Krebs Daily Briefing 21 April 2016

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


Welcome to the China Debt, Shadow Banking, Wealth Management Product Nexus

Here’s a growing list to further excite China bears this Thursday: Baoding Tianwei Group Co., China National Erzhong Group, Sinosteel Co., China Coal Huayun and China Railway Materials Co., Guangxi Nonferrous Metal Group, Greenland Holdings Corp.’s Yun Feng unit, and Dongbei Special Steel Group Ltd. These are the eight state-owned enterprises (SEOs) that have run into some sort of repayment problem this year, exacerbating already heightened concerns over the future of China’s debt-fueled economy. It’s a point picked up with some aplomb by Bank of America Merrill Lynch’s China strategists on Wednesday, who argue that SEO-issued debt could eventually come to destabilize a much wider slew of China’s investment landscape. At issue is the degree to which the debt issued by China’s SEOs has infiltrated the country’s wider financial system, as well as the complex interplay of motives that has come to characterize its various stakeholders. SEOs that overindulged on debt may actually be keen to default on their bonds, while government officials may be loath to bail them out entirely. Meanwhile, banks will likely want to suppress defaults in the SEO space through potentially any means possible including, perhaps, pushing losses onto investors who have purchased the debt through wealth management products (WMPs). More:

A Busy Queen Elizabeth II Pencils In a 90th Birthday

LONDON — She has been served by 12 prime ministers, starting with Churchill; navigated the decline of the British Empire; braved the tragedies of her family and the nation; and, on Sept. 9, edged out Queen Victoria as the longest-reigning monarch in British history: 64 years now. And she is lauded for having the stiffest upper lip in the realm. On Thursday, Queen Elizabeth II celebrates her 90th birthday, and a grateful Britain is honoring a woman her biographer Douglas Hurd, a former foreign minister, has called “The Steadfast.” Through seven decades, she has remained gloriously and relentlessly enigmatic in one of her signature pastel outfits and colorful hats, chosen, royal experts say, so onlookers can spot her in a crowd. This being Britain, the occasion will be celebrated with pageantry; warm beer; longer pub hours; equestrian displays; and an appearance by the actress Helen Mirren, who won an Oscar for portraying the queen. But befitting a workhorse who carried out 341 engagements last year, Elizabeth kicked off birthday celebrations on Wednesday in a dutiful display: at a Royal Mail delivery center, where she and her husband, the Duke of Edinburgh, watched workers sort mail and were serenaded by a choir of postal employees. On Thursday, she is to light the first of more than 900 celebratory beacons. On Friday, President Obama will offer the queen birthday wishes at Windsor Castle. And the frenzy will not end this week. Pub opening times in England and Wales will be extended by two hours, until 1 a.m. on June 10 and 11. (Her birthday is officially celebrated in June for ceremonial purposes.) A British artist has also paid tribute to her service as an Army mechanic during World War II by using 800 car parts to create a giant sculpture of the queen’s head, including a crown made with spark plugs. There is a new set of stamps to honor the birthday, featuring four generations of royals, including little Prince George. They will be first class, of course. More:

Abducted Nigerian Girls Have Not Been Abandoned, U.S. Says

MAROUA, Cameroon — The American and African forces sent toCameroon to fight Boko Haram have, on several occasions, located clusters of the schoolgirls kidnapped by the militant group two years ago, United States officials say. Rescue operations have not been carried out, the officials said, because of fears that any ensuing battle with Boko Haram fighters would put the captives at risk, or incite retaliation against hostages still being held in other areas. American officials said a combination of local intelligence, intercepted communications and drone footage had been used to locate groups of the 276 girls abducted from the Government Girls Secondary School in the Nigerian town of Chibok two years ago this month. Some of the girls have since been tracked to Nigeria’s sprawling Sambisa Forest. Officials insist that efforts to free the girls have not been abandoned. They say that a major concern is the hundreds of other women and girls who are also held by Boko Haram, captives who are often sexually assaulted, forced into marriages with their tormentors, and sometimes killed. “You’re not just looking for 200 girls,” said Gen. Carter F. Ham, the retired head of the United States military’s Africa Command. “There are many, many others who have been taken hostage, and more thousands killed, and two and a half million people displaced.” Senior American military officials joined Samantha Power, the United States ambassador to the United Nations, in Cameroon this week to speak with the country’s military and civilian leaders about the fight against Boko Haram and information gleaned by American intelligence. The talks took place not far from where American Special Operations forces and hundreds of surveillance drone operators are based. Despite the proximity of the troops, Boko Haram’s attacks continued. On Monday night, three Cameroonian soldiers were killed and five were wounded after Boko Haram fighters ambushed a military convoy near Dabanga, a town in the country’s north, Cameroonian military officials said. The ambush followed intense fighting on the Nigerian side of the border, where Boko militants attacked an army base, wounding 22 soldiers. United States military officials said that intelligence reports show that the girls have been divided into smaller groups. Gen. David M. Rodriguez, the head of the military’s Africa Command, told reporters at the Pentagon this month that the Chibok girls have been “moved to some very isolated places.” General Rodriguez added that locating them is “not an exact science.” Because the girls have been dispersed, military forces from Chad, Nigeria and Cameroon might need to mount simultaneous rescues to make sure that Boko Haram fighters do not retaliate for the rescue of one group. Such a multipronged, coordinated operation would be difficult even for highly trained American troops with combat experience in Afghanistan and Iraq to pull off. More:

There’s Only One Country That Isn’t Worried About a Trump Presidency

Ever since it began to look as though Donald Trump might have an actual prayer of becoming president, there has been a steady stream of stories about foreign diplomats and other officials contacting their US counterparts to express their discomfort at the prospect of The Donald wielding the power of the White House. However, a new survey by YouGov, working for the German business publisher Handelsblatt, found that there is at least one country in the G20 where Trump is the preferred candidate in a matchup between the billionaire, former secretary of state Hillary Clinton, Texas Sen. Ted Cruz, and Vermont Sen. Bernie Sanders. That country, it will come as little surprise to anyone who has followed the long-distance flirtation between Trump and Russian President Vladimir Putin, is Russia. In fact, it wasn’t even close. The Russian people surveyed by YouGov supported Trump over Clinton by a margin of 21 percent. For reference, Trump’s next-best showing in the poll was in China, where he lost to Clinton by 12 points — a 33-percentage point swing. Mexico, unsurprisingly given Trump’s antagonistic stance toward the US’s southern neighbor, was the most likely to prefer Clinton to Trump, with a margin of 54 percent. However, north of the border Clinton didn’t do nearly as well. Canadians gave her the nod over the former reality television star by only 17 points. More:

