Krebs Daily Briefing 27 October 2015

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


Is War About to Break Out in the Balkans?

Lost in the cacophony of international news about Russian airstrikes against U.S.-backed anti-Assad rebels in Syria and refugees flooding through the Balkans on their way to Western Europe, a crisis is brewing in Bosnia-Herzegovina on the European Union’s southeast flank. And here, too, Moscow has a hand in the mischief-making. Nov. 21 marks the 20th anniversary of the Dayton peace agreement, which ended three-and-a-half years of brutal war between Serbs, Croats, and Bosniaks. In Dayton, Ohio, U.S. envoy Richard Holbrooke achieved a major diplomatic victory that ended the conflict and established the foundations of a viable state. The Dayton agreement also created an internationally backed overseer called the high representative to implement the peace accords. To this day, Bosnia is a rare success story in post-conflict state-building. The anniversary should be a time for celebration. Unfortunately, it may not turn out that way. The Dayton agreement created two highly autonomous entities inside Bosnia: the Bosniak-Croat majority federation and the Serb majority Republika Srpska. Milorad Dodik, president of Republika Srpska, plans to rain on the Dayton anniversary parade by openly violating the agreement on Nov. 15 in a move that many see as a thinly veiled independence referendum. The scheduled plebiscite has only one question: “Do you support the unconstitutional and unauthorized imposition of laws by the High Representative of the International Community in Bosnia and Herzegovina, particularly the imposed laws on the Court and Prosecutor’s Office of [Bosnia-Herzegovina] and the implementation of their decisions on the territory of Republika Srpska?” Such a biased and leading question offers only one right answer. The referendum will give Dodik political and legal cover to order Republika Srpska institutions — from government administrators to tax collectors — to stop obeying state court orders, verdicts, and rulings, and to obstruct the work of the prosecutor’s office. This would undo 20 years of progress and commence the destruction of Bosnia’s legal order. While the referendum only addresses the judiciary, its destructive intentions make it a de facto declaration of independence. Lest anyone doubt Dodik’s intentions, in April he announced that Republika Srpska will hold an independence referendum in 2018. The referendum threat is unfolding amid a perfect storm generated by Dodik’s strident Serbian nationalism, a demonstrably flawed EU policy of appeasing him, Russian meddling in the Balkans, and the United States’ dangerous unwillingness to override the EU on Bosnia. More:

Watch a pro-Assad volunteer explain why he fights for the world’s most despised dictator

This summer, PBS Frontline‘s Martin Smith traveled to Syria to try to get a perspective we don’t see often: that of Bashar al-Assad’s supporters. The Assad regime has an active propaganda apparatus, and so do his allies in Russia and Iran. But while many Syrians so loathe Assad they rose up against him, there are also Syrians who earnestly and wholeheartedly support the world’s most despised dictator. While in Syria, Smith traveled to meet some of those Assad supporters in the highlands of Latakia. This is the traditional heartland of the Alawites, a small branch of Islam the Assads follow, and home of many of Assad’s most loyal supporters. While there, Smith met with a volunteer militia of honest-to-god Assad supporters, people who are willing to fight and die for him. Frontline was kind enough to share an advance clip of this encounter (they asked that I let you know the full documentary, which I have seen and is excellent, premieres on Tuesday evening). Here it is:

Saudi Arabia’s Royal Drug Problem

Saudi prince and four others were reportedly arrested in Lebanon Monday after authorities found more than two tons of illegal drugs, including cocaine and the amphetamine Captagon, in crates loaded onto a Saudi-bound jet. But if history is any indication of his fate, the unidentified member of the royal family may be let off the hook if he can find his way home, where other members of his sprawling family tree have previously avoided international accusations of drug smuggling under protection in Riyadh. In 1999, Saudi Prince Nayef bin Sultan bin Fawwaz Al Shaalan allegedly smuggled two tons of cocaine from Venezuela to France. Now believed to be living under legal shelter in Saudi Arabia, Prince Nayef was accused by France of using his diplomatic status to sneak the drugs onto a jet belonging to the Saudi royal family. He managed to escape his sentencing and was convicted in absentia in 2007. The United States also indicted him with conspiracy to distribute cocaine. In 2010, a leaked WikiLeaks cable described a royal underground party scene in Jeddah that was “thriving and throbbing” because Saudi officials looked the other way. The dispatch described a Halloween party, funded in part by a prince from the Al Thunayan family, where more than 150 young men and women dressed in costumes and slogged expensive alcohol, which is sold only on the black market in Saudi Arabia. “Though not witnessed directly at this event, cocaine and hashish use is common in these social circles,” the cable read. The harsh punishments for violations of Saudi Arabia’s interpretation of sharia law tend not to apply to the some 15,000 princes and princesses who belong to the royal House of Saud. But that hasn’t stopped Riyadh from pursuing executions of foreigners and non-royal citizens accused of less egregious violations of the country’s drug laws. In recent months, Saudi authorities have beheaded a number of people convicted of trafficking drugs, including two Pakistani men — one in June and one in August — despite calls for reconsideration by human rights groups and the Pakistani government. Captagon pills are at the heart of the conflict in Syria, where their trade reportedly generates millions of dollars in revenue and helps fuel fighters addicted to the drugs. Monday’s drug bust — one of the largest at the airport in Lebanese history — is just the latest incident in what’s been an embarrassing month for the Saudi royal family. In late September, Prince Majed Abdulaziz Al Saud was arrested after a female worker accused him of abusing her at the home he rented in Beverly Hills. Last week, further details about the abuse emerged after an amended complaint filed by three female house workers accused Prince Majed of intense emotional and sexual abuse. Last week’s civil lawsuit was filed after the Los Angeles county district attorney’s office declined to file earlier felony charges against the 29-year-old prince, citing insufficient evidence.

New US Czar for Anit-ISIS Fight Will Inherit ‘Job From Hell’

The White House is ready to name an experienced diplomat to serve as the new U.S. envoy in the war against the Islamic State, but the next czar will face the same constraints and bureaucratic turf wars that frustrated his predecessor. Administration officials said Thursday that President Barack Obama plans to name Ambassador Brett McGurk, the current number two in the administration’s campaign to defeat the Islamic State, to the post within the next few days. McGurk helped craft the status of forces agreement with Baghdad that led to the withdrawal of U.S. combat forces from Iraq in 2011 and has helped shape Washington’s relationship with Iraq ever since. McGurk will take over from retired Marine Gen. John Allen, who is due to step down after one year on the job. Allen, a member of the State Department, had clashed repeatedly with the U.S. military during his tenure and lacked the authority to force the Pentagon or other government agencies to follow his directives. McGurk worked closely with Allen, and the two men have similar views about how to confront the Islamic State. Unfortunately for the diplomat, McGurk will also be confronted with the same dilemmas and obstacles that Allen faced. Unlike some czars from previous campaigns, McGurk will continue to be based in the State Department, not the White House, and will not be a member of the president’s National Security Council. That means he, like Allen, will have to defer to U.S. military commanders and won’t have the power to force changes to a strategy that is currently struggling in its stated goal of defeating the armed group. “Nobody is going to do any better than John Allen unless the president says, ‘This counts,’ and the way to do that would be to say, ‘He’s working directly for me,’” said Ryan Crocker, a former ambassador to Iraq and Afghanistan under the Obama and George W. Bush administrations. “Otherwise, it will be the job from hell, and I don’t see why anyone would want it,” he told Foreign Policy, adding, “Either you don’t have an envoy at all or you give him or her real clout.”

