Krebs Daily Briefing 25 September 2015

International

The Thucydides Trap: Are the U.S. and China Headed for War?

When Barack Obama meets this week with Xi Jinping during the Chinese president’s first state visit to America, one item probably won’t be on their agenda: the possibility that the United States and China could find themselves at war in the next decade. In policy circles, this appears as unlikely as it would be unwise.  And yet 100 years on, World War I offers a sobering reminder of man’s capacity for folly. When we say that war is “inconceivable,” is this a statement about what is possible in the world—or only about what our limited minds can conceive? In 1914, few could imagine slaughter on a scale that demanded a new category: world war. When war ended four years later, Europe lay in ruins: the kaiser gone, the Austro-Hungarian Empire dissolved, the Russian tsar overthrown by the Bolsheviks, France bled for a generation, and England shorn of its youth and treasure. A millennium in which Europe had been the political center of the world came to a crashing halt. The defining question about global order for this generation is whether China and the United States can escape Thucydides’s Trap. The Greek historian’s metaphor reminds us of the attendant dangers when a rising power rivals a ruling power—as Athens challenged Sparta in ancient Greece, or as Germany did Britain a century ago. Most such contests have ended badly, often for both nations, a team of mine at the Harvard Belfer Center for Science and International Affairs has concluded after analyzing the historical record. In 12 of 16 cases over the past 500 years, the result was war. When the parties avoided war, it required huge, painful adjustments in attitudes and actions on the part not just of the challenger but also the challenged. Based on the current trajectory, war between the United States and China in the decades ahead is not just possible, but much more likely than recognized at the moment. Indeed, judging by the historical record, war is more likely than not. Moreover, current underestimations and misapprehensions of the hazards inherent in the U.S.-China relationship contribute greatly to those hazards. A risk associated with Thucydides’s Trap is that business as usual—not just an unexpected, extraordinary event—can trigger large-scale conflict. When a rising power is threatening to displace a ruling power, standard crises that would otherwise be contained, like the assassination of an archduke in 1914, can initiate a cascade of reactions that, in turn, produce outcomes none of the parties would otherwise have chosen. War, however, is not inevitable. Four of the 16 cases in our review did not end in bloodshed. Those successes, as well as the failures, offer pertinent lessons for today’s world leaders. Escaping the Trap requires tremendous effort. As Xi Jinping himself said during a visit to Seattle on Tuesday, “There is no such thing as the so-called Thucydides Trap in the world. But should major countries time and again make the mistakes of strategic miscalculation, they might create such traps for themselves.”

http://www.theatlantic.com/international/archive/2015/09/united-states-china-war-thucydides-trap/406756/?utm_source=SFFB

The 9 deadliest special forces in the world

Elite special forces are some of the best-trained and most formidable units a country can boast. They go where other soldiers fear to tread, scoping out potential threats, taking out strategic targets, and conducting daring rescue missions. These really are the best of the best.            Although it’s extremely difficult to rank these forces relative to one another, there are some units that rise above the rest in their track record and the fear they instill in their adversaries. These soldiers have been through rigorous training exercises designed to weed out those who can’t hit their exacting standards. In a world where the importance of the sheer size of a country’s military forces is no longer a guide to their effectiveness, these soldiers are the ones states look to in order to get the job done.

http://www.businessinsider.com/the-deadliest-special-forces-in-the-world-2015-5?utm_content=bufferd118d&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

The Potential Criminal Consequences for Volkswagen

It appears automakers have become the latest source of corporate misconduct after Volkswagen admitted installing software to fool emissions tests. It comes after the General Motors settlement of a criminal investigation into how it handled defective ignition switches that caused at least 124 deaths. And when there is a video in which the head of Volkswagen’s American operations tells an audience in Brooklyn that the company was “dishonest” and “totally screwed up,” then it is only a matter of time before the company has to deal with multiple civil and criminal penalties. The question is what types of proceedings Volkswagen is likely to face and how far up the corporate ladder prosecutors can go in seeking to hold individuals accountable. According to a notice of violation filed by the Environmental Protection Agency on Sept. 18, Volkswagen installed what is known as a “defeat device” in vehicles equipped with 2-liter diesel engines that made it appear to meet emissions standards. The software installed in the cars very likely resulted in a violation of the Clean Air Act by avoiding applicable testing requirements for automobiles and providing false information to obtain a “certificate of conformity” required to sell cars in the United States. The E.P.A. can impose civil penalties on an automaker of up to $37,500 for every vehicle for violations of the Clean Air Act. Thus, Volkswagen could face a total penalty of about $18 billion, based on selling nearly 500,000 vehicles with the defeat device.

http://www.nytimes.com/2015/09/25/business/dealbook/thepotential-criminal-consequences-for-volkswagen.html?ref=dealbook&_r=0

National

Pope Francis addresses Congress: Read the full remarks

Pope Francis became the first pontiff to deliver an address to a joint meeting of Congress on Thursday. Here is the text of his remarks, as prepared for delivery:

http://www.vox.com/2015/9/24/9391549/pope-remarks-full-text

Everyone Who Cried During the Pope’s Speech to Congress

During his historic address to the U.S. Congress, Pope Francis’s powerful words moved the crowd gathered in the House chamber, as he spoke on matters such as religious freedom, social justice, and the “transcendent dignity of the human being.” It was the first time a Pope had addressed a joint session of Congress—along with senior military officials, Supreme Court justices, and Cabinet members—and Francis made it count. Coming from perhaps the most widely recognized moral authority in the world, the Pope’s message caused more than a few tears in the chamber. Francis’s invocation of Dr. Martin Luther King Jr.’s march from Selma to Montgomery for civil rights—“That dream continues to inspire us all,” he said, as he called on America to keep fighting for the public interest—prompted this lone tear from Representative John Lewis, a fellow leader of the 1960s civil-rights movement who also marched in Selma. Senator Marco Rubio, whose parents emigrated to America from Cuba, got teary as Francis, speaking on the need to welcome “the stranger in our midst,” talked about how he, too, was the son of immigrants. And Speaker John Boehner, a Catholic and famously prone to publicly expressing his emotions, sat behind the Pontiff’s podium and wept just because. Oh, he wept. And he cried. Even when the speech was over, he still had trouble not weeping. (Vice President Joe Biden, also a Catholic, managed to keep it together.) The cameras caught Secretary of State John Kerry ever so slightly frozen when Francis spoke about the Syrian refugee crisis, which he called a crisis “of a magnitude not seen since the Second World War.” (The State Department has been accused of not doing enough to help relocate migrants to America.) We can’t explain why Senator Elizabeth Warren was texting. Judging by her social-media feed, however, she wasn’t tweeting “#blessed.”  See pictures/video at link below:

http://www.vanityfair.com/news/2015/09/pope-francis-congress-crying-politicians?mbid=social_facebook

