogance and entitlement — believe he can sit on the stand and explain away contracts and emails and persistent begging for jobs and money? Easy. Hubris. And arrogance. And entitlement. It’s remarkable what has happened here. The prosecution’s obligatory march through scores of emails between Hubbard and others featured plenty of damning moments. But by the time prosecutors rested the sharpest barbs were covered in a haze of tedium. The facts were not so much in dispute – Hubbard took contracts and asked for jobs and help from lobbyists, and he voted on a bill he had an interest in – but the defense had been effectively clouded some of the issues. But when Hubbard took the stand he opened himself up to cross-examination, which gives prosecutors more latitude in what they can ask, and how they can ask it. Swing away, Mr. Hart. Swing away. The defense had muddied the water on the count in which Hubbard is charged with steering money to his own printing company as head of the GOP. It was a team decision, they said. But then Hubbard gave Hart the hammer to ask the question: “Were you the only member of the team who was subject to the ethics law and who had an interest in the company?” And Hubbard had to answer “yes.” Hubbard’s defense had often, and effectively, blurred the lines to claim Hubbard and many of those he sought jobs and favors from were friends and nothing more. But every time Hubbard spoke of his friends, Hart spoke of his “friend and lobbyist.” And the hammer fell. Over and over Hart showed emails in which Hubbard asked for favors or jobs as he complained about his woeful financial condition. Over and over Hart showed Hubbard’s finances at the time he moaned and groaned. His monthly incomes averaged $31,000. His household income was well over $300,000 a year. The pay for his part-time job as a legislator – which he groused about as insignificant in emails – was $61,000. That paltry sum for that part time job, as Hubbard was forced to admit to Hart and to that jury, was the same as the medium income for entire Alabama households. For him it amounted to nothing. Hubbard had to talk about his house in Auburn, and his part interest in the house on Lake Wedowee, and his 24-acre farm in Loachapoka, and his beach house. Hart tried to get the judge to let him talk about loan documents in which Hubbard claimed an $8 million net worth, but the judge said there was enough in evidence to make his point already. Hart made the point right in front of the jury. “The motive is greed,” he said. What was Hubbard thinking? It was clear the very things that convinced him to take the stand were the things that got him in trouble in the first place. Arrogance. Hubris and an unfathomable deafness of tone. It is the story of his life. Nobody can destroy Mike Hubbard like Mike Hubbard himself.
Field guide to defending Hillary Clinton against every fake scandal
The hard part in getting through to those who are convinced that the lies about Hillary Clinton are facts, is that they have a boatload of phony “facts” and right-wing web sites to draw from, but their main source of information is Fox News, Sean Hannity, Rush Limbaugh, and/or their duped listeners. When you go into detailed evidence against their claims, the response is longer than they’re willing to read or hear. So, its either a shorter version which may not get the point across, or the long version which won’t be read. My recommendation is to answer one attack at a time in as much detail as you can to prove your case. These are short paragraphs along with a few links for support. Speak softly and don’t yell at them for being duped. Your goal should be to disarm them and get them to hear you, which can’t be done if they raise their shield.
ANOTHER REASON FOR WARREN VP PRESSURE? — It’s far from the biggest reason but some Dems are suggesting that Harry Reid and his likely successor as Democratic leader in 2017, Chuck Schumer, would not be terribly sorry to see Sen. Elizabeth Warren move down Pennsylvania Ave. to the Clinton White House. Schumer wouldn’t have to worry about Warren constantly pushing him and the caucus left — including on financial services issues. Again, the main reason is she’s dynamite against Trump, but other motivations may be in play …
ANOTHER CARROT FOR SANDERS? — As Sen. Bernie Sanders goes about winding down his campaign, one Democrat notes that if Clinton routes Trump and sweeps in a Democratic Senate majority, the Vermont senator could be chairman of the Senate Budget Committee, where he could put all his issues front and center. He’d have even more leverage if he took the gavel after helping deliver his voters to Clinton.
