Krebs Daily Briefing 17 February 2016


Boutros Boutros-Ghali, U.N. secretary general who clashed with U.S., dies at 93

Boutros Boutros-Ghali, an urbane Egyptian diplomat whose service as United Nations secretary general during the early 1990s led to friction with the United States and caused the Clinton administration to block him from a second term, has died at 93. The UN Security Council announced the death, but no further details were immediately available. In an almost unprecedented display of very public strong-arming in an international forum, the United States, led by Madeleine K. Albright — then the U.S. ambassador to the United Nations — defied the widespread support mustered by Mr. Boutros-Ghali in his 1996 bid for reelection and forced the 185 U.N. members to choose instead Washington’s hand-picked candidate, Kofi Annan of Ghana. Although Mr. Boutros-Ghali had arrived at the United Nations as a distinguished, high-ranking diplomat from a country with close ties to the United States, he came to be perceived in Washington as a man who personified many of the fears and concerns directed against the United Nations by Republican conservatives. As a result, the administration concluded that Mr. Boutros-Ghali had become a symbol of U.N. mismanagement in the eyes of many Americans and that his departure was necessary to defuse the possibility of the world body becoming an issue in President Bill Clinton’s 1996 reelection campaign. More:

Boko Haram Is Enslaving Women, Making Them Join the War

“They have a look in their eyes—they look like they are possessed,” says Amira, a Nigerian woman held captive by Boko Haram fighters for several years. “They would even drink the blood of the people they killed,” she adds, using her hands to tip an imaginary bowl of blood to her mouth. Amira is in her mid-50s, and the signs of a life of hard agricultural labor show across her face and hands. (She asked Newsweek to identify her only by the pseudonym Amira because she fears reprisals.) She is dressed in clean but worn clothes, a long skirt and a head wrap. Leaning forward in her plastic lawn chair in the modest administrative office of a camp for internally displaced people, she describes how the young fighters of Boko Haram, some not even in their teens, ransack communities, rape young women and kill on a scale unseen in Nigeria since the country’s civil war in the 1960s. Around three years ago, Amira fled from Michika, a town in northern Adamawa State, attempting to escape from Boko Haram. The area is one of the hardest hit by the Islamist insurgency, which has killed more than 30,000 people and displaced an estimated 2.2 million in just over six years. Because Amira and her neighbors were forced to flee at night, families were scattered, separated from one another as they ran for their lives. Amira lost track of her three children, and she fears at least one of them was killed that night. She had already lost her husband to Boko Haram. When she came across a group of young men in khaki uniforms in the forest, she assumed they were the Nigerian military. “I trusted them when they told me to follow them.” That night, Amira was abducted by Boko Haram. More:

U.S., Cuba sign pact to restore scheduled flights: U.S. Dept of Transportation

Transportation officials from the United States and Cuba signed an arrangement on Tuesday to restore scheduled air service between the two countries, the U.S. Department of Transportation said in a statement. The department invited U.S. air carriers to apply for the opportunity to provide scheduled passenger and cargo flights, launching a process to award the new flights, the statement read.

Egypt orders arrest of Facebook administrator after unfaithful wives comments

Egypt’s top prosecutor has ordered the arrest of a Facebook page administrator whose assertion on a popular television talk show that a third of married women in the conservative country are unfaithful caused a social media uproar. The public prosecutor issued an arrest warrant on Tuesday for Taymour el-Sobky, accusing him of slandering Egyptian women and damaging their honor, according to a statement from his office. Sobky caused a furor after making his conclusions on the evening talk show Mumkin, which means “It is Possible”. His remarks were aired in December on privately-owned CBC channel but did not generate controversy until a clip was posted on social media this week. The show was suspended for 15 days as a result. “Thirty percent of Egyptian women are ready for immorality, they just can’t find someone to encourage them,” said Sobky, whose Facebook page, “Diaries of a Suffering Husband”, has more than one million followers. “These days, it is very normal for women to cheat on their husbands and seek it out … Many women are involved in extramarital affairs while their husbands are abroad.” Egypt is a conservative, predominantly Muslim country where sex outside of marriage is frowned upon. Sobky’s comments included the suggestion that arranged marriages in traditional southern Egypt exacerbated the problem of infidelity because women ended up with men they don’t know. One masked man from the region appeared in a video carried on YouTube with an assault rifle and issued a death threat against Sobky. Legal expert Tarek Ismail said that according to Egyptian law, Sobky could be jailed for up to three years if convicted. “Women cheat on their husbands, and their husbands know about it. They keep forgiving them until they give up and leave,” Sobky said. CBC said in a statement that Sobky’s remarks were part of a long discussion and that the host of Mumkin refuted them.

Young Saudis See Cushy Jobs Vanish Along With Nation’s Oil Wealth

RIYADH, Saudi Arabia — In pressed white robes and clutching crisp résumés, young Saudi men packed a massive hall at a university in the capital city this month to wait in long lines to pitch themselves to employers. It was one of three job fairs in Riyadh in two weeks, and the high attendance was fueled in part by fear among the younger generation of what a future of cheap oil will mean in a country where oil is everything. For decades, the royal family has used the kingdom’s immense oil wealth to lavish benefits on its people, including free education and medical care, generous energy subsidies and well-paid (and often undemanding) government jobs. No one paid taxes, and if political rights were not part of the equation, that was fine with most people. But the drop in oil prices to below $30 a barrel from more than $100 a barrel in June 2014 means that the old math no longer works. Low oil prices have knocked a chunk out of the government budget and now pose a threat to the unwritten social contract that has long underpinned life in the kingdom, the Arab world’s largest economy and a key American ally. The shift is already echoing through the economy, with government projects delayed, spending limits imposed on ministries and high-level discussions about measures long considered impossible, like imposing taxes and selling shares of Saudi Aramco, the state-run oil giant that is estimated to be the world’s most valuable company. More:

Wanted by U.S.: The Stolen Millions of Despots and Crooked Elites

It’s hard to imagine a public official with more toys than Teodoro Nguema Obiang Mangue, who spent $300 million on Ferraris, a Gulfstream jet, a California mansion and even Michael Jackson’s “Thriller” jacket. The buying spree is all the more remarkable since this scion of the ruling family of Equatorial Guinea, one of Africa’s smallest countries, bought all this while on an official salary of $100,000 a year. But legal action by the Justice Department has brought an end to Mr. Obiang’s spendthrift ways. His $30 million Malibu estate is on the market, as are his luxury cars and six life-size Jackson statues. Proceeds from these sales are earmarked for citizens of Equatorial Guinea, who prosecutors claim are victims of Mr. Obiang’s “relentless embezzlement and extortion.” The turnabout in Mr. Obiang’s fortunes is part of an effort by the federal government to recover assets it says were stolen by foreign officials — dictators, politicians and ruling elites — and laundered in the United States. Since its start in 2010, the Kleptocracy Asset Recovery Initiative has grown to include a dozen government lawyers and teams from the F.B.I. and Homeland Security. More:



Fed’s Kashkari Floats Breaking Up Big Banks to Avert Meltdown


Federal Reserve Bank of Minneapolis President Neel Kashkari said Congress hasn’t gone far enough to protect the U.S. economy from potential crises and unveiled plans to study options for regulators that include breaking up the nation’s largest financial institutions. “The biggest banks are still too big to fail and continue to pose a significant risk to our economy,” said Kashkari, who managed the U.S. Treasury’s $700 billion rescue of banks in the 2008 crisis known as the Troubled Asset Relief Program. Kashkari, 42, said the Minneapolis Fed will hold a series of events and collect public and financial-industry input before making proposals by the end of this year on how to address the issue. He said options to consider include breaking up big banks, forcing large banks to hold so much capital they resemble “public utilities” and taxing leverage in the financial system to alleviate risks. Kashkari, who took over at the Minneapolis Fed on Jan. 1 following a failed run for governor of California in 2014, compared the risk posed by big banks to that of a nuclear power plant in explaining why the government would probably have to bail out banks again in the event of another systemic crisis. “The cost to society of letting a reactor melt down is astronomical,” said Kashkari, who was a Goldman Sachs Group Inc. banker before joining the Treasury during the administration of Republican President George W. Bush. “Given that cost, governments will do whatever they can to stabilize the reactor before they lose control.” In testimony before Congress last week, Fed Chair Janet Yellen said regulations imposed since the financial crisis have had “very substantial payoffs in the form of a much more resilient and stronger, better capitalized, more liquid banking system.” More:

Google Parent Should Buy AIG: An ‘Audacious’ Idea From Citigroup

It’s an “audacious” idea, and Citigroup Inc. acknowledges as much. Google’s parent, Alphabet Inc., should buy American International Group Inc. to expand into financial services, and turn the insurer into a laboratory for innovation, the New York-based bank’s analysts said in a note Monday. “We realize it is a very low-probability event, while maintaining that it is still a very good idea,” analysts led by Todd Bault wrote. “There is a perfect convergence of reasons why it might be exactly what AIG and the insurance industry needs. And the tech community could help solve what could well be one of the most challenging problems it could tackle.” Google changed its name and structure last year to help highlight ventures beyond its search engine. Alphabet has been investing in artificial intelligence, self-driving cars and health technology, while dipping its toes into insurance with a price-comparison site for auto coverage. Insurance startups globally lured about $2.65 billion in venture and equity funding last year, a more-than-threefold increase from 2014, according to research firm CB Insights. AIG Chief Executive Officer Peter Hancock likened his company in January to Alphabet when he announced the creation of nine “modules” to improve accountability for managers and add visibility for investors. He said the effort may help AIG eventually sell or spin off some of the units. Hancock applauded the technology giant for separating operations and targeting areas of investment.

As Marijuana Sales Grow, Start-Ups Step In for Wary Banks

When Lamine Zarrad was not at his job as a federal banking regulator in recent months, he was spending a lot of time at Denver’s marijuana dispensaries. As a federal employee, he could not partake of the pot. He was there, instead, to pitch the shops on a start-up he has been working on in his free time and is making official this week after quitting his job as a bank examiner at the Office of the Comptroller of the Currency, a division of the Treasury Department. Mr. Zarrad’s start-up, Tokken (pronounced token), is one of several recently created companies looking to solve one of the most vexing problems facing marijuana businesses in Colorado and several other states: the endless flow of dirty, dangerous, hard-to-track cash. The State of Colorado legalized marijuana for recreational use in 2014, joining several other states where the drug has been decriminalized in some form, but Visa and MasterCard will not process transactions for pot dispensaries and most banks will not open accounts for the businesses — leaving dispensaries dealing with a constant influx of cash, and nowhere good to put it. Tokken and others start-ups, with names like Hypur and Kind Financial, have been putting together software that helps banks and dispensaries monitor and record transactions, with the long-term goal of moving transactions away from cash. Stephanie Hopper, the owner of Ballpark Holistic Dispensary in Denver, said the tech solutions could not come soon enough. “We are all kind of chomping at the bit, trying to figure out what to do,” Ms. Hopper said. “We’re fighting so hard on so many fronts that taking one thing off of us would be such a relief.” More:

Apple CEO opposes court order to help FBI unlock iPhone

Apple Inc (AAPL.O) Chief Executive Tim Cook said his company opposed a demand from a U.S. judge to help the FBI break into an iPhone recovered from one of the San Bernardino shooters. Cook said that the demand threatened the security of Apple’s customers and had “implications far beyond the legal case at hand.” ( Judge Sheri Pym of U.S. District Court in Los Angeles said on Tuesday that Apple must provide “reasonable technical assistance” to investigators seeking to unlock data on an iPhone 5C that had been owned by Syed Rizwan Farook. In a letter to Apple’s customers, Cook said the FBI had asked the company to build “a backdoor to the iPhone.” “The government is asking Apple to hack our own users and undermine decades of security advancements that protect our customers — including tens of millions of American citizens — from sophisticated hackers and cybercriminals,” he said. “We can find no precedent for an American company being forced to expose its customers to a greater risk of attack.”