VW to pay each U.S. customer $5,000 to settle dieselgate: Die Welt

BERLIN (Reuters) – Volkswagen has reached a deal with U.S. authorities to settle the case over its cheating of diesel emissions tests that would involve it paying each affected customer $5,000, Germany’s Die Welt newspaper reported on Wednesday. Citing unidentified sources close to the negotiations, Die Welt said the agreement would be presented on Thursday to Judge Charles Breyer in San Francisco, avoiding a trial. Volkswagen (VW) declined to comment. Earlier on Wednesday, the possibility of a settlement had boosted the carmaker’s shares by 6.6 percent, the biggest gain in Germany’s benchmark DAX index. A U.S. federal judge last month gave VW and regulators until Thursday to agree on a fix for nearly 600,000 diesel cars on U.S. roads implicated by VW’s emissions test-rigging scandal. The company does “not believe any expedited hearing or bench trial is appropriate or required”, according to the agenda for the hearing on Thursday at the San Francisco district court about VW’s progress toward reaching a deal with the U.S. Environmental Protection Agency (EPA). The plaintiffs – a committee representing thousands of consumers who say they were tricked into buying polluting diesel vehicles – proposed an expedited hearing or bench trial, or an expedited “all issues” trial including punitive damages. Die Welt said the agreement did not include a detailed plan to fix the affected cars, nor were details fixed on fines and other compensation measures, with one source saying the deal would be fleshed out in the coming months. However, the owners of affected cars should receive $5,000 each in compensation and VW will separately have to pay to fix their vehicles, the paper said. More:–finance.html


Why Haven’t Bankers Been Punished? Just Read These Insider SEC Emails

This story was co-published with The New Yorker. It is not subject to our Creative Commons license.

In the late summer of 2009, lawyers at the Securities and Exchange Commission were preparing to bring charges in what they expected would be their first big crackdown coming out of the financial crisis. The investigators had been looking into Goldman Sachs’ mortgage-securities business, and were preparing to take on the bank over a complex deal, known as Abacus, that it had arranged with a hedge fund. They believed that Goldman had committed securities violations in developing Abacus, and were ready to charge the firm. James Kidney, a longtime SEC lawyer, was assigned to take the completed investigation and bring the case to trial. Right away, something seemed amiss. He thought that the staff had assembled enough evidence to support charging individuals. At the very least, he felt, the agency should continue to investigate more senior executives at Goldman and John Paulson & Co., the hedge fund run by John Paulson that made about a billion dollars from the Abacus deal. In his view, the SEC staff was more worried about the effect the case would have on Wall Street executives, a fear that deepened when he read an email from Reid Muoio, the head of the SEC’s team looking into complex mortgage securities. Muoio, who had worked at the agency for years, told colleagues that he had seen the “devasting [sic] impact our little ol’ civil actions reap on real people more often than I care to remember. It is the least favorite part of the job. Most of our civil defendants are good people who have done one bad thing.” This attitude agitated Kidney, and he felt that it held his agency back from pursuing the people who made the decisions that led to the financial collapse. While the SEC, as well as federal prosecutors, eventually wrenched billions of dollars from the big banks, a vexing question remains: Why did no top bankers go to prison? Some have pointed out that statutes weren’t strong enough in some areas and resources were scarce, and while there is truth in those arguments, subtler reasons were also at play. During a year spent researching for a book on this subject, I’ve come across case after case in which regulators were reluctant to use the laws and resources available to them. Members of the public don’t have a full sense of the issue because they rarely get to see how such decisions are made inside government agencies.

Kidney was on the inside at a crucial moment. Now retired after decades of service to the SEC, Kidney recently provided me with a cache of internal documents and emails about the Abacus investigation. The agency holds the case up as a success, and in some ways it was: Goldman had to pay a $550 million fine, and a low-ranking trader was found liable for violating securities laws. But the documents provided by Kidney show that SEC officials considered and rejected a much broader case against Goldman and John Paulson & Co. More:


Flint Water Crisis Yields First Criminal Charges

FLINT, Mich. — The first criminal charges stemming from the Flint, Mich., water crisis were filed on Wednesday, as two state officials and a city employee were accused of covering up evidence of lead contamination. Two officials at the state Department of Environmental Quality were charged with misleading the federal Environmental Protection Agency about whether Flint was using the treatment needed to control lead levels after the city switched its water supply in 2014. The officials Michael Prysby, a district engineer, and Stephen Busch, a district supervisor, were also accused of impeding a Genesee County investigation. And Michael Glasglow, the city’s utilities administrator, was charged with tampering with test results to make the lead contamination appear less severe. The charges were brought by the state attorney general, Bill Schuette, and authorized by Judge Tracy Collier-Nix of Genesee District Court. The contamination of the water in Flint, a poor, majority-black city, has become not only a public health crisis but also a political crisis for Gov. Rick Snyder, a Republican. Last month, a panel appointed by the governor assigned most of the blame to state officials, citing “government failure, intransigence, unpreparedness, delay, inaction and environmental injustice.” In a bid to save money, Flint, which had for years been under the control of an emergency financial manager appointed by the governor, decided in 2014 to switch from buying its water from the city of Detroit to taking it from the Flint River. The river water was much more corrosive, causing lead to leach from old pipes, and the city failed to add chemicals that would have prevented that contamination.