House Speaker John Boehner Will Step Down From Congress In October

House Speaker John Boehner will give up his seat in Congress at the end of October, NPR’s Sue Davis reports. Boehner became the 53rd Speaker of the House in 2011. His tenure has been marked by fierce confrontations with Democrats and sometimes his own party. One of those fights led to a 16-day partial government shutdown in 2013. Congress is once again facing a government shutdown, unless a budget deal is reached by the end of the month. A Republican aide tells Sue that Boehner believes “the first job of any Speaker is to protect this institution.” The aide said that Boehner expected to serve through the end of the year, but changed his mind after seven term Rep. Eric Cantor, the former House Majority Leader, lost his seat to a Tea Party Candidate in 2014. “The Speaker believes putting members through prolonged leadership turmoil would do irreparable damage to the institution,” the aide said. Boehner, one of 12 brothers and sisters, grew up working at his family’s tavern. He has represented Ohio’s Eighth Congressional District since 1990. His speakership was almost immediately challenged in 2011 as the Tea Party wing of the Republican party refused to vote for a plan to raise the debt ceiling. In 2013, that fight came to head, ending in a partial government shutdown. At the time, both Democrats and Republicans criticized the speaker of being too accommodating to the conservative wing of his party.

http://www.npr.org/sections/thetwo-way/2015/09/25/443406854/speaker-john-boehner-will-step-down-at-the-end-of-october?utm_source=facebook.com&utm_medium=social&utm_campaign=morningedition&utm_term=nprnews&utm_content=20150925

Woman Threatens to Throw Shoe at Pope on Floor of Congress

Despite all the heavy Secret Service and Swiss Guard security around him, Pope Francis came thisclose to getting a shoe hurled at him as he headed to the floor of Congress. ​As CNN’s cameras awaited the pope’s entry, a woman in the crowd, with a noticeable Southern accent, could be heard ​saying that she planned to “take my shoe off and throw it at his head.” The words were uttered just as Pope Francis​​ was being led onto the House floor for his historic speech. CNN’s Wolf Blitzer was anchoring coverage and told viewers he would go silent to capture the natural sounds of Pope Francis’ introduction. That’s when the woman spoke about shoe throwing, with no clue that CNN viewers were listening. It wasn’t immediately clear if anyone on Pope Francis’ security team heard the remark. Francis came and went without ​incident.​

http://nypost.com/2015/09/24/woman-threatens-to-throw-shoe-at-pope-on-floor-of-congress/?utm_campaign=SocialFlow&utm_source=NYPFacebook&utm_medium=SocialFlow

Takeover of Treasury market by high-speed firms catches regulators by surprise

What’s really caught regulators by surprise in the U.S. Treasury market is the speed by which automated high-speed trading has become the dominant force. Two reports published Wednesday by The Wall Street Journal highlight why markets should still be worried. The first, describing the growth of computerized trading strategies in the $12.7 trillion Treasurys market, says investors may be getting the benefits of new efficiencies in order flow and pricing consistency, but the sheer volumes driven by high speed traders are driving more dramatic volatility whenever the market pivots. Nonbank, high frequency trading firms account for 60% of activity in the most active corners of electronic Treasury trading, up from 45% in 2012 says Anthony Perrotta, a partner at researcher Tabb Group. That estimate is consistent with a list of the top 10 firms by volume traded on BrokerTec, an ICAP IAP, -0.53%  -owned interdealer trading platform for US Treasurys published also late on Wednesday at Risk.net. Barclays BARC, -0.71%   and J.P. Morgan JPM, -0.97%   are the only banks on the list. The top three firms on the list — Jump Trading, Citadel, and Teza Technologies — tally $4.2 trillion in volume, according to the BrokerTec report. Unfortunately , according to a second article published late Wednesday at the Wall Street Journal, regulators have not caught up to these changes. It’s no use being sentimental about those days when Treasurys were traded over the phone by humans on physical trading floors boisterous trading floors across Wall Street. That process, the article says, is almost entirely automated by software, with all the activity on a computer screen. Treasury trading is dominated by around 10 large technology-driven trading firms and maybe 35 to 40 smaller ones. But the rules regulators use to monitor the market were adopted during the age of paper filings and telephone trading. Back in July the Treasury Department, the Federal Reserve, the New York Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission published a joint report that attempted to explain what happened one day last October when the yield on the 10-year Treasury swung around wildly for no apparent fundamental reason. Their conclusions were disappointingly inconclusive. While trying to figure out what happened last October, government investigators were surprised to learn, the Wall Street Journal says, how dominant the high speed algorithm driven firms had become. As a result, investigators could not easily and efficiently access or analyze the trading records that reflect sometimes microsecond differences between buy and sell orders that are now standard for the equity and futures markets. The structure of the equity markets and the impact of high frequency trading on access and pricing of shares is the subject of the SEC’s Equity Markets Structure Advisory Group, which met for the first time last May. Antonio Weiss, a senior adviser to Treasury Secretary Jacob Lew, may have implied similar serious study is overdue for the Treasury bond market. In a speech at a Washington think tank last month he remarked, “Put simply, we cannot get the information we need to analyze risk across Treasury markets in anything that approaches real time. That has to change.”

http://www.marketwatch.com/story/takeover-of-treasury-market-by-high-speed-firms-catches-regulators-by-surprise-2015-09-24

Dems rise against Obama’s financial adviser regs

Ninety-six House Democrats have signed onto a letter calling for President Obama to make significant changes to his regulatory proposal for financial advisers, writing that they’re concerned the current pitch would limit low- and middle-income Americans’ access to financial advice. The missive is a blow to the administration’s efforts to rally support within their own party on a proposal that Obama tried and failed to implement in 2010 — and one that he’s framed as an effort to rein in Wall Street. And it’s a sign that the business community and the financial advice industry has successfully convinced half of the Democratic caucus — as well as all Republicans — that Obama’s current plan does more harm than good. Rep. Gwen Moore (D-Wis.) circulated the letter, which was first reported by The Hill, and nabbed signatures from different wings of the caucus, including House Democratic vice chairman Joseph Crowley (D-N.Y.). “We continue to hear from constituents, academics, providers, and investors that there are specific provisions of the Rule that may cause market disruptions and limit the ability of segments of the market to reasonably access advice,” according to the lawmakers’ letter, sent to Labor Secretary Tom Perez. Obama wants to implement a “fiduciary standard” that would increase disclosure requirements for financial advisers. He says it’s needed to help consumers understand that their financial advisers might be earning a profit from Wall Street institutions by selling them financial advice packages. But the industry argues that the proposal is not needed given the bevy of regulations that already exist. And they argue that the regulations would serve as a disincentive for financial advice firms to take on low-income clients, whose financial planning needs are less lucrative than wealthy Americans. The large contingency of Democratic opposition on a financial services issue is rare, especially given that Obama and Sen. Elizabeth Warren (D-Mass.) announced the proposal in March at a high-profile event at AARP’s D.C. headquarters. Notably, House Minority leader Nancy Pelosi (D-Calif.), Democratic Whip Steny Hoyer (D-Md.) and House Financial Services Committee ranking member Maxine Waters (D-Calif.) did not sign the letter. The Democratic dissent presents a hurdle for Perez, who now must weigh whether to significantly alter the proposal. Appropriation bills in both the Senate and the House attempt to block the Labor Department from implementing the current proposal. And should Democrats get onboard with those measures, it will make it next to impossible for the administration to implement the regulation before Obama leaves office.

http://thehill.com/policy/finance/254860-dems-rise-against-obamas-financial-adviser-regs

