Krebs Daily Briefing 26 April 2016


A large, bipartisan group of senators is pushing the Obama administration to quickly reach a new foreign aid agreement with Israel, arguing that mounting security concerns in the Middle East are threatening the United States’ closest ally in the region. Eighty-one senators, including the Republican and Democratic leaders, sent President Obama a letter on Monday urging him to speed up the process, pledging themselves “ready to support a substantially enhanced new long-term agreement.” While the Obama administration has until 2018 to conclude a new 10-year deal, the senators cited a long list of regional threats they argue make a new memorandum of understanding between the two countries a necessity now. “Israel could quickly find itself on the wrong end of the regional military balance,” the group of senators, led by Sens. Chris Coons (D-Del.) and Lindsey Graham (R-S.C.) wrote, adding the threats “mean that the United States must enhance its investment in the long-term security requirements of our closest Middle East ally.” The Obama administration has long been in discussions with Israel over the terms of the next agreement, but the talks have been moving cautiously as leaders wrestle with how much the United States is willing to put on the table. Israeli leaders have asked for $40 billion over the next decade and, in addition, money for missile defense systems, according to Israeli media,  which is a bump over the last agreement that gave Israel $30 billion over 10 years. There are also unresolved questions about how that money would be spent – much of U.S. military aid to Israel, which covers about a fifth of its defense budget, is currently tied to the requirement that Israel purchase weapons from U.S. contractors. The contentious U.S. presidential election has also cast a long shadow over the discussions, leading to widespread speculation that a final agreement could be deferred until a new president is sitting in the White House. Republican candidates have been heavily critical of Obama’s Middle East policy, with GOP front-runner Donald Trump declaring that the administration is “the worst thing that’s happened to Israel” — despitereports that he wavered on whether the United States should provide the Middle East ally with as much assistance as it currently does. In recent years, Israeli Prime Minister Benjamin Netanyahu and Obama have also had a rocky relationship, highlighted by Netanyahu’s March 2015 speech to Congress, which he delivered over the White House’s objections, and his passionate campaign against the Iran nuclear pact. More:

Blind faith turns to disbelief in Italian banking’s heartland

Until very recently, Domenico Bertini, a machinery technician nearing retirement, viewed his local bank in the picturesque Vicenza region of northern Italy as family. The 150-year-old Banca Popolare di Vicenza was a world away from the faceless bankers of Wall Street who brought the global financial system close to collapse almost a decade ago. It was a traditional, safe institution staffed by Bertini’s friends. Or so he and many others thought. What remained of their extraordinary faith in the bank has now turned to anger and disbelief, with grave implications for Italy’s banking system, which is funded to a large extent by ordinary people via bonds and shares as well as deposits. Popolare di Vicenza — in financial straits and under investigation for misselling its own shares to clients, false accounting and deceiving regulators — revealed last week that many of its customers’ life savings would be all but wiped out. For Bertini, aged 56 and with two children, it was a personal betrayal. “These are people you used to play football with when you were 15 and maybe their father was your school teacher,” he said to explain why he had not only deposited money at the bank but also put his retirement savings, 400,000 euros ($450,000), in its shares. “You meet them in the town square every day, you meet them in church. You trust them. They tell you to buy the bank’s shares, you do it,” said Bertini, sitting in a cafe in Vicenza, a Renaissance-era town at the foothills of the Italian alps, a ream of newspaper clippings and correspondence on the table. Bertini is among thousands of customers who have lodged legal claims against the bank and official investigations are under way into several former executives. Those executives declined requests to comment and the bank’s new management has promised to cooperate with prosecutors and put the lender on a solid footing. It will take longer to restore trust in the country’s banks, which, despite government efforts to promote bourse listings and bond issues, remain the main source of financing for Italy’s million small businesses — the backbone of the economy. More:

Exclusive: SWIFT warns customers of multiple cyber fraud cases

SWIFT, the global financial network that banks use to transfer billions of dollars every day, warned its customers on Monday that it was aware of “a number of recent cyber incidents” where attackers had sent fraudulent messages over its system. The disclosure came as law enforcement authorities in Bangladesh and elsewhere investigated the February cyber theft of $81 million from the Bangladesh central bank account at the New York Federal Reserve Bank. SWIFT has acknowledged that the scheme involved altering SWIFT software on Bangladesh Bank’s computers to hide evidence of fraudulent transfers. Monday’s statement from SWIFT marked the first acknowledgement that the Bangladesh Bank attack was not an isolated incident but one of several recent criminal schemes that aimed to take advantage of the global messaging platform used by some 11,000 financial institutions. “SWIFT is aware of a number of recent cyber incidents in which malicious insiders or external attackers have managed to submit SWIFT messages from financial institutions’ back-offices, PCs or workstations connected to their local interface to the SWIFT network,” the group warned customers on Monday in a notice seen by Reuters. The warning, which SWIFT issued in a confidential alert sent over its network, did not name any victims or disclose the value of any losses from the previously undisclosed attacks. SWIFT confirmed to Reuters the authenticity of the notice.  More:

Obama: U.S. preparing ‘shield’ to block low-level North Korea threats – CBS

The United States is preparing to defend itself against North Korea, positioning its missile development systems and setting up a “shield” to counter low-level threats from an “erratic” country, U.S. President Barack Obama told CBS in an interview that aired on Tuesday. “One of the things that we have been doing is spending a lot more time positioning our missile development systems, so that even as we try to resolve the underlying problem of nuclear development inside of North Korea, we’re also setting up a shield that can at least block the relatively low-level threats that they’re posing now,” Obama said.

How Does Your State’s Economic Output Compare to Foreign Countries?

The United States has a huge economy, so it might be hard to visualize all that activity. Using 2014 information gathered from the International Monetary Fund via WikipediaCarpe Diem Blog decided that the best way to illustrate the economy was to break down the gross domestic product (GDP), the value of everything produced by businesses and people in a year. The team behind the blog matched each state in the U.S. with a country that had a similar economic output. For example, the United State’s largest GDP is California, which shares similar numbers to Brazil.


Wall Street’s Problem Isn’t Too Big to Fail. It’s Too Big to Nail.