North Carolina is the latest state to find welfare recipients rarely use illegal drugs

Results of newly mandatory drug tests for some North Carolina welfare recipients were reported this month, proving the whole process was much ado about nothing. The law, which requires North Carolinians who receive public aid to be screened and possibly tested for drugs, went into effect last August. Applicants are automatically referred for drug testing if they have been convicted of a felony within three years of applying to the program. The North Carolina Department of Health and Human Services told Vox that they screened 7,600 applicants to the Work First Program between August 3 and December 31, 2015. Among them, 150 were referred for drug testing and 21 tested positive — that’s “0.3 percent of the approximate 7,600 applicants and recipients screened for drug abuse,” the DHHS confirmed to Vox via email on Tuesday. State lawmakers assumed welfare recipients inherently engage in criminal activity, and therefore use public assistance to pay for drugs. The results suggest these ideas have little (if any) statistical grounds, and that there is no reason to isolate welfare recipients in particular. This rate is substantially lower than both the state and national rate of illicit drug use. The most recently collected data shows the rate of illegal drug use in North Carolina is 8 percent. The national rate of illegal drug use is 9.4 percent, according to the National Institute on Drug Abuse. Out of the aforementioned group of 150, WRAL, a TV news station from Raleigh, North Carolina, reported approximately 70 people who were asked to get a drug test failed to show up for testing (though the department did not verify this figure to Vox). But even if each of those 70 people tested positive for drug use, the combined 91 people would still mean only 1 percent of applicants had used illegal drugs. North Carolina’s law went into effect last August, after a contentious back and forth between Republican Gov. Pat McCrory and the Republican-majority Senate in 2013. The bill passed through the House and the Senate 35-15, but McCrory vetoed the bill, citing the possibility of government overreach. “This is not a smart way to combat drug use,” he said in a statement. “Similar efforts in other states have proved to be expensive for taxpayers and did little to actually help fight drug addiction. It makes no sense to repeat those mistakes in North Carolina.”

President Raises Stakes in Supreme Court Nominee Battle

RANCHO MIRAGE, Calif. — President Obama on Tuesday challenged Republicans to offer a plausible rationale for refusing to consider aSupreme Court candidate to replace Justice Antonin Scalia, and he pledged to nominate someone with an “outstanding legal mind” who cares about democracy and the rule of law. “The Constitution is pretty clear about what is supposed to happen now,” Mr. Obama said during a news conference after a meeting in California with leaders of Southeast Asia. He said the Constitution demanded that a president nominate someone for the court and the Senate either confirms or rejects. “There’s no unwritten law that says that it can only be done on off years,” Mr. Obama said. “That’s not in the constitutional text.” But Mr. Obama — who defended his own role in an effort to block a confirmation vote on Samuel A. Alito Jr. in 2005 — said he understood the political stakes of a nomination that could change the balance on the court. “I understand the pressure that Republican senators are now under,” he said. “This would be a deciding vote.” Mr. Obama’s remarks were his first extensive public reaction to the political forces unleashed by the death last weekend of Justice Scalia, and they offered a glimpse of how he intends to use the power of the presidency to raise pressure on Republicans to hold hearings on whomever he nominates for the court. More:

Who killed Antonin Scalia? Conspiracy theories blame Obama, Bush, Mr. Spock


Did the Bush clan murder Antonin Scalia? As medical professionals attributed the late Supreme Court Justice’s weekend death to natural causes, conspiracy theorists blamed a host of potential assassins — including former President George W. Bush, who supposedly feared the judge would spill the secrets about 9/11. Here are the most widely circulated — and the most bizarre — conspiracy theories. More:


The Battle to Replace Scalia Shows Why Americans Are Hopelessly Divided


In wartime, everything is viewed in terms of its helpfulness or unhelpfulness to the cause—events, people, art, music, sport, humor. So too is the culture war—the ever grinding conflict between red and blue America, two groups that are increasingly decoupling from each other not only mentally but geographically—a dynamic that is bad enough in the background but sometimes takes center stage. This weekend, it was stoked by a major event and a minor one.The major event was the unexpected death of Supreme Court Associate Justice Antonin Scalia, age 79. I happened to be on my laptop when the news broke. The major papers hadn’t yet picked up the news, but already the cannons were out on Twitter. Perhaps to punish myself for something, I began to refresh the breaking tweets. “Scalia was the worst, REST IN SHIT ASSHOLE,” offered one @kobland. “Leftist f*ckity-f*cks out in force over death of #Scalia. F*ck ’em all,” retorted @theaxeman. Out of morbid curiosity, I typed in “f*ck” and “Scalia,” just to narrow things down, and new results came in every few seconds. I won’t conclude too much from Twitter, where even decent humans can morph into Pol Pot. But Scalia’s demise—particularly the speed with which we moved from the human tragedy of a grandfather having died to the political stakes involved (about a nanosecond)—was a reminder not only of the anger dividing the nation but also the preposterous stakes that have come to be associated with a vacancy on the Supreme Court, the final stop for many of our cultural battles. No American wants to see our most bitter skirmishes decided by nine people who are chosen in a grim lottery of election outcomes, guesswork, and death. The more active the court has become in pulling our fights out of the democratic theater, however, the more of a bulwark and threat it has become. The winning side celebrates today and fears a reversal tomorrow. The losing side, believing the democratic process to have been circumvented, questions the legitimacy of the institution. It wasn’t always this bad. Prior to 1965, most Supreme Court justices got confirmed in voice votes, held when the consensus is so strong in favor the nominee that a formal tally is deemed unnecessary. But what divided us then were less matters of faith or flag but of economics. In 1968, the author and management expert Peter Drucker wrote that the brilliance of the American system was its ability to make economic issues partisan ones while assuring that noneconomic issues were nonpartisan. The founding fathers, wrote Drucker, “saw in economic conflict their means to prevent the more dangerous ideological conflict,” because “economic interests are divisible, whereas political or religious beliefs are not.” The American political system could help split a loaf, but not a baby. Today, economics still divides us, of course, but far more intense are our conflicts over abortion, same-sex marriage, immigration, the place of religion in the public sphere, the values taught in schools, and many other non-divisible babies. The culture war will shape this presidential race, because it shapes every presidential race, but the death of Scalia reminded us of how much. More:

When a Brain Surgeon Becomes a Malpractice Lawyer


The line drive ripped off the hitter’s bat and rocketed into the right hand of Dr. Lawrence Schlachter, shattering bones and ending his career as a neurosurgeon. The Atlanta doctor, then 52, turned to an unusual place for a new challenge: Law school. He became, of all things, a medical malpractice attorney. Schlachter has been practicing law for a dozen years and says he sees the medical world differently than he did from the operating room. Now it is from the perspective of patients, who too often suffer infections and injuries while undergoing medical care and then are unable to get answersfrom doctors and medical officials. Schlachter recently wrote a provocative op-ed for The Wall Street Journal with the headline “More Must Be Done To Expose Bad Doctors.” The piece cited a recent study in the New England Journal of Medicine asserting that 1 percent of physicians are responsible for nearly a third of all paid malpractice claims. Schlachter’s book, “Malpractice,” is scheduled for release later this year. This Q&A has been edited for length and clarity. More:

Cyber attack snarls Los Angeles hospital’s patient database


The FBI is investigating a cyber attack that has crippled the electronic database at Hollywood Presbyterian Medical Center for days, forcing doctors at the Los Angeles hospital to rely on telephones and fax machines to relay patient information. The origin of the computer network intrusion was unknown but since it began late last week has bogged down communications between physicians and medical staff newly dependent on paper records and doctors’ notoriously messy handwriting, doctors and a Federal Bureau of Investigation spokeswoman said on Tuesday. “It’s right there on paper, but it may not be legible,” Dr. Rangasamy Ramanathan, a neonatal-perinatal specialist affiliated with the 434-bed facility, said. “The only problem is doctors’ writing.” Although the cyber attack has snarled the hospital’s patient database, doctors have managed to relay necessary medical records the old-fashioned way through phone lines and fax machines, Ramanathan said. The FBI is seeking to pinpoint hackers responsible for the intrusion, FBI spokeswoman Ari Dekofsky said. She declined to release further details. Allen Stefanek, the hospital’s president and CEO, told Los Angeles television station KNBC-TV the hospital declared an internal emergency on Friday, after encountering significant information technology problems due to the hack. A spokeswoman for the hospital could not be reached for comment.

America‘s unlearned lesson: the forgotten truth about why we invaded Iraq

Perhaps the tensest moment in Saturday’s Republican presidential debate came when Donald Trump finally said something so outrageous that the other candidates onstage and even the debate audience closed ranks against him. Here is what Trump did: He accused George W. Bush of launching the Iraq War based on a lie:  You do whatever you want. You call it whatever you want. I want to tell you. They lied. They said there were weapons of mass destruction, there were none. And they knew there were none. There were no weapons of mass destruction. Trump’s 10-second history of the war articulated it as many Americans, who largely consider that war a mistake, now understand it. And, indeed, Bush did justify the war as a quest for Iraqi weapons of mass destruction, which turned out not to exist. The other Republican candidates, who have had this fight with Trump before, did not defend the war as their party has in the past, but rather offered the party’s standard line of the moment, which is that Bush had been innocently misled by “faulty intelligence.” But neither version of history is really correct. The US primarily invaded Iraq not because of lies or because of bad intelligence, though both featured. In fact, it invaded because of an ideology. A movement of high-minded ideologues had, throughout the 1990s, become obsessed with deposing Saddam Hussein. When they assumed positions of power under Bush in 2001, they did not seek to trick America into that war, but rather tricked themselves. In 9/11, and in fragments of intelligence that more objective minds would have rejected, they could see only validation for their abstract and untested theories about the world — theories whose inevitable and obvious conclusion was an American invasion of Iraq. This is perhaps not as satisfying as the “Bush lied, people died” bumper sticker history that has since taken hold on much of the left and elements of the Tea Party right. Nor is it as convenient as the Republican establishment’s polite fiction that Bush was misled by “faulty intelligence.” If the problem were merely that Bush lied, then the solution would be straightforward: Check the administration’s facts. But how do you fact-check an ideology, particularly when that ideology is partially concealed from the public view? How do you guard against that ideology, which still dominates much of the GOP, and some of whose ideas are shared by more hawkish Democrats, from leading us astray again? More:

Skimm the Vote: 2016


Heads up: you have to hire a new president. Your full guide, to the candidates, the questions, and the calendar with fun facts added.




Former Alabama chief justice Sue Bell Cobb files complaint against Houston County DA

Former Alabama Supreme Court Chief Justice Sue Bell Cobb last year successfully championed the parole of ReNaul Johnson, a man who had already served more than a decade of a 50-year sentence on charges related to an attack on a school principal, who was not hospitalized for her injuries. It was a case that had first come to Cobb’s attention while she was still on the state’s criminal court of appeals. She says at the time she saw no reversible error but did have a concern about what she saw as Johnson’s excessive, but legal, sentences. After winning Johnson’s parole in June, Cobb has now set her sights on the prosecutor who tried to keep him behind bars. Cobb in early January filed a complaint with the Alabama State Bar’s disciplinary committee stating that Houston County District Attorney Doug Valeska had given false statements, or was not properly prepared and relied on a faulty memory, to the Alabama Board of Pardons and Paroles. obtained a copy of the letter purporting to be Cobb’s letter to the Bar last week. Cobb confirmed she had sent the letter. A spokeswoman for the bar said they can’t confirm or deny whether a complaint has been received. Valeska had not responded to phone calls and emails from prior to publication of this story. According to court records Valeksa in January asked for and got an order from Houston County Circuit Judge Michael Conaway on Jan. 26 to have the VHS tapes held in evidence in the case by the county court clerk’s office to be copied onto discs. The motion does not say why Valeska wanted the video released. In her letter to the bar Cobb stated this was the first time in her 30-year legal career that she had filed a complaint against a lawyer, much less a district attorney. More:


Mike Hubbard case: Judge OKs hearing on alleged leaks

The ruling, following a contentious hour-long court battle in which prosecutors and defense attorneys hurled accusations of lawbreaking and bad faith at one another, sets up a March 3 hearing on claims by attorney and radio show host Baron Coleman that Matt Hart, the lead prosecutor in the Auburn Republican’s case, gave him grand jury information that he used in a “whisper campaign” in a 2014 campaign against Hubbard. The state said Coleman was a “confidential informant” and cited affidavits where Coleman’s co-host said Coleman denied that he received grand jury information. The effect on Hubbard’s trial, set to start March 28, is not yet clear. The defense team Tuesday filed a motion to delay the start date after former Lt. Governor Bill Baxley’s law firm joined the speaker’s defense team. Hubbard’s team, which has long alleged prosecutorial misconduct in the speaker’s case, filed the motion for hearing on Feb. 2, based on Coleman’s affidavit signed and dated the same day. Attorney Lance Bell said in court Tuesday Coleman gave them the affidavit. Bell also said Coleman played him snippets of phone call recordings between Coleman and Hart in which Hart said Coleman was a “source,” not a confidential informant, as the state asserted in its response. The defense argues Hart leaked grand jury information to Coleman, which would be a felony. “The few minutes I heard, I felt there were criminal laws being violated,” Bell said. Prosecutors pointed out Coleman twice said in an affidavit he was not alleging that violations took place, and accused the defense team of delaying the case. “Every allegation brought to us by the defense has been investigated,” said W. Van Davis, Acting Attorney General in the case. “I don’t know of any evidence put before this court that there was a grand jury leak or any grand jury testimony from anybody.” But Walker said Tuesday the affidavit from Coleman troubled him because it appeared to contradict earlier testimony that Coleman gave to the court on his relationship with the grand jury. “Isn’t it best to have a hearing to get Mr. Coleman under oath and get to the bottom of this?” Walker asked prosecutors. Deputy Attorney General Michael Duffy argued that “we know what (Coleman’s) going to say” and asked why the defense had not called Coleman to the stand in previous hearings. “He didn’t state anything under the ethics law,” Duffy said. “ALEA rejected Mr. Coleman. He didn’t state a criminal violation.” But Walker said he had to investigate after an attorney “says A, B, and C (and) a few days later” said something different. The hearing included what are by now standard fusillades between the legal teams. Hart suggested Coleman had “flipped over” to the defense. “If Mr. Coleman has been paid, we’re going to get to the bottom of that,” he said. Bell said Hart “has lied to this court” in his characterization of the state’s relationship with Coleman. “He’s committed fraud on this honorable court,” he said. Hubbard attended the hearing with his wife Susan but did not take part in the proceedings. Prosecutors accuse the speaker of using his office – and previously, his role as Alabama Republican Party chair – to solicit jobs or investments from friends and associates. Hubbard is also accused of lobbying Gov. Robert Bentley and other executive branch officials on behalf of clients, and of inserting language into a budget that would have benefitted another client. Hubbard maintains his innocence. His defense team from the beginning has accused the Alabama Attorney General’s office of prosecuting Hubbard for political purposes and focused on Hart’s role. Prosecutors have maintained such efforts are delaying tactics. Walker said the legal teams could call other witnesses besides Coleman. The judge seemed interested in learning who the targets of Coleman’s alleged “whispering campaign” were.

Will Alabama Send in a Marine?

Can a former Marine’s “Oorah!” defeat an incumbent’s moolah? That’s the question Marine veteran Jonathan McConnell poses to Alabama’s veteran U.S. senator, Richard Shelby. McConnell (no relation to Kentucky’s senior senator) has a remarkable résumé for a 33-year-old: combat veteran, businessman, and lawyer. Now he’s challenging Shelby in the Republican primary, accusing the senator of being a career politician. No doubt Shelby is a Washington, D.C., fixture. First elected to Congress in 1978, Shelby won his Senate seat in 1986. Now in his fifth term, if reelected he would be 88 at the end of his next. But even in an antiestablishment year, Shelby is no soft target. His voting record is solidly conservative and he dutifully tends his home front. That makes him less vulnerable than other superannuated Republican senators — Richard Lugar, anyone?— who in recent elections have been defeated, or just scared silly, by conservative primary challengers. And then there is the blunt force of the money at Shelby’s disposal: He began the race with $19 million in his campaign coffers, a mind-boggling sum for Alabama, a midsized state with low media costs. But for all the challenges he faces in taking on Shelby, McConnell isn’t exactly a political neophyte. He was reared in a political household: His parents are Republican activists and his father, Roger, was a GOP state chairman who closely aligned himself with conservative senator Jeff Sessions. (Sessions, though, has endorsed Shelby, which suggests a GEICO ad: If you’re a Republican senator, you endorse your home-state GOP colleague. It’s what you do.) McConnell learned to campaign in college. At Auburn University he ran for president of a student government dominated by fraternity and sorority members. Though not himself in a frat, McConnell won.

By the time he graduated, McConnell was on track to go to law school. Instead, he volunteered for Marine officer-training school. Deployed twice to Iraq, McConnell led a platoon in tough combat near Fallujah in 2006. Their mission: going house to house searching for terrorists and militant fighters. Retiring as a captain, McConnell returned home to attend University of Alabama law school. That’s where he was when he learned pirates had hijacked the Maersk freighter Alabama (events later dramatized by Tom Hanks in Captain Phillips). Astonished that riff-raff in skiffs could seize a large merchant vessel, McConnell launched a “private maritime security” company, Meridian Global Consulting, deploying former Marines to secure commercial ships in treacherous waters. McConnell did this while studying to be a lawyer and still managed to finish law school a semester early. More:


House approves bill blocking Birmingham’s minimum wage


The Alabama House of Representatives Tuesday passed a bill to stop Birmingham from setting a $10.10 an hour minimum wage after a furious debate over the objective of the bill and the proper roles of state and local government. The legislation, sponsored by Rep. David Faulkner, R-Mountain Brook, passed 71 to 31 Tuesday evening. In the Montgomery County delegation, Reps. Reed Ingram, R-Pike Road and Dimitri Polizos, R-Montgomery, voted for the measure. Reps. John Knight and Thad McClammy, D-Montgomery, voted no. Rep. Alvin Holmes, D-Montgomery, was listed as voting no despite not being present Tuesday. Alabama has no state minimum wage and follows the federal $7.25 an hour limit. The median hourly wage in the state in May 2014 was $14.83 an hour. The national median was $17.09.

Birmingham last August approved a city minimum wage of $10.10 an hour, to be implemented over two years. Defenders of the increase say the current wage is insufficient for working people to live on.