The Texas secession debate is getting kind of real

When Texas Republicans assemble for their state convention next month, it’s possible they will debate whether Texas should secede from the United States. There’s almost no chance Texas Republicans will actually vote in favor of seceding, mind you — not least because most of the party wants nothing to do with this — but the fact we’re even mentioning secession and the Texas GOP convention in the same sentence suggests that the once-fringe movement has become a priority for at least some conservative grass-roots Texans. To be sure, that seems to be a relatively small group. The Texas secession movement says 22 out of the 270 county GOP conventions passed some kind of independence resolution this spring. A party official said he’d be surprised if that were the case, and the Houston Chronicle was able to confirm only 10 counties. But 10 is a lot more than the one county that passed an independence resolution in 2012. Texas Republicans say these independence resolutions are just a handful of tens of thousands various resolutions to be considered at their convention. But it does seem like the secession movement is growing, or at least organizing, and may have become too big for party officials to ignore. “It’s cropped up in a major way just in this last year,” Paul Simpson, chairman of the Republican Party of Harris County, told the Houston Chronicle. Here’s a rundown of what you should know about it:


Anti-slavery activist Harriet Tubman to replace Jackson on $20 bill

WASHINGTON — Treasury Secretary Jack Lew will announce that Alexander Hamilton will stay on the front of the $10 bill Wednesday, while anti-slavery activist Harriet Tubman will go on the $20 bill, a department official told USA TODAY. Lew will also announce that a group of women voting rights activists will appear on the back of the $10 bill. Lew once considered placing women’s voting rights pioneer Susan B. Anthony on the $10 bill, according to an internal Treasury memo reported Wednesday by the Wall Street Journal. Lew, however, switched course and decided to ask for public comment about which woman should be on the bill. Anthony has already been featured on a $1 coin from 1979 to 1981 and again in 1999. “The March 2015 memo, which hadn’t previously been reported, sheds new light on a couple of long-running currency dramas,” the Journal reported. Hamilton, the nation’s first Treasury secretary, is the subject of a popular Broadway musical, which was awarded a Pulitzer Prize Monday.

The decision on the $10 bill has been the focus of much interest in the last week. On Monday, White House Press Secretary Josh Earnest said it’s up to Lew. “It, of course, is not at all uncommon for the Treasury Department to consult with the White House where appropriate when making important policy decisions,” Earnest said. “But I don’t have any news to make on Treasury’s behalf, at least not today.”

On Friday, Earnest said, “Lew has demonstrated a seriousness of purpose in taking a look at what the next generation of U.S. currency would look like.  Obviously, there are updates that are made to our currency based on security requirements.  And the question that he has considered is when those security updates are required, should we make some changes to our currency to make sure that it better reflects the country, and certainly the role that women have played in contributing to the development of our country. “And he has indicated that that look will result in changes being made not just to the $10, but to the $5 and the $20.  But beyond that, we’ll have to wait for an announcement from the Treasury Department.”


In an Age of Terror, an Early Start on the Presidential Transition

WASHINGTON — At a luxurious hilltop estate with sweeping vistas of the Hudson River, an adviser to President Obama began meeting on Wednesday with aides to the candidates vying to replace him to make the first, early preparations for the day when Mr. Obama leaves office. During a two-day gathering on the grounds of Kykuit, the manor built by John D. Rockefeller, they will attend breakout sessions, working lunches and dinners, and white-board-assisted discussions on how to execute a seamless transfer of power in an age when the threat of a terrorist attack like the one on Sept. 11, 2001, requires a fully functioning White House at all times. That need was brought home forcefully to President George W. Bush after 9/11, and his concern that his successor lose no time in taking the reins of power led to what is regarded as a model transition when it was time for him to leave office. Now, in an acknowledgment that its time is running out, the Obama White House has begun planning for the next transition, a task akin to a giant corporate merger, but one that involves the federal government’s 4,000 senior executives and a $4 trillion budget. And it will all be compressed into the 72 days between the election on Nov. 8 and the Jan. 20, 2017, inauguration. “It is the most complex, most difficult takeover on the planet today, and probably in history,” said Max Stier, the founder and president of the Partnership for Public Service, the nonprofit group that is hosting the retreat and has established a Center for Presidential Transition to guide the process from the outside. Mr. Stier declined to discuss the details of the meeting, including its participants, saying it was designed to provide a “safe space” for frank and confidential discussions about the transition process. But he said it was vital that the preparations begin now, removed from the chaos and rancor of the presidential campaign and the pressures of a White House bent on pressing Mr. Obama’s agenda while there is still time. “Campaigns were always loath to do early or aggressive pre-transition planning for fear that they will be accused of measuring the drapes or being presumptuous, so they ended up doing it at the last minute,” said Mr. Stier. “And the White House doesn’t want to be viewed as lame duck, but they also, as stewards of our government, really need to ensure that the handoff is as thorough and clean as possible.”


Bank Overdraft Fees Hit Younger Adults Hardest, Pew Says

Younger adults are among those hardest hit by bank overdraft fees, a new report from the Pew Charitable Trusts that was released on Wednesday said. More than a third of “heavy” overdraft users — those who pay $100 or more in bank fees in a year for overdrawing their bank accounts — are in their late teens through early 30s, Pew found. One reason younger consumers may be more affected is that they are more likely to use debit cards, and debits make up the majority of transactions resulting in overdraft fees, said Joy Hackenbracht, a research officer with Pew. “Frequent overdrafts are a financial burden,” she said. Many banks let customers overspend their checking accounts when they do not have enough money to cover a purchase, but then charge a fee — typically $35 — known as an overdraft fee. A small proportion of customers pay the majority of overdraft fees, Pew found, and they pay more than three such fees a year. The typical debit transaction amount that results in an overdraft fee is $24. These customers are essentially using the overdraft option not just as an occasional courtesy, but as an expensive form of short-term credit, Pew found. It’s also riskier credit, Pew said, because unlike with other loans, banks do not have to verify if a consumer has the financial ability to repay the debt, and consumers do not have to be given a reasonable time to repay it. Even if some consumers knowingly use overdrafts as a form of credit, the practice should come with the protections that go with other types of loans, said Susan K. Weinstock, director of consumer banking at Pew. For instance, she said, banks should have to disclose the effective annual percentage rate on the overdraft protection, which can be quite high. The findings come from a Pew-commissioned telephone survey of 304 heavy overdraft users in late 2014. (Social Science Research Solutions screened more than 8,400 people to find the participants.) The margin of sampling error is plus or minus 7 percentage points. In 2015, 628 large banks that are required to report overdraft and insufficient fund fees said the charges totaled $11.16 billion in revenue, or almost two-thirds of all the reporting banks’ fee revenue from consumer deposit accounts, the Consumer Financial Protection Bureau said.