Guatemala just elected a comedian with zero political experience to be president

This Sunday, Guatemala held the final round of its presidential election. Jimmy Morales, a television comedian with no political experience and no real policy platform, won with 70 percent. Just six months ago, Morales was commanding less than 1 percent in polls. Morales’s simple campaign slogan — “not corrupt, not a thief” — really cuts to the heart of his victory. The election was in large part a backlash to Guatemala’s deeply entrenched corruption and crime problem, issues brought to the fore after President Otto Pérez Molina was indicted on corruption charges in early September. Morales represented, as one Guatemalan citizen put it, “the least worst option” in a country whose political class is terminally corrupted. The big question now is whether Guatemala’s Stephen Colbert, as he’s been called, actually has what it takes to be president. Guatemala is one of Latin America’s poorer countries. It’s also a haven for drug traffickers and has the world’s fifth-highest homicide rate (per UN data). But it’s very, very hard for the country to make progress on these issues when its leaders routinely collude with cartels and steal from public funds. “A series of corrupt presidents have left the Guatemalan institutions — and particularly its judiciary — broken, corrupted and dependent on the executive,” Manfredo Marroquín, the head of Transparency International Guatemala, told scholar Christopher Sabatini for the site Latin America Goes Global. Marroquín calls addressing this corruption “the greatest challenge in Guatemala today.” It’s so bad, in fact, that the UN stepped in to help deal with it. In 2007, it established the International Commission Against Impunity in Guatemala, an investigative organization aimed at prosecuting corrupt Guatemalan officials. Against all odds, the Commission has had some real success. In April, it uncovered a customs bribery scam called La Línea, which involved agents taking bribes at the border and sending kickbacks to the very top of the government. The revelations mobilized a massive protest movement against corruption, with weekly protests demanding that President Molina resign. More:


Congress, White House reach two-year budget deal

House Republican leaders introduced legislation just before midnight on Monday, finalizing a two-year budget agreement between Congressional leaders and the White House. The introduction sets up a vote as early as Wednesday on the bipartisan budget deal which would increase military and domestic spending and avert a potentially catastrophic default in exchange for long-term spending cuts. The 144-page bill, which is the result of weeks of negotiations between the White House and Congressional leaders, would increase spending by $80 billion over two years and would increase the federal borrowing limit through March 15, 2017. A Wednesday vote all but ensures the budget deal will be one of the last acts for House Speaker John A. Boehner (R-Ohio) who intends to step down from the speakership by Friday. The timeline is tight for building support for the plan with the Treasury Department saying the debt ceiling will be hit by Nov. 3. The legislation is expected to be the primary issue discussed on Tuesday morning during a weekly closed-door meeting of House Republicans. But it remains unclear if House conservatives will support the deal, leaving Boehner and his allies to spend his final days in office rallying support for a potentially unpopular agreement. If he is successful the deal could clear the slate for House Ways and Means Committee Chairman Paul Ryan (R-Wisc.) who is expected to be elected speaker later this week. The agreement includes about $80 billion in additional spending over two years, divided equally between defense and domestic programs. Those spending increases would be offset by savings from changes to the Social Security disability insurance fund and Medicare payments to doctors and other health care providers. New revenue would be raised by auctioning off portions of government owned broadcast spectrum, selling oil from the Strategic Oil Reserve and by cracking down on audits of large business partnerships. It also includes an additional $16 billion over two years from off-budget spending increases from the Overseas Contingency Operations Fund. That portion would not need to be offset, but Democrats previously opposed using the money for defense-only spending. In addition, a premium increase for Medicare Part B recipients would be prevented from going into effect. More:

Reforming the S.E.C.’s Administrative Process

In examining the fight over the Securities and Exchange Commission’s use of administrative proceedings to pursue violations of the securities laws, a question arises: How did we ever get here? An area of the law thought long settled and, indeed, something of a backwater in the securities enforcement apparatus, has been attacked by defense lawyers and now on Capitol Hill as fundamentally unfair. Representative Scott Garrett, Republican of New Jersey, has introduced a bill called the “Due Process Restoration Act of 2015,” that would substantially curtail the S.E.C.’s use of administrative proceedings. In a statement, Mr. Garrett said that “in recent years the agency has transformed into a veritable judge, jury, and executioner with its blatant overuse of their in-house courts.” Since its inception in 1934, the S.E.C. has had the authority to impose sanctions on violators who come within its purview, such as brokers and investment advisers, without having to go to court. Even as Congress provided it with greater authority to seek substantial monetary penalties, including fines up to three times the gain from insider trading, the agency was still limited to using the administrative process for only a small range of cases. All that changed with the Dodd-Frank Act in 2010, which authorized the S.E.C. to pursue any case in which it seeks a penalty in an administrative proceeding. This was the holy grail for the agency, opening the door to pursuing insider trading and faulty disclosure actions before its own in-house judges rather than filing in a Federal District Court, like it had done for the first 75 years of its existence. Armed with its new authority, the S.E.C. took a more aggressive stance by bringing many more administrative proceedings, resulting in a torrent of criticism and legal challenges. The administrative process, which had seemingly worked well for years, did not suddenly break down. Perhaps it was just that these hearings finally got enough attention as more defendants found themselves thrown unexpectedly before the S.E.C.’s in-house judges — if nothing else, lawyers hate changes in procedure. More:

Tom Krebs Securities Attorney Mountain Brook Alabama

Ex-Goldman Banker Faces Criminal Case in Leak From Fed

Federal prosecutors are preparing to announce a criminal case against a former Goldman Sachs banker suspected of taking confidential documents from a source inside the government, a rare criminal action on Wall Street that comes as Goldman itself is facing an array of regulatory penalties over the leak. The banker and his source, who at the time of the leak was an employee at the Federal Reserve Bank of New York, one of Goldman’s regulators, might plead guilty to misdemeanor theft charges rather than fight the case at trial, according to lawyers briefed on the matter who were not authorized to discuss private deliberations. The men, who were both fired in the wake of the leak, would face up to a year in prison if they accept the plea deals this week. In a statement, a Goldman spokesman emphasized that the banker worked for the firm for less than three months, and that the bank “immediately began an investigation and notified the appropriate regulators” once it detected the leak. Nonetheless, the bank is expected to pay a significant price for the leak. Under a tentative deal with New York State’s financial regulator, the lawyers said, Goldman would pay a fine of $50 million and face new restrictions on how it handled delicate regulatory information. The settlement with the Department of Financial Services would also force Goldman to take the rare step of acknowledging that it failed to adequately supervise the former banker — thrusting the bank back into the spotlight just as it was shedding a popular image as a firm willing to cut corners to turn a profit. For Goldman and the New York Fed, the charges will give new life to an embarrassing episode that illustrated the blurred lines between their institutions. Perhaps more than any other bank, Goldman swaps employees with the government, earning it the nickname “Government Sachs.” More:

Benghazi panel reconsiders scope of email probe

Amid growing Democratic accusations of overreaching, especially on the matter of Hillary Clinton’s emails, Republicans on the House Benghazi Committee are now reconsidering how aggressively to pursue the email scandal that’s been dogging the Democratic front-runner. The committee is also undecided about whether to call ex-Clinton campaign staffer Heather Samuelson, who helped screen Clinton’s State Department emails, according to a GOP source. Just a few weeks ago, GOP members of the panel were eager to question Samuelson, because panel sources say she was the lawyer who initially chose which of Clinton’s emails were work-related — and thus should be turned over to the State Department — and which would ultimately get deleted. Now, however, Republicans are debating whether to bring her in. “The question becomes: Is it worth the hassle and the drama?” the GOP source said. The reevaluation follows a Thursday hearing which was widely seen as a success for Clinton, while Republicans failed to strike any decisive blows. Meanwhile, Democrats amped up their claims that the entire investigation was a partisan witch hunt. The panel’s mandate was to investigate the circumstances surrounding the killing of four Americans outside the U.S. consulate in Benghazi, Libya, in 2012, in the waning months of Clinton’s tenure as secretary of state. But after the revelation that Clinton used a private email server for her State Department correspondence, Republicans on the panel began probing further into whether she had turned over all relevant emails. More:

