Krebs Daily Briefing 7 August 2015

Thomas L. Krebs, Securities Litigation, Regulation and Compliance Attorney Lawyer (c)2014 Brandon L. Blankenship
Thomas L. Krebs
(205)401-2383

International

EC gives green light for derivatives clearing

The nod from the EC, which was confirmed in a statement from the body on August 6, is the strongest step yet towards making central clearing an obligatory aspect of the European OTC market. It is designed to minimise risk in derivatives trading by placing a clearing house between both sides of a trade, guaranteeing the successful settlement of the transaction if either counterparty defaults. The approval means the clearing mandate for interest-rate swaps could begin at the earliest in April 2016, as Lord Jonathan Hill, the European Commissioner for financial services, promised earlier this year. Interest-rate derivatives are by far the largest segment of the OTC derivatives market, comprising roughly 80% of all global derivatives, with a daily turnover in the EU of around €1.5 trillion as of April 2013, according to statistics from the EC included in the statement. The central clearing mandate will cover plain vanilla interest-rate swaps, basis swaps, forward rate agreements and overnight index swaps, and will be phased in over three years for different types of market participants, ranging from dealer banks and interdealer brokers through to end users who use the contracts to hedge commercial activities including farming and milling. The adopted rules, which come in the form of a delegated act, will now pass to the European Parliament and Council for final approval, under the legislative process of the EU. They can review the rules for two to three months, and extend by an additional three months if they want to, either approving or rejecting them. If approved, they will enter into force 20 days after its publication in the Official Journal of the European Union, and then for category one participants, compliance begins six months after its entry into force.

http://www.efinancialnews.com/story/2015-08-06/ec-adopts-clearing-mandate-interest-rate-swaps

Why Iran Isn’t Nazi Germany

Mike Huckabee’s sin was being too vivid. Last week, after the Republican presidential hopeful said that by signing the Iran nuclear deal, President Barack Obama “would take the Israelis and basically march them to the door of the oven,” a parade of organizations and politicians accused him of inflammatory language and bad taste. But in both the United States and Israel, Huckabee’s core assumption—that the Iranian government is genocidally anti-Semitic—is mainstream. In January, Israeli Prime Minister Benjamin Netanyahu warned that “The ayatollahs in Iran, they deny the Holocaust while planning another genocide against our people.” Last month, Fox News host Sean Hannity called the Iran deal “the equivalent of giving Adolf Hitler weapons of mass destruction.” The fact that a nuclear attack on Israel would also kill Palestinians, argued Texas Senator Ted Cruz recently, would not deter Tehran because “they would view the murder of those Palestinians” as “perfectly acceptable collateral damage to annihilating millions of Jews.” Far from being marginal or extreme, Huckabee’s claim—that Iranian leaders seek another Holocaust—sits at the emotional core of the debate over the nuclear accord with Tehran. But the closer you look, the weaker that claim is. In asserting that Iran seeks to murder all Jews, politicians like Huckabee, Cruz, and Netanyahu focus overwhelmingly on the regime’s words. “When people who are in a government position continue to say they’re going to kill you,” said Huckabee, “I think somebody ought to wake up and take that seriously.” “If history teaches one lesson,” added Cruz, “it is that if somebody tells you they want to kill you, believe them.” But that’s not actually history’s lesson. It’s not true that the best way to predict a regime’s behavior is by its most menacing words. In 1956, Soviet Premier Nikita Khrushchev famously told Western diplomats, “We will bury you” (also translated as, “We will be present at your funeral”). In the 1970s, Soviet officials openly boasted that they could win a nuclear war. In 2005, Chinese Major General Zhu Chenghu warned that in the event of a conflict with the United States over Taiwan, “we will have to respond with nuclear weapons,” and that “the Americans will have to be prepared that hundreds … of cities will be destroyed by the Chinese.” This February, North Korea’s National Defense Commission threatened the United States with the “most disastrous final doom on its mainland.”In foreign relations, as in life, what people do is a far better guide to their future actions than what they say. And while Iran’s rhetoric can sound genocidal, not only toward Israel but toward the United States, Iran’s behavior has not come close.

http://www.theatlantic.com/international/archive/2015/08/iran-nuclear-deal-nazi-germany/400631/

The Crew of the Enola Gay on Dropping the Atomic Bomb

On August 6, 1945—70 years ago today—the B-29 bomber Enola Gay dropped an atomic bomb on the city of Hiroshima. Twelve men were on that flight. Some chose to keep a low profile and others spoke out about their place in history. Almost all had something to say after the war. The 509th Composite Group was formed in by the US Army Air Force to deliver and deploy the first atomic bombs during World War II. The group was segregated from the rest of the military and trained in secret. Even those in the group only knew as much as they needed to know in order to perform their duties. The group deployed to Tinian in 1945 with 15 B-29 bombers, flight crews, ground crews, and other personnel, a total of about 1,770 men. The mission to drop the atomic bomb on Hiroshima, Japan (special mission 13) involved seven planes, but the one we remember was the Enola Gay. Read about the crew:

http://mentalfloss.com/article/24269/crew-enola-gay-dropping-atomic-bomb

National

Coal Industry Wobbles as Market Forces Slug Away

In April 2005, President George W. Bush hailed “clean coal” as a key to “greater energy independence,” pledging $2 billion in research funds that promised a new golden age for America’s most abundant energy resource. But a decade later, the United States coal industry is reeling as never before in its history, the victim of new environmental regulations, intensifying attacks by activists, collapsing coal prices, and — above all — the rise of cheap alternative fuels, especially natural gas. This week President Obama slammed the industry with tougher-than-expected rules from the Environmental Protection Agency limiting power plant carbon emissions, which will accelerate an already huge shift from coal to natural gas and other alternatives. “Clean coal” remains an expensive and thus far impractical pipe dream. Coal is the world’s biggest source of carbon emissions by far and the leading culprit in global warming. Coal advocates like Mitch McConnell, the Kentucky senator and Republican majority leader, have accused the president of an out-and-out “war on coal.” But it’s collapsing prices and heavy debt loads that are driving the industry into bankruptcy. Alpha Natural Resources, the nation’s fourth-largest coal producer after it doubled down on coal two years ago in acquiring Massey Coal for $7.1 billion, filed for bankruptcy protection on Monday. It follows Walter Energy, which filed last month; Patriot Coal, which sought court protection in May; and numerous smaller mining companies. The demise of the two biggest surviving publicly traded coal companies — Peabody Energy and Arch Coal, the nation’s two largest producers — may just be a matter of time, based on their recent stock performance.

http://www.nytimes.com/2015/08/07/business/energy-environment/coal-industry-wobbles-as-market-forces-slug-away.html?emc=edit_th_20150807&nl=todaysheadlines&nlid=53476364&_r=0

 