Looting the Pension Funds

In the final months of 2011, almost two years before the city of Detroit would shock America by declaring bankruptcy in the face of what it claimed were insurmountable pension costs, the state of Rhode Island took bold action to avert what it called its own looming pension crisis. Led by its newly elected treasurer, Gina Raimondo – an ostentatiously ambitious 42-year-old Rhodes scholar and former venture capitalist – the state declared war on public pensions, ramming through an ingenious new law slashing benefits of state employees with a speed and ferocity seldom before seen by any local government. Called the Rhode Island Retirement Security Act of 2011, her plan would later be hailed as the most comprehensive pension reform ever implemented. The rap was so convincing at first that the overwhelmed local burghers of her little petri-dish state didn’t even know how to react. “She’s Yale, Harvard, Oxford – she worked on Wall Street,” says Paul Doughty, the current president of the Providence firefighters union. “Nobody wanted to be the first to raise his hand and admit he didn’t know what the fuck she was talking about.” Soon she was being talked about as a probable candidate for Rhode Island’s 2014 gubernatorial race. By 2013, Raimondo had raised more than $2 million, a staggering sum for a still-undeclared candidate in a thimble-size state. Donors from Wall Street firms like Goldman Sachs, Bain Capital and JPMorgan Chase showered her with money, with more than $247,000 coming from New York contributors alone. A shadowy organization called EngageRI, a public-advocacy group of the 501(c)4 type whose donors were shielded from public scrutiny by the infamous Citizens United decision, spent $740,000 promoting Raimondo’s ideas. Within Rhode Island, there began to be whispers that Raimondo had her sights on the presidency. Even former Obama right hand and Chicago mayor Rahm Emanuel pointed to Rhode Island as an example to be followed in curing pension woes. What few people knew at the time was that Raimondo’s “tool kit” wasn’t just meant for local consumption. The dynamic young Rhodes scholar was allowing her state to be used as a test case for the rest of the country, at the behest of powerful out-of-state financiers with dreams of pushing pension reform down the throats of taxpayers and public workers from coast to coast. One of her key supporters was billionaire former Enron executive John Arnold – a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation’s Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers. Nor did anyone know that part of Raimondo’s strategy for saving money involved handing more than $1 billion – 14 percent of the state fund – to hedge funds, including a trio of well-known New York-based funds: Dan Loeb’s Third Point Capital was given $66 million, Ken Garschina’s Mason Capital got $64 million and $70 million went to Paul Singer’s Elliott Management. The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state. Felicitously, Loeb, Garschina and Singer serve on the board of the Manhattan Institute, a prominent conservative think tank with a history of supporting benefit-slashing reforms. The institute named Raimondo its 2011 “Urban Innovator” of the year.

http://www.rollingstone.com/politics/news/looting-the-pension-funds-20130926#ixzz3ml20IKkq

Senate blocks Republican bill denying Planned Parenthood funds

The U.S. Senate on Thursday stopped an effort by Republicans to deny federal funding for women’s healthcare provider Planned Parenthood as part of a bill keeping government agencies operating on Oct. 1, the start of the new fiscal year. The vote was still continuing. The Senate is next expected to advance the same federal funding bill, but without the provision stopping Planned Parenthood funding. Planned Parenthood denies allegations that it has improperly used fetal tissue from abortions.

http://www.reuters.com/article/2015/09/24/us-usa-fiscal-senate-idUSKCN0RO27020150924

Here we go again: Cruz vs. McConnell and Boehner

Sen. Ted Cruz is gearing up for another showdown with Republican leaders in Congress. The presidential candidate, a conservative Republican from Texas, is deploying arguments similar to those he used two years ago in rallying Tea Party lawmakers to block a government funding measure. Back then, the focus was on ObamaCare. Now, it’s on Planned Parenthood. Cruz has invited House conservatives to meet in his Dirksen Building office while ratcheting up criticism of GOP leaders in recent days. Cruz’s message is simple and a repeat of 2013’s: President Obama and the Democrats will deserve blame for a shutdown, not Republicans. “President Obama’s position is that if Congress funds 100 percent government that he will nonetheless veto funding for the government, unless Congress also gives $500 million to Planned Parenthood,” Cruz told reporters, noting the group is not part of the government and under investigation. “That is a radical and extreme proposition.” On Tuesday he accused Senate Majority Leader Mitch McConnell (R-Ky.) and Speaker John Boehner (R-Ohio) of capitulation after news broke they planned to move a spending bill stripped of language that would defund the family planning group, which has been engulfed in controversy since the release of undercover videos detailing its fetal tissue program. “Republican leadership’s position has been, in effect, to surrender across the board,” he said in a fiery floor speech. He is urging colleagues to use the expiration of government funding as leverage. Cruz said Congress should pass a continuing resolution that funds the government but “does not give taxpayer funds to a private organization, Planned Parenthood, that is under multiple criminal investigations.” He published an op-ed in Politico on Wednesday calling on leaders to pass piecemeal bills funding parts of the federal government but not Planned Parenthood, similar to a strategy the GOP tried in 2013. Cruz has a potential ally in Sen. Rand Paul (Ky.), a fellow Republican White House hopeful whom McConnell has endorsed. Paul told reporters on Tuesday that he wants to defund Planned Parenthood and will oppose a stopgap funding measure. “Why wouldn’t we put all 12 appropriations bills up? They’ve passed the committees. Just put them up one at a time, have a separate vote on Planned Parenthood,” he said. “Those things that don’t get 60 votes, guess what, we don’t spend any money on.” McConnell and Boehner are working to ensure the government stays open. Many Republicans in Washington believe another shutdown would play into Democrats’ hands and vastly increase the chances they take back the Senate next year. Cruz’s power on Capitol Hill rests largely with House conservatives, as it did two years ago, because few Senate colleagues are willing to join him in challenging McConnell. If enough Republicans in the lower chamber side with Cruz, it could pressure Boehner not to schedule a vote on a clean Senate-passed stopgap out of fear that it may cost him his gavel. McConnell has warned Senate Republicans that their party will get the blame in case of a shutdown, and he is mobilizing a plan to move a clean stopgap funding measure ahead of next week’s deadline. But some on the right are siding with Cruz in the brewing fight. Heritage Action for America on Wednesday urged lawmakers to block a short-term government funding measure that funds Planned Parenthood and announced it would count the vote on its legislative scorecard.

http://thehill.com/homenews/senate/254743-here-we-go-again-cruz-vs-mcconnell-and-boehner

The Very Strange Case Of Sgt. Bowe Bergdahl

When you don’t know the facts of a given incident, it’s human nature to attempt to fill them in yourself. But in the case of Bowe Bergdahl, there’s no way you could concoct the narrative the Army’s two-month investigation uncovered. According to the testimony of Maj. Gen. Kenneth Dahl, who led the 22-member team during the investigation, Bergdahl, who was a private first class at the time, quietly slipped away from his bunk and sneaked out of Forward Operating Post Mest in eastern Afghanistan on the night of June 30, 2009. Left behind, stowed neatly atop his bed, were his rifle and night vision goggles. The platoon was due to be rotated out the next morning to a larger base for a little break. So when Lt. John Billings was awakened by one of his men at the crack of dawn to tell him they couldn’t find Bergdahl, he figured it was a prank. The post was about the size of a football field, and beyond the wire the area teemed with Taliban. This was a joke, right? Nope. To everyone’s complete, gobsmacking amazement, Bergdahl was gone. They looked everywhere, then looked again, which didn’t take long. Shrugs all around; nobody had heard or seen anything. Billings started getting sick to his stomach at the thought of informing his superior officers. He delayed another 10 minutes because he just couldn’t make sense of it. Bergdahl was one of his best soldiers, always ready and willing. He’d seemed fine. There was zero chance he could have been taken during the night — the camp was too small, and anyway, who’d want only Bergdahl? Then why did he sneak out? There’s nowhere to go. What was going on here? Instead of rotating out, the platoon’s life became a living hell for the next six weeks as they searched for Bergdahl in the Afghan desert in July and August. It was 100 degrees, their T-shirts rotted off their backs, at night they slept with their arms around one another, freezing in the open desert. Though some members of the unit would later claim that soldiers died looking for Bergdahl, the Army says nobody died in the search. But as the fruitless search and suffering went on, the consensus in the platoon was that Bergdahl had deserted and brought this on himself. Perhaps not everybody felt that way, but plenty did, according to the testimony at a preliminary court hearing in San Antonio last week. Officers had to remind soldiers that the same effort would be given if one of them had gone missing. Fate dealt the 1st Platoon and the other searchers an unlucky hand. According to Dahl, Bergdahl was captured less than 12 hours after he walked off base, not long after it got light. His capture must have been as big a surprise to the Taliban as his departure was to the Army.