Inside the Secretive World of Tax-Avoidance Experts

Shakespeare said that all the world’s a stage, but the sociologist Erving Goffman added that most of the interesting stuff lies behind the scenes, in what he called the “backstage” areas of everyday life. Having spent the past eight years doing research on the international wealth-management profession, I have to agree with Goffman: The most revealing information comes from the moments when people stop performing and go off-script. Like the time one of the wealth managers I interviewed in the British Virgin Islands lost his composure and threatened to have me thrown out of the country. His ire arose from an unexpected quarter:  He took offense to my use of the term “socio-economic inequality” in the two scholarly articles I had published on the profession. I thought the articles were typically academic, which is to say, the opposite of sensationalizing and of little interest to anyone outside my field.  But my suggestion that wealth managers might be connected to inequality in any way seemed alarmingly radical to this gentleman. I was lucky that he merely threatened me. A journalist from Newsweek actually was deported from a different tax-haven island (Jersey) for her reporting there, and was banned from re-entering the island, or any part of the U.K., for nearly two years. Even though her story was unrelated to the financial-services industry, it was expected to bring negative publicity to the island, threatening its reputation as a place to do business. The message was therefore quashed by banishment of the messenger. The wealth-management industry does not mess around. Wealth management is a profession on the defensive. Although many people have never heard of it, it is well known to both state revenue authorities and international agencies seeking to impose the rule of law on high-net-worth individuals. Those individuals—including the 103,000 people classified as “ultra-high-net-worth” based on having $30 million or more in investable assets—pay wealth-management professionals hefty fees to help them avoid taxes, debts, legal judgments, and other obligations the rest of the world considers part of everyday life. The general public doesn’t hear much about these professionals, since there are only a few of them worldwide (just under 20,000 belong to the main professional society) and they strive to keep a low profile, both for themselves and their clients. But they are very much on the radar of regulatory agencies, due to the central role wealth management plays in tax avoidance. Media coverage of the 2012 presidential campaign of Mitt Romney noted that his $250 million personal fortune was spread out through a network of offshore trusts and bank accounts, lowering his effective income-tax rate to just under 15 percent. Few outlets, however, noted the professional interventions that made that happen: Mitt Romney employs at least one wealth manager to create and maintain those offshore shelters. More:

Inside the Secretive Circle That Rules a $14 Trillion Market

Fifteen of the biggest players in the $14 trillion market for credit insurance are also the referees. Firms such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. wrote the rules, are the dominant buyers and sellers and, ultimately, help decide winners and losers. Has a country such as Argentina paid what it owes? Has a company like Caesars Entertainment Corp. kept up with its bills? When the question comes up, the 15 firms meet on a conference call to decide whether a default has triggered a payout of the bond insurance, called a credit-default swap. Investors use CDS to protect themselves from missed debt payments or profit from them. Once the 15 firms decide that a default has taken place, they effectively determine how much money will change hands. And now, seven years after the financial crisis first brought CDS to widespread attention, pressure is growing inside and outside what’s called the determinations committee to tackle conflicts of interest, according to interviews with three dozen people with direct knowledge of the panel’s functioning who asked that their names not be used. Scandals that exposed how bank traders rigged key interest rates and fixed currency values have given ammunition to those who say CDS may also be susceptible to collusion or, worse, outright manipulation. The trade group that oversees the process, the International Swaps & Derivatives Association, is now proposing rule changes that it says will reform the determinations committee. The proposals include limiting the people who can be involved in decision-making and prohibiting panel members from discussing decisions outside meetings, according to a document obtained by Bloomberg News.

‘Spoofing’ Trial Gets Underway in Chicago

A commodities trader accused of market manipulation is set to go on trial in federal court in Chicago on Monday in a case that puts a spotlight on so-called “spoofing,” a high-frequency trading tactic outlawed in the 2010 Dodd-Frank financial-overhaul law. Spoofing involves rapidly placing and then canceling orders to try to lure investors into buying and selling at artificially high or low prices. The bluffing tactic isn’t new, but regulators have started to clamp down. The trial of New Jersey trader Michael Coscia is the first federal prosecution under Dodd-Frank’s anti-spoofing provision, according to the government. Bloomberg Business has more on the case:  The trial comes after a year of U.S. law enforcement and regulatory actions against traders who authorities allege systematically place orders they don’t intend to execute to trick the market into thinking there’s demand that doesn’t actually exist….The trial’s outcome will potentially shape government cases against other accused spoofers…“It is a groundbreaking case,” said Trace Schmeltz, a partner at law firm Barnes & Thornburg LLP and co-chair of the its financial and regulatory litigation group. As WSJ’s Bradley Hope reported earlier, federal prosecutors in October charged Mr. Coscia with six counts of commodities fraud and six counts of spoofing in 2011. Prosecutors accused him of illegally earning $1.6 million from spoofing in the U.S. and Europe. He denied the charges and sought to dismiss them, arguing that anti-spoofing laws are vague. “In its zeal to enforce this provision for the very first time, however, the government has overlooked that the ‘anti-spoofing’ provision is hopelessly vague, and its criminal enforcement would violate Michael Coscia’s right to due process of law,” lawyers for Mr. Coscia wrote in December. U.S. District Judge Harry D. Leinenweber denied the motion. Mr. Coscia separately paid $2.8 million and agreed to a one-year trading ban to settle CFTC allegations in 2013 of spoofing, according to CFTC documents. “Traders and investors deserve a level playing field, and when the field is tilted by market manipulators, regardless of their speed or sophistication, we will prosecute criminal violations to help ensure fairness and restore market integrity,” Chicago U.S. Attorney Zachary T. Fardon said in last year’s announcement of the indictment. Distinguishing between spoofing and savvy strategy isn’t always easy, some traders told WSJ. They said what looks like illegal market manipulation could be efforts to conceal the size of an intended trade. “There are stories going way back about the guys in the Chicago trading pits trying ways to disguise their trading or show their cards in a certain light,” Matt Simon, an analyst at the market-research firm Tabb Group, told WSJ earlier this year. “It raises a question now about whether someone is engaging in legitimate market activity or clear market manipulation.”

100 years of tax brackets, in one chart

The US currently has seven tax brackets — and many presidential candidates think that’s too many. Donald Trump wants to cut the number to three. Jeb Bush and Chris Christie do, too. Marco Rubio wants just two. And Ted Cruz, Ben Carson, and Rand Paul have expressed interest in a flat tax for everyone. Generally, politicians want to reduce the number of brackets because they believe it will simplify the tax code. That said, tax brackets are among the easiest parts of the tax code, thanks to modern software and, well, math. The other rationale — held by Carson — is that having different tax rates based on income is socialism, which is why he supports a flat tax. But as the graphic above shows, the US has historically taxed the very wealthy more than the somewhat wealthy — and way more than the middle class. In the 1960s, the tax brackets on the high end started to disappear, and during Ronald Reagan’s presidency we went down to just two brackets. That meant that many middle-class citizens were in the same tax bracket as millionaires. Since the beginning of Reagan’s term, wealth inequality has been on the rise — with the gap between the top 0.1 percent and everyone else, including many quite affluent families, growing. More tax brackets aren’t necessarily a good thing, but bracket reduction does violate the basic concept of progressive taxation. Cutting back to two adds a bit of simplicity, but also means there are huge ranges of incomes that are taxed the same. See charts:

John Boehner’s parting gift to Paul Ryan

Call it the Paul Ryan protection plan. The Wisconsin Republican wasn’t involved in crafting the bipartisan budget deal hashed out in secret between Speaker John Boehner, Senate leaders and the White House. In fact, the way the plan came about is pretty much the opposite of how Ryan has told people he intends to do business if he’s speaker. Nonetheless, Boehner is handing his likely successor an invaluable gift that could help smooth his transition to power. No legislative cliffs. No fiscal emergencies that rattle Wall Street. No government shutdown threats or default countdown clocks. If Boehner can shepherd the deal through the House in his final hours in Congress, and the Senate sends it to the White House, Ryan would start out as speaker with more running room than Boehner ever enjoyed. The next time Congress would have to deal with the debt ceiling increase would be March 2017. Government funding levels would be set through the end of the next fiscal year, taking a shutdown threat off of the table for the first year of Ryan’s speakership. Spending targets would be in place through the end of 2017. And when the conservative uproar that’s already bubbling in private spills into the public, Ryan can point to Boehner, who will be on his way out the door or already gone, as the author of the deal. More:

The Darknet: Is the Government Destroying ‘the Wild West of the Internet?’