Fannie Mae, Freddie Mac to send taxpayers $8.3 billion this quarter

Fannie Mae and Freddie Mac will send taxpayers $8.3 billion in second-quarter profits, an increase of nearly 50 percent, the government-supported mortgage giants said this week. The companies, which help support the mortgage market, have gotten a boost from the improving housing market, and both said this week that rising interest rates had improved their bottom lines. Fannie, based in the District, and Freddie, based in McLean, Va., have returned to the black in recent years, and they are required to hand their profits over to the U.S. Treasury under the terms of a government bailout that rescued the companies during the Great Recession. With their latest payments, the two will have paid taxpayers a combined $239 billion in dividends, well above the $187 billion they received from their bailouts. Fannie Mae said Thursday that it expects to stay profitable “for the foreseeable future,” but cautioned that its profits this year could end up being “substantially lower” than they were in 2014, when its bottom line swelled with legal settlements dealing with bad mortgages. Freddie Mac hasn’t publicly made similar predictions, spokeswoman Lisa Gagnon said. “We reported another strong quarter of financial performance with solid revenues and an impressive book of business that only continues to improve,” Fannie Mae chief executive Timothy Mayopoulos said in a statement. Created by the government decades ago to oil the mortgage market by buying home loans, selling bundles of them to investors and guaranteeing their value, the future of the companies is uncertain. The Obama administration has said it wants to push that responsibility to the private sector, but Congress hasn’t approved any plans to do that. The two companies also drew renewed scrutiny last month when the Federal Housing Finance Agency, the agency that oversees Fannie and Freddie, approved looser rules on their executives’ pay. Under the new rules, their chief executives could earn up to $4 million a year; they had been limited to $600,000 in pay by the terms of the bailout. That riled the White House and a group of lawmakers in both parties, who have proposed legislation to reinstate pay limits. The House Financial Services Committee last week advanced one such proposal to the full House of Representatives. The head of the Federal Housing Finance Agency has defended the move, saying it was meant to retain top leadership. Speaking to reporters this week, Freddie Mac chief executive Donald Layton declined to discuss the issue, saying the company doesn’t comment on matters of public policy.

http://www.washingtonpost.com/business/economy/fannie-mae-freddie-mac-to-send-taxpayers-83-billion-this-quarter/2015/08/06/d0a818e8-3c6c-11e5-9c2d-ed991d848c48_story.html?tid=hpModule_79c38dfc-8691-11e2-9d71-f0feafdd1394

 

Bitcoin startups lure quant whizzes from Wall Street

Armed with a doctorate in financial engineering, 34-year-old Timo Schlaefer was on his way to a promising career at Goldman Sachs in London. Previously with the bank’s mergers and acquisitions team, he became an executive director of credit quantitative modeling at Goldman, where quants like Schlaefer are highly valued. In February he gave that up, and launched a company called Crypto Facilities Ltd, a bitcoin derivatives trading platform, which now has six employees. For now, the platform trades bitcoin forwards, which are directly linked to the price of bitcoin, but it’s also developing other digital currency derivative products. “This is uncharted territory,” said Schlaefer. “It’s an exciting opportunity to participate in a new area of technology that has massive potential.” Bitcoin is a virtual or online currency created through a “mining” process where a computer’s resources are used to perform millions of calculations. Once mined, bitcoins can be stored in an online wallet, traded in an online exchange, or used to buy goods and services. Once the province of small-time investors driven by their distrust of government-backedcurrencies, now Wall Street bankers and traders are leaving high-paying jobs to join bitcoin start-ups, while big firms hire in-house to get their arms around bitcoin and the related ‘blockchain’ technology. “A lot of people are entering the bitcoin space as the sector has reached an overall level of funding that’s hard to ignore,” said Jaron Lukasiewicz, founder and chief executive officer at New York-based bitcoin exchange Coinsetter. Lukasiewicz, 29, moved to the bitcoin world in late 2012, having left behind a six-figure salary in private equity at The CapStreet Group in New York. Bitcoin is not backed by a government and its value fluctuates. On Thursday, it was trading at $278 BTC=BTSP, making the value of outstanding bitcoin worth about $4 billion. It has had a volatile history, with a rapid rally in 2013 that boosted its value to more than $1,150 per bitcoin at one point.

http://www.reuters.com/article/2015/08/07/us-usa-bitcoin-wall-street-analysis-idUSKCN0QC0EO20150807?feedType=nl&feedName=usmorningdigest

McCaskill, Democrats slam Obama’s financial adviser regs

Moderate Democrats slammed President Obama’s proposal to regulate financial advisers, arguing that the administration’s proposed regulations would decrease low- and middle-income Americans’ access to financial advice. The administration is battling the business community to implement new disclosure requirement for financial advisers. Obama and Labor Secretary Thomas Perez argue that the requirements are needed because some financial advisers sell faulty investment advice to consumers so that they can pocket payments from financial institutions off the sale. But in a letter to Perez on Wednesday, Sen. Claire McCaskill (D-Mo.) wrote that “there are still risks in this proposal.”  “More individuals may completely lose access to in-person investment advice,” McCaskill wrote in the letter, an argument that Republicans have made for months. McCaskill Letter DOL Fiduciary Rule 08052015

 

http://thehill.com/policy/finance/250476-mccaskill-democrats-slam-obamas-financial-adviser-regs

 

The Tangled Web Pennsylvania’s Attorney General Allegedly Wove

Pennsylvania Attorney General Kathleen Kane was charged Thursday with leaking grand-jury documents in order to embarrass a political rival—and then lying about it to another grand jury in an attempted coverup. “Kane devised a scheme to secretly leak confidential information and secret grand jury items directly to media,” Risa Ferman, the district attorney in Pennsylvania’s Montgomery County said at a news conference. She said Kane, the first Democrat elected as attorney general in the state, “lied repeatedly about her own actions, about the law and about other matters.” Kane was charged with, among other things, perjury and obstruction of justice. In a statement, Kane denied wrongdoing and said she looked “forward to the opportunity to present my case in a public courtroom and move beyond the behind-the-scenes maneuvering that has defined the process to this point.” And despite calls for her resignation, including from Governor Tom Wolf, a fellow Democrat, Kane said she would not step down. Kane’s troubles began last year when the Inquirer published a story that said she shut down an investigation into corrupt Philadelphia Democrats. Kane blamed Frank Fina, the lead investigator on that case, for the newspaper’s story. So, prosecutors allege, to punish him, Kane leaked information to the Philadelphia Daily News concerning Fina’s handling of an older corruption case involving an official from the NAACP. The Daily News story, also published last year, said the attorney general’s office had begun a grand-jury investigation into the official in 2009—before Kane’s time at the office—and found evidence the official had misused funds, but never charged him. The article itself relied on confidential grand-jury information, which prosecutors say Kane released to the newspaper in order to embarrass Fina and her political opponents.

http://www.theatlantic.com/politics/archive/2015/08/the-tangled-web-pennsylvanias-attorney-general-is-alleged-to-have-weaved/400697/