http://www.npr.org/sections/parallels/2015/09/24/443071030/the-very-strange-case-of-sgt-bowe-bergdahl?utm_source=facebook.com&utm_medium=social&utm_campaign=npr&utm_term=nprnews&utm_content=20150924

Law Firms Are Learning: Work-Life Balance Isn’t Just for Moms

For decades, work-life balance at law firms has been a women’s issue—something for working moms to sort out. But there are a growing number of new firms built on flexible schedules that are now attracting men, and slowly shifting the definition of a successful legal career. Though the partner office is still the prototypical legal-career status symbol, the prerequisites of long hours and 24-7 availability are inconsistent with the emphasis many men put on time away from the office.  “Young men today have different values, different aspirations than their fathers,” says Stewart Friedman, a Wharton Practice professor of management and director of the Wharton Work/Life Integration Project. “They want to be available both psychologically and physically for children.” At some of the most competitive white-collar workplaces, such as Netflix and Microsoft, these shifts have led to expanded parental-leave policies. Some major law firms have formal paternity-leave policies on their books, but many of them still lack a culture in which men feel comfortable utilizing those policies. Male lawyers—as well as men in other industries—often receive mixed messages from superiors: They’re allotted significantly less parental leave than their female counterparts, they’re implicitly discouraged from taking leave at all, and those that do take leave say they feel stigmatized, according to a survey by industry blog Above the Law. Though recent lawsuits have demonstrated that men—including men who are lawyers—are willing to stand-up for stigma-free paternity leave, the well documented benefits of such leave and the logistics of family-life balance in general remain taboo for men at major law firms. Unlike women, who are generally eager to speak with me about work-life issues, male associates feared openly expressing an interest in a more sustainable relationship between work and family.

http://www.theatlantic.com/business/archive/2015/09/lawyers-work-life-balance-men/407011/?utm_source=SFFB

SEC Has No Right to Smartphone Passcodes of Defendants, Judge Says

A federal judge in Pennsylvania ruled that the Securities and Exchange Commission can’t force two former credit-card company employees accused of insider trading to give up their personal passcodes for their work-issued smartphones. The SEC needed the passcodes to access the data on the phones. In a ruling issued Wednesday, the judge held that the codes are personal, not corporate records, concluding that the defendants have a constitutional right not to share them with the government. Here’s background on the case from Volokh Conspiracy’s Orin Kerr:  The Securities and Exchange Commission is investigating Bonan and Nan Huang for insider trading. The two worked at the credit card company Capital One asCOF -0.52% data analysts. According to the complaint, the two allegedly used their jobs as data analysts to figure out sales trends at major U.S. companies and to trade stocks in those companies ahead of announced company earnings. According to the SEC, they turned a $150,000 investment into $2.8 million. Capital One let its employees use company-owned smartphones for work. Every employee picked his own passcode, and for security reasons did not share the passcode with Capital One. When Capital One fired the defendants, the defendants returned their phones. Later, as part of the investigation, Capital One turned over the phones to the SEC. The SEC now wants to access the phones because it believes evidence of insider trading is stored inside them. But here’s the problem: The SEC can’t get in. Only the defendants know the passcodes. And the defendants have refused to disclose them. Generally, under the so-called collective entity doctrine, corporate records possessed by former employees aren’t protected by the Fifth Amendment right against self-incrimination. Agreeing with the defendants, U.S. District Judge Mark Kearney said the passcodes were protected because in his view they weren’t corporate records. Only the former employees — and not their employer — knew them, he said. More:

http://blogs.wsj.com/law/2015/09/24/sec-has-no-right-to-smartphone-passcodes-of-defendants-judge-says/

State/Local

RSA under fire: Inside the latest battle over Alabama’s pension powerhouse

Displayed on the walls outside David Bronner’s office in Montgomery are more than 100 framed political cartoons that span his career leading the Retirement Systems of Alabama. A who’s who of Alabama politics, the framed illustrations depict Bronner scrapping with everyone from governors to judges over the billions of dollars in pension money. “To get a political cartoon, you have to get your head kicked in on the front page, followed by getting your head kicked in on the editorial page,” said Bronner, 70. “That’s the third shot at you in the era of editorial newspapers. “Each one represented a battle of trying to keep people from ripping off the system.” If there’s any space left on those walls, Bronner might want to save it. That’s because the RSA CEO is once again fighting over the money he says belongs to the RSA’s 350,000 members. Earlier this year, the State Legislature formed a subcommittee to consider pension efforts that have occurred in other states. Backed by well-organized political advocacy groups, some of these changes have eliminated guaranteed contributions to future employees while reducing other states’ pension obligations. Last year, Alabama contributed more than three times the state’s General Fund shortfall – about $940 million – in support of the RSA. Lawmakers that are leading the subcommittee claim that Alabama’s pension system is a long-term liability in need of repair. But Bronner and other top RSA officials characterize the potential changes as yet another attack on Alabama retirees. They are set to present their case to the subcommittee during the next meeting on Oct 5.Meanwhile, Bronner continues to publicly feud with a number of top state officials including a board that manages about $11 billion in pension money. Concerned about some of the RSA’s underperforming investments, the board has curbed some of Bronner’s power and has formed a committee to plan, in part, for his departure. “There will always be a fight with the pension fund over money,” Bronner said. “If you are sending me money and you can take the money and spend it on something that’s cooler, you’re going to fight over it.”

http://www.al.com/news/index.ssf/2015/09/retirement_systems_of_alabama.html#incart_river

 

Judicial panel censures former judge Mark Fuller for 8 counts of domestic abuse, perjury

MONTGOMERY, Ala. — A panel of judicial investigators released Wednesday a summary of their report on former U.S. District Judge Mark Fuller to Congress, hoping it would serve as a censure of his “reprehensible conduct.” The “certification” presented is part of the Circuit Judicial Council’s process to “identify and investigate allegations of misconduct by judges.” Judge Fuller, who was appointed to the federal bench in Alabama’s Middle District in 2002, was arrested in the early morning hours of August 10, 2014 after his wife called 911 and told the dispatcher “he’s beating me… please help me.” According to the subsequent police report, Fuller’s wife had lacerations to her forehead and mouth, which she said she received from Fuller throwing her to the ground, pulling her hair and kicking her after she confronted him about and alleged affair. On August 1st, 2015, Fuller made official his resignation from the bench.