On July 15th in Pittsburgh, David J. Hickton, a gray-haired U.S. attorney in a crisp dark suit, stepped out before an American flag to announce the feds’ latest victory against online crime. “We have dismantled a cyber-hornet’s nest of criminal hackers, which was believed by many to be impenetrable,” he said. “We are in the process of rounding up and charging the hornets.” By the next morning, more than 70 people across the world had been charged, arrested or searched in what the Department of Justice called “the largest coordinated international law-enforcement effort ever directed at an online cybercriminal forum.” After an 18-month international investigation led by the FBI, known as Operation Shrouded Horizon, hackers on a site called Darkode were accused of wire fraud, money laundering and conspiring to commit computer fraud. The trail of crimes was massive, with one member compromising companies including Microsoft and Sony and another swiping data from more than 20 million victims. Hickton said Darkode posed “one of the gravest threats to the integrity of data on computers in the United States and around the world.” Its computers were considered “bulletproof” from the law by running on offshore servers — including one traced to Seychelles, the remote island nation in the Indian Ocean. “Cybercriminals should not have a safe haven to shop for the tools of their trade,” said FBI Deputy Director Mark F. Giuliano, “and Operation Shrouded Horizon shows we will do all we can to disrupt their unlawful activities.” At least for a bit. Two weeks later, “Sp3cial1st,” the main administrator of Darkode, posted a retaliatory statement on a new website — underscoring the feds’ struggle to police the Internet. “Most of the staff is intact, along with senior members,” Sp3cial1st wrote. “It appears the raids focused on newly added individuals or people that have been retired from the scene for years. The forum will be back.” He vowed the organization would regroup on the Web’s deepest, most impenetrable region, the Darknet — a space where anyone, including criminals, can remain virtually anonymous. And the Darknet could never be shut down — thanks, conveniently, to the feds, who created it and are still financing its growth. The Darknet (sometimes called the Dark Web) works on the Tor browser, free software that masks your location and activity. Originally designed by the Naval Research Lab, Tor receives 60 percent of its backing from the State Department and the Department of Defense to act as a secure network for government agencies as well as dissidents fighting oppressive regimes. It is a privacy tool that has been used for both good and evil. Over the past decade, Tor has empowered activists to spread news during the Arab Spring; it has helped domestic-violence victims hide from online stalkers; and it has allowed ordinary citizens to surf without advertisers tracking them. But at the same time, the Darknet, which Tor enables, has become the primary cove for criminals like Ross Ulbricht, imprisoned founder of Silk Road; the hackers behind the recent Ashley Madison attacks; and the international crew busted by the feds in July. As an instrument for both activists and criminals, Tor presents an increasingly difficult problem for law enforcement to solve — exacerbating the hapless game of whack-a-mole facing those who try to bring law to the most lawless part of the Net. And the battle over the Darknet’s future could decide the fate of online privacy in the U.S. and abroad. As Hickton tells Rolling Stone, “It’s the Wild West of the Internet.”  More:

The House science committee is worse than the Benghazi committee

Last Thursday, the nation watched with a mix of amusement and horror as the House Benghazi committee spent 11 hours grilling Hillary Clinton on a bizarre farrago of issues, many of which bore only tangential connection to the Benghazi attack. Over the past few weeks, the political narrative seems to have shifted from “Clinton in trouble” to “congressional witch hunt seeks to take down Clinton.” Between McCarthy’s accidental truth telling, an ex-staffer confirming the worst reports about the committee, and another House Republican conceding the obvious, it has become clear that the Benghazi committee is a thoroughly partisan political endeavor. Opinion has turned, but Republicans are trapped. The thing is: The Benghazi committee is not even the worst committee in the House. I’d argue that the House science committee, under the chairmanship of Lamar Smith (R-TX), deserves that superlative for its open-ended, Orwellian attempts to intimidate some of the nation’s leading scientists and scientific institutions. The science committee’s modus operandi is similar to the Benghazi committee’s — sweeping, catchall investigations, with no specific allegations of wrongdoing or clear rationale, searching through private documents for out-of-context bits and pieces to leak to the press, hoping to gain short-term political advantage — but it stands to do more lasting long-term damage. In both cases, the investigations have continued long after all questions have been answered. (There were half a dozen probes into Benghazi before this one.) In both cases, the chair has drifted from inquiry to inquisition. But with Benghazi, the only threat is to the reputation of Hillary Clinton, who has the resources to defend herself. With the science committee, it is working scientists being intimidated, who often do not have the resources to defend themselves, and the threat is to the integrity of the scientific process in the US. It won’t take much for scientists to get the message that research into politically contested topics is more hassle than it’s worth. This year, Smith was one of the committee chairs granted sweeping new subpoena powers by his fellow House Republicans, what one staffer called “exporting the Issa model.” No longer is the chair required to consult with the ranking member before launching investigations or issuing subpoenas. A spokesperson for Nancy Pelosi (D-CA) said, “This change will inevitably [lead] to widespread abuses of power as Republicans infect the other committees with the poisonous process that Issa has so abused during his chairmanship.” That turned out to be pretty prescient, at least in the case of the science committee. No chair has taken to his new role with as much enthusiasm as Smith. Here are just three of his recent exploits.

Graduating, but to what?

The day of his high school graduation, like so many of the days before, began with chaos. Ruleville Central had pledged to lock its front doors an hour before the ceremony to prevent a crowd overflow, and Jadareous Davis was still at his grandmother’s home six miles up the road, time slipping away. Davis scanned through his mental checklist. Shoes? His older brother hadn’t yet swung by to drop off a pair. Bow tie? Maybe he could borrow one from a neighbor. Pants? Davis wasn’t even sure whether the dress code mandated black or brown, and he called a friend for help.“Hey, what color pants we supposed to be wearing?” he said over the phone. His grandmother’s voice blared from the other room. “Quarter after nine!” she said. “C’mon, fellas! I don’t want to be locked out.” Davis, 19, was about to graduate from one of the poorest-performing schools in a region of America that offers the bleakest landscape for the young, and the moment came with equal parts excitement and dread: As he entered adulthood, there was no telling when or how all the combustible parts of his life might now blow up. Davis’s senior year had doubled as a reminder about all the hazards. He barely had a stable place to live and had moved months earlier to the far edge of town, taking over a dim unit paid for by his aunt after he grew sick of sleeping on a love seat at his grandmother’s cramped place. Davis had little family support; he’d fought with his mother so furiously several years back, his solution now was to simply not see her. He also was graduating with a debt — $1,200, the fine for driving his aunt’s car without insurance and then skipping a court date. Toughest of all, graduation meant stepping into a place providing few examples of something better. His street in Drew consisted of a rusting cotton gin and a row of boarded-up storefronts. His neighborhood had a thriving drug trade that took place near an abandoned building with “For Colored” painted atop a doorway. His county had a poverty rate nearly three times the national average, at 36 percent. His state had the lowest median income in the nation and the second-highest incarceration rates. He could drive for two hours in any direction without finding a local jobless rate resembling anything near the national average. The Deep South’s paralyzing intergenerational poverty is the devastating sum of problems both historical and emergent — ones that, in the life of a young man, can build in childhood and then erupt in early adulthood. Students such as Davis deal with traumas at home and dysfunction at school — only to find themselves, as graduates, searching for low-paying jobs in states that have been reluctant to fund programs that help the poor. That cycle carries implications not only for the current generation, but also for the ones to come, and holds back a region that has fallen further behind the rest of the nation. More:

Hot dogs are now considered carcinogens. There are roughly 480 other things the WHO says might cause cancer.

In the 45 years the World Health Organization’s cancer research arm has been studying carcinogenic agents it’s looked at nearly 1,000 things you might eat, be exposed to, or do that might put you at higher risk of getting cancer. They’ve determined that about half of them do cause cancer or “probably” or “possibly” cause it. When it comes to business, public health and the environment, this cancer list is enormously influential. It affects everything from workplace safety to dietary guidelines and pollution controls around the world. But much of this debate has been happening behind the scenes and the WHO’s International Agency for Research on Cancer was hardly a household name. That changed on Monday when the IARC announced a shocker (at least for the average citizen) — that it would be adding as a processed meats like hot dogs, sausages, bacon, ham and other processed meats to its list of highest risk carcinogens, causing furor and confusion among meat-loving folk all over the planet. The expert panel also declared red meat a probable carcinogen. There may be other high-profile, controversial additions coming up as the IARC has announced it will investigate other food products in the near future. Next up for study: coffee, which will be discussed at a meeting in late May 2016. Below is a look at some of the other cancer-causing agents that have been added to the IARC growing list over the years. They include a slew of industrial chemicals you’ve probably never heard of as well as some ubiquitous and often unavoidable aspects of modern life: air pollution, tobacco smoking, alcohol, and X-rays.