Carly Fiorina was the clear winner of Fox News’s first debate

Fox News’s second-tier debate had an impressive lineup of experienced politicians. It included Rick Santorum, the runner-up in the 2012 GOP presidential primary; Rick Perry, the longest-serving governor in Texas history; George Pataki, the three-term governor of New York; Bobby Jindal, the sitting governor of Louisiana; and Lindsey Graham, a two-term US senator. But the most compelling candidate on the stage, by far, had never held elected office. The only campaign Carly Fiorina has ever run was a failed challenge to Sen. Barbara Boxer in 2010. Her résumé comes from the corporate world — she led Hewlett-Packard from 1999 to 2000, and her record was, shall we say, mixed — but you wouldn’t have known it by watching her performance on Thursday. The debate was humiliating. It took place in an empty arena and the moderators, seemed intent on rubbing the participants’ noses in their failure to qualify for the primetime clash. They began by asking, in so many words, why they were such losers that they hadn’t made the cut for the bigger debate. Fiorina had the most graceful response:  Well, I would begin by reminding people that at this point in previous presidential elections, Jimmy Carter couldn’t win, Ronald Reagan couldn’t win, Bill Clinton couldn’t win, and neither could’ve Barack Obama. The moderators then moved on to asking why Donald Trump was crushing in the polls. Perry rambled through his reply. Fiorina responded with a nice zinger, a clear understanding of what was powering Trump’s rise, and a fairly devastating closing line:  I didn’t get a phone call from Bill Clinton before I jumped in the race. Did any of you get a phone call from Bill Clinton? I didn’t. Maybe it’s because I hadn’t given money to the foundation or donated to his wife’s Senate campaign. Here’s the thing that I would ask Donald Trump in all seriousness. He is the party’s frontrunner right now, and good for him. I think he’s tapped into an anger that people feel. They’re sick of politics as usual. You know, whatever your issue, your cause, the festering problem you hoped would resolved, the political class has failed you. That’s just a fact, and that’s what Donald Trump taps into. I would also just say this. Since he has changed his mind on amnesty, on health care and on abortion, I would just ask, what are the principles by which he will govern? In a strange way, Rick Perry also made the case for Fiorina. In his closing statement, he said:  Our best days are in front of us. We can reform those entitlements, we can change that corporate tax code and lower it. We can put America back on track on a growth level and a growth rate that we’ve never seen in the history of this country. Manufacturing will flow back into this country. It just needs a corporate executive type at the top that’s done it before. That seems like an argument for a used-to-run-a-company type, not a long-serving-governor type.

http://www.vox.com/2015/8/6/9113989/carly-fiorina-fox-news-debate

This Economist’s Computer Model Is Forecasting a Clinton Victory

Hillary Clinton will win the 2016 presidential election by the narrowest of margins — if a computer model put together by Moody’s Analytics Inc. is to be believed.  The model, which uses economic and political data to predict the election’s outcome on a state-by-state basis, has the Democratic Party’s nominee for president garnering the minimum 270 electoral votes needed for victory to 268 for the Republican contender.  While the model uses only generic candidates for each party in forecasting the future, Clinton is the favorite by far to be the Democrats’ nominee.  The “2016 election will be a nail-biter,” Moody’s chief economist Mark Zandi and his colleagues wrote in a report. While the economy’s performance will strongly favor the Democrats, the political backdrop — including voter fatigue with a two-term incumbent president — will benefit the Republicans, they said.  Moody’s results depend crucially on its economic and political projections heading into the November 2016 ballot. Even small changes in those assumptions could tip the race to the Republican nominee. To predict the popular vote in each state, Moody’s looks at three economic variables in the two years leading up to the presidential poll: household incomes after taking account of inflation and house and gasoline prices.

http://www.bloomberg.com/news/articles/2015-08-06/this-economist-s-computer-model-is-forecasting-a-clinton-victory

 

Trump’s corporate website hacked to thank Jon Stewart

Donald Trump’s corporate website was hacked, but according to the hackers, it wasn’t to do any damage. They just wanted to thank comedian Jon Stewart for his work. “We are writing you today via Mr Trump’s website because, seeming, the only way to get anyone to pay attention any more is to grease a Presidential candidate’s website,” an archived version of Trump.com says. Thursday is Stewart’s last night hosting “The Daily Show.” He has hosted since 1999. “Mr Stewart, we at @TelecomixCanada would like to take this opportunity to thank you for the many happy years of quality journalism and entertainment you and your team have undertaken at Comedy Central,” an archived version of website says. “Know, Sir, that your steadfast dedication to the irony and power of Truth has inspired a generation which we ourselves now serve.”  “Well that’s about it, other than to join you all in celebrating America’s first openly Asshole Presidential Candidate. Godspeed Mr. Trump,” the letter ends. According to CBC News, who first reported the hack, the letter was live since early Saturday. As of Monday afternoon, it could no longer be viewed. TelecomixCanada posted a news release on pastebin.com explaining what it had done and pointing out that no harm was done to the server. “Given the nature of the many diverse Anonymous flags, TelecomixCanada wishes to again stress that no further action was taken against the server (ie data leaking or infection), nor have they shared access details with other hactivists or repaired the problems allowing access to trump.com in the first place,” the release said.

http://www.politico.com/story/2015/08/donald-trump-website-hacked-121087.html#ixzz3i3RhYV2g

 

This is how much Apple spends to keep Tim Cook safe

It’s a lot. The life of a one of the world’s best-paid and most powerful CEOs sounds pretty sweet, except for one thing: lot’s of people are out to get you. That’s the conclusion one must draw from taking a look at some of the security budgets of Fortune 100 CEOs. Apple AAPL -0.40% , for instance, spent $699,133 keeping CEO Tim Cook safe in 2014, according to a security filing unearthed by Patently Apple. And while that might seem like a lot of money, it actually pales in comparison to the security budgets of Oracle ORCL -0.81% CEO Larry Ellison and Amazon AMZN -1.41% CEO Jeff Bezos —their companies each spend more than $1.5 million on CEO-security, according to a report by Equilar.

http://fortune.com/2015/08/07/apple-tim-cook-security/?xid=soc_socialflow_facebook_FORTUNE

 

State/Local

Bentley ends Medicaid contracts with Planned Parenthood

Gov. Robert Bentley Thursday said he was moving to end Medicaid’s contracts with Planned Parenthood, following the release of videos showing members of the organization discussing the sales of fetal parts. “As a doctor and Alabama’s governor, the issue of human life, from conception to birth and beyond, is extremely important,” Bentley said in a statement. “I respect human life and do not want Alabama to be associated with an organization that does not.” The number, size and scope of the contracts, as well as the services they provide, were not immediately clear Thursday afternoon. Messages seeking comment were left Thursday with Alabama Medicaid and Planned Parenthood Southeast. The governor’s statement did not say if the services would be replaced. An email was sent to Jennifer Ardis, a spokeswoman for Bentley, Thursday afternoon. Bentley’s letter to Planned Parenthood Southeast CEO Staci Fox said the contracts would be terminated within 15 days of the organization’s receipt of the letter. Planned Parenthood has 60 days to appeal the decision. In videos released by an anti-abortion activists over the last several weeks, Planned Parenthood staffers discussed the price of parts of fetuses. The organization, which says the program is a donation program for medical research, says it broke no law and does not profit from the practice. Planned Parenthood Southeast said in a statement earlier on Thursday that it does not operate a donation program in Alabama. Planned Parenthood Southeast provides abortion services at clinics in Birmingham and Mobile. However, Medicaid does not pay for abortions except in the case of rape or incest, or if the mother’s life is in jeopardy. Planned Parenthood services include help with access to birth control, testing for sexually transmitted diseases, breast exams and pap tests for cervical cancer. Louisiana Gov. Bobby Jindal earlier this week ended that state’s contract with Planned Parenthood.

http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/08/06/bentley-ends-medicaid-contracts-planned-parenthood/31231357/

 

Where are we at the end of five days in special session?

MONTGOMERY, Alabama – Here is what we know at the end of the fifth day of a special legislative session called to find a way to plug a $200 million hole in a critical state budget.