The main problem with Wall Street isn’t that, as Bernie Sanders says, the banks are too big to fail. It is that the bankers who run them are too big to nail—to be held financially and personally liable for the bad or corrupt decisions they make. This is now, sadly, documented history. The heart of the subprime mortgage mania—the real reason it could go on for so many years, nearly sinking the world economy in the end—was that no one was really held responsible for any of his or her bad decisions. Ever. Bank executives weren’t held responsible during the bubble as it was building, when banks stopped caring about their own mortgage lending standards because the bankers knew all those bad loans would be bundled into securities that could be sold around the world, thus relieving the bankers’ firms of liability (though many banks also fecklessly kept substantial amounts on their books). Executives weren’t held responsible during the crash, when they were bailed out by the federal government and barely had to promise any change of behavior in return. And they weren’t held responsible long afterwards, when the Justice Department and the SEC failed to convict (and barely put on trial) a single senior executive, or even to send any to the poorhouse by levying fines and penalties. No personal accountability whatsoever, from start to finish; on the contrary, bankers, traders and executives were rewarded for their reckless behavior with big bonuses. Is there any better recipe for encouraging more greed, mania and irresponsibility by Wall Street—no matter how big the bank you’re working at is? Federal regulators are gradually trying to get at this problem; on Thursday, they proposed new rules under the 2010 Dodd-Frank law intended to prevent executives at businesses with more than $1 billion of assets from earning “excessive” pay that encourages too-risky or aggressive tactics. The idea is to require the nation’s largest banks and financial firms to hold back executives’ bonus pay for longer than before—and require a minimum period of seven years for the biggest firms to “claw back” bonuses if it emerges that an executive’s actions have hurt the institution. More:

High-speed traders now dominate the most important market in the world, and it is freaking some people out

High-frequency traders have taken over the market for US Treasuries, and a bunch of market participants say that they’re alarmed by the change. The US Treasury recently asked for public comments on changes to the largest government-bond market in the world. The responses have been flooding in. The topic is a weighty one. The US government-bond market makes up around 30% of the fixed-income market, according to a letter from the Securities Industry and Financial Markets Association and American Bankers Association. The Treasury market is “the most important global benchmark for pricing and hedging spread asset classes and is a key transmission mechanism for US monetary policy,” they wrote. Several Wall Street players took the opportunity to get in a dig in over the growing role of principal trading firms and high-frequency specialists. The general consensus among this group is that regulation has discouraged Wall Street banks from making markets in US government bonds. While banks have pulled back, high-frequency trading firms have piled in, and these firms are more flighty in times of stress. Here is Mike Zolik from prop-trading firm Ronin Capital pointing the finger at leverage ratios:  Why are primary dealers retreating from the US Treasury market? Participating in the US Treasury market no longer generates a profitable return on capital for those primary dealers that are subject to regulatory leverage ratios. Most primary dealers have been designated as G-SIBs (Global Systemically Important Banks). The lack of diversity in primary dealer membership means that regulation targeting the “too big to fail” problem has the unfortunate side effect of reducing liquidity in US Treasuries. More:

Goldman Bank Website Caps Quiet Shift Before New U.S. Cash Rule

Goldman Sachs Group Inc.’s new online bank, acquired from General Electric Co. last week, caps a decade-long shift by the firm and Morgan Stanley to lean more on deposits for funding — efforts that will help them comply with a U.S. rule to be unveiled Tuesday. Goldman Sachs took over $16 billion of deposits from the online business it bought from GE Capital. It merged the platform with its GS Bank USA unit and is offering 1.05 percent interest on savings accounts opened online. That’s adding to a deposit base that’s already grown almost seven-fold since 2007. Goldman and smaller rival Morgan Stanley scraped through the 2008 financial crisis, converting into bank holding companies under the oversight of the Federal Reserve, while three of their biggest rivals succumbed or sold themselves to stronger firms. Since then, the pair have been amassing deposits, a form of funding favored by regulators over the short-term financing markets that froze during the crisis. On Tuesday, two U.S. agencies are set to approve their version of a long-term liquidity rule outlined by global regulators in 2014. The so-called net stable funding ratio requires banks to hold enough easy-to-sell assets to meet any liabilities coming due in the next 12 months. Because deposits are viewed as a more stable form of financing than market-based sources such as repos, regulations — including a short-term liquidity standard approved almost two years ago — let banks hold fewer liquid assets against them. Goldman Sachs said in its latest annual report that it’s already in full compliance with the short-term rule, called the liquidity coverage ratio, even though the measure doesn’t take full effect until next year. The firm said it was still evaluating the potential impact of the long-term rule as suggested by the Basel Committee on Banking Supervision. More:

New Data on OTC Equity Trading Now Available, FINRA Says

WASHINGTON–(BUSINESS WIRE)–The Financial Industry Regulatory Authority (FINRA) today announced that expanded data on over-the-counter (OTC) trading in equity securities is now live, extending FINRA’s trading-volume transparency to all of the OTC market. With this enhancement, FINRA is supplementing the data that it currently makes available on trading by alternative trading systems (ATSs) including venues known as “dark pools” with new data on all other equities volume executed OTC by FINRA members (non-ATS OTC volume). The additional data covers approximately 20 percent of all trading volume in National Market System equities. “Enhanced disclosure of over-the-counter trading serves the interests of investors and other market participants by enabling them to better understand a firm’s trading volume and market share. Taken together with FINRA’s current reporting on alternative trading systems, the new data completes a holistic picture of trading that investors can use to make better-informed trading decisions,” said FINRA Chairman and CEO Richard Ketchum. Beginning today, the non-ATS OTC volume is being published on the same schedule as that for ATS volume: a two-week delay for stocks in Tier 1 of the National Market System (NMS) Plan to Address Extraordinary Market Volatility (i.e., those NMS stocks in the S&P 500 Index or the Russell 1000 Index and certain ETPs) and a four-week delay for all other NMS stocks and OTC equity securities. In addition, a firm’s aggregate non-ATS volume for each month is being published on a one-month delayed basis. For firms that execute fewer than 200 non-ATS transactions per day on average during the reporting period (weekly or monthly), FINRA combines and reports the volume for all such firms on an aggregated, non-attributed basis. The expanded transparency is the latest in a series of FINRA measures that increase public visibility into off-exchange trading. In June 2014, FINRA began providing aggregate weekly volume information and number of trades, by security, in equity securities, for each ATS. In July 2015, FINRA began making the ATS data available free of charge to all users. FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit

A Leak Wounded This Company. Fighting the Feds Finished It Off

The first phone call that changed Michael Daugherty’s life came in May 2008. Daugherty was a happy man, running a good business in a nice place. That’s how he talks about it, like the opening five minutes of a movie, setting up how great everything is before disaster strikes. His Atlanta-based company, LabMD, tested blood, urine, and tissue samples for urologists, and had about 30 employees and $4 million in annual sales. Daugherty is a middle-aged guy distinguished by small, kind brown eyes and a big, meaty laugh—a business everyman of a certain vintage, with a salesman’s mix of friendly and aggressive. He’s from Detroit, and you can occasionally hear it in his vowels. Kevin Spacey could play him in the movie. Here’s where the story turns dark. That Tuesday, LabMD’s general manager came in to tell Daugherty about a call he’d just fielded from a man named Robert Boback. Boback claimed to have gotten hold of a file full of LabMD patient information. This was scary for a medical business that had to comply with federal rules on privacy, enshrined in the Health Insurance Portability and Accountability Act. I need proof, Daugherty told his deputy. Get it in writing. Boback e-mailed the document. It was a LabMD billing report containing data, including Social Security numbers, on more than 9,000 patients. Boback quickly got to the sales pitch: His company, Tiversa, offered an investigative service that could identify the source and severity of the breach that had exposed this data and stop any further spread of sensitive information. LabMD’s four-person IT team found the problem almost immediately: The manager of the billing department had been using LimeWire file-sharing software to download music. Without knowing it, she’d left her documents folder, which contained the insurance report now in Tiversa’s possession, open for sharing with other users of the peer-to-peer network. The billing manager’s computer was the only machine at LabMD with LimeWire—having it was a violation of company policy—and the tech staff removed it. They also began scouring peer-to-peer networks and the Internet for signs of the file on the loose, in case someone outside Tiversa had downloaded it and shared it with others. They looked for months and never found it. Boback kept e-mailing during this period, urging swift action and claiming that Tiversa was seeing searches and downloads of the file. When LabMD asked for specifics, Boback said he could provide those only after LabMD signed a service agreement. The sample agreement he sent listed a rate of $475 an hour, and Boback said the fix for a problem of this nature typically took two weeks. (Two 40-hour weeks at that rate would total $38,000.) His e-mails mentioned negative press related to the leak of 1,000 Social Security numbers by Walter Reed Army Medical Center, and he offered to send over a breakdown of data breach notification laws in 43 states.

The Republican Senate Majority Is Collapsing Around Mitch McConnell

The 2016 map always looked good for Democrats. But if Donald Trump or Ted Cruz is at the top of the GOP ticket, it looks freaking great for them. The 2014 midterm was nothing short of a disaster for Democrats, a combination of a dismal map, midterm-election Obama fatigue and shoddy recruitment, that ultimately cost Democrats the Senate and netted Republicans nine seats from North Carolina to Colorado. In 2016, the tables were expected to turn even before Trump emerged. Now things have gone from bad to awful for Republicans’ Senate hopes. “It creates lots of problems and headaches for Republicans, and Democrats firmly believe that it is going to be a train wreck unlike anything seen in a long time,” says Cook Political Report analyst Jennifer Duffy. “I have Democrats talking to me about 8 to 10 seats. I am not there yet.” In 2016, Democrats only have 10 seats to hold on to. Republicans, meanwhile, have 24–seven in states Obama won in both 2008 and 2012. And unlike a midterm election where turnout is anemic and older white voters call the shots, the presidential race is expected to bring more minority and young voters out to to polls. Kyle Kondik, a congressional race analyst at the University of Virginia’s Center for Politics, breaks it down into three categories. There are the hardest seats for Republicans to hold onto; Wisconsin and Illinois, which have trended further to the left in recent years. Then there are races that are more truly toss-ups, places like Florida, New Hampshire, Pennsylvania and Ohio where a presidential race could swing the state one way or the other. And, finally there are a new slew of seats that could be up for grabs if Republicans select a presidential nominee like Trump or Cruz.  Since the cycle started, Democrats have bet they could net four or five seats with a specific eye on Ohio, Wisconsin, Pennsylvania, New Hampshire, Illinois and Florida, but the prospect of Cruz or Trump on the top of the ticket is making them more bullish. More:

Column: How Reaganomics, deregulation and bailouts led to the rise of Trump

The media is inundated with pundits analyzing the unexpected rise of demagoguery in the primaries. I would like to add my own: the establishment’s utter loss of credibility. Abraham Lincoln’s warning, “you cannot fool all of the people all of the time,” has now come back to haunt them with a vengeance. It took Everyman on Main Street some time to figure out that they’ve been had and finally revolt — 35 years to be more precise. There has been no shortage of big promises since Reagan’s “It’s Morning again in America,” but in the end, they all left the middle class staring into thin wallets while their manipulators were living high on the hog. The failed big ideas began with Reaganomics. The stimulating effect of its tax cuts was supposed to “trickle down” to the masses, but the flow had the viscosity of molasses and stuck with the ultrarich. Under Reaganomics, the ultrarich had their taxes cut sharply — by about half. A millionaire who was paying $700,000 in taxes in the 1970s saw her taxes cut to $350,000 in the 1980s. But what was he or she going to do with the $350,000 windfall? Some spent it on conspicuous consumption, but many decided to fund think tanks and hire economists to support their ideology, while others used the windfall to influence politicians and shape laws. And so the tax cuts became a vicious circle in which wealth begot more wealth and still more influence. Then came North Atlantic Free Trade Association, initiated by President George H. W. Bush and eventually signed into law by President Bill Clinton. Clinton promised that NAFTA would “promote more growth, more equality… and create 200,000 jobs in this country by 1995 alone.” Of course, he failed to mention how many hundreds of thousands of jobs would be destroyed at the same time, but few noticed such nuances at the time. (It’s worth noting that his economic team was headed by Bob Rubin, CEO of investment mega-bank Goldman Sachs.) Together with globalization and the opening up of China, NAFTA devastated the U.S. manufacturing sector and the middle class with it. And the treaty has a long reach: just last month, air conditioning manufacturer Carrier announced that it will move 1,500 jobs to Mexico to its employees’ bitter disappointment. Deregulation of the financial sector was yet another big idea that was supposed to be good for Americans, and it was — for the elite. Begun in earnest by Reagan, the process was continued under Clinton who declared many of the FDR-era laws “antiquated.” He abolished the Glass-Steagall Act, which kept commercial banks from speculating on Wall Street with other people’s money. The act was supposed to be a “major achievement that will benefit American consumers, communities and businesses of all sizes.” With amazing shortsightedness, Clinton declared at the signing ceremony that we’re “modernizing the financial services industry, tearing down these antiquated walls.” Deregulation was in full swing — always framed as modernization or in the name of efficiency. The prohibition on interstate banking was also removed, allowing for the creation of “too big to fail” banks. In 2000, Congress passed the Commodity Futures Modernization Act, which prohibited the regulation of credit default swaps. The elite forgot, however, that short-term efficiency can turn into long-term disaster when the risks in the economic system accumulate. And so we were inching toward the Meltdown of 2008, which wrought havoc among so many members of the middle class. More:

Billionaire Environmentalist to Spend $25 Million to Turn Out Young Voters

WASHINGTON — The billionaire environmentalist Thomas F. Steyer and his political advocacy group, NextGen Climate, will spend at least $25 million on a get-out-the-vote campaign targeting young voters this year in seven mostly battleground states, the group announced on Monday. Mr. Steyer, the single biggest political donor of the 2014 midterm election cycle, said the campaign would target at least 203 college and university campuses. He called it the largest youth voter outreach program ever undertaken by a candidate or political campaign. Mr. Steyer spent $74 million in the 2014 midterm elections, including $67 million for NextGen Climate to reward candidates who embracedclimate change as a major issue. That year, Democrats were clobbered,losing control of the Senate and falling deeper into the minority in the House. Of the seven candidates for Senate or governor NextGen Climate spent money on, three won. Undeterred, Mr. Steyer said on Monday that the $25 million dedicated to voter outreach was a floor, not a ceiling. His group expects to press other efforts focused on electing climate-friendly lawmakers. Outreach to young voters will concentrate on the swing states of Ohio, Pennsylvania, Iowa, Colorado, Nevada and New Hampshire, as well as Illinois. And this year, the impact of Mr. Steyer’s largess could be amplified by the reluctance of conservative megadonors to spend. Charles G. Koch, the billionaire bankroller of conservative causes, suggested on Sunday that Hillary Clinton could make a better president than the two Republican front-runners. Other Republican donors, such as the casino magnate Sheldon Adelson, have been similarly reluctant to open their wallets. While polls show that younger people are more likely to support candidates with strong environmental policies, they are also less likely to show up at the polls. “As I traveled around the country in the 2014 election cycle, I saw that young voters care deeply about climate change, but what they haven’t been is as engaged in the electoral process as older Americans,” Mr. Steyer told reporters on a conference call. “Millennials are the biggest cohort in this election cycle,” he added. “When they do engage, it can make a difference in these states. This is about turnout and letting millennials’ voices be heard.” In the 2014 election, Mr. Steyer’s group spent heavily on expensive television advertising. This time, taking a page from Americans for Prosperity, the conservative group backed by Mr. Koch and his brother David, the effort will shift to person-to-person contact, voter registration and a get-out-the-vote ground game. The prospect of a Democratic presidential candidate going against a Republican who denies the existence of human-caused climate change should increase passions on the issue. More:

TSA’s idea: End screening at some airports

The TSA’s latest effort to make air travel more efficient would have let passengers board flights at some small airports without being screened for threats like guns or explosives. But then Congress got wind of the proposal. And now the TSA is backing down after lawmakers denounced the idea as bizarre and even dangerous, especially following terrorist attacks such as the March bombings in Brussels. “From a security standpoint, it makes no sense,” said Rep. Greg Walden (R-Ore.), who learned months ago that the TSA had refused to place screeners at a regional airport in his district. Instead, the agency suggested, it would screen the passengers after they landed at larger airports and before they boarded connecting flights. The dispute represents yet another setback for the agency’s troubled efforts to adopt what advocates call a leaner, more “risk-based” security strategy in an era of flat-lined budgets. The agency has offered few public details about the latest proposal, including how many airports it would have affected, and refused to answer questions from POLITICO about its change of course. Members of Congress say TSA’s strategy would have affected at least six airports, and some sources say it could have been as many as 22. Supporters of the TSA plan say the risks would be limited: The smaller airports get relatively little air traffic, and the regional planes in question would be far smaller than the hijacked jumbo jets that crashed into the World Trade Center and the Pentagon on Sept. 11, 2001. But lawmakers criticized the idea as an invitation for terrorists to bring bombs or other weapons on board — something they called an unacceptable risk. They expressed astonishment that the TSA would even propose such a strategy. “Their answer is fly to Portland, we’ll screen you when you land — reverse screening,” Walden said. “But meanwhile, what says the plane ends up in Portland? And by the way, it’s just flown over Oregon’s biggest city.” “I don’t think most Americans would agree to get on a plane that’s got 49 other passengers without a sense that everybody on that plane is safe to be with,” Sen. Jerry Moran (R-Kan.) told POLITICO. Walden and Moran have each offered legislation — adopted by the House and Senate in separate bills — to prohibit the TSA from going ahead with the proposal. The TSA has acknowledged the danger of not staffing some airports, no matter how small or rural. But ultimately, the agency has to weigh the risks against its budget and staffing, Administrator Peter Neffenger said. “Basically you fly unscreened in that aircraft, then you land at another airport, then you get screened at that airport,” Neffenger said. “I understand the concern with that.” But on the other hand, he said, many small airports don’t have a steady stream of flights, and sometimes airlines pull out entirely. “You have to have some guarantee that they be in service long enough to justify the expense of hiring screeners, putting the equipment in,” Neffenger said. “You don’t want to go in there and six months later have to pull it all back out.” More:

14 things you never knew your iPhone could do


Alabama brewery to debut Unimpeachable Pale Ale mocking Bentley scandal

An Alabama craft brewery will observe the state’s new growler law by debuting a limited-release peach beer inspired by the ongoing Gov. Robert Bentley scandal. Salty Nut Brewery of Huntsville said its new Unimpeachable Pale Ale will celebrate the “unimpeachable leadership shown by Bentley,” who came under fire in March after he admitted to making sexually inappropriate comments to his former political adviser, Rebekah Caldwell Mason, who has since resigned. The promotional artwork references a leaked recording, part of which includes Bentley describing how he liked to stand behind Mason and touch her breasts. Both Bentley and Mason have denied there was a physical relationship between them. “When naming and branding a beer, we try to come up with names and imagery that are memorable and descriptive of the beer, and feel that Unimpeachable Pale Ale is both,” said Salty Nut co-owner Jay Kissell. Unimpeachable Pale Ale, made with fresh peaches and Idaho 7 hops, will be available for on-premise consumption on 2406 Clinton Avenue West in mid-May and 32-ounce cans when the growler law takes effect June 1. T-shirts, posters and stickers are already available for purchase here. The initial taproom release will likely be a week or less. If consumer interest is there, Kissell said the brewery would be eager to make Unimpeachable Pale Ale available to beer lovers across the state. Kissell, who wouldn’t directly address the impact the scandal has had on Alabama’s image, said they are focused instead on “the positive attention that the passage of the growler law has brought to the state of Alabama.” “Eight years ago, Alabama had a very restrictive legal structure for breweries that has

changed dramatically and the industry and consumers are seeing the benefits,” he said. Bentley signed the growler law, also known as House Bill 176, the day after he apologized to the people of Alabama for comments he made to Mason in 2014. It was the same week former Alabama Law Enforcement Secretary Spencer Collier hurled the affair rumors into the national spotlight. More:

Too Big to Try?