The Judicial Conference, however, decided to send the report to the U.S. House of Representatives to let them decide whether or not to impeach the disgraced judge. The summary, delivered to U.S. Speaker of the House John Boehner (R-OH), describes the Council’s findings. (a) Judge Fuller physically abused Kelli Fuller at least eight times, both before and after they married, which included and culminated in the assault that took place on August 9, 2014, in the Ritz-Carlton Hotel in downtown Atlanta, Georgia. (b) Judge Fuller made repeated statements under oath before the Special Committee that he never, at any time, hit, kicked, or punched Kelli Fuller, which were false and material under 18 U.S.C § 1621. (c) Judge Fuller made false statements to the Chief Judge of the Eleventh Circuit in late September 2010 in a way that caused a massive disruption in the District Court’s operation and loss of public confidence with the actions outline in (a) and (b), contributed to the overall determination that Judge Fuller’s conduct may constitute grounds for impeachment. (d) The conduct described (a)-(c) has individually and collectively brought disrepute to the federal judiciary. Perhaps best known for presiding over former Alabama Democratic Governor Don Siegelman’s corruption trial, Fuller, whose George W. Bush appointment was supported by Senators Richard Shelby (R-AL) and Jeff Sessions (R-AL), had very few allies in either party after the domestic violence allegations surfaced. According to police reports filed after the fateful August 9th police call, Mrs. Fuller “stated when she confronted him about their issues, he pulled her to the ground and kicked her… (The victim) also stated she was dragged around the room and Fuller hit her in the mouth several times with his hands.” The report also detailed lacerations to her mouth and forehead. His lawyer, using a law for first time offenders, worked out a deal with prosecutors that provided for his record to be expunged if he participated in weekly group counseling sessions for six months.

http://yellowhammernews.com/politics-2/judicial-panel-censures-former-judge-mark-fuller-for-8-counts-of-domestic-abuse-perjury/

Child bitten by copperhead snake at Birmingham Zoo

A child was taken to a hospital today after being bitten by a copperhead snake at the Birmingham Zoo. The child was bit by a wild snake, not one on exhibit, near the Trails of Africa exhibit, said zoo spokesman Clark Maxwell. The snake has been captured. “It is a snake you would typically see in your backyard…The most important thing at this time is the child’s medical needs,” Maxwell said. “This could happen anywhere in Alabama.” The condition of the child and other details were not immediately available. Zoo officials said in a press release they are working with the hospital to determine the appropriate treatment for the child.

http://www.al.com/news/birmingham/index.ssf/2015/09/child_bitten_by_snake_at_birmi.html#incart_2box

Alabama State trustee accused of assaulting former coach Reggie Barlow

An Alabama State University trustee is being accused of physically assaulting the school’s former coach during a Thursday morning deposition in Montgomery. Former ASU coach Reggie Barlow filed an arrest warrant against trustee Herbert Young following the incident, Barlow’s attorney Donald Jackson said. The warrant was apparently filed in Montgomery Municipal Court. It’s unclear at this time if Young was arrested. Jackson said Young was at Jackson’s Water Street office in Montgomery for a disposition as part of Barlow’s ongoing wrongful termination suit against ASU when the alleged assault occurred. “It was clear (Young) was angry, and it was clear he didn’t want to be there,” Jackson said. Jackson said Young became aggressive after only asking him a few questions at the beginning of the deposition. The situation escalated quickly when while out of the room Young apparently overheard Barlow make a comment about Young’s demeanor.  “(Young) charged back into the room,” Jackson said. “I jumped in between them. He grabbed coach Barlow around the neck and started slamming his head up against the door and trying to throw punches at him over my shoulder. I’m trying to push Mr. Young away. “This went back and forth for the next couple of minutes,” he added. A message for ASU’s general council Ramadanah Jones wasn’t immediately returned. Barlow filed a wrongful termination suit against ASU in February. The university asked him to resign at the end of the 2014 season, a month after extending his contract by three years. The suit is currently in the discovery process.

http://www.al.com/news/index.ssf/2015/09/alabama_state_trustee_assaults.html

 

Alabama joins multi-state investigation into Volkswagen scandal

Alabama Attorney General Luther Strange announced Thursday that Alabama has joined a coalition of at least 27 states that is investigating potential fraud by Volkswagen. Alabama will be among the states issuing subpoenas to Volkswagen as part of the multi-state probe of the auto manufacturer’s representations of its diesel vehicle emissions. Volkswagen has admitted falsifying emissions outputs on certain models. “We take any allegations of consumer fraud very seriously and will review the representations made by Volkswagen to its diesel customers in Alabama,” Strange said in a release. Other states participating in the investigation include Arizona, California, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Michigan, Mississippi, Nebraska, Nevada, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Virginia and the District of Columbia.

http://www.al.com/news/index.ssf/2015/09/alabama_joins_multi-state_inve.html#incart_river_mobileshort_home

 

Alabama middle-school girls learn about engineering careers

TUSCALOOSA, Ala. — Mckayla Carroll, 13, used the tip of an uncooked angel hair pasta noodle to puncture the soft, white fluff of a miniature marshmallow in the process of building the Leaning Tower of Pasta. Mckayla was one of 16 seventh-grade girls at Davis-Emerson Middle School to participate in the Alabama Power iCan program, which teaches middle-school girls about engineering. The company launched the program in Tuscaloosa last year at the same school. The program is also offered at schools in Gadsden, Anniston and Birmingham. The program, which started in Birmingham in 2008, uses a fun learning environment where girls can think like an engineer. The program teaches them about the different career opportunities available to them in the engineering field — civil, computer, environmental and chemical engineering, to name a few. “The purpose of iCan is to introduce middle school girls to careers in a STEM field, which is science, technology, engineering and math. We focus on engineering and math with this program,” said Anna Catherine Roberson, communications specialist for Alabama Power. “Our mission statement for iCan is empowering young female minds of today to engineer a better world for tomorrow.”

http://www.sunherald.com/2015/09/24/6432574_alabama-middle-school-girls-learn.html?rh=1#storylink=cpy

 