  • The problem isn’t close to being solved.
    • Key state senators say they will not approve a House of Representatives budget passed Wednesday that effectively guts the state’s Medicaid program which provides health care services for over 1 million Alabamians.
    • Proposed legislation back by Senate leader Del Marsh that would authorize a public vote to establish a lottery and casino-style gambling and then tax its profits appears to lack the votes for passage in the Senate.
    • A Marsh suggestion that the budget be plugged by moving $225 million from the state’s education budget also appears dead in the Senate.
    • Gov. Robert Bentley, who has watched his proposed legislation to raise $300 million in taxes to plug the hole wither, said again he will veto a budget that does not fix the problem. With only five days left in the session to pass a budget before time runs out and no variable fix yet in sight, some legislators on Thursday began talking about the new fix to the budget hole being the same fix they approved just two months ago at the end of the regular session: Approving a budget that cuts about $200 million from the General Fund. But unlike the budget passed in the House Wednesday, the budget approved in June does not devastate Medicaid and in fact would contain about $33 million more than the one approved by the House Wednesday. “The Senate budget we passed at the end of the regular session is I think a better alternative than the House budget (the one passed Wednesday),” said Sen. Trip Pittman, R-Montrose. Pittman is the influential chairman of the Senate Finance, Taxation and Education committee. Sen. Arthur Orr, R-Decatur, the influential chairman of the Senate’s General Fund Budget Committee said he is confident the Senate will approve a budget and he thinks it’s likely to be one close the one passed in June.

http://www.al.com/news/index.ssf/2015/08/where_are_we_at_the_end_of_fiv.html

 

Tax-free weekend kicking off

It’s the calm before the storm at Davie’s School Supply. The staff has been preparing since January to ready themselves for tax-free weekend, and now the frenzy is upon them. To prepare, they’ve brought in additional employees and have stocked the shelves to the point of overflow. “It’s always crazy like this,” said Caroline Davie, whose father started Davie’s School Supply roughly 40 years ago. “I try to warn the new people (on staff) of what it’ll be like. We’re appreciative that we’re this busy though.” The exemptions began today at 12:01 a.m. and will last until Sunday at midnight. Most areas in the River Region, such as Prattville, Pike Road, Wetumpka, Millbrook and Montgomery, are participating in the weekend, which means a variety of school supplies can be purchased without having to pay state, county or local sales taxes. Sometimes there are discrepancies about which items are tax exempt and which aren’t. Hats can be exempted, for example, but hard hats cannot. Many pieces of clothing such as jeans, dresses and coats won’t be taxed. Neither will diapers. At Davie’s School Supply, a handwritten list of non-taxable items sits on the counter to help guide shoppers. A complete list is available on the Alabama Department of Revenue’s website at:  www.revenue.alabama.gov/salestax/STHolidayQuickRefSheet15.pdf

http://www.montgomeryadvertiser.com/story/news/2015/08/06/tax-free-weekend-kicking/31245945/

 

Ala. Senate could revive vetoed General Fund budget

The General Fund budget didn’t make any progress Thursday. According to its members, the Senate GOP didn’t, either. With the House passing the budget Wednesday, and the Senate unable to take it up in committee until Friday, both chambers left early Thursday to prepare for work over the weekend. Some said a second special session is inevitable. “I think we’re there,” Senate Finance and Taxation General Fund chairman Arthur Orr, R-Decatur, said Wednesday. Possibilities floated Thursday included everything from trying to pass portions of Gov. Robert Bentley’s budget plan in the Senate to reviving a June General Fund budget that cut funding to every state agency, and could trigger layoffs and lawsuits. The chambers remain divided over the approach to the budget. Republican senators said a $156 million cut to Medicaid — approved by the House on Wednesday — would be unlikely to pass. But they’re still unable to agree on a plan within their caucus. “Every time we come close, some wheel falls off,” said Sen. Greg Albritton, R-Range. “And we’re only on a bicycle.” Legislators are floating various ideas have been including transfers of the use tax from the Education Trust Fund to the General Fund and a repeal of a FICA deduction, both of which could fill a General Fund shortfall of at least $200 million. As of early Thursday afternoon, none of those ideas had gotten traction.

http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/08/06/ala-senate-revive-vetoed-general-fund-budget/31246985/

Tom Krebs Securities Attorney

Blogs/Opinions

Editorial: Another special session

MONTGOMERY, AL (WSFA) –  As this special session winds down and our tax dollars continue to flow down the drain, our legislators are already saying that they need MORE time and another session. As a taxpayer, I am floored by the lack of ANYTHING and I MEAN ANYTHING of substance coming from our legislators. The special session started on July 13. Legislators complained and said that they needed time to meet and discuss issues so they promptly recessed for three weeks to do that. What were they doing during the regular session? This week they came back together to do nothing really. This week the House passed a budget that is in NO WAY a workable budget, cutting $156 million from Medicaid as well as cutting other state agencies by around 5.5 percent. All of these agencies are working at well below standards NOW and all need a revenue boost not a cut. This is not new information to anyone in the legislature. Interesting options like reallocating the “use tax” have been discussed but not acted on. Why not, and why wasn’t this idea floated during the regular session? In the end, we elect our legislators to run our state and do what is best for all of Alabama. They have failed taxpayers and the entire state. Unless we have a miracle, another special session is coming, meaning taxpayers are on the hook for about $800,000, money the state doesn’t have, all because legislators failed to do their job in the regular session.

 

http://www.wsfa.com/story/29730911/editorial-another-special-session

 

THE ELEPHANTS IN THE ROOM from the Skimm

The GOP had a big night out in Cleveland, OH. And Fox News moderators wasted no time welcoming the candidates to 2016.

WHAT DO I NEED TO KNOW?

That Donald Trump likes to talk a lot. And everyone else would like some more attention. Trump is going for the White House — even if he doesn’t get the GOP nomination. And he clarified that he doesn’t like to insult all women. Just Rosie O’Donnell. Jeb had to talk about his last name. But he’d prefer if you call him ‘Veto Corleone.’ Dr. Ben Carson reminded everyone that he exists, and that he’s separated Siamese twins. Scott Walker is proud to be normcore. Rand Paul and Chris Christie do not — repeat DO NOT — like each other. Everyone likes the Iran nuclear deal just about as much as they like Hillary Clinton (hint: they don’t, but Kimye does). John Kasich said he still doesn’t like the idea of gay marriage, but he’d still love his daughter if she were gay. Marco Rubio feels #blessed to be on stage with all these candidates, since the Dems can’t even find one. And Ted Cruz and Mike Huckabee were there too. 2016’s officially coming up. In 16 months. Last night set the stage for the rest of the election cycle. Insert “SNL” writers saying ‘thank you.’

 

http://www.theskimm.com/2015/08/07/skimm-for-august-7th-3

“Ethics Playbook” – Something To Add To Your Summer Reading

In the aftermath of Enron and Worldcom, business schools took the initiative to better prepare future leaders to play by the rules … act ethically.  ‘Ethics’ became a buzzword but there was also an emphasis to incorporate ethics into every facet of the business school experience. While students and corporate employees usually hear from inspired leaders who played by the rules, some of the most memorable accounts come from those who have fallen short.  One of those is Aaron Beam who was the former Chief Financial Officer at Healthsouth.  Beam was one of five CFOs at the company who pleaded guilty to manipulating financial records to overstate earnings in an effort to inflate the company’s stock price.  It worked, for a while, but in 2004 the company was the focus of a Security and Exchange Commission investigation.  A number of those involved went to prison as a result of the scandal, with the exception of Healthsouth’s CEO Richard Scrushy, who was found not-guilty at the conclusion a federal trial where Beam testified.  Scrushy would later go to prison in another case related to bribery charges. Beam, who served three months in federal prison, has been a mainstay on the speaker’s circuit, appearing at both business schools and corporations, sharing his cautionary tale.  His latest project was putting his thoughts down on paper and writing the newly released, Ethics Playbook.  The message he delivers in the book is done in the same manner as his speeches … he takes full responsibility, has a great sense of humor and is a great story teller.  From the opening of the inside cover, the reader is drawn in by his folksy and sincere words:   “Avoiding ethical landmines takes hard work, sharp senses and more than a little courage.  I wish I had had that courage when it mattered most.  Maybe you will.  Maybe this book will help you.” Ethics Playbook is an easy read book that presents reflections of a man who was once at the height of the business world.  Now, he uses his story and puts it into context with some of the insights from pioneers in the research of ethics and cheating, Dr. Dan Ariely and Professor Marianne Jennings. “This book is a guide or playbook for those who want to lead a more ethical life,” Beam said in an interview.  Like other books on ethics, it is a reminder of how to the importance of character, but unlike other books, it provides the insights of someone who let their guard down.  “Professionals can learn that trying to be ethical takes hard work and is always a work in progress,” Beam added.