British Prime Minister William E. Gladstone is credited with saying, “Justice delayed is justice denied.” Once again, Speaker Mike Hubbard, who is charged with committing 23 felony acts of public corruption, has asked for a continuance, and it appears Lee County Circuit Judge Jacob Walker, III, may, once again, grant Hubbard’s wishes. The State’s case against Hubbard is not as complex as his attorneys J. Mark White, Lance Bell and now, Bill Baxley, have been claiming. The crimes Hubbard is accused of committing are based on simple, easy-to-understand laws, laws that Hubbard himself championed and voted to pass. Over the last two years, Hubbard and his criminal attorneys have tried to deceive the public, confuse the court, and delay, deflect, and deny at every turn. Over the last year and a half, Hubbard has tried, with some success, to turn Judge Walker’s court into a legal marketplace for every absurd argument imaginable to delay his trial, deflect his guilt, and deny any wrong doing. The court has more than not given in to Hubbard’s every request, showing him unprecedented deference. Judge Jacob Walker, III, is a highly respected jurist, but his willingness to yield to Hubbard’s endless delay tactics have gone beyond projecting the integrity of the process, and veered sharply into a justice denied. No doubt, celebrity cases are difficult because they draw more of the public’s attention. Hubbard has made himself a glamorous figure in Lee County, with his white Mercedes, sharkskin suits, and slicked-back hair. He has a radio show, he knows Bo, and he even has a building and a street named after him, not to mention the fact, that he has brought millions in State and Federal dollars to the district. In the O.J. Simpson trial, Judge Lance Ito showed the world how not to conduct a celebrity trial. Ito will forever be remembered for allowing sleazy defense lawyers to turn his court into a mockery of justice, with silly stunts and trickery. Simpson’s trial shaped how the American people viewed judges, prosecutors, and especially defense attorneys. More:

Who’s Getting Paid?

MONTGOMERY—The State Legislature looks poised to pass an $800-million-dollar prison bill based on vague plans, powerful lobbying, and a process that lacks even a modicum of transparency. The real worry over the $800-million-dollar prison bill is, who’s going to receive a big payday? Speculation is that Gov. Robert Bentley’s former senior adviser and sexting partner, Rebekah Caldwell Mason, has a deal. Minda Riley Campbell’s name has been linked to a company that wants to build the prisons, lease them back to the State, but staff them with civilian security contractors. A law enforcement officer speaker on background said, “This bill if it passes will keep Federal investigators busy for years.” A source close to the negotiations says Mason has a contract with one of the construction companies to secure the construction work, and that is why Gov. Bentley has pushed to use the alternative delivery method, where a contractor is handpicked instead of the traditional competitive bid process. A Florida contractor has been working with the Governor’s office for two years, according to a former staffer, who claims Mason brought the company to the Governor. The measure has Bentley’s full support, and the lack of transparency has led to the speculation about Mason. But, as with most big projects in Alabama, former Gov. Bob Riley’s fingerprints are often to be found on any deal, causing his daughter’s name to surface. According to several sources close to the Department of Finance, Acting Director Bill Newton has bragged about the hold he has over Bentley, causing many to believe he has made a common cause with Mason. Word from inside the Department of Finance, is that Goodwyn Mills & Caywood will be architects on the project.  Finance officer Katherine Lynn’s husband works for the firm. Newton has close ties to those in the bond business, who stand to make a considerable profit off of the $800 million offering. The fact that the bill is being crammed through the State House by Speaker Mike Hubbard, and Senate President Pro Tem Del Marsh, with Bentley’s backing, has raised many eyebrows. Marsh is the only one of the three not currently under a cloud of suspicion.

Marsh willing to consider one-year extension of historic tax credit

Alabama Sen. Pro Tem Del Marsh said he is willing to discuss a one-year extension for the state’s historic renovation tax credit. The program is set to expire next month unless lawmakers pass an extension during the current legislative session. A seven-year extension has already passed the House by a wide margin and is co-sponsored by 32 of the state’s 35 senators. But Marsh last week said he is holding that legislation and would let the session expire without taking action – a decision at least one prominent local developer has said would kill two Birmingham projects. Marsh has said the Senate budget chairs, Sen. Arthur Orr and Sen. Trip Pittman, have concerns about the historic tax credit program. Last week, Marsh said none of the $60 million approved in the first three years of the credit had been claimed, arguing that if all of that money was claimed at the same time, it could send the state’s budget into proration. But the BBJ has confirmed that at least $630,281 was claimed during the 2014 tax year alone. Representatives from the Alabama Department of Revenue said they used a “colloquial expression” when telling Marsh that “none of the credit has been claimed.” While 2015 statistics are not yet available, several additional projects were certified by the Alabama Historic Commission to claim the credit for the 2015 tax year – and projects can claim the credit during the first year they are in service. That means there will not be a case when $60 million is claimed during one year in conjunction with the first three years of the program. Marsh said he will meet Tuesday with the budget chairs to discuss a possible one-year extension and give the state time to consider a true, nonpartisan report to study its impact. More:

Alabama GOP chair on Bentley, Hubbard scandals: ‘Embarrassing’

In the wake of ongoing scandals involving two top elected Republicans, the head of the state’s party is cautioning supporters against lumping all GOP members together. In a column for, Terry Lathan, chairman of the Alabama Republican Party, said the barrage of news involving Gov. Robert Bentley’s inappropriate relationship with a female staffer and the upcoming ethics violation trial of Speaker of the House Mike Hubbard could result in people forgetting reforms accomplished by the GOP legislature. Among the reforms she cited are consolidation of state agencies which saved $1 billion annually; formation of charter schools; establishing a reserve fund for education; and closing off PAC to PAC transfers, among others. That work is endangered by the ongoing scandals, however. “The embarrassing situation with Governor Bentley and the criminal charges against speaker Hubbard are currently dominating the news,” Lathan wrote. “We should remember that the GOP legislature has passed legislation that makes a true difference in the lives of our people and businesses. While the other two stories make for deep humiliation, the often used saying of “They are all alike!” does not apply. We certainly are not “all alike.” It is imperative that we do not lose sight of the solid, conservative reforms that our GOP team has accomplished in just six years. State Republicans have been placed in a hard position by Bentley and Hubbard scandals. GOP lawmaker Ed Henry, R-Hartselle, has introduced a measure that would move forward with the impeachment of Bentley, the two-term Republican governor who since his reelection has found himself often at odds with party leaders. In January, the steering committee of the Alabama Republican Party passed a resolution asking Hubbard to step down until his ethics case is resolved. Hubbard dismissed the ideas as “ill-advised and premature.” The speaker, who is set to go on trial next month, has filed a motion to push his hearing back to August. Lathan urged Alabamians to not let the actions of a few change their opinion of the party in general. “We cannot blame the many honorable, hard-working public servants when a few let us down,” she wrote. You can read her column here.