FRIDAY FUNNIES — M.M. spoke with an official involved in putting together the GOP convention in Cleveland who lamented that the Trump coronation could be another in a series of bad breaks for the mistake by the lake. This person suggested t-shirts reading: “The Drive. The Fumble. The Shot. And now The Donald.” If you don’t now what those things were: http://es.pn/22X9jjj
TRUMP TREASURY SECRETARY? — M.M. wants to hear from you on possible candidates to serve as Treasury Secretary under Donald Trump. Glenn Hubbard? Carl Icahn? Steve Schwarzman? Who else? Email us your thoughts on email@example.com
SANDERS ENDGAME NEARS — POLITICO’s Gabriel Debenedetti: “The walls are crumbling, and Bernie Sanders knows it. Barack Obama made his support for Hillary Clinton official on Thursday. So did Vice President Joe Biden and liberal hero Sen. Elizabeth Warren. The major political groups surrounding Sanders are saying it’s time to unify. The campaign is rapidly winding down around Sanders, the Senate gadfly-turned-unlikely revolutionary who outperformed everyone’s expectations, and he finally began to acknowledge it Thursday.
“‘We need real change in this country. And what people also understand is that no president, not Bernie Sanders, not anybody else, can do it alone,’ he told roughly 3,000 supporters gathered near Washington’s RFK stadium … The courtship letters his campaign had planned to send superdelegates have been put on hold. His go-to argument — that he polls better against Donald Trump than Clinton — has been scrubbed from his public statements.” http://politi.co/1U9MMwg
HOUSE PASSES PUERTO RICO BILL — POLITICO’s Colin Wilhelm: “In a victory for both Speaker Paul Ryan and the White House, the House of Representatives Thursday passed a bill to resolve Puerto Rico’s $73 billion debt crisis, taking a major step toward helping the island avoid a historic default. Support for the bill came from a mix of Republicans and Democrats, emblematic of the rare compromise struck between congressional Republicans and the Obama administration.
“Ryan lent significant political capital to fixing Puerto Rico’s debt crisis during negotiations for government funding in December, pledging to move legislation to address it in the first quarter of the year. The bill passed by a 297-127 vote. … Ryan and his whip team managed to deliver a majority of Republican votes, averting the past costly victories of his predecessor, John Boehner … Senate Majority Leader Mitch McConnell has pledged to take up the House bill prior to July 1, when Puerto Rico faces default on $2 billion in debt payments” http://politi.co/1XdhCaE
TREASURY SECRETARY JACK LEW on the Puerto Rico bill: “I commend the House of Representatives for acting today to pass critical legislation to address the debt crisis in Puerto Rico. The bill is a bipartisan compromise, and while it is not perfect, it will stem the crisis and allow Puerto Rico to reduce its debt payments so it can focus its resources on building a healthy economic future for the 3.5 million Americans who live on the island.”
FIRST LOOK: FINANCIAL INCLUSION REPORT — The White House Council of Economic Advisers on Friday will publish a new issue brief: “Financial Inclusion in the United States.” From the report: “In a range of areas in the economy it can be expensive to be poor, with low income consumers paying more for everything from diapers to canned soup. One area where these challenges are particularly prevalent is in finance.
“Lack of access to safe and affordable financial services-which include payment settlement, credit intermediation, and maturity transformations, provided to consumers by a range of financial institutions-is not only costly but is also significantly more common for lower-income households.” Full report live at 8am: http://1.usa.gov/1WHtEt1
CLINTON: WARREN COULD BE VP — POLITICO’s Annie Karni: “Hillary Clinton on Thursday said she has no doubt that Sen. Elizabeth Warren would be qualified to serve as her vice president. ‘I have the highest regard for Sen. Warren,’ she said in an interview with POLITICO. ‘I think she is an incredible public servant, eminently qualified for any role. I look forward to working with her on behalf of not only the campaign and her very effective critique of Trump, but also on the issues that she and I both care about.’” http://politi.co/1PNzhDX
COMING NEXT WEEK: OBAMA HITS THE TRAIL — Per release: “President Barack Obama and Hillary Clinton will campaign in Green Bay, Wisconsin on Wednesday, June 15. … In Green Bay, President Obama and Clinton will discuss building on the progress we’ve made and their vision for an America that is stronger together. Earlier in the week, Hillary Clinton will campaign in Ohio on Monday, June 13 and Pennsylvania on Tuesday, June 14.
TRUMP STIFFS WORKERS I — WSJ’s Alexandra Berzon: “Trump often boasts on the presidential campaign trail that hardball tactics helped make him a successful businessman, an approach many voters say they admire. Those tactics have also left behind bitter tales among business owners who say he shortchanged them.