“We want to raise the standard in our community,” said Johnathan Austin, Birmingham City Council president, who watched the debate Tuesday. “One way to do that is through raising the minimum wage and setting a standard higher than what the federal standard is.” Opponents said it would create a “patchwork” of wages and possibly hurt entry-level jobs. Faulkner’s bill would forbid cities from establishing their own minimum wage for private sector employees. Municipalities would still be able to establish wage levels for public employees. Faulkner said during the debate he wanted Alabama to be seen as a “pro-business” state and expressed concerns Birmingham’s move would cost jobs in the city.

“This bill is a good bill to help people,” he said. “It will help maintain jobs for those who make minimum wage and jobs for those who make more.” Birmingham’s City Council voted to accelerate the implementation of the minimum wage last week, after it became clear Faulkner would file his bill. The wage in Birmingham will go up to $8.50 an hour on March 1, and rise to $10.10 an hour in July, if Faulkner’s bill failed. Democrats brought a lengthy filibuster against the legislation, challenging both the value of the current level and whether the state had a right to interdict a city’s move on the issue.

“Do realize a man trying to feed a family of four on $7.25 an hour . . . are still under the level of poverty level?” said Rep. A.J. McCampbell, D-Demopolis, to Faulkner. McCampbell and other Democrats also said the state government was overreaching in trying to dictate what Birmingham could do.

“Every elected official has the freedom to make a stupid decision,” said Rep. Chris England, D-Tuscaloosa. “Do you know what the remedy is? They get sent home.” England also challenged Faulkner on whether he supported an incremental increase in the minimum wage. Faulkner said that was a “hypothetical” and said he could not answer it unless it is “analyzed studied and looked at whether a raise in the minimum wage would affect jobs and people’s lives.” Democrats also criticized language that they said would strip cities and counties of much of their authority in negotiating contracts, such as those with private employers to set a living wage. “Once this bill is passed, the repercussions you’re going to feel will be awesome in a negative way,” said Rep. Mary Moore, D-Birmingham. “You are systematically stripping cities and counties of their authority.” As is usually the case, the minority party dominated the debate. Rep. Ed Henry, R-Hartselle, spoke in favor of the bill, saying it would protect business owners from “overreach” by city and county governments. Henry called the Alabama Legislature “the last line of constitutional defense.” 29 states and the District of Columbia have minimum wages higher than the federal $7.25 an hour minimum, according to the National Conference of State Legislatures. The bill moves to the Senate. It is not clear if the city would take legal action should the bill become law.


Judge blocks Alabama use oil spill funds to build hotel


A federal judge has blocked Alabama from using a portion of oil spill funds for the construction of a hotel and conference center at Gulf State Park. Senior U.S. District Judge Charles Butler ruled Tuesday that federal trustees failed to examine alternative uses for the money. Gulf Restoration Network sued state and federal trustees over Alabama’s plans to use $58.5 million in early restoration funds for the project. Butler blocked the state from using the money for the hotel development until the analysis is completed.

The environmental group argued that a hotel development wasn’t proper use of money meant to restore the coast after the largest oil spill in U.S. history. However, Butler noted that he couldn’t block Alabama from using other funds for the project.




The politics of noise by Ed Rogers

In politics, sometimes noise is useful and serves an effective purpose, and sometimes it’s just noise.  Sen. Harry Reid’s (D-Nev.) whining over Republicans dismissing the prospect of confirming a President Obama Supreme Court nominee is just noise. But for Donald Trump, creating noise is a very specific tactic, meant to deceive voters and bluff opponents and commentators. Sen. Reid’s faux hyperventilation over the Republican Senate majority indicating that they will not move President Obama’s Supreme Court nominee following Justice Antonin Scalia’s death is in the category of noise for the sake of noise. It will have no effect. There’s not one Republican presidential candidate, one Republican elected official or any Republican of stature I can think of who believes it would be anything other than a giant mistake to proceed with confirming an Obama Supreme Court nominee this close to the 2016 election. It’s not going to happen. Sen. Reid should do what he has to do, but he should not strain his vocal chords.  In an op-ed in today’s Washington Post, Sen. Reid writes, “If Republicans proceed, they will ensure that this Republican majority is remembered as the most nakedly partisan, obstructionist and irresponsible majority in history.” He also threatened that if Republicans don’t allow President Obama’s Supreme Court nomination to receive a hearing and floor vote, “the consequences will reverberate for decades.” Well, I think most Republicans would see it another way — that if President Obama is allowed to appoint someone to the Supreme Court, the consequences will reverberate for decades. Sen. Reid’s outrage is pointless, but as minority leader, he’s obligated to try to make some lemonade out of the lemons the Democrats are left holding. At least this way he can try to stir up anger against Republicans, use some of their words against them and maybe even get some solid fundraising out of it.  The chances are close to zero that an Obama nominee will get a vote, but Sen. Reid has to at least put up the appearance of waging the good fight.  What will be interesting to see is who it is the Democrats will recruit to play the aggrieved, would-be Supreme Court nominee. Obviously, the nominee would have to be willing to be part of the charade, something most serious legal scholars wouldn’t readily embrace. Anyway, it will be interesting to watch. In the meantime, the noise coming from the Trump campaign might be effective. Trump’s campaign tactics involve screaming at a fever pitch and intimidating others into not objecting to what he says.  The media often takes his words at face value, and as we saw at the beginning of the campaign, even the other candidates didn’t really challenge him. But now some of the candidates, specifically Jeb Bush and Ted Cruz, have started to push back against Trump, and we seem to be stuck in a cycle where Trump screams some absurdities and acts churlish, he is called out and then he screams even louder.  It’s all very fatiguing.  But I guess that’s the point. The Post’s Philip Rucker points out that Trump “unloaded” on Cruz in South Carolina, “labeling the Texas senator ‘a liar’ and ‘the most dishonest’ person in politics.” In this case, Cruz isn’t a liar, he’s simply supplying useful information by pointing out the inconsistencies in Trump’s record. Trump is counting on his threats to the other candidates and on commentators being worn out by the deluge of Trump noise to allow his nonsense to continue carrying the day. I hope Cruz and others are not intimidated or just worn out by Trump and won’t allow themselves to be shouted down. The very idea that everyone should take what Trump says at face value is crazy.  The very idea that he is somehow immune to political expediency and hasn’t tailored his positions to meet today’s politics is just funny. And let’s face it, Trump hasn’t just evolved on some of the issues, he’s done some outright 180s.  For other campaigns to not question his sincerity and highlight his obvious pandering is a disservice to the voting public. Politics is full of noise, which is almost always a turn-off.  But it’s something we all have to endure, and we shouldn’t let the noise obscure what’s really important.