Alabama AG: Scammers threaten jail if bogus debt isn’t paid

Scammers posing as attorneys representing debt collectors have been targeting those who have filed for bankruptcy, Alabama Attorney General Luther Strange warned Monday. The scammers are using Caller ID “spoofing” and the victims’ personal information to demand  payments by wire on bogus debts, the attorney general stated in a press release. The scammers use publicly available documents about bankruptcy filers and “spoof” the Caller ID system to make it appear they are calling from a bankruptcy attorney’s office,  according ot the press release. Often times the perpetrators phone after business hours to make it difficult to verify they are not legitimate, according to the press release. In most cases, the scammers inform their victims they must wire a debt payment immediately or face arrest, according to the press release. Strange warns that such calls are fraudulent and asks that anyone receiving them report it to law enforcement. The press release states that according to the National Association of Consumer Bankruptcy Attorneys, “under no circumstances would a bankruptcy attorney or a staff member telephone a client and ask for a wire transfer to immediately satisfy a debt.  Nor would the bankruptcy attorney and staff ever threaten arrest if a debt isn’t paid.” “You should be suspicious of any call you receive demanding you make immediate payment of a debt or face arrest,” Strange states in the press release. “Debt collectors cannot arrest you.  Frequently debt collection scams also claim to be calling on behalf of the IRS, law enforcement, the courts and even the Attorney General’s Office demanding immediate payments. Consumers should never give out personal information over the telephone and should verify the identity of any caller seeking payments.” For more information on ways to protect yourself from consumer fraud, visit the Attorney General’s Consumer Protection web site:, or call 1-800-392-5658 FREE.

Former Deputy AG: Prosecutor wanted to ‘ruin’ Hubbard

In about three-and-a-half hours of testimony in Lee County Circuit Judge Jacob Walker’s courtroom, Sonny Reagan said Matt Hart, the director of the Attorney General’s Office of Special Prosecutions, had made inflammatory statements about Hubbard, indicted last year on 23 counts of using public office for private gain. Reagan said Hart threatened to bring Hubbard in front of a grand jury, “tie a noose” around his neck and “cinch it down” until he was gasping for air. “Matt Hart told me he would ruin Mike Hubbard politically,” Reagan said on the witness stand. “He would put a 155(mm) howitzer through him and he didn’t care about the collateral damage to anyone else.” Prosecutors, noting that Reagan had shared counsel with a state representative indicted by the same grand jury that indicted Hubbard, hammered at Reagan’s credibility. Solicitor General Andrew Brasher asked Reagan if he took Hart’s statements too literally. “You actually believed Mr. Hart was going to take Mr. Hubbard in front of a grand jury, tie a noose around his neck and strangle him in front of 18 members of a grand jury?” he asked. Monday’s hearing took up Hubbard’s claims of prosecutorial misconduct, alleging that Hart and the attorney general’s office targeted the speaker and improperly influenced the grand jury that indicted Hubbard. Much of the defense’s case rests on memos written by Reagan, alleging threats and improper language by Hart. Prosecutors have called the motion a delaying tactic and say the defense has no evidence of misconduct. Reagan resigned from the attorney general’s office last December. A memo from Attorney General Luther Strange, who recused himself from the Hubbard case, said Reagan shared counsel with Rep. Barry Moore, R-Enterprise, acquitted last year of perjury charges, and had “undisclosed communications” with individual affiliated with or under investigation by the grand jury. Reagan’s testimony mostly recapped filings made earlier this year by Hubbard’s defense team, based on his memos. On the stand, Reagan accused Hart of vindictiveness toward Hubbard, saying conversations with Hart about the case raised ethical concerns in his mind. Reagan also suggested Hart used the grand jury to build cases against individuals, rather than present evidence for an indictment. “Matt believed, or told me he believed, everyone has a public life, a private life and a secret life,” Reagan said. “Key to this is to get a subpoenaed witness in a room and confront them from their secret life, and control the testimony.” Reagan testified before the grand jury last year. Hubbard’s defense has argued Reagan’s subpoena was retaliation for an internal complaint he filed against Hart last year. Reagan’s testimony alluded to the timing of his grand jury subpoena but did not mention it explicitly. Hart sat at the prosecutor’s table but did not take part in the questioning Monday. On cross-examination, Brasher noted that Moore’s attorneys – who included Bill Baxley, Reagan’s attorney – filed a request for Hart’s personnel file one day after Reagan filed his complaint. Baxley, who was in the courtroom, objected to the question, saying it was “very, very misleading” but that he would be willing to have Reagan testify to the situation in public if the court so desired. Reagan said he “never had a conversation” with Baxley about Moore’s case. Reagan also denied the state’s accusations that he tried to undermine the grand jury. Brasher questioned him on that, noting that his attorneys filed a motion about a week after his grand jury testimony to dissolve it. “How is it consistent you did nothing to undermine the grand jury when your attorneys tried to have it disbanded?” Brasher asked. Reagan said Hart was pursuing a “vendetta” – jabbing his finger at Hart without looking at him – and said he exercised “every legal option” in his defense. Prosecutors and defense attorneys have sniped at each other throughout the Hubbard trial. Monday continued the pattern. Brasher raised many objections to defense attorney Mark White’s questioning of Reagan, saying most of the questions were hearsay, irrelevant or protected by executive privilege. Reagan will continue testifying Tuesday morning.

Alabama lawyers clean up in BP oil settlement

Alabama lawyers are due about $20 million in legal fees connected to the 2010 Deepwater Horizon oil spill settlement. Half of the legal fees – about $10 million – will benefit the Alabama Attorney General’s Office budget; the other half flow to private firms. Mike Lewis, a spokesman for the office, said staff attorneys spent five years and more than 24,000 hours negotiating the settlement. Overall, Alabama’s portion of the settlement is worth more than $2 billion, with nearly $1 billion going to the state’s general fund. “The attorney and the staff here have worked very hard for five years to try to receive justice for the state,” Lewis said. In total, attorneys representing Alabama as well as Florida, Louisiana, Mississippi, and Texas received a payout of about $98 million. Harrison, Rivard, Duncan & Buzzett, of Panama City, Florida, received the most of any private firm involved in the settlement: $52 million. Beasley, Allen, Crow, Methvin, Portis and Miles received the most of any private firm in Alabama: $6.2 million. When you’re dealing with multibillion-dollar international corporation, they have the best lawyers money can get. Beasley Allen partner Rhon Jones, who manages the Montgomery-based firm’s environment and toxic exposure section, said the firm spent about 20,000 lawyer hours and 10,000 staff hours on the case. Four attorneys worked on litigation. “When you’re dealing with multibillion-dollar international corporation, they have the best lawyers money can get,” Jones said. “BP is a company that spares no expense in defending themselves. They’re very well equipped at every level.” Gov. Robert Bentley tapped Beasley Allen to help litigate the state’s case. The firm previously represented Alabama in its long legal battle over natural gas royalties due the state. As a result, the state collected more than $120 million in royalties. “I think that we worked very hard to see that the state of Alabama got every dollar they could possibly get in this settlement,” Jones said. Other firms that received payouts were Lewis, Kullman, Sterbow, and Abramson of New Orleans; Breit, Drescher & Imprevento of Virginia Beach, Va.; and Cunningham Bounds of Mobile. Each firm received about $1.26 million.