http://www.forbes.com/sites/walterpavlo/2015/08/06/ethics-playbook-something-to-add-to-your-summer-reading/

 

Morning Money

WELCOME TO JOBS DAY — Easy to forget it’s happening with all the GOP debate excitement (more on which below) but it’s a huge number for the Fed (and the political world). Consensus is a solid gain of 225K and no change to the 5.3 percent jobless rate. Such a number would likely keep the Fed on track for an initial hike in September. But a very soft number (and no increase in wage growth) could push things back to December if not later.

Moody’s Mark Zandi emails: “[E]verything points to a status quo number. … The only technical complications are 1) auto retooling, which may be less this year given booming auto production and should lift jobs; and 2) the timing of when K-12 schools close, could be later this year given bad winter weather … I expect payroll employment to increase by 215,000 in July, and for the unemployment rate to hold steady at 5.3 percent. Average hourly earnings should increase a strong 0.3 percent, putting the year-over-year gain at 2.3 percent.

Story Continued Below

HOW THE FED WILL READ IT — Mohamed A. El-Erian on Bloomberg View: “The Fed doesn’t need a super strong jobs report in order to act in September. What it needs is a relatively solid assurance that the labor market, having grown by more than 2.9 million jobs during the past 12 months, retains its firm footing.

“With concerns lurking behind the scenes that the Fed has gone too far in decoupling financial markets from the economy’s fundamentals, just a slight strengthening of labor market conditions (particularly on the wage front) would be enough to increase the probability of a September rate hike.” http://bv.ms/1eW5wiv

COMING THIS FALL: NASDAQ EVENT WITH BEN BERNANKE — Very excited to announce that former Fed chairman Ben Bernanke will by my guest at the next America’s Fiscal Future Event at Nasdaq Marketsite in NYC on Oct. 21st. Doors open at 7:30 a.m. For info email POLITICOEvents@POLITICO.com

GOP DEBATE WRAP: WELCOME TO THE JUNGLE — Quite a circus last night with Donald Trump going bananas as usual, refusing to rule out a third party run, calling everyone in Washington stupid, saying he forced Hillary Clinton to attend his wedding and claiming to have created the debate on illegal immigration (which is ludicrous). Trump made very little sense on substantive questions from the Iran deal, to actual immigration policy (beyond a wall) to his views on health care reform. He defended his previous support for a single payer system but said he’d evolved and would now get rid of Obamacare and replace it with … well it was hard to tell.

A Fox News focus group after the debate showed many previous Trump supporters souring on the billionaire after the performance. But M.M. knows better than to predict what will happen to The Donald’s poll numbers. They could tank, they could rise, they could stay the same. Who knows? Marco Rubio probably won the debate with his optimistic, detailed, confident answers to questions on a range of policy issues. No one else stood out very much. Chris Christie did well, especially sparring with Rand Paul on national security and Mike Huckabee on entitlement reform.

John Kasich showed why he quickly made it into the top ten with his folksy delivery and a focus on non-traditional GOP issues like drug treatment and prison reform. Kasich is probably too far from the GOP base on issues like Medicaid expansion but he certainly made a good case for a VP slot and he comes from the critical state of Ohio (as does another potential VP, Sen. Rob Portman).

Scott Walker was fine. So was Jeb Bush who started off shaky but got stronger and made robust defenses of his positions on immigration and education while talking up his aspirational 4 percent growth target, his record in Florida and his very conservative stances on abortion and government spending. It was a B- performance but he didn’t need an A the first time out. He is in it for the long haul. Rand Paul didn’t help himself. Neither did Mike Huckabee. Ben Carson was quite strong at points including a funny closing statement.

Financial reform issues did not get much play beyond a Rubio pledge to repeal Dodd-Frank and Bush and others pledging thorough reviews and changes to all regulations. M.M. didn’t catch all of the undercard but apparently financial regulation came up more often. One GOP aide emailed: “How did the kids table address crony capitalism and Dodd-Frank and the adult table didn’t even get close to those topics?!”

M.M.’S DEBATE GRADES — Rubio: A; Christie: B+; Walker: B; Bush: B- Kasich: B; Carson: B; Huckabee: C; Paul: C; Cruz: C; Trump: Classy

SPEAKING TIMES via @LaurenLeatherby: Trump 10:30 Bush 8:33 Huckabee 6:32 Carson/Cruz tie 6:28 Kasich 6:25 Rubio 6:22 Christie 6:03 Walker 5:43 Paul 4:51

HOT CLICK: Trump’s nine craziest comments: http://politi.co/1KUyOwk

THE UNDERCARD: FIORINA SHINES — POLITICO’s Eli Stokols: “On a stage filled by several faltering also-rans, Carly Fiorina stood out for her seriousness, fluidity and her willingness to strongly criticize not just Democrats but her Republican opponents as well. Fiorina … didn’t just criticize Donald Trump, the current GOP front-runner, but she went out of her way to rip the recently gaffe-prone Jeb Bush, who will take the debate stage later Thursday evening. … But it’s unclear whether out-debating her six struggling rivals in the undercard will do much to elevate her in the sprawling GOP field …

“The former Hewlett-Packard CEO has struggled to gain traction, despite her assiduous campaigning in New Hampshire and having impressed many in the party’s donor class. As the debate drew to a close, Fiorina used much of her 30-second closing statement to question Bush’s abilities as a campaigner in light of another unforced error by him earlier this week. ‘2016 is going to be a fight. A fight between conservatism and a Democrat Party that is undermining the very character of our nation,’ she said in her closing argument. ‘We need a nominee who is going to throw every punch … someone who cannot stumble before he even gets in the ring.” http://politi.co/1Ipr5lW

GOOD FRIDAY MORNING — M.M. heads out on vacation for two weeks starting today. But you will be in good hands with members of the crack POLITICO financial services team. For the next two weeks please send tips, news, gossip and hot takes to Clea Benson (cbenson@politico.com). Column is dark the week of Aug. 24th. See you back here Aug. 31.

DRIVING THE DAY — July jobs report at 8:30 a.m. expected to show a gain of 225K with no change in the 5.3 percent jobless rate and a 0.2 percent increase in wages … Consumer credit at 3 p.m. expected to expand by $17.0B … President Obama heads to Martha’s Vineyard this afternoon for vacation … Steaming hot takes throughout the day on the #GOPDebate

DEBATE GETS RAUCUS — WSJ’s Patrick O’Connor, Janet Hook and Rebecca Ballhaus: “Donald Trump created a raucous atmosphere in the first Republican debate, kicking off the event by refusing to say he would support the eventual nominee if he doesn’t win, then sparring with other contenders and setting a contentious tone for the evening. … His strident objection to pledging to endorse the eventual nominee — which was met with boos from the audience and an immediate rebuttal from Kentucky Sen. Rand Paul — opened a rollicking debate in Cleveland on Thursday night that illustrated the carnival atmosphere Mr. Trump has brought to the race.