Blogs/Opinions

Turns Out, Hubbard is Fredo

The single, most relevant thing we can take away from the numerous email exchanges between Speaker Mike Hubbard and his cohorts, is that each one is about how to make money off of State government, but not even one is about how to better serve the people of Alabama, or his House District. Not one. Hubbard whines, threatens, pleads, and grovels in a most unmanly way, and never once is it about anything other than him, personally. He never puts his Alabama family first. He has continually betrayed them for his own prurient interests. Hubbard knows how to package an idea, but he doesn’t know how to be a leader without breaking the rules. He knows how to sell a concept, but like the cars salesman who has lost his divers license due to a drunk driving charge, he can only sell vehicles, but he can’t drive one, legally. Hubbard is an actor, and not a very good one at that. In the small world of Alabama politics he wanted to be Michael Corleone to former Gov. Bob Riley’s Godfather, but instead, it turned out he was more suited for the role of Fredo. In The Godfather, Fredo is a most obedient, and dutiful son, but he is simple-minded, and the weakness of character has dire consciences for he and his family. When his father, Don Corleone is gunned-down in the street by would be assassins, Fredo panics, fumbles his gun, and fails to return fire. Next, we see him sitting on the curb sobbing, paralyzed by his own failure. This is the real Mike Hubbard, who, at heart, is a greedy, little, sniffling coward. That sexy beast, Riley, is learning that his creation can’t be trusted, but he is playing both Hubbard, and the prosecution, trying to come out on the winning side of the equation.  Ultimately, it will be Riley’s son Rob, his wartime consigliere, who will decide when to have Hubbard rowed to his unexpected demise. Rob, and his sister Minda Riley Campbell, are both pretty good lawyers, and by now they have realized that J. Mark White, the attorney Rob recommended Hubbard hire, is digging an expensive grave for his client, and perhaps the Riley mob as well. White has fumbled Hubbard’s defense in unimaginable ways. His calling for a, “More Defined Statement of Facts” led to the first barrage of emails, which showed that Hubbard was a double-dealing cheat. And again, his motion to dismiss on the grounds that State ethics laws were unconstitutional, opened the floodgates for further emails which revealed the machinations of Hubbard’s schemes to enrich himself, using his office for personal gain. Interestingly, it was Augusta Dowd, not White, who issued a statement  rebutting John Archibald’s rich denunciation of Hubbard. She thought the prosecution was “cherry picking” emails. Sorry Mrs. Dowd, they are his emails, and they are most likely the most damning. “It’s ironic that I was the “architect” of putting a pro-business legislature in place, yet businesses seem to want to avoid any personal association with me like the plague!,” wrote Hubbard to investment banker and BCA board member Will Brooke. Of course, this was right after asking Brooke, “Ya got a little something for me?” Like Fredo, Hubbard begs from his betters, and threatens those he perceives as inferior. Hubbard packaged the Republican takeover of the legislature, but like Fredo, he was too corrupt and inept to hold on to it. Fredo Corleone to Michael: “It ain’t the way I wanted it! I can handle things! I’m smart! Not like everybody says… like dumb… I’m smart and I want respect!” Hubbard is smart, but he can’t handle things, important things, like his greed, his appetite, and his lust. These are the soul killers.  Fredo Corleone: “Every time I put my line in the water I said a Hail Mary, and every time I said a Hail Mary, I caught a fish.” In a January 14, 2011 email Hubbard wrote to Riley, “I hope you know how much I love and respect you. I try every day to pattern myself after you as a husband, father, Christian and as a public servant. That’s a pretty lofty goal, but I try. If I can even come close, I will be happy.” I’m sure that Hubbard is familiar with the “The Godfather.” That being said, he may not want to accept an invitation from his Godfather to go fishing anytime soon.  He most likely would metaphorically join Luca Brasi, who sleeps with the fishes. RIP Fredo Hubbard.

http://www.alreporter.com/archives/2015/146-state/8292-turns-out-hubbard-is-fredo.html

Commenter of the Day: Reuben F. Kolb chimes in on pension reform

Casey Toner’s latest examination of the Retirement Systems of Alabama struck a chord with many readers. One piece of the pension puzzle is Houston billionaire John Arnold, a former hedge fund manager and Enron commodities trader whose charity, Toner reports, has donated $4.85 million to Pew Charitable Trusts to support its pension reform efforts. Commenter Reuben F. Kolb says that’s a key fact that’s often missing from public pension reform debate:  “Casey Toner is to be commended for noting how the Arnold Foundation poured money into Pew. Many “journalists” in this state failed to note this as they parroted what they were told. The irony of a fellow who made much of his fortune via Enron pushing solid investments is rather classic. “I highly recommend Matt Taibbi’s “Looting the Pension Funds” as well as further rooting around on what Gina Raimondo pulled up in Rhode Island. Then again, Chris Christie up in New Jersey also managed to steer some tasty business to his cronies. Given Alabama’s history of politicians and their allies wetting their beaks, not to mention their own struggles with budgets and borrowing, the idea of putting more politics into public pension oversight is rather scary. Let us also not forget Kay Ivey’ running the PACT program to ruin. “Wall Street is lusting after public pension money for not just the fees they can extract but also how those buckets of money can be leveraged around to prop up the bizarre way high finance now works.” What’s your take on public pension reform? Keep the conversation going below. And many thanks to Mr. Kolb for always offering keen insight.

http://www.al.com/news/index.ssf/2015/09/commenter_of_the_day_1.html

The Insiders: Republicans shouldn’t pick a fight with Pope Francis

I worry that Republicans think Pope Francis has been captured by the left.  Some of the pope’s messages recently — including his comments on climate change, income inequality and capitalism — have had a noticeable leftist bent. And because of those remarks, some Republicans have been down on the pope, and the Democrats have swooped in to suggest the pope is one of them. Well, maybe Republicans should be a bit more forgiving of Pope Francis. Republicans have more in common with the pope than the secular and often faithless Democratic elite have in common with the pope.  And while Pope Francis has waded into some political areas where we have disagreements, the fact is, Republicans probably agree with Pope Francis on more issues than we disagree with him.  Plus, let’s face it, politically speaking, the pope is not a good “bad guy” in today’s world. It’s not flattering to pick a fight with the pope over individual policy positions. While many in the media have focused on the pope’s comments about climate change and income inequality, let’s not forget that the pope probably agrees more with Kentucky county clerk Kim Davis than he would with Planned Parenthood founder Margaret Sanger. The Democrats can try all they want to cloak themselves in the pope’s goodness and drape their policy positions in his morality, but they are forgetting — or ignoring — the fact that the pope is against gay marriage and is certainly against abortion. There is no way Pope Francis could be a delegate to the Democratic National Convention. Anyway, I do wish we had heard more from Pope Francis about the need to protect the sanctity of unborn lives while he was in front of Congress, and less about the death penalty, especially given how the pro-abortion Democrats are doing everything they can to keep federal funding for Planned Parenthood and blocking the 20-week abortion ban bill currently in the Senate.  But the pope’s visit to Washington was a big net-plus for everybody and Republicans should say so. The pope’s speech to a joint meeting of Congress was powerful. Watching it on TV, it was evident that both Republican and Democratic members of Congress were moved by the pope’s message to work together and to remember the Golden Rule. The pope has struck a responsive chord, and Republicans should try to hear it. Just because the left is cherry-picking from some of the pope’s comments doesn’t mean Republicans should ignore the totality and context of the pope’s teachings.

http://www.washingtonpost.com/blogs/post-partisan/wp/2015/09/24/the-insiders-republicans-shouldnt-pick-a-fight-with-pope-francis/

 

Morning Money

YELLEN: RATES WILL LIKELY RISE THIS YEAR — At a speech at UMass Amherst, Fed Chair Janet Yellen, who had a brief health scare during her address, said the central bank remains inclined to hike rates this year. “It will likely be appropriate to raise the target range of the federal-funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation moves back to our 2 percent objective,” Ms. Yellen said.

All anyone talked about after the speech, however, was Yellen’s health. The Fed chair paused multiple times toward the end and faltered on some words. She received medical attention at the school but returned to her regular schedule later in the evening. The Fed said Yellen was dehydrated after a long day but was otherwise fine.

Video of Yellen struggling: http://bit.ly/1NQ3KNT

THE TAKEAWAY — Pantheon’s Ian Shepherdson: “In short, the Chair sounds very much like she wants and expects to start raising rates. Barring a sustained bout of serious further market volatility, the only question now is whether the first move comes in October or December. We favor the latter, but this is a coin-toss.