Speechless: Lawyer wants to delay Hubbard trial again — to give a speech

It’s rare to read a motion in a serious corruption case that makes you laugh out loud. Except in the case of Alabama House Speaker Mike Hubbard. In the state of Alabama’s recent filing opposing yet another continuance in the trial – which is scheduled to begin at the end of March next year – prosecutors began like this:  “Defendant Michael Gregory Hubbard once again seeks to delay the criminal proceedings in this case. This time it’s because Attorney Mark White has a meeting set for April 2–5, 2016, in Washington D.C., during which he is expected to give a speech of some kind.” Why is that funny? Because the case involves the Speaker of the House of Representatives of the entire state of Alabama, and the furor surrounding it has already thrown uncertainty and chaos into a political system that desperately needs attention. Because, as prosecutor Matt Hart points out, the case was already continued twice, casting the Hubbard shadow over one regular session of the Legislature and two special sessions. Because it is already set for a date during the next regular session, in which the very serious business of the state of Alabama is to be considered. And because White wants all that to stop – to bump this case past 528 days of delay – because he has the honor of giving a speech to a bunch of lawyers in D.C. Stop the world! I have attention to get! And of course it was funny because the prosecutor wrote it just the way any incredulous person would:  “This time it’s because Attorney Mark White has a meeting set for April 2–5, 2016, in Washington D.C., during which he is expected to give a speech of some kind.” He wants to step away from his job as a trial lawyer to talk about being a trial lawyer to a bunch of trial lawyers in Washington D.C. Priorities. Priorities. White, in his request for continuance, said it was his “unprecedented privilege and honor” to be elected dean of the International Academy of Trial Lawyers, where he is to speak. “I wanted to give you as much lead time as possible to advise you of this conflict and to respectfully request that you postpone the trial,” White wrote in his letter to the judge. I’m sure White is justifiably proud. But he has a speech to prepare for in Lee County as well, unless Judge Jacob Walker stuns the world and this week finds reason to dismiss the charges against Hubbard. White has asked for dismissal on grounds of selective prosecution, prosecutorial misconduct and that the ethics law Hubbard is charged with (and helped to pass) is unconstitutional. If White wants to go to Washington during his client’s trial to speak and rub elbows, he can certainly go. As prosecutors also pointed out, Hubbard is represented by five law firms – paid for largely from campaign contributions. Some of them might even consider it a priority.

Alabama closes driver’s license offices, keeps money-losing liquor stores open

After the Alabama Legislature gave state agencies a haircut with this year’s austere General Fund budget, the state announced it will close 15 drivers license offices, even though 10 of those offices were profitable. Wait … Did I say drivers license offices? I meant liquor stores. According to a story Sunday in the Montgomery Advertiser, the Alabama Beverage Control Board will close 15 retail liquor stores throughout the state. Here’s the kicker. Ten of those 15 stores were returning at least modest profits. And here’s the jab to the ribs. At the same time the state is closing profitable liquor stores, it is keeping open others that have had substantial losses. And here’s the knockout blow to the jaw. The reason that the state is leaving unprofitable ABC stores open is that many of them are in rural areas, where customers would otherwise have to drive much further to buy a bottle of booze if they were to close. “What’s hard to do is close those rural ones,” ABC administrator Mac Gipson told the Advertiser’s Brian Lyman. “They’re losing more money, but (closings) make the customer constituents have to drive further to get a bottle.” In Alabama, the state has a monopoly on the liquor business. State stores sell liquor at huge mark-ups, and the state’s liquor and beer taxes are among the highest in the country. Private liquor stores must buy their booze from ABC, at the same price as other ABC customers. According to a recent story on, Alabama rakes in $18.22 of taxes on every gallon of liquor it sells, and that excludes ABC’s 30 percent mark-up. As broke out last year, once the state is done with taxes and ABC mark-ups, a $10 bottle of booze will set you back $21.50. Seems like an easy road to profits, right? And yet, one store that’s closing showed a profit of $64,386. Meanwhile another in Bibb County, that will stay open, lost $75,000 last year. Bibb County. The irony here is strong enough to make you dizzy. Earlier this month, the state caught all kind of hell — from me and others — for closing 31 drivers license offices throughout the state. Those offices were in rural areas, many in Alabama’s Black Belt, and the Alabama Law Enforcement Agency argued that they only serviced about 5 percent of the state’s total population. The closures left 28 Alabama counties without a place to get a driver’s license. Counties like Bibb County. Those closures came a year after Alabama’s Voter ID law went into effect when the most common form of voter ID is a driver’s license. And now we know that the state made those closures while knowing full well that the federal government was already threatening to sue the state for not obeying the 22-year-old Motor Voter Act. The governor has backtracked somewhat, saying ALEA will work to open those 31 offices at least one day a month, and ALEA has said that the closures — which it, too, blames on budget cuts — would not save that much money, anyway. In all, the closures would save about $100,000, ALEA has said. So let’s recap. The state has closed the driver’s license offices in 28 counties to save $100,000, incurring local backlash and a national shaming and leaving residents in those counties having to drive longer distances just to be able to drive legally. At the same time, the state will keep open one liquor store in one county, Bibb, at a cost of $75,000 a year, so that folks there won’t have to drive too far for a bottle of booze. That’s no way to run a government. Heck, it’s not even a way to run a liquor store.

Juan Williams: GOP disgraces itself with voter ID push

Alabama’s Republican political leaders last week began slyly backpedalling from their plan to close 31 offices that issue drivers’ licenses in counties with heavily black, Democratic-leaning populations. Republican Gov. Robert Bentley said the decision to reopen the offices for one day a month was necessary despite a tight state budget because residents of those districts need the licenses if they are going to drive. Now that is the definition of political shamelessness. While feigning concern for the needs of black people in poor, rural areas, the governor is desperately covering up Alabama’s effort to suppress the black vote. His sudden empathy was prompted by a national outcry over the shuttered offices as a crude act of oppression in a state with a long history of white segregationist politics. Hillary Clinton called the state’s initial actions a “blast from the Jim Crow past.” The fallout has prompted critics to sound alarms about the wave of new restrictions on voting across the country. Those new rules clearly depress turnout among minority, young, and elderly voters. Until now, that tragic impact has been overlooked. Polls show most Americans — including most black people — support the Republican efforts to fight “voter fraud,” despite a lack of evidence of any such fraud being widespread in Alabama or anywhere else. One study of a billion people who voted from 2000 to 2014 found only 31 cases of voter impersonation. The claims of voter fraud are themselves political fraud. And the Alabama story has pulled back the curtain to reveal it. The fact is that Alabama’s Republican legislature voted in 2013 to require photo identification from all people trying to vote. Then they raised the price for applying for a license by 50 percent. And now they’ve closed — for all but for one day a month — the rural Department of Motor Vehicles offices where licenses are issued. These changes come after 2014 elections in which 20 percent of the state’s registered voters did not have identification that included a photograph. The Boston Globe recently reported: “Alabama in 2014 …had the lowest turnout in an election since 1986. Now Alabama is closing offices where state residents can get a license with a photo ID and doing it almost exclusively in places where black people live.” The federal government could not stop these changes because the Supreme Court, in a 2013 ruling on a suit filed by Alabama’s Shelby County, ended federal oversight of changes to any state’s voting practices. In a 5-4 ruling, the court’s conservative majority said the formula for determining which states needed pre-clearance was outdated. Until Congress acts to revise the so-called “coverage formula,” there is no pre-clearance requirement for any state – even those with a proven history of race-based voting discrimination. Last week, the governor was dismissive of charges that Alabama is suppressing the state’s minority vote. “To suggest the closure of the driver’s license offices is a racial issue is simply not true, and to suggest otherwise should be considered an effort to promote a political agenda,” the governor said in a prepared statement. Why would any cynic think that closing those offices might be politically subterfuge by Republicans? Well, here’s why. “Every single county in which blacks make up more than 75 percent of registered voters will see their driver license office closed. Every one,” claimed John Archibald, who writes for the Alabama Media Group, which includes the Birmingham News. Archibald concluded that the Republican governor and legislature had committed an “affront to the very notion of justice in a nation where one man one vote is as precious as oxygen.” He wrote that he’d “love to say” that people who see a dangerous, modern-day brew of race and politics “have us all wrong,” but “the numbers say they don’t.” The lone Democrat in Alabama’s congressional delegation, Rep. Terri Sewell, is another voice raised to assert that this is voter disenfranchisement. In a state where a quarter of the population is black, Sewell is the only Democrat in Congress. The state legislature’s GOP majority gerrymandered the state’s congressional districts so that six of the seven are represented by Republicans, and blacks are concentrated and isolated in Sewell’s district. She was reelected last year with 98.37 percent of the vote while white Republicans enjoy safe and heavily white, Republican districts in the rest of the state. Sewell recently asked the Justice Department for an investigation into whether Alabama is violating existing federal election laws by limiting black citizens’ access to identification while raising the standards for voter ID. Sewell also points out that no Republican is supporting the Voting Rights Advancement Act of 2015 which reinstates federal clearance for changes that impact voting in 13 states with past instances of proven voter discrimination, including Alabama. “We have over 106 sponsors, and we’re looking for our first Republican,” Sewell told U.S. News & World Report. An earlier legislative effort, the Voting Rights Amendment Act of 2014, would have reinstated pre-clearance for only four states, not including Alabama. That bill had 12 Republican supporters, including Rep. Jim Sensenbrenner (R-Wis.), the influential former chair of the House Judiciary Committee, but the Republican House leadership somehow never scheduled a vote. As the author of several books on civil rights history, and decades spent covering Washington politics, I am reluctant to assign blame for playing racial politics. Republicans and Democrats, black and white, play the sad game. But the crass effort at suppressing the black vote ahead of the 2016 presidential race is a tragic, bright stain on the Party of Lincoln. Juan Williams is an author and political analyst for Fox News Channel.