Credit Bureaus Were the NSA of the 19th Century

In 1873, the Brooklyn Eagle published this description of the interior of a commercial credit bureau, in an article about the industry and its effects on individuals:  A stranger going into one of these agencies during business hours is struck by the stupendous machinery at work before him. Rows of desks, private rooms, particular departments, scores of busy clerks, hundreds of interested searchers, are around and on all sides of him. A constant stream of busy men, young and old, is flowing in and out all day, and every manuscript volume, of which there are hundreds, seems to be the subject of eager examination.

A few lines beneath the enormous all-caps headline (“AGENCIES”), a series of truncated sentences in a large, bold type summarized the article: “Private Detectives Watching Business Men Day and Night—Spies Around the House and in the Kitchen—Questioning a Man’s Tradesmen and Pumping his Domestics—The Family History of Business Men and Their Wives Made a Subject of Daily Record, &c., &c.” To be accused of spying was, at this point, par for the course for the commercial credit bureaus. Thirty years prior, Lewis Tappan, the founder of the agency that would eventually turn into Dun & Bradstreet, took out an ad defending his creation, “It is not a system of espionage, but the same as merchants usually apply—only only on an extended plan—to ascertain whether persons applying for credit are worthy of the same and to what extent.” But whether you called them spies or correspondents, the agencies relied on networks of locals sending written dispatches back to the central office. They sought information (often unreliably subjective) about a person’s credit-worthiness, judged not just in terms of his financial circumstances, but his personal character—was he married? Did he have children? Who were his parents? What church did he attend? Sometimes this information wandered into the deeply embarrassing: In 1854, a man sued Tappan’s Mercantile Agency for libel after a credit report claimed that he had left his wife for a prostitute. More:


This map shows every place in the US that has ever had a woman in Congress

Nearly one hundred years after the first woman was elected to Congress, three states have never had either a woman senator or representative: see map. As you can see above, Vermont, Delaware, and Mississippi have never been represented by a woman. Now, let’s break it down by legislative body. Along with the three states mentioned above, Iowa and Alaska have also never had any women in the House. And 22 states total haven’t had a woman senator. Washington, DC, elected Eleanor Holmes Norton as the District’s non-voting delegate to the House in 1991 and has reelected her ever since.

And of the US territories that elect non-voting delegates to the House of Representatives, American Samoa, Guam, and the Virgin Islands have elected women delegates, while Puerto Rico and the Northern Mariana Islands have not. You can look up your own address with our searchable map below, and we’ll tell you about any women who have represented your location in Congress.



Alabama historic tax credit program ending next month, says Senate president

A tax incentive credited with fueling the recent revitalization of aging buildings in downtown Birmingham and Mobile will expire next month with no legislative action. Alabama Senate President Pro Tem Del Marsh said Wednesday he was holding up legislation authorizing a seven-year extension of the state’s historic tax credit until there is a better understanding of its financial implications. Marsh said he was concerned about the budget impact on the initial three years of the tax credit program, which doled out up to $20 million a year to developers willing to take on revitalization projects of aging or historic structures. Among Marsh’s concerns are the lack of claims on the $60 million set aside in the initial program. Developers and city leaders have been credited the first three years of the program with spearheading the revival of the Admiral Semmes Hotel in downtown Mobile and the Pizitz building and Lyric Theater in Birmingham, among other prominent buildings. “In the last three years, $60 million in tax credits have been given, and I was informed that none of it is claimed yet,” Marsh, R-Anniston, said. “What is alarming to me is if these hit at one time, the $60 million, it could throw us into proration with the Education Trust Fund. If we are to add another $140 million over the next seven years and … it’s not being claimed, it could cause some serious budget problems going forward.” Marsh said the expiration of the three-year tax credit program doesn’t mean the economic incentive is permanently dead. He said he wants to authorize an independent, third-party study to conduct an economic impact analysis on all credits authorized by the Legislature. Included among those is a credit for film production in Alabama. “I am not convinced the credits are advantageous to the state,” Marsh said. “I want to make sure we are creating a program that (doesn’t just benefit) large corporations and big developers.” More:

Committee halts plan to spend part of BP settlement on roads

The budget committee in the Alabama House of Representatives today chose not to approve a proposed constitutional amendment that would have spent part of the state’s $1 billion oil spill settlement with BP on road projects. The bill, by Sen. Bill Hightower, R-Mobile, would have allocated the largest share of that road money to Mobile and Baldwin counties. BP agreed to pay the state $1 billion to compensate for economic damages from the Deepwater Horizon disaster, which started with the oil rig explosion six years ago today. That’s separate from a $1.3 billion settlement for environmental damages. Some officials, including the budget chairmen in the House and Senate and State Treasurer Young Boozer, support using the settlement to fully repay more than $500 million owed to the Alabama Trust Fund. That money has been borrowed over the last seven years to prop up the state budget. Hightower’s bill called for repaying $161 million of that debt, a repayment mandated by the state constitution, but not the other money owed to the ATF. The committee today voted to carry over Hightower’s bill at the request of Rep. Steve Clouse, R-Ozark, the chairman. Coastal lawmakers, including Reps. Randy Davis, Victor Gaston and Napoleon Bracy, urged support for Hightower’s bill before the committee voted to carry it over.

BP is scheduled to pay the state the $1 billion in installments over 18 years, starting this year.

Hightower’s plan called for a bond issue of about $650 million and for using the BP payments to pay off the bond debt. Besides the $161 million that would go to the Alabama Trust Fund, his plan called for Mobile and Baldwin counties to receive about $260 million for road projects, with the rest of the state receiving $230 million. As a proposed constitutional amendment, Hightower’s bill would have been subject to voter approval if it had passed the House.


Alabama House committee hears payday loan debate, doesn’t vote

A bill that offers what some consumer advocates say is the best chance of relief from the high cost of payday loans was debated in an Alabama House committee today and still has time to pass before the legislative session ends. But the bill did not advance today, as the House Financial Services Committee took no vote after a public hearing. Rep. Ken Johnson, R-Moulton, said the committee could vote on the bill by Sen. Arthur Orr next week. It has already passed the Senate. It’s typical for legislative committees that hold a public hearing to wait until the next meeting to vote. Time is growing short, though. Seven days remain in the legislative session, counting today. “This is the last vehicle we have to pass reform this session,” Rep. Danny Garrett, R-Trussville, who is carrying the bill in the House, told the committee.