“A review of court filings from jurisdictions in 33 states, along with interviews with business people, real-estate executives and others, shows a pattern over Mr. Trump’s 40-year career of his sometimes refusing to pay what some business owners said Trump companies owed them. A chandelier shop, a curtain maker, a lawyer and others have said Mr. Trump’s companies agreed to buy goods and services, then reneged when some or all were delivered.” http://on.wsj.com/1sy01Oi
TRUMP STIFFS WORKERS II — USAToday’s Steve Reilly: “Trump casts himself as a protector of workers and jobs, but a USA Today Network investigation found hundreds of people — carpenters, dishwashers, painters, even his own lawyers — who say he didn’t pay them for their work.” http://usat.ly/1YdAwxu
IS THIS MARKET RALLY FOR REAL? — Wells Capitals James Paulsen: “[T]he contemporary rally looks and feels much more likely to break to new record highs than it did last year. Much of the character of the 2016 stock market rally is very different from the character of the 2015 rally.
“Overall the current rally is benefiting from much broader participation, a total lack of competitive yields pressures, increasingly positive U.S. economic momentum and continued investor pessimism. Our guess is the S&P 500 index will soon breach the overhead resistance of old record highs and perhaps rise to about the 2200 level.”
FED TO TAKE SUMMER OFF? — Via Morgan Stanley: “At the June meeting, we think policymakers will hold to the 2-hike expectation for this year, but lower the 2017-18 dots. Not only does the looming risk of Brexit keep the Fed on hold in June, but the conditions necessary to support any summer hike have also faded. At the conclusion of the June 14-15 meeting, we expect: The FOMC to hold the target range of the federal funds rate steady at 0.25 to 0.50 percent; the statement to describe early signs of a rebound in 2Q growth that is led by the consumer.”
CHAOS IN CLEVELAND? — CNBC’s Lori Ann LaRocco: “One delegate, who is on the RNC’s all-powerful credentials committee and who spoke on a condition of anonymity, told CNBC: ‘Until all the delegates are validated by the credentials committee, he is not the official nominee. We have to make sure the all delegates are valid. Then you have Mr. Trump saying his campaign was going to challenge some of the delegates. This is far from over. He is not the official GOP nominee.’” http://cnb.cx/1ZBU0KW
EXPLAINING TRADE, ONE KNIFE AT A TIME — Breaking Views’ Rob Cox uses his grandfather’s electric GE carving knife to explain free trade and 2016: http://reut.rs/1YhdJ4n
CLINTON EMAIL PROBE FOCUSED ON DRONE EMAILS — WSJ’s Adam Entous and Devlin Barrett: “At the center of a criminal probe involving Hillary Clinton’s handling of classified information is a series of emails between American diplomats in Islamabad and their superiors in Washington about whether to oppose specific drone strikes in Pakistan. The 2011 and 2012 emails were sent via the ‘low side’ — government slang for a computer system for unclassified matters — as part of a secret arrangement that gave the State Department more of a voice in whether a [CIA] drone strike went ahead, according to congressional and law-enforcement officials …
“Some of the emails were then forwarded by Mrs. Clinton’s aides to her personal email account, which routed them to a server she kept at her home in suburban New York when she was secretary of state, the officials said. Investigators have raised concerns that Mrs. Clinton’s personal server was less secure than State Department systems. The vaguely worded messages didn’t mention the ‘CIA,’ ‘drones’ or details about the militant targets, officials said.” http://on.wsj.com/1ZCQ6le
TRUMP CONVENES FINANCE TEAM — NYT’s Matt Flegenheimer and Maggie Haberman: “Trump convened the first meeting of his national finance team on Thursday amid persistent Republican concerns that a shortfall in fund-raising efforts and a lack of discipline were imperiling his presidential bid. During the gathering at the Four Seasons Hotel in Midtown Manhattan, Mr. Trump dwelled little on his recent controversies, including his comments about the Mexican heritage of the judge presiding in a lawsuit filed by former students of Trump University.