“But it wasn’t only Mr. Trump stirring the waters. New Jersey Gov. Chris Christie and Sen. Paul had several tense exchanges, including one over government surveillance programs. The 10 candidates on the Fox News debate stage seemed to divide into those eager to mix it up and those — former Florida Gov. Jeb Bush, Sen. Marco Rubio and Govs. Scott Walker of Wisconsin and John Kasich of Ohio — who seemed more intent on sounding presidential. The real-estate mogul’s tell-it-like-it-is performance Thursday may turn unease among the Republican establishment about his candidacy to outright opposition.” http://on.wsj.com/1IRu7Rt

NO BIG CHANGES — WP’s Dan Balz: “The first Republican debate of the 2016 campaign appeared to leave the nomination contest just as it was before. … Trump brought to Thursday’s debate the same sharp tongue and controversial style that has propelled him to the top of the polls in the Republican nomination contest. He was outspoken, bombastic and unapologetic. He did exactly what he has been doing up to now, and it hasn’t hurt him yet. … From here forward, the others in the race might be forced to recalibrate their assessments of whether Trump is a comet flashing across the political skies or someone who eventually will have to be confronted directly in order to stop him.

“Anyone who thought a calmer, cooler — yes, more presidential — Trump would show up in Cleveland, as he had hinted in the days heading into the debate, was probably as surprised as they were earlier this summer when he left his rivals in the dust in poll after poll. … At one point he seemed to cross a line when he sarcastically responded to Megyn Kelly after she had asked an unfriendly question that quoted some of the abusive language he has used to describe women. He later offered a tutorial to Chris Wallace about business and bankruptcy laws when Wallace asked him about the various times his company has declared bankruptcy” http://wapo.st/1K6nG9W

ACKMAN GOES BIG ON OREOS — NYT’s Michael J. de la Merced and Alexandra Stevenson: “By putting $5.5 billion into Mondelez International, a hedge fund billionaire is wagering that the company, which makes Oreos, Cadbury chocolates and Trident gum, could be prodded into selling itself. That would make it only one of many possible takeover targets in the food industry. The emergence of William A. Ackman and his Pershing Square Capital Management as a major investor in Mondelez highlights the widespread belief that opportunities for deals abound in the food sector.

“Though Pershing Square’s regulatory filing on Thursday disclosing its 7.5 percent stake does not elaborate on the hedge fund’s investment thesis, a person briefed on the move has said that the firm believes Mondelez must cut costs, or consider a sale. Mr. Ackman is said to like the aggressive cost-cutting measures announced by the company’s chief executive, Irene Rosenfeld, last year … The cuts followed months of pressure from another activist investor, Nelson Peltz, who had built a stake of more than $1 billion in the company and suggested that Mondelez merge with PepsiCo’s Frito-Lay snack business. He later dropped the campaign and joined the Mondelez board.” http://nyti.ms/1gOeZdr

INVERSIONS DEFY TREASURY CRACKDOWN — FT’s Arash Massoudi in London, James Fontanella-Khan in New York and Barney Jopson in Washington: “An Obama administration crackdown to stop US businesses pursuing takeovers that let them escape the country’s high corporate tax regime was dealt a sharp rebuke on Thursday, after two deals paved the way for more companies to move their domicile to Europe. In separate transactions, three of Coca-Cola’s European bottlers agreed a $27.5bn merger to form the region’s largest distributor of Coke products, while fertiliser maker CF Industries acquired assets from rival OCI for $8bn including debt.

“Both will create new UK-based companies in so-called tax inversion deals, highlighting corporate America’s desire to move its tax base overseas. The deals are a further indication that efforts last year by the US Treasury … have failed to stem interest in the manoeuvre. At least 15 companies successfully struck inversions last year before the Treasury took action to limit the attraction of such deals. Including Thursday’s activity, five large inversions have been agreed in 2015 and several more attempts are under way, including Monsanto’s $45bn pursuit of Switzerland’s Syngenta.” http://on.ft.com/1HuLXo9

AMALGAMATED BACKS $15 MIN WAGE — Amalgamated Bank become the first bank in the nation to pay a $15 minimum wage. http://bit.ly/1T9nmMt

JUDGE OUT AT PEGCC — Bloomberg: “Steve Judge, the private equity industry’s top lobbyist, told executives of the leading firms he will step down later this month … Judge, 61, plans to leave the post Aug. 15, he wrote in a letter to members of the Private Equity Growth Capital Council, a copy of which was obtained by Bloomberg. James Maloney, a spokesman for the council, confirmed the contents of the letter and said the board will begin a search for a replacement.

“The eight-year-old council represents Blackstone Group, Carlyle Group and KKR & Co., as well as smaller private equity firms, in their dealings with U.S. regulators and lawmakers. KKR’s Ken Mehlman, a former chairman of the Republican National Committee, is the current chairman of the council.” http://bloom.bg/1IRtkA9

POTUS Events

WASHINGTON (AP) — Eager for a break from Washington, President Barack Obama is returning to his summer vacation spot of choice, the Massachusetts island of Martha’s Vineyard, a day earlier than originally planned for more than two weeks of hoped-for rest coupled with extended pursuit of his favorite leisure sport: golf.

Obama apparently was so anxious to join the hordes of lawmakers, lobbyists and others who turn Washington into a political ghost town every August that he moved up his departure by a day. He was leaving the White House on Friday afternoon with his wife, Michelle, and teenage daughters Malia and Sasha, instead of on Saturday as initially planned.

Obama plans no public events during the 17 days he will spend on the island situated south of Cape Cod and known as a summer hangout for the wealthy. The vacation will be his sixth on the Vineyard since taking office in 2009. Obama skipped a trip to the island during his 2012 re-election campaign.

He was returning to the same secluded estate he rented last year, a seven-bedroom, nine-bathroom property in Chilmark, on the western part of the island, and valued at $12 million, according to local news reports. The property’s amenities include a dual basketball and tennis court.

With no official appearances on the schedule, Obama will spend his time away from Washington dabbling in his usual vacation activities: leisurely rounds of golf, beach outings, hikes and bike rides with the family, and dinner with Mrs. Obama at some of the island’s top restaurants. He will travel with a cluster of top aides who will update him as developments warrant.

Floor Action

Congress will return September 8.