Garrett said the bill hits a “sweet spot” because he said it would allow lenders to stay in business while providing some relief for consumers. The Legislature debates payday loan reforms every year, but the bills die. Under the law that’s been on the books since 2003, lenders can charge up to 17.5 percent on loans of up to $500 with terms as short as two weeks. That’s an annual rate of 455 percent. Orr’s bill would limit monthly fees to 7 percent of the amount originally borrowed, require loan terms of at least six months and allow customers to make installment payments. “We’re standing on the precipice right now of the best opportunity to do something about this issue,” Stephen Stetson, policy analyst with Alabama Arise, told the committee. Alabama Arise advocates for low-income families and has pushed payday loan reforms for years. Some lenders told the committee they could not stay in business if Orr’s bill became law because the loans are risky. Dwight Blake, who said he operates four Money in a Flash stores in Alabama, said most payday loan customers do not have the credit rating to qualify for conventional loans under Alabama’s small loan act, which allows interest rates of up to 36 percent. Blake said his businesses provide both types of loans. Blake said the vast majority of his payday loan customers are satisfied.

“They understand what they’re getting involved in,” Blake said. He said the terms of the loans are clear. “There’s no hocus pocus.” Jabo Covert, who lobbies for the Tennessee-based company that operates Check into Cash stores in Alabama, disputed assertions that Orr’s bill was based on reforms passed in Colorado in 2010, changes that supporters of Orr’s bill deemed a success. Covert said Orr’s bill originally was like the Colorado law but that an amendment added by the Senate reduced the allowed fees to a level that could not sustain businesses. Covert acknowledged that his company charges lower rates in Colorado, however. He said the maximum allowed there is 180 percent. Because states set the allowed rates, prices differ among states, he said, just like the cost of gasoline and other products. “Every state is different,” Covert said. A database established last year by the state Banking Department shows that payday loan regulations affect a large number of Alabamians. Through mid-March, that database showed that 208,105 unique borrowers had taken out 1.3 million payday loans since the database was established Aug. 10, about 43,000 loans a week. The average loan amount was $322 and the average fee paid was $56. The average term was 19.6 days. The committee also held a public hearing, but took no vote, on a bill that would lower fees and make other changes for auto title loans. That bill, by Rep. Rod Scott, D-Fairfield, would drop the allowed monthly interest rate from 25 percent to 10 percent, and make other changes.


Hubbard Hearing: Confusion, Concerns, Possible Continuance

MONTGOMERY—The pretrial hearing on Wednesday in Mike Hubbard’s felony criminal case was confusing and troubling. At issue before the court were the State’s motion on Rule 404(b), seven Motions in limine, and the admissibility of evidence. Judge Jacob Walker, III, was ready, the State was ready, but Hubbard’s attorney Bill Baxley claimed he didn’t know the hearing was about those matters and was not prepared to address them. Although Judge Walker seemed visually unpleased with Baxley’s response, he let it slide and the hearing quickly de-evolved into a patchwork of musing by the Judge and arguments by the State. Nothing of substance was resolved. What would have been Judge Walker’s reaction had Deputy Attorney General Matt Hart said, “Oh, Judge, I didn’t know we were going to cover that?” as Baxley did? Baxley and second chair, Lance Bell, spent the first 10 minutes of the 30 minute hearing repeating over and over, “We can’t be ready, there’s no way we can be ready for trial.” Baxley, with a straight face, told the Judge that he thought the purpose of the hearing was to set a date for trial, and he was prepared to argue for yet another continuance. After the hearing, Judge Walker issued an order stating that the defense had until April 22 to file a motion to continue, and the State has until April 26 to respond, setting up what appears to be another delay in a case that is entering its second year.

Most troubling for those of us who have watched Hubbard’s attorneys turn Judge Walker’s court into a sideshow was that the Judge seemed to accept the idea that Baxley could reintroduce selective, and vindictive, prosecution and prosecutorial misconduct at trial. This is an issue that has cost the court and the people months of time and money. Recently, Judge Walker issued an order stating the defense did not engage in selective or vindictive prosecution, and that prosecutorial misconduct did not occur.

The State reminded the Judge of that fact several times. Bell confirmed introducing that to the jury was part of the defense’s game plan, saying they would call Baron Coleman and Hart to testify. Hart said this could prejudice the jury against the prosecution and lead to jury nullification. “Jury nullification occurs when a jury returns a verdict of ‘Not Guilty,’ despite its belief that the defendant is guilty of the violation charged. The jury, in effect, nullifies a law that it believes is either immoral or wrongly applied to the defendant, whose fate they are charged with deciding.” Hart also stated that the State has spent months proving to the court that they were not the “bad guys,” and this would force them to convince a jury as well. Deputy Attorney General John Gibbs said, that Coleman couldn’t give testimony to anything Hubbard is accused of doing in the indictments, but if something like prosecutorial misconduct is planted in the minds of the jurors, “That bell can’t be unrung.” In the Rep. Barry Moore case, Judge Walker did grant the State Motion in limine to not allow the defense to bring up selective or vindictive prosecution, or prosecutorial misconduct. The Judge did not directly address the other five of the Motions in limine but did say that sentencing issues would not be allowed to be discussed during the trial. The next issue that was monetarily discussed was the State’s motion on Rule 404(b). Rule 404(b) “refers to ‘a crime, wrong, or other act’ and does not say that those other acts need ever have resulted in arrest, prosecution, or conviction or even be criminal,” according to a study made at Indiana University Law. The study states that under Rule 404(b), evidence may be admissible for any of nine other reasons, so as to show motive, opportunity, or intent. Federal evidence review states, “…the rule allows the introduction of other acts evidence for limited purposes if it bears on a relevant issue, such as motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.” Judge Walker said the State’s motion was overly vague, and if they wanted a ruling he would need more specifics, with names, acts and other pertinent information. Baxley objected to the entire notion of the 404(b), complaining how recent motions by the State were harming Hubbard, because it was being reported in the press. Baxley said that because of Judge Walker’s gag order, he was unable to counter the prosecution’s arguement “with the truth.” Judge Walker said he would take all of this under advisement, and would most likely set another pretrial hearing for April 29.