Full Yellen speech: http://1.usa.gov/1OWd8QJ

ASIA DIPS ON YELLEN SPEECH — Reuters: “Asian shares gave up early gains on Friday, while the dollar firmed after Federal Reserve Chair Janet Yellen suggested the central bank is still on track to raise interest rates later this year.” http://reut.rs/1NQ5KWf

TRUMP’S BANKTUPTY PROBLEM — BreakingViews’ Rob Cox: “There’s … something unsettling about a potential leader of the free world whose word seems to be worth so little … Though all of his transgressions were perfectly legal, Trump’s bankruptcy recidivism suggests a flawed character.” http://reut.rs/1VcDseq

SHUTDOWN AVOIDANCE PLAN TAKES SHAPE — POLITICO’s Jake Sherman, Anna Palmer and John Bresnahan: “House Republican leadership will move next week on a clean government-funding bill, but only after they vote on a resolution calling for an end to federal funding of Planned Parenthood, according to multiple sources familiar with the plan. The resolution — called an ‘enrollment correction’ — would essentially change the text of the funding bill. But Senate Democrats are unlikely to allow its consideration. The tactic would stave off a government shutdown, but is almost certain to continue a period of political turmoil in the House.

“Furthermore, Speaker John Boehner (R-Ohio) is expected to announce Friday morning in a closed meeting that the House will ramp up its oversight of Planned Parenthood, and immediately begin drafting a budget reconciliation bill that would strip the group of its government funding. That bill will only need 51 votes to pass the Senate, and is likely to reach President Barack Obama’s desk. He is expected to veto it. Furthermore, Boehner (R-Ohio) and the GOP leadership will announce additional votes on anti-abortion legislation. As always in the unpredictable House GOP, this is subject to change.” http://politi.co/1KTebiQ

WELLS FARGO: NO SHUTDOWN — Wells Fargo’s John E. Silvia and Michael A. Brown: “[O]ur view is that a ‘clean’ CR to keep the government funded will clear the Senate and the House in time to avoid a partial federal government shutdown. … While we expect Congress and the Administration to agree to a short-term budget deal in time to prevent a shutdown, it is worth noting what the effect of another partial shutdown would mean for GDP growth. In general, the economic effects are likely to be more subtle compared to the 0.3 percentage point reduction in GDP from the last shutdown observed in Q4 2013. …

“The more prominent effect would likely be on consumer confidence, which has downshifted during prior fiscal fights. … Once Congress buys itself more time on the FY16 budget, further budget debates will need to take place in order to provide funding for the remainder of the federal fiscal year. The next major Congressional deadline is the need to re-authorize highway programs, which are set to expire on Oct. 29.”

GOOD FRIDAY MORNING — Congrats to NY Giant fans on yet another win over M.M.’s Skins. Big Blue shut down the Washington running attack and Eli Manning executed while Kirk Cousins did not. One more bad Cousins outing and the QB controversy will be back in the nation’s capital. Email me at bwhite@politico.com and follow me on Twitter @morningmoneyben.

DRIVING THE DAY — Third estimate of Q2 GDP at 8:30 a.m. expected to be unchanged at 3.7 percent … Univ. of Michigan Consumer Sentiment at 10:00 a.m. expected to fall to 87.0 from August’s 91.9 … President Obama and the First Lady this morning will welcome Chinese President Xi and Madame Peng Liyuan to the White House for an official State Visit. The two leaders hold a joint presser in the afternoon followed by a state dinner …

M.M. RADIO — Listen to me, Time’s Rana Foroohar and WNYC’s Charlie Herman talk VW, China, Congress and more: http://bit.ly/1OWFoTu

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Patrick Temple-West on the SEC’s proposed changes to its in-house court [http://politico.pro/1YESmJC]. For Pro’s subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or info@politicopro.com

CHINA/US TO RELEASE CLIMATE STATEMENT — POLITICO’s Andrew Restuccia: “The United States and China will release a joint statement on Friday outlining their vision for an international climate change agreement — the latest signal that the world’s two biggest greenhouse gas emitters are determined to help broker a deal at a summit in Paris later this year. … The statement, which will be unveiled during Chinese President Xi Jinping’s visit to the White House, will also include a handful of new policy announcements, chief among them a commitment by China to launch a national cap-and-trade system in 2017, according to senior Obama administration officials.

“The announcement could help to counter criticism from conservative opponents of the Obama administration’s efforts to fight climate change, who have contended that the United States shouldn’t act because Beijing has done little to reduce its emissions. … The new statement will build on the November 2014 joint announcement in Beijing between Obama and Xi in which the two leaders committed to curb their greenhouse gas emissions in the coming years. That announcement has been one of the few bright spots in the U.S.-China relationship” http://politi.co/1JsRk8q

XI/OBAMA BROMANCE IS DEAD — WP’s David Nakamura: “President Obama has lavished more personal attention on Chinese President Xi Jinping than on any other world leader over the past several years. But as Xi makes his first state visit to Washington, the romance is all but dead. Observers said there is little personal warmth, and even less trust, between Xi and Obama as the White House prepares to roll out the red carpet with a pomp-filled arrival ceremony Friday. Xi has aggressively sought to expand China’s influence in Asia, and his assertiveness has caught the Obama administration off guard, often making the White House appear indecisive in its responses.

“Obama aides insist the president’s strategy of engagement over confrontation will pay long-term dividends. They point to a major climate pact with Beijing last year and China’s backing for the U.S.-led nuclear accord with Iran. … If Xi has been more forceful on the world stage, the aides said, he has also provided evidence that China has the potential to be the kind of responsible global partner that the United States has sought. At the same time, escalating tensions have led others to conclude that Xi has gotten the better of Obama”http://wapo.st/1Ve3b0K

JOBS REPORT FIGHT CONTINUES! — Stuart Roy emails: “[I]n Bush W years jobs report did go over Weds not Thurs. I know because we at Labor were irritated by it from time to time since we didn’t see it until 8 am Friday. … Also OPA runs the lockup not BLS. BLS released info but that would not necessarily need to be the case … The numbers would not be a secret.”

Tony Fratto counters: “OK – to prove I’m not crazy and losing my memory, I checked in today with 1 former CEA chairman and his Chief of Staff; a Fed official; two former NEC chairmen; two former Treasury chiefs of staff; three former Treasury Assistant Secretaries (not including myself) and the unanimous conclusion is Thursday late afternoon/early evening.”

**A message from Chase for Business: Fan of fish tacos? Real Good Fish is on a mission to serve fresh fish to the local community along the CA coast. Find out how this Chase Mission Main Street Grant recipient is sourcing local, sustainable seafood from bay to tray: http://bit.ly/1gqOKZq **

ANOTHER TOUGH POLL FOR CLNTON IN NH — POLITICO’s Eliza Collins: “Bernie Sanders has pulled ahead of Hillary Clinton in New Hampshire, and now boasts a 16 point lead, according to a new poll out Thursday. Sanders leads the Democratic field of likely Democratic primary voters with 46 percent, according to a New Hampshire Primary CNN/WMUR poll, while Clinton comes in second with 30 percent, and 14 percent would support Joe Biden … Clinton’s numbers have been steadily declining since their high point in January, while Sanders has been on a sharp increase” http://politi.co/1PzYdtR

HOTTEST NEW COMMODITY: WATER — NYT’s Nelson Schwartz: “Real profits may be nearly as scarce as snow in the High Sierra, but Wall Street, as it is wont to do, smells profit as California endures its worst drought in decades. ‘Investing in the water industry is one of the great opportunities for the coming decades,’ said Matthew J. Diserio of Water Asset Management … ‘Water is the scarce resource that will define the 21st century, much like plentiful oil defined the last century.’ So far, though, this veritable Gold Rush has mostly turned up fool’s gold.” http://nyti.ms/1jgdIgb

EMISSIONS SCANDAL GROWS — FT’s Andy Sharman: “Researchers have provided fresh evidence of a growing gap between vehicle emissions in laboratory tests and their performance on the road, as questions mount about the carmakers’ conduct in the wake of the Volkswagen scandal. The German manufacturer faces regulatory and legal probes on both sides of the Atlantic after admitting to the US Environmental Protection Agency that it cheated in diesel emissions tests. VWhas said the rogue algorithms — or ‘defeat devices’ — affect 11m vehicles worldwide, and has set aside €6.5bn to deal with the fallout.