Morning Money

KASHKARI DROPS A BOMB — Minneapolis Fed President (and ex-Goldman Sachs banker and George W. Bush Wall Street bailout mechanic) Neel Kashkari dropped a bomb on the banking industry on Tuesday with a speech in DC calling for breaking up “too big to fail” banks. In remarks at Brookings, Kashkari said the “biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy” and promised a plan to end the problem by the end of the year.”

Among possible actions, Kashkari listed: “Breaking up large banks into smaller, less connected, less important entities. Turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant). Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.

“Options such as these have been mentioned before, but in my view, policymakers and legislators have not yet seriously considered the need to implement them in the near term. They are transformational — which can be unsettling. The financial sector has lobbied hard to preserve its current structure and thrown up endless objections to fundamental change.” Full remarks:

WALL STREET REACT: UM. WHAT? — Bank lobbyists were, to put it mildly, surprised by Kashkari’s remarks. And the reaction came flowing in, both on record and off.

Via one banking industry source: “The speech is notable not only for its radical proposal to convert banks to utilities but also for its failure to note, much less engage, any of the post-crisis reforms in this area — e.g., TLAC, the ISDA protocol on derivatives, central clearing — and the resulting absence of any TBTF benefit in debt pricing or credit ratings. But one thing is for sure: he’s now on Bernie Sanders’s short list for Treasury Secretary.”

Another banker emails: “Kashkari has managed to get to the left of [Fed governor] Dan Tarullo. He’s turned Tarullo into Hillary Clinton to his Bernie Sanders.”

And one more: “To the extent that banks were surprised it was more by how blatantly political Neel has become. He’s spent the last seven years promoting himself as the guy who saved Wall Street, two years running for the US Senate and never once suggesting that this was his policy view. Makes you wonder if he’s trying to move to the left of Al Franken for the next Democratic Senate primary in Minnesota.”

And on the record … John Dearie, Acting CEO of the Financial Services Forum: “The largest financial institutions are smaller and less complex with twice the capital and triple the liquidity since Mr. Kashkari left government to enter politics. The Fed’s stress tests show that large financial institutions can withstand a crisis far worse than 2008, and the largest banks have ‘living wills’ to guide an orderly wind-down without putting taxpayer money at risk. … Of the ten largest global financial institutions, only a few are U.S. based”

HPS’s Tony Fratto: “Neel is a friend and former colleague, and I have great respect for him. I appreciate him wanting to jump into this issue, but over the past eight years a lot of very serious and effective work has been done on TBTF, and what Neel calls ‘slow and incomplete’ is actually a very deliberate and thoughtful process, not just in the U.S., but with overseas authorities.

“Furthermore, Dodd-Frank already affords regulators all the authority they need to take additional measures if necessary. Unless this is a predetermined scheme to recommend breaking up banks, this is something like re-opening the barn door after the horse is in the stable.”

THE LEFT LOVES IT — Bernie Sanders: “I am delighted that the new president of the Minneapolis Federal Reserve believes that we need to break up too big to fail banks. If a bank is too big to fail, it is too big to exist. When it comes to Wall Street reform that must be our bottom line. The risk of another bailout is too great, and the economic and political power of a handful of huge financial institutions is simply too large.”

Better Markets CEO Dennis Kelleher: “Minneapolis Fed President Kashkari’s voice is a welcome addition to the important debate about ending too-big-to-fail firms … He correctly recognizes that too-big-to-fail firms continue to threaten not only the financial system and the economy, but also the jobs, homes, savings and livelihoods of all Americans. While the devil is in the details, we welcome the Minneapolis Fed’s initiative to propose transformational change”

DEPARTMENT OF STRANGE TIMING — Via email invite from DLC founder Al From: “You are invited to a special, by invitation only, showing of the about-to-be-released film Crashing the Party. Based on Al From’s book, The New Democrats and The Return to Power, this feature documentary film tells the inside story of one of the most dramatic and important political comebacks in recent American history.

“It chronicles the shaping of Clintonism, the idea-based formula that rescued the Democratic Party from three straight crushing defeats in the 1980s and offers the party’s best hope for retaining the White House in 2016.” … Seems like the last thing Dems — including those named Clinton — want at this point is to be reminded of the rise of “Clintonism.”

TRADE AND SOUTH CAROLINA — WSJ’s Bob Davis and Valerie Bauerlein: “Global competition has turned South Carolina, the scene of a Republican primary on Saturday, into a trade powerhouse. … Few states have been more nimble than South Carolina in adjusting to global competition. The state turned the loss of 80,000 textile and apparel jobs since 1980 into part of its pitch to foreign manufacturers and U.S. exporters that need a big pool of workers to staff new car, tire and aerospace plants.

“Even some Chinese textile makers, once the scourge of the state’s business establishment, are setting up beachheads in South Carolina, which leads the nation in percentage of workers employed by foreign companies — 8.4 percent in 2013. Yet the benefits are unevenly spread and have gone disproportionately to the college-educated in larger population centers. And though the new jobs generally pay better than those in textiles and apparel, there aren’t nearly enough of them to make up for the losses when international competition hammered those older industries.”

HILLARY’S CASH DASH — POLITICO’s Gabriel Debenedetti: “Hillary Clinton’s top bundlers and donors are reconciling themselves to a jarring new reality: The money advantage that they had long taken for granted is unlikely to last … Now, with two weeks left before Super Tuesday and the prospect of an extended contest ahead, they’re girding for a suddenly crucial late February fundraising sprint they hope will keep pace with Sanders’ blazing clip.