Governor Bentley needs professional help — from a lawyer

If Gov. Robert Bentley’s sex scandal were a typical scandal, the public relations cleanup would be easy, but a mess like this takes professional help. What the governor needs is a fixer. Not Doug Stamper, nor Olivia Pope. Who Gov. Bentley needs is me. Welcome to Kyle Whitmire’s Political Crisis Management in Three Easy Steps. Step One: If someone knows your secrets, keep them close. Don’t throw them out of windows. Certainly don’t fire them and accuse them of crimes. If you do accuse them of crimes, don’t make vague wishy-washy statements about ongoing criminal investigations. If you have the goods on them, make them public. Otherwise, nobody will believe you. But seeing, governor, as how you already blew this one when firing ALEA Sec. Spencer Collier, let’s skip to Step Two. Step Two: Bolt the doors.  No public appearances where reporters can ask pesky “did you or didn’t you” questions. If you decide to ignore the advice, don’t say to the press that you’re only taking questions on Topic B, because what that means to the press is “I dare you to ask about Topic A.” Somebody will take that dare every single time. Also, if decide you have to apologize publicly for anything, then apologize for something. Don’t say you’re taking responsibility for the thing you did and then not say what that thing was, or that no such thing — which you may or may not be taking responsibility for — ever happened. Also, don’t say you haven’t heard the tapes when everyone else in the room has heard the tapes. OK, all this is ugly and there’s no putting the toothpaste back in the tube. Let’s just jump to step three. Step Three: Just shut up, already.  This is the same as Step Two, but you didn’t want to follow Step Two so we’re going to try again with Step Three. Safety Tip: If you have someone handling external communications, make certain that when they argue with the press that they don’t cop to possible felonious violations of the Fair Campaign Practices Act. Oh, wait. That happened? Well, great. Did I say Three Easy Steps? I meant “four.” Step Four: Wait for the next guy’s turn.  Eventually, another big thing will come along. The rabid hordes with their pitchforks and torches will grow bored and move along. Lucky you, the next big thing is on the horizon. Next month, Alabama House Speaker Mike Hubbard will face a jury in Opelika, where he will be on trial for 23 counts of felony ethics violations. It’s guaranteed to be a circus, with a witness list that’s a Who’s Who of Alabama politics. Everybody will forget about this silly sex scandal and you can move …Umm, governor, what’s that on your desk? Is that a subpoena? There shouldn’t have to be five steps, but … Step Five: Never go under oath.  The Bible says the truth will set you free, but let’s face it. That’s only in a spiritual sense and most folks gave up on your soul a long time ago. In the I-might-have-broke-the-law and Oh-God-I-got-a-subpoena sense, telling the truth on a witness stand might just land you in jail. You see, on a witness stand, defense lawyers can impeach your credibility (which is guaranteed to happen) which is different than the Legislature impeaching you (never going to happen). Get ready to hear … “Governor, have you ever lied to the people of Alabama?” Or … “Governor, have you ever lied to your wife?” And the questions will only get worse from there. And if you’ve already answered questions one way in front of a grand jury, don’t — don’t ever — give another answer on the witness stand. If that thought even enters your mind, direct your gaze at the defense table. Look at Hubbard sitting there. Does he look like this was how he imagined his political career playing out? Does he look uncomfortable sitting quietly in that chair? Take a good look governor. If you make one more misstep, you could be sitting there next. Because the professional help you need right now isn’t from me. I can’t help you. Nor can Olivia Pope, Doug Stamper or Karl Rove. Who you need now is a lawyer.

Alabama Inmate: Prisoners stab each other weekly

Alabama politicians want to tell you they can solve the prison problem with money. Just borrow $800 million – which will cost twice that by the time the debt comes due – and Alabama can fix … everything. For only about $900 from every body in the Alabama labor force. Or just $75,000 for every prisoner. It’ll solve everything. Which is horse hockey. Lawmakers are actually debating the issue now. Some are questioning the wisdom of pouring money into megaprisons in the first place. Others are asking what should have been asked long ago: Do we really need to lock all these folks up? Is it the best investment? Are prisons about corrections in the first place, or just revenge? But it’s too little too late. The money will win out, and a broke state will pay big cash to call itself tough on crime. But enough from me.The whole debate reminds me of a letter I received from an inmate at St. Clair Correctional Facility a few weeks ago. It wasn’t mailed out the normal way, but slipped out through a mutual friend. Today, as Alabama grapples with this prison issue, I’ll give him the space to say his piece. Earlier this year, law enforcement in my community caught a fellow officer transporting drugs and weapons to a gang of criminals. A few weeks later, I looked out my window and saw three men with knives chasing a fourth man down a sidewalk in the middle of the night. More recently, a band of looters broke into the corner store. You probably think I live in a blighted area in Birmingham, but in fact, I’m a long-term resident of St. Clair Correctional Facility and the incidents I’ve described are typical here.  St. Clair is in a state of chaos where correctional officers and prisoners co-exist in an uneasy truce and no one is really in control. Prisoners stab each other weekly and assaults and robberies happen every day, often going unreported. Several officers have been stabbed here in the last year and one of them was badly wounded this month.  In most of the prison, gangs of inmates decide who sleeps in which cell, regardless of the official bed assignments issued by prison staff. One prisoner recently slept outside on a sidewalk for two nights in 30-degree weather because other inmates had already taken the cell he had been assigned. Wardens and senior supervisors knew about this and did nothing. St. Clair hasn’t always been such a terrible place. Before 2010, a series of capable wardens and supervisors used innovative strategies to manage the prison effectively, despite being short on staff. But much has changed in the time since. Constructive programs for inmates were cut back and volunteers were made to feel unwelcome. Prison leadership developed an informal policy of not communicating with prisoners, taking the position that “the inmate is always wrong,” regardless of the circumstances. This may sound like a good policy, but the outside world needs to understand that a prison is a community, and when leadership shows that type of disregard for community members, it leads to the kind of dangerous, desperate situation that we see today. More:


Morning Money

WARREN RIPS SEC — In a letter to SEC Chair Mary Jo White this morning, Sen. Elizabeth Warren (D-Mass.) questions the SEC’s “ability to protect investors, to uphold the integrity of financial markets from corrupt, illegal investment management practices, and to impose meaningful accountability on wrongdoers.” Full letter:

A BRIDGE BETWEEN SANDERS AND CLINTON? — From a plugged-in Democratic insider: “Thoughtful senior staff in ClintonWorld are carefully assessing practical steps necessary to bring the Dem nominating contest to a conclusion that satisfies Bernie and his followers. … One serious obstacle is that Bernie has very few friends in politics who can serve as a bridge and help him to make the turn to the end-game. … A key player is likely to be Elizabeth Warren, who has a frosty relationship with Hillary but is perfectly positioned to serve as an end-game broker.