Review: ‘Notorious RBG: The Life and Times of Ruth Bader Ginsburg’

Aesthetically speaking, “Notorious RBG: The Life and Times of Ruth Bader Ginsburg” is a cheery curio, as if a scrapbook and the Talmud decided to have a baby. Pages are filled with photographs of the Supreme Court justice old and young (ravishing, by the way). More entertaining are the dozens of images of her rendered in every conceivable medium — as nail art and shoulder tattoos, as needlepoint samplers and bronze busts, as surrealist watercolors, deadpan cartoons and somber illustrations. (“Fear the frill,” says one, referring to her signature jabots.) Woven throughout are excerpts from Justice Ginsburg’s most influential opinions, with added blocks of scholars’ commentary strutting down the margins. “Notorious RBG” began in 2013 as a saucy Tumblr blog by Shana Knizhnik, then a law student, shortly after the Supreme Court decided Shelby County v. Holder, which discarded a crucial provision of the Voting Rights Act. (For the hip-hop unlettered, Notorious RBG is a play on the Notorious B.I.G., the rapper who was murdered in 1997.) Justice Ginsburg read her dissent from the bench, which in the genteel, marbled universe of the Supreme Court, is most unusual — the equivalent of shaming your spouse in front of dinner guests. More unusual still was that she’d read two other dissents from the bench the day before. Almost overnight, she became a supersignifier of liberal idealism, with Washington artist-activists plastering stickers and posters saying, “Can’t Spell the Truth Without Ruth” all around town. A cottage industry of Ginsburgiana — greeting cards, T-shirts, homemade Halloween costumes (“Ruth Baby Ginsburg,” in the case of toddlers) — was born, and Ms. Knizhnik’s Tumblr became a clearinghouse for it. Objets de Ruth are now part of the temple of highbrow kitsch, along with Freud bobblehead dolls and Shakespeare rubber ducks. More:

Morning Money

BUSH WORLD MIND-MELD — One top donor’s thinking on Senator Marco Rubio: “I like Marco and he is obviously running a very efficient operation … But he basically has no staff, I think he has like one policy person and his proposals are mainly op-eds. At some point he has to put more meaningful proposals out there. And at some point he’s going to get a lot more scrutiny and the question is whether he has the infrastructure to handle it.”

Another donor — a Wall Street CEO — discussing the Bush campaign cutting salaries and staff, said cutting expenses is not the main problem at the moment. “They are cognizant of it and they are being diligent about it … But they are not going to cost cut their way to the White House.”

“NOT THE CAMPAIGN HE WANTED TO RUN” — This donor said that at the moment the main problem is Bush is in an early-stage campaign that nobody wanted, least of all Bush himself. “He wasn’t looking for a fight with Donald Trump. He delayed and delayed and delayed before engaging and he’s quite frustrated because it’s not the campaign he wanted to run,” the donor said. But he added that after days and days of “the kid in the corner yelling insults reality TV-style, he had to respond.”

THE BEST SENTENCE WE’VE READ THIS YEAR — From the NYT budget deal story: “The prospective fiscal agreement would … theoretically could be one of the last spending fights between President Obama and the Republican-controlled Congress before he leaves office in January 2017.” Could we possibly be this lucky??

BANKERS FOR BERNIE! — POLITICO’s Ben Schreckinger: The are “a small minority defying stereotypes and shattering taboos across New York City’s finer eateries and trading pits this primary season: Wall Street financiers who support the presidential bid of Vermont’s self-described ‘socialist’ senator, Bernie Sanders. … ‘I’m not aware of anyone else who might also be a Bernie supporter,’ writes … a former financial analyst at Goldman Sachs. ‘Best I can tell, I am the only one,’ writes a third, while confessing to being hung over from a night out with clients.

“But a dive into Sanders’ donor rolls from the second and third quarters reveals that of the tens of thousands of Americans listed as contributors on Sanders’ campaign finance reports, well over a hundred work in the financial services sector. Most are west of the Mississippi at small firms and local bank branches, where Sanders’ calls to rein in Wall Street do not hit so close to home. More noteworthy are the lonely few — roughly two dozen — who work in high finance in Manhattan.”

BUDGET DEAL TAKES SHAPE — POLITICO’s Jake Sherman and John Bresnahan: “Call it the Paul Ryan protection plan. The Wisconsin Republican wasn’t involved in crafting the bipartisan budget deal hashed out in secret between Speaker John Boehner, Senate leaders and the White House. In fact, the way the plan came about is pretty much the opposite of how Ryan has told people he intends to do business if he’s speaker.

“Nonetheless, Boehner is handing his likely successor an invaluable gift that could help smooth his transition to power. No legislative cliffs. No fiscal emergencies that rattle Wall Street. No government shutdown threats or default countdown clocks. If Boehner can shepherd the deal through the House in his final hours in Congress, and the Senate sends it to the White House, Ryan would start out as speaker with more running room than Boehner ever enjoyed. … The next time Congress would have to deal with the debt ceiling increase would be March 2017.

“Government funding levels would be set through the end of the next fiscal year, taking a shutdown threat off of the table for the first year of Ryan’s speakership. Spending targets would be in place through the end of 2017. And when the conservative uproar that’s already bubbling in private spills into the public, Ryan can point to Boehner, who will be on his way out the door or already gone, as the author of the deal.”

CONSERVATIVES HATE THE DEAL! — POLITICO’s Seung Min Kim, Burgess Everett, and Jennifer Haberkorn: “The ink isn’t even dry on a tentative two-year budget agreement, but conservatives in Congress are already pouncing … It would boost defense and domestic spending over the next two years, and lift the nation’s debt limit through March 2017 … But conservative lawmakers, eager to keep the strict spending caps from a 2011 budget agreement intact, were very skeptical of the deal after they emerged from close-door briefings with their leaders on Monday night.

“Asked about the tentative agreement after the briefing, Alabama Sen. Jeff Sessions replied: ‘My knees quiver at the sound.’ … Still, GOP leaders are operating under the assumption that despite the grumblings from the right, they should be able to draw enough votes from the center to comfortably pass the legislation in both chambers.

DETAILS — “The budget deal, which has not yet been finalized, would boost defense and domestic spending above sequestration levels by $50 billion in the first year and $30 billion in the second year. In each year, there would be an additional $16 billion spent using the Overseas Contingency Operations fund. It would also curtail a huge increase in Medicare premiums due to go into effect in January for some beneficiaries — a provision sought by House Minority Leader Nancy Pelosi (D-Calif.)”

EX-IM HEADED TO FINAL VOTE IN HOUSE — POLITICO: “Supporters of the expired Export-Import Bank succeeded early Monday evening in using a rare parliamentary maneuver to force the agency’s proposed resurrection onto the House floor, over the opposition of conservative Republicans. The 246-177 vote on the petition to bring the legislation to the floor, with dozens of House Republicans joining Democrats, sets up a series of further actions … expected to lead to a final House vote to reauthorize Ex-Im late Monday or Tuesday.

“The unusual parliamentary maneuver led by Tennessee Republican Stephen Fincher is a slap in the face to conservatives who have sought to kill the export credit agency … But even if the effort succeeds as expected, the move to restore the export credit agency still faces an unsettled fate in the Senate. Majority Leader Mitch McConnell of Kentucky opposes the reauthorization and has been reluctant to move stand-alone legislation in that chamber.”