Announcements

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  • Your problem is causing financial difficulty for you, your family, or your business.
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  • You have tried repeatedly to contact the IRS but no one has responded. We will also help if the IRS has not responded by the date promised.
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  • The right to be informed.
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Krebs Daily Briefing 6 August 2015

International

The Bureaucrats Who Singled Out Hiroshima for Destruction

On May 10, 1945, three days after Germany had surrendered to the Allied powers and ended World War II in Europe, a carefully selected group of scientists and military personnel met in an office in Los Alamos, New Mexico. With Germany out of the war, the top minds within the Manhattan Project, the American effort to design an atomic bomb, focused on the choices of targets within Japan. The group was loosely known as the Target Committee, and the question they sought to answer essentially was this: Which of the preserved Japanese cities would best demonstrate the destructive power of the atomic bomb? General Leslie Groves, the Army engineer in charge of the Manhattan Project, had been ruminating on targets since late 1944; at a preliminary meeting two weeks earlier, he had laid down his criteria. The target should: possess sentimental value to the Japanese so its destruction would “adversely affect” the will of the people to continue the war; have some military significance—munitions factories, troop concentrations, and so on; be mostly intact, to demonstrate the awesome destructive power of an atomic bomb; and be big enough for a weapon of the atomic bomb’s magnitude. Groves asked the scientists and military personnel to debate the details: They analyzed weather conditions, timing, use of radar or visual sights, and priority cities. Hiroshima, they noted, was “the largest untouched target” and remained off Air Force General Curtis LeMay’s list of cities open to incendiary attack. “It should be given consideration,” they concluded. Tokyo, Yawata, and Yokohama were thought unsuitable—Tokyo was “all bombed and burned out,” with “only the palace grounds still standing.” A fortnight later, at the formal May 10 target meeting, Robert Oppenheimer, the chief scientist on the project, ran through the agenda. It included “height of detonation,” “gadget [bomb] jettisoning and landing,” “status of targets,” “psychological factors in target selection,” “radiological effects,” and so on. Joyce C. Stearns, a scientist representing the Air Force, named the four shortlisted targets in order of preference: Kyoto, Hiroshima, Yokohama, and Kokura. They were all “large urban areas of more than three miles in diameter;” “capable of being effectively damaged by the blast;” and “likely to be unattacked by next August.” Someone raised the possibility of bombing the emperor’s palace in Tokyo—a spectacular idea, they agreed, but militarily impractical. In any case, Tokyo had been struck from the list because it was already “rubble,” the minutes noted.

http://www.theatlantic.com/international/archive/2015/08/hiroshima-nagasaki-atomic-bomb-anniversary/400448/

Money, Lust and Kung Fu: Shaolin’s ‘C.E.O. Monk’ Is Under Fire

DENGFENG, China — Incense drifting through ancient cedars. Saffron-robed monks, limbs a blur of movement, making quick work of imagined enemies. The boing of a giant bronze bell calling the faithful to prayer. This is the scene at the fabled Shaolin Temple, a cradle of kung fu and Zen Buddhism nestled in the forests of the central Chinese province of Henan, where legend has it monks have trained in martial arts for centuries. But in recent days, another sound has been wafting across its hallowed grounds: the snickering of tourists trading the latest news about the abbot of Shaolin and his reportedly less than virtuous ways. Over the past week, much of the nation has been transfixed by salacious allegations that the famed abbot, Shi Yongxin, known as China’s C.E.O. Monk for transforming Shaolin into a global commercial empire, is a swindler and serial philanderer who secretly fathered children with two of his lovers, vows of celibacy notwithstanding.  The accusations — new tidbits have appeared almost daily in the Chinese news media — are mostly based on documents released by a self-described former monk at the temple who says the abbot owns a small fleet of fancy cars, has embezzled millions of dollars from a temple-run corporation and has funneled some of the cash to a mistress now living in Australia. Beyond the obvious legal repercussions, the abbot’s apparent lust for women, money and bling runs counter to the virtues of chastity and austere living that he has long sought to personify as one of the most prominent figures in Chinese Buddhism. To his growing legion of critics, the scandal has heightened public cynicism about a society in which greed and crass materialism often seem to trump morality, especially among those in positions of power.

http://www.nytimes.com/2015/08/06/world/asia/shi-yongxin-shaolin-ceo-monk-accused-of-swindling-and-philandering.html?emc=edit_th_20150806&nl=todaysheadlines&nlid=53476364&_r=0

National

S.E.C. Approves Rule on C.E.O. Pay Ratio

After a long delay and plenty of pushback from corporate America, the Securities and Exchange Commission approved on Wednesday a rule that would require most public companies to regularly reveal the gap between the compensation of the chief executive and the pay of the rest of their employees. The rule, which stems from the 2010 Dodd-Frank overhaul of financial regulation, gives companies considerable flexibility in calculating the pay gap, suggesting that the S.E.C. was receptive to concerns about cost and complexity that corporations expressed. Still, the data point, which calculates the ratio of a chief executive’s compensation to the median compensation of a company’s employees, could further stoke the debate over income inequality that has intensified in recent months. Fifty years ago, chief executives were paid roughly 20 times as much as their employees, compared with nearly 300 times in 2013, according to an analysis last year by the Economic Policy Institute. The rule was conceived to help shareholders assess the compensation packages of senior executives. The ratio, for instance, could provide a benchmark for comparing the pay of chief executives at companies in similar industries. The rule starts to take effect in 2017, which means that companies will most likely start reporting the ratio in public financial statements that come out in 2018. The rule passed by three votes to two, with the S.E.C.’s two Republican commissioners voting against it. Mary Jo White, the chairwoman of the S.E.C., who voted in favor of the rule, said the agency’s staff had written a thoughtful rule that honored the intent of Congress when it passed the Dodd-Frank Act. “I want to commend the staff for all of their exceptional and extensive work to craft a reasonable rule that is both flexible and faithful to the terms and objective of the statute,” she said in a statement. But some union analysts said that the agency appeared to give up too much ground in the final rule. “There are definitely weaknesses that we are concerned about,” said Heather Slavkin Corzo, director of investment at the A.F.L.-C.I.O.

http://www.nytimes.com/2015/08/06/business/dealbook/sec-approves-rule-on-ceo-pay-ratio.html?ref=dealbook

Bank of America Starts to Pull Clients’ Money Out of a Paulson Fund

The billionaire investor John A. Paulson is having a rocky year. And at least one major investor may have had enough. The wealth management arm of Bank of America Merrill Lynch is liquidating its clients’ money from one of Paulson & Company’s funds and has put another fund under “heightened review,” according to two people with knowledge of the hedge fund. The bank told its financial advisers on Tuesday that it had submitted a full redemption request for client money in Paulson’s Advantage fund. The bank has also closed another Paulson fund, the Special Situations fund, to new client money and put it on “heightened review,” citing concerns “regarding significant concentration in illiquid investments, as well as heightened volatility and risk profile for the funds,” according to a document that was sent to advisers and seen by The New York Times. The move by the bank was based on months of discussions, according to one person knowledgeable about its thinking, who spoke on the condition of anonymity.

http://www.nytimes.com/2015/08/06/business/dealbook/bank-of-america-starts-to-pull-clients-money-out-of-a-paulson-fund.html?ref=dealbook

 

Elizabeth Warren Slams Republicans for Holding Government Hostage over Planned Parenthood

With talks swirling through Washington that the Senate G.O.P. will push a proposal to defund Planned Parenthood—and that they would attempt to shut down the government in order to do so—Massachusetts senator and progressive voice Elizabeth Warren delivered a blistering speech on the Senate floor on Tuesday to her colleagues. “Do you have any idea what year it is?” she asked. “Did you fall down, hit your head, and think you woke up in the 1950s? Or the 1890s? Should we call for a doctor? Because I simply cannot believe that in the year 2015, the United States Senate would be spending its time trying to defund women’s health-care centers. “On second thought, maybe I shouldn’t be surprised,” she added. “The Republicans have had a plan for years to strip away women’s rights to make choices over our own bodies.” Planned Parenthood has recently been at the center of controversy ever since a group of anti-abortion activists released a series of videos last month claiming that the organization sold fetal organs for profit. Pointing out that federal money doesn’t even pay for abortions, Warren added that the timing of the push was so blatantly tied to the upcoming G.O.P. presidential debate. “This is an all-out effort to build support to take away a woman’s right to control her own body and access to medical care she may need,” she noted.