“Several women Dem Senators are discussing how/when to begin nudging Bernie, with both their public comments and Warren’s private approach to Bernie. A potential Warren endorsement of Hillary would be a serious wake-up call for Bernie. More likely is a joint effort by Senators Warren and Merkley to help Bernie ‘land his plane’ with dignity and maximum concessions by Hillary on issues and convention programming.”

HAMILTON SURVIVES; TUBMAN ON THE $20 — POLITICO’s Ben White and Nolan D. McCaskill: “Harriet Tubman will bump Andrew Jackson from the front of the $20 bill while Alexander Hamilton will stay put on the $10 — a historic move that gives a woman prime placement on U.S. currency and quells a controversy kicked up by Hamilton super-fans. … [Treasury Secretary Jack] Lew rolled out sweeping changes that will put a new cast of historic figures onto various bills that have remained largely static for decades.

“Leaders of the women’s suffrage movement will make their way onto the back of the $10 bill, while civil rights era leaders and other important moments in American history will be incorporated into the $5 bill. Jackson will be kicked to the back of the $20 bill. The plan is a major reversal for Lew, who appeared taken aback by the swift rebukes Treasury received last summer when he announced that he was considering replacing Hamilton on the $10 bill with a woman. … Lew … got an earful from fans of Hamilton, who helped create the Treasury Department and the modern American financial system.”

HAPPY BIRTHDAY POLITICO EUROPE! — From a note going out this a.m. from John Harris, Scheherazade Semsar-de Boisseson and Matt Kaminski: “At a stroke past midnight last April 21st, came to life with a bit of nervous excitement and lots of champagne. … Since then, we’ve posted more than 6,100 articles on and on, delivered 1,120 newsletters and 1,230 Pro alerts, and published 46 weekly newspapers and one glossy magazine (the very successful POLITICO 28 list). About 1.5 million readers each month are informed, moved, enlightened and amused

… Our newsroom numbers 50 staff journalists in Brussels, Berlin, London and Paris and a network of correspondents in other key countries. Our 80 total POLITICOs in Europe represent 19 nationalities.”

DRIVING THE DAY — ECB not expected to change policy when it meets today … House Financial services has a hearing at 9:15 a.m. on “Continued Oversight of the SEC’s Offices and Divisions … Index of Leading Economic Indicators at 10:00 a.m. expected to rise 0.4 percent.

ALSO TODAY: MILLENNIAL MONEY — Per release: “Navy Federal Credit Union holding an event to highlight how millennial service members manage and save their money. At 8:00 am … at the National Press Club.”

WATCH POLITICO’s America’s Energy Agenda: New Prices, New Policies? at 8 a.m. — an event examining the future of energy. How will fluctuating energy costs change the calculus for Washington regulators and impact innovation? What are the new strategic priorities for building energy infrastructure post-Paris and could this agenda change with a new administration? Livestream:

PRAISE FOR LEW — From a former administration official: “Jack deserves credit for backing down gracefully and respecting the voluminous feedback he got during the process. His final decision is positively Solomonic. And while it was messy, the process was a healthy way for Americans to think about where our country started and where it is going. And the debate was classier (and more educational) than much of what we’ve heard in the presidential debate.”

BLACKROCK SCORES IN DC — WSJ’s Ryan Tracy and Sarah Krouse: “In 2014, BlackRock Inc. executives obtained a copy of a confidential Federal Reserve PowerPoint presentation that argued part of the giant money manager could pose the same financial-system risk as big banks. … The presentation — which BlackRock told members of Congress contained wrong information — galvanized the firm around a crusade to elude more aggressive oversight from the Fed.

“The latest public confirmation of its escape came Monday when a U.S. panel advocated a closer examination of certain asset-management activities and products but not new scrutiny of large fund managers — a stance BlackRock has long endorsed. The guidance affirmed what regulators have signaled for two years. BlackRock and rivals Vanguard Group and Fidelity Investments will dodge for now the ‘systemically important’ label that would draw them in for greater oversight by the Fed.

BOOZMAN ON THE SEC — POLITICO’s Ben Weyl and Matthew Nussbaum sat down with Sen. John Boozman (R-Ark.), chairman of the Senate Financial Services Appropriations Subcommittee. Boozman on the SEC and CFTC budget requests: “Those are things that we’re looking at and working with everybody to see what their needs are. They really have been increased a tremendous amount in the last several years. This is something that both sides have increased. The question is, at this point, are they taking those dollars, using them to the maximum effect?

POLITICO: Last year, Sen. Richard Shelby attached a broad piece of legislation to loosen banking regulations to the appropriations bill, which obviously Democrats didn’t love.

Boozman: That’s an understatement.

POLITICO: So do you expect he’ll try to add that again? Or do you think there’s a different strategy you’ll take to try to get maybe some more modest regulatory changes?

Boozman: “We’re working very, very closely with Sen. Shelby and trying to figure out what would be appropriate to stick in this year. We’re not going to stick the entire banking bill in or anything like that. … There’s some good things in Dodd-Frank, but there’s some really bad things in Dodd-Frank. … There’s a lot of feeling that there’s tremendous overregulation, particularly for community bankers.”

CRUZ SCORES BIG DONORS — POLITICO’s Isaac Arnsdorf: “Ted Cruz consolidated his support with major Republican Party donors last month as their last best hope to stop Donald Trump. Trusted Leadership PAC, the super PAC that has emerged as the main vehicle for seeking unlimited donations to support the Texas senator, received $1 million from Herzog Contracting, the Missouri road paver whose boss, Stan Herzog, previously backed Scott Walker. Another million came from Richard Uihlein, the Wisconsin shipper who had also backed the Wisconsin governor.