“But a top Trump surrogate, Gov. Chris Christie of New Jersey, did allude to the recent bumpiness of the campaign, said an attendee, John A. Catsimatidis, a New York investor and grocery magnate. ‘People make mistakes,’ Mr. Christie said, according to Mr. Catsimatidis, ‘and they take it back.’ … Mr. Trump had initially said he hoped to raise roughly $1 billion by November for himself and the party, but efforts to date have been well off pace. He has since revised that figure downward” http://nyti.ms/25OFZkk
FOREIGN HUNGER FOR U.S. DEBT RISES — WSJ’s Min Zeng: “The global hunger for U.S. government debt is intensifying as investors seek better returns from the negative yields and record-low rates found in Japan and Europe. On Thursday, an auction of 30-year Treasury debt attracted some of the highest demand ever from overseas buyers, at a yield of 2.475 percent, the lowest for the 30-year bond since January 2015.
“It was the second sale in as many days to draw strong foreign interest. On Wednesday, the Treasury sold $20 billion of 10-year notes with a record share going to buyers outside the U.S., offering a yield of 1.702 percent, down sharply from the 2.461 percent investors got a year ago. The European Central Bank’s bond-buying program and a negative-rate environment in Japan are keeping U.S. yields down even as riskier assets like stocks and oil have risen” http://on.wsj.com/1YheF8E
GROSS WARNS ON NEGATIVE RATE BONDS — FT’s Robin Wigglesworth and Joel Lewin: “The $10tn pile of negative-yielding government bonds is a ‘supernova that will explode one day’, according to Janus Capital’s Bill Gross, underscoring the rising nervousness over the previously unthinkable financial phenomenon. Central banks in Europe and Japan have moved their benchmark interest rates below zero. This, combined with investors’ ravenous appetite for bonds, has pushed the yields of more than $10tn of sovereign debt into negative territory.
“This is costing investors billions of dollars and forcing many to buy increasingly longer-dated or more lowly rated bonds that still offer positive yields — and has sparked concerns that investors could be exposed to painful losses if yields, which move inversely to prices, snap back up.” http://on.ft.com/1RYRCbl
NO, THE ECONOMY ISN’T THAT BAD — WP’s Catherine Rampell: “[I]f you go by the historical record, we may have exceeded expectations for where we should be this many years after a severe financial crisis. And relative to most other countries that weathered a crisis when we did, we’re doing spectacularly well. …
“It’s true that the Great Recession has been followed by a slow and shallow recovery. Rather than bouncing back with annual growth rates in the 3 or 4 percent range, as we might have hoped, we’ve been trudging along at about 1.5 to 2.5 percent. Hiring has lately disappointed, too. This record seems pretty damning. Except, in the grand scheme of things, it’s not.” http://wapo.st/1tfwol1
POLL BLAST: TRUMP SINKS — Fox’s Dana Blanton: “The new poll shows Hillary Clinton with a three-point edge over Donald Trump (42-39 percent) in a hypothetical matchup. That’s within the poll’s margin of error. … Clinton’s edge over Trump is due to a six-point drop in support for him rather than an increase for her. Trump was up by 45-42 percent three weeks ago (May 14-17, 2016). Since then, he lost three points among self-identified Republicans and 11 points among independents.
“Clinton is ahead among blacks (+76), unmarried women (+34), women (+18), lower-income households (+14), and voters under age 30 (+13). Trump is preferred among white evangelicals (+42), whites without a college degree (+25), whites (+16), men (+15), and independents (+5). Expect the race to remain tight, as people are pretty set with their choice.” http://fxn.ws/1YhfqPf
The president has no public schedule today
All times Eastern
Live stream of briefing with Press Secretary Josh Earnest and Special Presidential Envoy for the Global Coalition to Counter ISIL Brett McGurk at 12:30 pm
The House meets at 9 a.m. with votes on the legislative branch funding bill—you know, the one that permits sledding on Capitol grounds—later in the morning. And words I never thought I’d write on a Friday: The Senate gavels in at 8:15 a.m. (!!) with a 9:00 a.m. procedural vote related to the defense authorization.
AROUND THE HILL – Reps. Filemon Vela, Juan Vargas and Luis Gutiérrez hold a 10:00 a.m. conference call on Republicans, the Latino community and federal judge Gonzalo Curiel, the target of Donald Trump’s recent attacks. Email Jasmine.Mora@mail.house.gov for call-in information.