Can Donald Trump change his spots? By Ed Rogers

There is talk from the Trump camp that perhaps his performance to date was an act, that he is in the process of pivoting to an image that is more “presidential.” I haven’t seen any explanation as to what they think that means, but one would assume it means fewer insults and vulgarities and a generally more appropriate demeanor. Trump boasts that he can easily achieve unprecedented levels of presidentialness, suggesting that at-will he could become: knowledgeable, judicious, thoughtful, solicitous, poised, mature, modest and dignified. Can being “presidential” be something that can be put on and taken off like a coat? Or does it have more to do with character and someone’s essence that cannot be artificially applied? Trump and crew seem to view it as more of the former. Okay, but absent assertions from Trump and a tape recording of Paul Manafort, we haven’t seen much from his campaign to indicate that Trump can actually control himself or that he even wants to or thinks he needs to. But try to give the Trump team the benefit of the doubt; is there anything in the candidate’s past, prior to running for president, where he conducted himself in a way that is consistent with a “presidential” demeanor? Hmmm. Nothing comes to mind. The Donald’s previous public escapades are not reassuring. His behavior and commentary have been consistent over the years; his shouting match with Rosie O’Donnell, his incredibly insulting rants against women, his bankruptcies and cheesy deals, Playboy interviews, Howard Stern appearances, his birther crusade, three marriages and a generally raunchy style seemed to have foreshadowed what we continue to see in his presidential campaign. There is no doubt that there is an appetite among many Republicans to see something better in Trump. This must be obvious to Manafort and crew. There is no shortage of party regulars trying to gracefully get on board with Trump. You will be surprised when you learn who helped with Trump’s foreign policy speech he will deliver later this week. So if Trump isn’t a vulgar, ignorant bigot for about 10 minutes, will the media swoon and herald a new era of an enlightened Trump? And, will GOP regulars, including rank-and-file suburban voters and women, buy into the proposition that everything that turned them off was just an act? Will people choose to believe the latest spin and get on board or has Trump damaged himself beyond repair with large components of the Republican coalition? The need for a new act is obvious but can Trump really pull it off? Does he truly want to present himself in a different way? There is the suggestion that Trump may lose some of his current support if he changes style. Could it be that the very characteristics that have given him his appeal so far are the same things that have made him the most unpopular presidential candidate from either party anyone can remember? Is it fair to his voters to say that they may be so offended by a modicum of restraint and dignity that they might abandon Trump? I guess we are going to find out. Trump’s negatives are too high for him to win. He must move fast to coalesce the traditional Republican vote. There isn’t much he can do to make Hillary Clinton more unpopular, so Trump must change or he has zero chance of winning. A shift won’t be easy because, based on everything voters have observed, it won’t be credible. And there are plenty of honest watchdogs out there that will remind voters of the Trump they knew. In case anyone already needs a refresher, read The Post editorial titled “Softening on Trump? Remember this.

How to Save the Republican Party: Lessons From Britain’s Tories

Scorched earth tactics. Pandering to people’s worst fears. Ugly and alienating rhetoric. Extreme positions that offend vast swaths of the electorate. Yes folks, this has been the apparent political strategy of the GOP over the past eight years. Donald Trump? If the Republicans are in crisis, he’s not the cause. He’s the symptom. The dawning of that reality is perhaps why so many obituaries are now being written for the Republican Party—some with relish, others with sorrow—and why the GOP establishment is desperately looking for a white knight such as House Speaker Paul Ryan to save the day at the convention in Cleveland in July. Whether Ryan ends up as the long-shot nominee or not, he is at least pointing the party in the right direction when he presses for politics to be “a battle of ideas, not insults.” I say this based on my own experience as former senior adviser to British Prime Minister David Cameron, where I helped turn around a “missing, presumed dead” right-of-center party and implement a reforming conservative agenda in government. I’m more than aware that there is no automatic read-across from British to American politics. But having moved to California, taught at Stanford, and co-founded Crowdpac (a tech startup focusing on U.S. politics), I can now view with a bit more detachment how the British experience might help the GOP in 2016. Here is the most basic lesson: The Republican Party’s problems cannot be fixed by better “messaging” or organization. It goes much deeper than that. This was the mistake the British Conservatives made for many years, believing that things like better “outreach” or a stronger online presence would turn things around. No, it’s all about what you fundamentally think, your ideology, and whether it meets the needs of real people. The gap between Trump, Ted Cruz and Marco Rubio, for example, is nothing compared with the much larger gap between the GOP and modern, mainstream America. The Republican Party cannot close that gap unless it makes itself more human, more in touch. And to do that it needs to change its policy prescriptions in a profound way. More:


Building Prisons Should Not Be Viewed In Isolation
by Dr. Henry Mabry

The proposed $800 million prison bond issue appears headed for passage in the Alabama Legislature; however, issues remain that should be considered for the near term and future. Potential savings by building new prisons should not be viewed in isolation. Needs of the overall prison system and past and present limited resources with a growing population should also be taken into account. The annual cost for debt service is estimated by the Department of Corrections to be $50 million per year, and such debt service is to be paid with purported savings by personnel reductions, medical contract savings via economies of scale, and maintenance efficiencies. No documentation supports such claims and no plans have been in public domain to verify what has been asserted, but at least some of the cost savings are plausible if looked upon in isolation. Is there rationale in the department’s cost savings assertions? Yes and no. Assuming personnel cost savings when the department has needed more and more personnel for decades is a specious argument. Can more efficient prison designs and automations reduce staffing needs? Yes, they can; however, the proposed $61,500 per head construction cost pales in comparison to other state estimated new prison construction costs by up to half (e.g., South Carolina). Further, by capitalizing bond payments for three years, the actual spending on design and construction will reduce the amount further to a level south of $60,000 per head. If the goal is to actually provide innovative and less labor intensive maximum and medium prisons, then more money may actually be needed. One way to provide some extra money for the project is by seeking local government financial participation. This would not be a huge amount, but the state could be leaving tens of millions of dollars on the table if it does not consider such an approach. More:

  1. Brandt Ayers: Doing good’s a winner

A delegation of notables dropped by the office last week to make the point that good, effective government and schools attract good industries, but don’t wait for them to find you: go to them and tell your story. These men are among the state of Alabama’s finest: Neal Wade, the state’s top economic guru, Ryan Hankins, new executive director of the Public Affairs Research Council, and Tom Spencer, a researcher and spokesman for PARCA. Yet they are doomed to forever play from behind because of enlightened past leadership in the sister Southern state of North Carolina and poor past and present leadership in Alabama. I was present at the creation of the North Carolina Research Triangle, which would be a wellspring of fabulous economic growth and an in-plant of highly educated, well-paid men and women who broadened the state’s culture and tastes. When I arrived to report on politics and government for The Raleigh Times in 1960, the Triangle was 1 year old and all I could see was 5,000 acres without a working farm, a wilderness of scrub pines and possums. What I did not see were years of thoughtful concern over what would replace the declining economic engines of tobacco, cotton and furniture. The concept snapped into focus for Romeo Guest, CEO of a construction company, who as a student at MIT saw economic growth spurred by Harvard, MIT and Boston College. Guest approached the presidents of N.C. State, UNC-Chapel Hill and Duke with his idea of a triangulation of government, business and the academy, which they bought into as long as it did not take away from their teaching mission. Next, he approached Gov. Luther Hodges, not knowing what an easy sell the governor would be. Hodges had been a Marshall Plan administrator in Germany after World War II. He saw what an alliance of government, brains and money can accomplish. Hodges threw himself into the Triangle project, recruiting some of the best men and women in the state as partners. For instance, he asked Archie Davis, CEO of Wachovia, to raise money to buy land. Davis quickly came up with $1.5 million and the Triangle had a start. At the same time, Alabama was throwing into massive resistance: trying to ban the NAACP, even amending its Constitution to make public education voluntary. Gov. George Wallace had words for the Kennedy administration: “I throw the gauntlet at the feet of tyranny and proclaim: Segregation today, segregation tomorrow and segregation forever.” Hodges had finessed the school integration controversy by making the decision to do the right thing or fight in the courts a local school board choice. In the fall of 1957, schools in Charlotte, Greensboro and Winston-Salem quietly integrated. Hodges and his newly elected successor, Terry Sanford, thought of JFK as a potential ally in developing the state. They backed Kennedy and in return won a promise of a big federal research facility. Locating the federal Environmental Research Center was the catalyst that triggered the rapid growth of the Triangle. Teams of professors visited research directors of major industry groups, matching the schools’ strengths with industry needs. IBM began considering relocating its headquarters from Connecticut to the Triangle Park. That meant 14,000 well-paid, highly educated new jobs. Of course, there were silly stereotypes for some IBM employees to overcome: “Do they have doctors down there? And veterinarians? What about the heat, the snakes … and mosquitos?” There were genuine obstacles, as well. IBM negotiators needed a railway spur into the Triangle. Hodges excused himself to check on the possibility. In 25 minutes, he was back with the answer. It’s a done deal. All the storm and fury of Alabama’s stands in schoolhouse doors was useless drama. They did not stop anything. They did not make Alabama smarter, richer or more respected. They only made the mission of the notables who visited us that much harder.


Morning Money

WELCOME TO PRIMARY DAY — Voters head to the polls in Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island. Donald Trump and Hillary Clinton are poised for big wins. Bernie Sanders may not drop out by the end of the day but he’s gonna be close, even if he wins Rhode Island. All that’s left now is negotiating terms of his surrender. And Clinton does not sound like someone inclined to give much ground to Sanders beyond perhaps a prominent spot at the Democratic Convention (more on which below) and some kind words.

On the Republican side, the big question will be what happens in Pennsylvania where 54 of 71 delegates will be unbound at the GOP convention. Pennsylvania awards just 17 bound delegates to the statewide winner. Both Trump and Texas Senator Ted Cruz have released the names of delegates in each of the state’s 18 congressional districts they say will support them in Cleveland. But it will be up to voters to arm themselves with that information before going into the voting booth.

Even if Trump rolls on Tuesday night a big part of the story will still be the Cruz-John Kasich pact to divvy up Indiana (Cruz) and New Mexico and Oregon (Kasich). The one that matters is Indiana. If Cruz can win there on May 3rd, Trump’s path to 1,237 delegates gets quite difficult. But to do that Cruz probably needs Kasich to specifically direct his supporters in the state to vote for Cruz, something Kasich so far seems unwilling to do, which could render the deal essentially moot. The other key on Tuesday is Trump’s margins. If he wins big across the board, his delegate math will get easier.

HILLARY: MY OFFER IS THIS … NOTHING — Monday night on MSNBC, Hillary Clinton did not seem inclined to offer up any policy concessions to ensure that she gets a hearty endorsement from Bernie Sanders. And she reiterated the line that she thinks her Wall Street stance is already tougher than Sanders’ indicating that no big moves are coming when it comes to bank regulation policy.

Rachel Maddow: “He seems to be saying now that even if you beat him in the primary it’s not necessarily a given that he will implore all of his supporters to go out and work for you. He says that he thinks that they’ll support you if basically you adopt some of his platform on the issues that are most important to him. He’s specifically talked about Wall Street and some other things in his platform. Does that make sense to you? …

Clinton: “I’ve got 10.4 million votes. I have 2.7 million more folks, real people, showing up to cast their vote, to express their opinion, than Senator Sanders. I have a bigger lead in pledged delegates than Senator Obama when I ran against him in 2008 ever had over me. I am winning. And I’m winning because of what I stand for and what I’ve done …

“Look, I think we have much more in common and I want to unify the Party, but my Wall Street plan is much more specific than his. We saw that when he couldn’t even answer questions in the New York Daily News interview. I have laid out a very clear set of objectives about not just reining in the banks — because we already have Dodd-Frank … But I’ve gone further.” …

Clinton on concessions: “Then-Senator Obama and I ran a really hard race; it was so much closer than the race right now between me and Senator Sanders … We got to the end in June, and I did not put down conditions. I didn’t say, ‘You know what, if Senator Obama does X, Y and Z, maybe I’ll support him. I said, ‘I am supporting Senator Obama because no matter what our differences might be, they pale in comparison to the differences between us and the Republicans.’ That’s what I did.””

MM TRANSLATION — “Bernie, I’m crushing you. You’ve been rude and nasty to me and hung around for no very good reason wagging your finger in my face. If you think I’m gonna kowtow and promise to bust up the big banks on day one in office just to please your goons … think again bud. It’s not happening. Now go get your shine box.”

HOT CLICK: FIX THE BUDGET YOURSELF! — The Hutchins Center at Brookings and Woodrow Wilson Center this a.m. are launching a “Fiscal Ship” computer game on the budget. David Wessel: “We’re trying to appeal to people who know the debt is important, but never manage to get to the end of any newspaper story on the subject and are baffled by the dueling assertions about taxes, spending and deficits on the 2016 campaign trail” Video trailer: Game:

FED MEETING PREP — Mohamed A. El-Erian on Bloomberg View: “Fed officials are likely to set the stage for a possible interest rate hike when they next meet in June. They mainly will be motivated by three factors: a further strengthening in labor market conditions that also improves the outlook for wage growth; the recent significant easing in financial conditions, including easier access to borrowing for corporates and mortgage financing; and, more generally, the central bank’s eagerness to continue the process of careful monetary-policy normalization after so many years of experimentation.”