“Thomas Rastin and Karen Buchwald Wright of Ohio compressor company Ariel Corp., who previously gave to John Kasich’s super PAC, chipped in a combined $300,000, according to the PAC’s filing with the Federal Election Commission on Wednesday. Florida electronics heir Lawrence F. DeGeorge contributed $150,000, and private equity investor John W. Childs gave $100,000.”

ANTI-TRUMP SUPER PAC LOW ON CASH — POLITICO: “The leading anti-Trump super PAC had its best fundraising run in March but finished the month with less than half a million dollars in the tank. Our Principles PAC raised $8.4 million last month, almost twice its February haul … But it also supersized its spending, unleashing a $11.2 million barrage against the Republican front-runner that left it just $423,922 by the end of the month.

“The group, led by Mitt Romney alumna Katie Packer and joined by former Jeb Bush spokesman Tim Miller, raised $2 million from Wisconsin shipper Richard Uihlein, $1.7 million from investor Michael Vlock (who’s married to Hyatt heiress Karen Pritzker), and $1 million apiece from asset manager Cliff Asness and Arkansas investment banker Warren Stephens.”

TRUMP TRIES TO GO LEGIT — WSJ’s Monica Langley and Reid J. Epstein: “Donald Trump, after notching a big win in New York, is planning to roll out significant changes in his campaign, including giving a policy speech on foreign affairs and using teleprompters and a speechwriter. … Mr. Trump, in an interview, acknowledged the need for a shift. ‘The campaign is evolving and transitioning, and so am I,’ he said. ‘I’ll be more effective and more disciplined.’ He’s changing, he said, because ‘I’m not going to blow it.’

“Still, Mr. Trump said he wouldn’t substantially change his personal style and populist message at his huge rallies. ‘I’m still the same candidate,’ he said. ‘Can you imagine how upset my supporters would be after waiting for hours?’ Indeed, at his first post-New York rally Wednesday in Indianapolis, Mr. Trump reverted to form, calling Sen. Ted Cruz ‘Lyin’ Ted’ and Democratic front-runner Hillary Clinton ‘Crooked Hillary,’ while taunting protesters who were being escorted out.”

INVESTORS PULL $15B FROM HEDGE FUNDS — FT’s Mary Childs and Lindsay Fortado: “Hedge funds have suffered their worst quarter in seven years after more than $15bn was pulled out by investors starting to fight back against the high fees being charged across the industry. The total amount invested in hedge funds fell to $2.86tn in the first three months of the year, marking the first time since 2009 that the sector has faced two consecutive quarters of net outflows …

“Sharp market moves have wrongfooted many firms, leading to poor performances in the first quarter from funds such as Bill Ackman’s Pershing Square, and rankling investors already disgruntled over fee structures charging 2 per cent for management as well as 20 per cent of profits. A broad index of hedge fund performance fell 0.7 per cent in the first quarter, according to HFR.”

ASIA RISES WITH OIL — Reuters: “Asian shares hovered close to 5-1/2-month highs on Thursday as oil prices showed surprising resilience partly on hopes that oil producers may eventually agree on a measure to ease a global glut. … Oil prices held near five-month high hit on Wednesday, when they rose 4 percent after a smaller-than-expected build in U.S. crude inventories offset supply-glut worries stirred by the end of a Kuwaiti strike.

“Oil bulls also bet that major crude producers would meet again to try to curtail output even as Moscow denied media reports that Russia planned to host such a meeting. Just on Sunday, Russia and OPEC nations failed to reach an agreement on freezing production at a meeting in Doha, Qatar.”

IS CHINA ABOUT TO CRASH? — Bloomberg: “Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession. China’s March credit-growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.

“What’s happening in China ‘eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth,’ Soros said. It can reach a turning point later than everyone expects.’ Soros, who built a $24 billion fortune through savvy wagers on markets, has recently been involved in a war of words with the Chinese government”


IBT on documents that “show the SEC helped GE — a big Obama donor — kill a shareholder resolution aimed at forcing the company to fully clean up its mess in the Hudson River”

WELLS SETS SOCIAL RESPONSIBILITY GOALS — Per release going out on Thursday: “Donating $100 million to meet critical social needs such as advancing social inclusion, developing women and diverse leaders, and increasing the financial capability of diverse consumers …

“Providing $500 million in philanthropic giving to critical economic needs including financial education and affordable housing … Extending $150 billion in mortgage originations to minority households and $70 billion in mortgage originations to low-to moderate-income households” More here:

BGR CELEBRATES 25 YEARS — Per release: “BGR Group — a premier bipartisan lobbying, public relations and business advisory firm with offices in Washington D.C. and London — is celebrating its 25th year of client service in 2016 and is marking the occasion with a fully redesigned website making it easier than ever for potential clients to learn about the firm.”

NEW PR FIRM LAUNCHED — Per release going out this a.m.: — “Thomas Walek today announced the launch of Peaks Strategies, a strategic communications firm serving financial services and capital markets clients.” Past Walek clients include Paulson & Co, Peter Thiel/Clarium Fund, Man Group, Citi, JPMorgan Chase Asset Management, Roubini, Oppeheimer & Co.

POTUS Events

11:10 am AST || Begins meetings of the the U.S.-Gulf Cooperation Council Summit; Diriyah Palace, Riyadh, Saudi Arabia
3:15 pm AST || Delivers a statement to the press
5:00 pm AST || Departs Riyadh, Saudi Arabia
10:00 pm BST || Arrives London

All times British Summer Time or Arabia Standard Time

Floor Action

The House is in today at 9 a.m., with first and last votes expected between 11 a.m. and noon on more IRS legislation. The Senate is in at 10 a.m. and will continue on the energy and water appropriations bill. One amendment vote is scheduled for 11:45 a.m., with more possible.



Things You Should Know about Filing Late and Paying Penalties


April 18 was this year’s deadline for most people to file their federal tax return and pay any tax they owe. If you are due a refund there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. To keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Here are some facts that you should know.

  1. Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.
  2. Penalty for late filing. If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.
  3. Penalty for late payment. The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.
  4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.
  5. File even if you can’t pay. Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.
  6. Payment Options. Explore your payment options on our website at For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan using the Online Payment Agreement tool on
  7. Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

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