“One of the research groups that helped uncover the VW case published new data on Friday, claiming that carbon dioxide emissions in European road tests were on average 40 per cent higher than the official laboratory results advertised in car sales literature. … Carmakers are known to ‘game’ an outdated laboratory regime using perfectly legal methods such as overinflating tyres to reduce rolling resistance or fully recharging a vehicle’s battery before testing. … VW’s supervisory board will meet on Friday to discuss Mr Winterkorn’s successor, with Porsche boss Matthias Müller seen as the frontrunner.” http://on.ft.com/1KTtIPv

ALSO FOR YOUR RADAR

HILLARY GAVE SPECIAL STATUS FOR ABEDIN — POLITICO’s Rachael Bade: “Hillary Clinton personally green-lighted the controversial ‘special government employee’ position for her top aide Huma Abedin, allowing her to both advise her at State Department while collecting a paycheck from an outside consulting firm and the Clinton Foundation. According to new documents … the 2016 Democratic front-runner was the immediate supervisor who approved the position on March 23, 2012, allowing her then-deputy chief of staff to work several jobs at once.

“That dual-role, which wouldn’t go into effect until June of that year, is currently under investigation by Senate Judiciary Committee Republican staff. Republicans and outside groups have openly wondered if the post presented a conflict of interest for the woman who is now vice chairwoman of Hillary for America, or if her other jobs influenced what happened at State.”http://politi.co/1OVUIzA

TRUMP FADING? — POLITICO’s Kyle Cheney reports: “The summer of Trump is over, and rival campaigns are latching onto glimmers of hope that autumn will be the season of the billionaire businessman’s decline. … After faltering in last week’s debate … Trump … is taking longer to shake off controversial remarks, delivering relatively subdued performances during interviews and campaign appearances, and, most disconcertingly, stalling in polls.” http://politi.co/1KCbT2W

TRUMP’S CLASSY REPONSE — Via Twitter: .@politico, which is not read or respected by many, may be the most dishonest of the media outlets — – and that is saying something.

SEC DOUBLE COUNTING CASES? — Bloomberg: “The federal agency that polices public companies’ bookkeeping appears to be doing some fuzzy math of its own. It’s an open secret that the Securities and Exchange Commission has long rolled out a high number of enforcement actions in September, the last month of its fiscal year, to try to beat the previous year’s tally. That fact isn’t lost on defense attorneys, several of whom said in interviews that the agency is motivated to settle cases as the U.S. calendar moves from summer to fall.

“But the SEC’s drive could be more than harmless numbers padding. It’s giving a misleading impression of how effective the agency is in policing financial markets, according to Urska Velikonja, a law professor at Emory University in Atlanta, who studied more than a decade of the regulator’s enforcement statistics.” http://bloom.bg/1L9nFIC

HOUSE DEMS WEIGH IN ON FIDUCIARY RULE — A group of House Dems wrote to Labor Secretary Perez asking the department to “further refine” its new rule on fiduciary duty for investment advisors: http://bit.ly/1iPjLZc

Better Markets’ CEO Dennis Kelleher says the letter does not represent opposition to the rule: “We are confident that the Department will carefully consider the suggestions in this letter. However, these or similar suggestions have already been raised during the Department’s unprecedented 150 day-long comment process, which followed years of input and deliberation.”http://bit.ly/1R4yIBS

POTUS Events

9:00 am || Welcomes Chinese President Xi and Madame Peng Liyuan to the White House; South Lawn
10:00 am || Begins meetings with Xi
Noon || Holds a joint press confeence with Xi
3:20 pm || Delivers remarks at retirement ceremony in honor of General Martin Dempsey
7:00 pm || Welcomes President Xi and Madame Peng Liyuan to the White House; North Portico
8:40 pm || Attends a State Dinner with President Xi and Madame Peng Liyuan; East Room and State Dining Room

All times Eastern

Floor Action

House lawmakers will huddle Friday morning as they try to figure out a path forward to fund the government and avoid a potential shutdown.

Top House Republicans are hoping to convince conservatives to use a fast-track process known as reconciliation to try to defund Planned Parenthood. A senior House GOP aide told The Hill on Thursday that they would begin immediately drafting the bill.

 

But House lawmakers would still have to pass the Senate’s short-term spending bill that includes money for Planned Parenthood before the Oct. 1 deadline to fund the government and avoid a shutdown.

 

That could get backlash from conservative lawmakers in the House, who have pledged to not support a government spending bill unless it defunds the organization.

 

The House is also expected to finish its work on legislation that would set hard deadlines on environmental reviews that could delay construction projects. Votes in the House are expected between 10:30 a.m. and 11:30 a.m.

 

Meanwhile, the Senate will convene at 10:30 a.m.

 

No votes are expected in the Senate until Monday at 5:30 p.m., when lawmakers will take a procedural vote on a short-term spending bill. They’ll need to get 60 votes to move forward, paving the way for it to be sent to the House early next week.

 

Senate leadership is also expected to meet with Chinese President Xi Jinping on Friday at the Capitol as part of his trip to Washington.

 

Announcements

How Coverage You Offer (or Don’t Offer) May Mean an Employer Shared Responsibility Payment for Your Organization

Under the Affordable Care Act, certain employers, based on workforce size – called applicable large employers – are subject to the employer shared responsibility provisions. The vast majority of employers fall below the workforce size threshold and, therefore, are not subject to the employer shared responsibility provisions.

If you are an employer that is subject to the employer shared responsibility provisions, you may choose either to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, or to potentially owe an  employer shared responsibility payment to the IRS.  Many employers already offer coverage that is sufficient to avoid owing a payment.

If your organization is an applicable large employer, and you choose not to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, you may be subject to one of two potential employer shared responsibility payments.

More specifically, you may need to make an employer shared responsibility payment to the IRS if you are an applicable large employer and either of these circumstances applies for 2015:

  • You offered minimum essential coverage to fewer than 70 percent of your full-time employees and their dependents, and at least one full-time employee enrolled in coverage through the Health Insurance Marketplace and received the premium tax credit.
  • You offered minimum essential coverage to at least 70 percent of your full-time employees and their dependents, but at least one full-time employee enrolled in coverage through the Health Insurance Marketplace and received the premium tax credit.  A full-time employee could receive the premium tax credit because the coverage that was offered was not affordable, did not provide minimum value, or was not offered to the full-time employee.

For both of these circumstances, the 70 percent threshold changes to 95 percent after 2015.

The terms “affordable” and “minimum value” have specific meanings under the Affordable Care Act that are explained in questions 19 and 20 on the employer shared responsibility provision questions and answers page on IRS.gov/aca.  Transition relief for offers of coverage to dependents for 2015 is described in question 33 on the same page.