BOND MARKET: NO HIKE TILL FEBRUARY — Bloomberg: “For bond traders, there’s little doubt about the path the Federal Reserve will take on interest rates. They aren’t fully pricing in another increase until February, while driving a gauge of expected volatility in Treasuries to the lowest since 2014 this month. That’s the sort of hubris that can get them burned, according to Jerome Schneider, a money manager at Pacific Investment Management Co. and Morningstar Inc.’s 2015 fixed-income fund manager of the year.

“‘Investors shouldn’t be lulled into complacency that the Fed isn’t going to be in play,’ Schneider said Monday at Pimco’s office in New York. ‘The Fed will continue to be data-dependent and really use gradualism in every approach,’ he said, ‘but simply assuming you are going to be in the 25 to 50 basis point range for the next few years seems to be a little bit conservative.’”

THE MAN WHO BEAT TRUMP — Meet Marvin Roffman, the securities analyst who took on Donald Trump and won, via POLITICO’s Michael Kruse:

GET READY FOR PROM! — White House Correspondents’ Association Weekend Event — Playbook Lunch with Billy Eichner and Mike Farah. Join POLITICO’s Chief White House Correspondent Mike Allen as he takes Playbook live for a conversation with Host of “Billy on the Street” and from Hulu’s “Difficult People”, Billy Eichner and President of Production of Funny or Die, Mike Farah. Friday, April 29 – Doors at 11:30 a.m — The Newseum. RSVP:

LEW WARNS ON PUERTO RICO — POLITICO’s Clea Benson: “Puerto Ricans will experience ‘chaos’ if Congress fails to pass a bill helping the island territory contend with its $73 billion debt, Treasury Secretary Jack Lew said this week in an interview taped for Univision. Negotiations over a measure being drafted by House Republicans appear to be on the verge of imploding. Groups that oppose the bill because it would allow restructuring of the debt have been airing ads calling it a ‘bailout,’ spooking some conservatives.

“Treasury also has problems with the bill as written. ‘It’s not yet in a form that works,’ Lew told Univision’s Enrique Acevedo … Lew faulted bondholders who are lobbying against the deal because they could lose money. ‘I think that there are Republicans and Democrats working together,” he said. “I think that there are pressures that are trying to pull that apart. … The interest of the sub group that are against it can’t be allowed to become the dominant consideration.’”

LIN-MANUEL MIRANDA IMPLORES CONGRESS — HBO’s Jon Oliver did a long segment on Puerto Rico including a new song from “Hamilton” creator and star Lin-Manuel Miranda calling for Congress to act to aid the indebted island.

REGULATORS TO BLESS CHARTER/TWC DEAL — WSJ’s Shalini Ramachandran and John D. McKinnon: “Federal regulators are poised to approve Charter Communications Inc.’s $55 billion acquisition of Time Warner Cable Inc., but they will force the merged company to live up to stringent obligations that don’t apply to its bigger rivals. Under a deal with the [DoJ and the FCC], Charter agreed to abandon for seven years several common industry practices that the government feared could threaten the growth of rival online video providers such as Netflix Inc. and Hulu.

“The company agreed not to impose data caps or charge broadband Internet customers based on data usage, practices that have riled customers. Charter will also be required to build out its broadband access to two million homes, which would compel it to compete against other cable companies in some markets … That would be a significant move for an industry that has divvied itself up geographically.”

HOW TRADE DRIVES 2016 — NYT’s Nelson D. Schwartz and Quoctrung Bui: “[R]esearch to be unveiled this week by four leading academic economists suggests that the damage to manufacturing jobs from a sharp acceleration in globalization since the turn of the century has contributed heavily to the nation’s bitter political divide. … Cross-referencing congressional voting records and district-by-district patterns of job losses and other economic trends between 2002 and 2010, the researchers found that areas hardest hit by trade shocks were much more likely to move to the far right or the far left politically.

“‘It’s not about incumbents changing their positions,’ said David Autor, an influential scholar of labor economics and trade at [MIT] and one of the paper’s authors. ‘It’s about the replacement of moderates with more ideological successors.’ … The new paper underscores a broader rethinking among economists of the costs and benefits of policies aimed at encouraging industrial competition across borders.”

CRUZ VETS CARLY — POLITICO’s Alex Isenstadt: “Ted Cruz has begun vetting Carly Fiorina as a potential pick for vice president, according to a source familiar with the discussions. Fiorina endorsed Cruz after she dropped out of the Republican nomination fight in February and has since become one of his most loyal and outspoken surrogates. … .

“Cruz and John Kasich have both said they have begun their vice presidential search, though both trail Donald Trump in the delegate chase. Cruz aides didn’t respond to requests for comment. But on Twitter, Cruz campaign manager Jeff Roe said the search had begun to narrow.”

SAUDI UNVEILS TRANSFORMATION PLAN — FT Simeon Kerr in Riyadh and Anjli Raval in London: “Saudi Arabia has unveiled a long-awaited plan for a radical transformation of its economy, pledging to end its ‘addiction to oil’ and bolster its private sector in a shift that will see the planned $2tn listing of the state-owned Saudi Aramco. Spurred by the collapse in oil prices, the kingdom has set out ambitious targets for economic and social reform under a ‘Vision 2030’ plan that is the brainchild of Mohammed bin Salman, the 30-year-old deputy crown prince and the favoured son of King Salman bin Abdulaziz.

“The kingdom could end its reliance on oil within four years, the prince said in a television interview … Saudi Arabia currently derives more than 90 per cent of its budget revenues from hydrocarbons. … The planned flotation of a 5 per cent stake in Aramco would value the oil giant at more than $2tn and mark a historic transformation of the kingdom’s primary economic engine, boosting transparency around the state-owned company’s finances, as well as granting Saudi Aramco more independence from government oil policy.”

ASIA FALLS AHEAD OF CENTRAL BANK MEETINGS — Reuters: “Asian stocks retreated on Tuesday as investors braced for central bank policy meetings in the United States and Japan this week. … Investors are cautious about buying riskier assets ahead of the U.S. Federal Reserve’s two-day policy meeting starting later on Tuesday. A surprise drop in new U.S. home sales data for March published on Monday supported a view of anemic U.S. economic growth, which may keep the Fed from raising interest rates.

“In fact, markets sees no chance of a rate increase at this week’s meeting and are pricing in just about a one in five chance of a move at the next meeting on June 14-15. Yet, Fed officials have repeatedly said a hike in June is on the cards. … Oil prices recovered on Tuesday, pushed up by a weaker dollar and a flood of new cash into the market, but analysts warned of further weakness as producers continue to battle for customers in the Middle East.”

POTUS Events

Obama has returned from Europe. No public schedule.

Floor Action

The House is in at noon and will vote at 6:30 p.m. on some suspensions. The Senate is in at 10 a.m. and will vote at 11 a.m. on a trio of Appropriations amendments.