U.S. SHIP CHALLENGES CHINA — Bloomberg: “A U.S. Navy warship sailed near islands built by China in the disputed South China Sea, a move that risks intensifying territorial tensions in the region. … The USS Lassen passed within 12-nautical miles of Subi Reef in the Spratlys island chain, according to a U.S. defense official who spoke on the condition of anonymity. U.S. officials have repeatedly said they’ll act to protect freedom of navigation in one of the world’s busiest commercial waterways. By passing so close the man-made island, the U.S. is showing it doesn’t recognize that the feature qualifies for a 12-nautical mile territorial zone under international law”

“The patrol could further strain U.S. ties with China ahead of key multilateral meetings to be attended by President Barack Obama and his counterpart, Xi Jinping, including the Asia-Pacific Economic Cooperation forum in the Philippine capital next month. So far, China has mostly relied on the coast guard to assert its claims to the South China Sea, rather than deploying more of its navy to the area”

GOOD TUESDAY MORNING — Email me on and follow me on Twitter @morningmoneyben

DRIVING THE DAY — Budget deal could be headed to votes … Ex-Im reauthorization could be on the floor in the House … Treasury Secretary Lew will deliver remarks on the debt limit at the Bipartisan Policy Center at 4:00 p.m. … President Obama heads to Chicago to address the International Association of Chiefs of Police at the 122nd Annual IACP Conference and Exposition … FOMC begins its two-day policy meeting … Senate Finance has a hearing at 9:00 a.m. on the IRS … Durable Goods Orders at 8:30 a.m. expected to drop 1.3 percent headline and flat ex-transportation … Case-Shiller Home Prices at 9:00 a.m. expected to rise 0.1 percent … Consumer Confidence at 10:00 a.m. expected to dip to 102.8 from 103 ..

PETER ROSE RETIRING FROM BLACKSTONE — Per email from Steve Schwarzman and Tony James: “After a career that has spanned 20 years in media relations and nearly two decades in Washington, Peter Rose has decided to retire from Blackstone at the end of January.

Peter joined Blackstone shortly after the firm went public in 2007 and has built the Public Affairs team into a global and industry-leading practice … While we hate to lose Peter, we are fortunate that Christine Anderson is ready to assume the role of Global Head of Public Affairs.” Anderson is also known as the better half of Goldman’s Jake Siewert …

TRUMP’S “SMALL LOAN” — POLITICO’s Nick Gass: “Donald Trump waxed on during a televised NBC town hall in New Hampshire about a “small loan” of $1 million dollars his father gave him as he began his career in business.

NEW ON THE TWITTERS — IIF’s Tim Adams: @timothydadams

ECON POLL: HIGH ANXEITY — Via Marketplace: “What we found is a lot of anxiety about the economy we live in. There’s a real divide between people who get paid hourly and people who are salaried. And a good percentage of people worry about losing their job, and then worry more about not being able to find the next one. … Sixty-three percent said they are sometimes or frequently anxious about their financial situation”

FED PREVIEW — WSJ’s Jon Hilsenrath: “Federal Reserve officials are widely expected to announce Wednesday that short-term interest rates will remain near zero, leaving mid-December as the central bank’s last chance to raise rates this year. The timetable poses twin challenges for Fed Chairwoman Janet Yellen: Deciding whether the U.S. economy is ready for an interest-rate increase, and signaling central bank intentions without causing further market confusion.

“In September, shaky economic conditions delayed a long-expected rate increase and many investors criticized mixed signals by Fed officials in the days before and after the decision — a dynamic partly of Ms. Yellen’s making. With attention now focused on whether the central bank will act before year’s end, the pressure is on the Fed to better manage expectations for rates and the U.S. economy.”

BUDGET DEAL DETAILS — NYT’s David M. Herszenhorn: “While congressional aides cautioned that the deal was not yet clinched, officials briefed on the negotiations said the emerging accord would increase spending by $80 billion, not including emergency war funding, over two years above the previously agreed-upon budget caps.

Those increases would be offset by cuts in spending on Medicare and Social Security disability benefits, as well as savings or revenue from an array of other programs, including changes to the nation’s strategic petroleum reserves. … The Medicare savings would come from cuts in payments to doctors and other health care providers. If the deal happens, it would represent a significant breakthrough after years of gridlock in Congress, especially on fiscal issues, as each side compromised on a core issue. … Under the emerging deal, the debt limit would be raised until March 2017.”

JPMORGAN TO CHALLENGE APPLE PAY — FT’s Ben McLannahan in New York and Leslie Hook in San Francisco: “JPMorganChase is going head-to-head with Apple Pay in mobile payments, announcing a tie-up with a group of merchants accounting for about $1tn of annual spending by consumers. … The move by JPMorgan, the biggest US bank by assets, underscores the determination of lenders to profit from a small but growing band of consumers who like to use their smartphones for simple financial transactions.

“Last September the bank partnered with Apple, announcing this year that it had already signed up 1mApple Pay users, many of them younger and wealthier than the typical cardholder. Now the bank is launching a digital wallet of its own, signing a deal with a group of major retailers including Walmart, 7-Eleven, Kmart and Best Buy. By next July, Chase’s 94m credit-, debit- and pre-paid cardholders will be able to pay at over 100,000 stores across America by displaying a code on their phone that can be scanned by the cashier. Chase’s initiative comes as Apple Pay, launched just over a year ago, struggles to gain traction in the market.”


ACTING NYDFS HEAD OUT — POLITICO’s Jimmy Vielkind: “The state’s Department of Financial Services is once again changing personnel after acting superintendent Anthony Albanese resigned from his post last week, two people briefed on the matter told POLITICO New York. … Albanese has been at the helm of the regulatory agency — which was created in 2011 after the merger of the state’s banking and insurance departments — since Ben Lawsky stepped down in June. Gov. Andrew Cuomo and his aides have been searching for a permanent successor to Lawsky, at one point considering litigator Sean Coffey to fill the slot.”

FISCAL CONFIDENCE AT 51 — Per release: “The Peter G. Peterson Foundation’s October Fiscal Confidence Index, a monthly measure of public attitudes about the nation’s long-term debt and the efforts elected leaders are making to address America’s fiscal challenges, is 51 (100 is neutral). As lawmakers face important decisions on the debt ceiling and the annual budget, voters are calling for their leaders to put the nation on a sustainable long-term fiscal path. In October’s survey, voters continue to have deep concerns about the long-term national debt, with nearly two thirds (65 percent increased/17 percent decreased) saying that their level of concern has increased over the last few years”

EX-GOLDMAN BANKER TO PLEAD GUILTY — NYT’s Ben Protess and Peter Eavis: “A former Goldman Sachs banker suspected of taking confidential documents from a source inside the government has agreed to plead guilty, a rare criminal action on Wall Street, where Goldman itself is facing an array of regulatory penalties over the leak. The banker and his source, who at the time of the leak was an employee at the Federal Reserve Bank of New York, one of Goldman’s regulators, will accept a plea deal from federal prosecutors that could send them to prison for up to a year …

“The men, both fired after the leak, also may face lifetime bars from the banking industry. In a statement, a Goldman spokesman emphasized that the banker worked for the firm for less than three months, and that the bank ‘immediately began an investigation and notified the appropriate regulators’ once it detected the leak. Nonetheless, the bank is expected to pay a significant penalty. Under a tentative deal with New York State’s financial regulator, the lawyers said, Goldman would pay a fine of $50 million and face new restrictions on how it handled delicate regulatory information”

POTUS Events

11:05 am || Welcomes the United States Women’s National Soccer Team; East Room
11:40 am || Departs White House
12:40 pm CT || Arrives Chicago
2:00 pm CT || Addresses the International Association of Chiefs of Police; Chicago
3:05 pm CT || Attends a fundraiser for Senate Democrats; Chicago
5:25 pm CT || Attends a fundraiser for the DNC; Chicago

All times Eastern except as noted

Floor Action

The House is in at noon, with votes postponed until 6:30 p.m. The only bill technically on tap is the Research Excellence and Advancements for Dyslexia (READ) Act, but supporters of the Export-Import Bank are expected to begin teeing up a vote to revive the bank during the vote series today. The Senate is back at it at 3 p.m. and resumes work on the cybersecurity legislation. Senators will vote on a judicial nominee at 5:30 p.m.