“Between last Thursday’s Democratic debate and February 27’s South Carolina primary, Hillary Clinton is scheduled for 13 events, Bill Clinton for 11, and Chelsea Clinton for nine — alongside a host of other fundraisers hosted by surrogates and aides, according to invitations obtained by POLITICO.”

GOP STANCE ON SCOTUS NOMINEE SHOWS CRACKS — POLITICO’s Burgess Everett: “Mitch McConnell’s message to the White House after Antonin Scalia’s death on Saturday seemed unequivocal: Don’t even bother sending a Supreme Court nominee to Congress, we won’t act on it. But on Tuesday, some Republicans were signaling they’re open to at least holding hearings, if not allowing a confirmation vote. In an interview on Tuesday afternoon Sen. Ron Johnson of Wisconsin bristled at the suggestion that his party would completely ignore a nomination: ‘It’s amazing how many words are being put in everybody’s mouth.’ ..

“Earlier on Tuesday, Judiciary Committee Chairman Chuck Grassley, whose panel would evaluate any potential Obama pick, said he wouldn’t rule out holding hearings. Johnson and other Republicans hastened to add, however, that even though hearings are a possibility, winning enough GOP votes to actually approve an Obama nominee would be very difficult.”

NOMINEE COMING SOON — WSJ’s Carol E. Lee and Coleen McCain Nelson: “President Barack Obama on Tuesday said he seeks a Supreme Court candidate who ‘indisputably is qualified’ for the job, while administration officials indicated he wants a nominee who can attract some Republican support and complicate GOP plans to push off any confirmation process until after the election. Mr. Obama said he would settle on a nominee within the next several weeks and would ‘nominate in due time a very well-qualified candidate’ to succeed Justice Antonin Scalia …

“The White House has ruled out choosing a liberal simply to fire up the Democratic Party base in a pivotal election year, suggesting Mr. Obama is looking for someone more moderate. The challenge for Mr. Obama is finding a nominee who Republicans, particularly Senate Majority Leader Mitch McConnell, find politically difficult to refuse. … Mr. Obama called on lawmakers to rise above ‘day-to-day politics,’ saying the Constitution is clear that the president should put forward a nominee to fill a vacancy on the Supreme Court, and the Senate should consider that nomination. ‘Historically, this has not been viewed as a question,’ he said.”

SAUDI AND RUSSIA AGREE TO FREEZE OIL OUPUT — FT’s David Sheppard and Anjli Raval in London, and Jack Farchy in Moscow: “Saudi Arabia has agreed with Russia to freeze oil output if they are joined by other large producers, in the first co-ordinated move to try to reduce a near record supply glut and halt the collapse in prices. After watching oil prices fall 70 per cent since mid-2014, Saudi Arabia’s powerful oil minister Ali al-Naimi said an output freeze by some of the world’s major producers should start to stabilise the market. … .

“The speed of the deal between the Opec powerbroker and the world’s largest crude oil producer surprised the market but traders remained sceptical that the provisional agreement would gain wider acceptance. Opec member Iran is seen as the biggest stumbling block. The deal was reached at a behind-closed-doors meeting in Doha with Opec members Qatar and Venezuela. Mohammad bin Saleh al-Sada, Qatar’s energy minister, said that the deal was still contingent on other major producers agreeing to join the freeze, which will probably complicate efforts”


NEW SOUTH CHINA SEA TENSION — Reuters: “China has deployed an advanced surface-to-air missile system to one of the disputed islands it controls in the South China Sea, Taiwan and U.S. officials said, ratcheting up tensions even as U.S. President Barack Obama urged restraint in the region. Taiwan defense ministry spokesman Major General David Lo told Reuters the missile batteries had been set up on Woody Island. The island is part of the Paracels chain, under Chinese control for more than 40 year but also claimed by Taiwan and Vietnam.”

BLOOMBERG NEWS PLANS FOR BLOOMBERG RUN — FTs’ Matthew Garrahan and Shannon Bond: “While Hillary Clinton, Donald Trump and the other candidates fighting to be nominated US presidential candidates prepare for a possible challenge from Michael Bloomberg, the 17,000 employees at his financial information group are also on tenterhooks about whether their boss will run. For older hands at the company, Mr Bloomberg’s confirmation in an interview with the Financial Times that he was considering entering the race may seem like history repeating itself. …

“Fifteen years ago the billionaire chief executive ran a successful campaign for New York mayor, winning the first of three terms. He left the company at the end of 2001 and then returned 13 years later. Company insiders believe the same leadership structures will kick in this year if Mr Bloomberg decides to embark on a presidential campaign. Many key senior employees are still with the company, notably Peter Grauer, its chairman, who ran the business in Mr Bloomberg’s absence when he became New York mayor. ‘The business runs independently of him,’ said one person close to the situation. ‘There are a lot of strong senior people in management.’”

POTUS Events

5:15 AM The Vice President will deliver remarks at the Memphis Regional Intermodal Facility to commemorate the 7th anniversary of the American Recovery and Reinvestment Act

Memphis Regional Intermodal Facility Open Press

12:00 PM The Vice President will tour the Port of New Orleans

Port of New Orleans Pooled Press

12:45 PM The Vice President will deliver remarks at the Port of New Orleans to commemorate the 7th anniversary of the American Recovery and Reinvestment Act

Port of New Orleans Open Press

3:15 PM The President meets with Secretary of State Kerry

Oval Office Closed Press

4:45 PM The Vice President will tour the Memphis Regional Intermodal Facility

Memphis Regional Intermodal Facility Pooled Press


Floor Action

The House will return on February 23rd. The Senate will return February 22nd.


What You Need to Know about Taxable and Non-Taxable Income

All income is taxable unless a law specifically says it isn’t. Here are some basic rules you should know to help you file an accurate tax return:

  • Taxable income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is normally taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you upon the death of an insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from a scholarship is not taxable. This includes amounts used for certain costs, such as tuition and required books. On the other hand, amounts you use for room and board are taxable.
  • Other income tax refunds.  State or local income tax refunds may be taxable. You should receive a Form 1099-G from the agency that paid you. They may have sent the form by mail or electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some items that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

For more on this topic see Publication 525, Taxable and Nontaxable Income. You can get it at anytime.

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