http://www.vanityfair.com/news/2015/08/elizabeth-warren-slams-gop-threatening-defund-planned-parenthood?mbid=nl_080515_Daily&CNDID=11508510&spMailingID=7962055&spUserID=NTMwMjA5Nzk0MjAS1&spJobID=740660396&spReportId=NzQwNjYwMzk2S0

How Planned Parenthood actually uses its federal funding

The long-running calls for the federal government to cease all funding directed toward Planned Parenthood have once again come to the fore. This time, a congressional vote and debate took shape after an anti-abortion group secretly recorded a series of videos with the organization’s medical officers and staff speaking dispassionately — some would say dismissively — about the work of extracting fetal tissue from aborted fetuses and transferring it to research facilities. And even though the defund Planned Parenthood fight on the Senate floor didn’t move the needle — in terms of actual impacts on funding — it did bring to the fore some important facts about how much federal money goes to the group, and what it’s used for. So, here’s what we know. During the fiscal year that ended June 30, 2014, the most recent for which data is available, Planned Parenthood affiliates around the country received $528.4 million in government funds (a combination of state, federal and sometimes local government dollars), according to the organization’s own annual report and information it’s required to share with the IRS. Those federal dollars were the single largest source of money coming into the organization and its local affiliates, by far. Another $305.3 million came from nongovernment sources, about $257.4 million reached the organization after private donors and foundations made contributions and bequests. The organization also raised another $54.7 million in fees charged for its services. So, government funding — with federal dollars comprising the biggest portion of this part of the organization’s budget — are absolutely critical to Planned Parenthood’s total operation. But, it’s important to note that federal dollars are not used to provide the service at the center of the political debate around Planned Parenthood: abortions. That’s been banned by law in almost all cases since 1976. (The details of the ban have shifted over time.) Instead, the organization uses money from other sources — private donors and foundations as well as fees — to fund its abortion services. All told, abortions comprise about 3 percent of all the services Planned Parenthood provides, according to the organization’s own data. (In 2011, FactCheck.org also examined this question and found the organization’s reports to be accurate) The rest of the organization’s revenue, including government dollars, are used to fund services in a way that breaks down like this: see chart at link below.

http://www.washingtonpost.com/news/the-fix/wp/2015/08/04/how-planned-parenthood-actually-uses-its-federal-funding/?tid=sm_fb

Texas AG Faces Contempt Hearing Over Gay Marriage Rights

SAN ANTONIO — Texas Attorney General Ken Paxton must explain why he should not be held in contempt for enforcing state laws that impede gay marriage rights after the U.S. Supreme Court’s landmark decision, a federal judge ordered Wednesday. Judge Orlando Garcia ordered Paxton to appear in a San Antonio federal court next Wednesday after a Houston gay man was not provided an amended death certificate for his husband. The court order comes just two days after Paxton was booked on securities fraud charges. The hearing is to determine whether Paxton and Kirk Cole, interim commissioner of the Texas Department of State Health Services, should be held in contempt after potentially disobeying a July 7 court order barring the state from enforcing any laws “that prohibit or fail to recognize same-sex marriage,” according to the court order. Garcia further ordered that state officials must provide an amended death certificate to John Stone-Hoskins of Conroe, who had filed court papers earlier Wednesday asking the judge to force Texas officials to place his name on the certificate for his husband, James Stone-Hoskins, who died in January. The two were married last year in New Mexico. He had argued that the U.S. Supreme Court’s landmark decision on gay marriage in June means his name should be placed on his spouse’s death certificate. The ruling required all states to recognize same-sex marriages, even those performed elsewhere, and overturned any legal bans.

http://www.nytimes.com/aponline/2015/08/05/us/ap-us-gay-marriage-texas.html?smid=fb-share

7 Takeaways from Vanity Fair’s 1990 Profile of Donald Trump

Donald Trump has lived the entirety of his adult life in the public eye, leaving behind a trail of bombastic headlines that include accusations of sexual assaultracist rental policies, and more than a mogul’s fair share of other scandals. Twenty-five years ago, this magazine’s Marie Brenner spent some time with Trump for an investigation into the dissolution of his marriage to Ivana Trump. In retrospect, the story has all the trappings of a perfect Trump piece: discord between reality and Trump’s claims about it, accusations of disloyalty, and triumphant highs amid a string of batted-away lows. Here are seven takeaways that still matter.

http://www.vanityfair.com/news/2015/08/donald-trump-marie-brenner-ivana-divorce?mbid=nl_080515_Daily&CNDID=11508510&spMailingID=7962055&spUserID=NTMwMjA5Nzk0MjAS1&spJobID=740660396&spReportId=NzQwNjYwMzk2S0

The Fight That Changed Political TV Forever

Gore Vidal called William F. Buckley a “crypto-Nazi.” Buckley then called Vidal a queer and threatened physical violence. They each knew the single term that could pierce the other’s psyche. hey came loaded for bear. William F. Buckley and Gore Vidal, representing the political poles in America, sat in front of the ABC News cameras in 1968 and, though hired to discuss the events of each party’s political conventions and their path toward their presidential tickets, these men each arrived with the intention of taking down the other. For the good of the nation. During the summer 1968 Republican and Democratic conventions, the United States was in turmoil, the chasm between youth culture and the establishment widening as the war in Vietnam dragged on, killing kids, killing civilians, killing hope. In March of that year, two weeks after the My Lai Massacre, President Lyndon Johnson announced he would not seek reelection. Dr. Martin Luther King was assassinated in April. Bobby Kennedy was assassinated two months later. Riots raged across the United States, in cities large and small. Major publications gave serious consideration to the possibility of a new U.S. civil war. Unlike now, conventions in those days were not a stage play with the outcomes predetermined. In 1968, neither party went in with a clear candidate. Actual politics would be conducted. For the previous several conventions, the three television networks had made it their journalistic duty to cover the proceedings “gavel-to-gavel,” meaning from late afternoon until whenever business was concluded, usually before midnight, but, if there were a floor fight, well into the night. Of the three networks—there were only three then, plus the precursor to PBS—ABC was a distant third. It had been founded later, was less funded, had fewer affiliates. It had neither the resources nor the personalities to draw viewership, and, in 1968, the ABC network chiefs decided they couldn’t afford gavel-to-gavel coverage. It wasn’t that live coverage was expensive; rather, they needed the income that their primetime programming would generate. While NBC and CBS would broadcast political speeches, ABC offered instead The Flying Nun, Bewitched, Batman and Land of the Giants (giving a new meaning to TV as escapism). Then, after its regular nightly news, ABC would offer 90 minutes of what it termed “unconventional convention coverage,” a five-segment nightly summation of the day. They’d open with a synopsis of the day’s events and close with an update. In between was “Correspondents’ Caucus,” a roundtable discussion from the leading ABC reporters; “Closeup” an in-depth analysis of the day’s major events; and “A Second Look,” which featured Buckley and Vidal and was described in a press release: “William F. Buckley Jr. and Gore Vidal will ‘discuss,’ in their usually irreverent fashion, the men and issues. Astute and articulate observers of the political scene, the conservative Buckley and outspoken liberal Vidal are expected to disagree occasionally.” ABC was ridiculed by news organizations from all media for forsaking its journalistic responsibility, but the results of their desperate measure surprised everyone.

http://www.politico.com/magazine/story/2015/08/william-buckley-gore-vidal-debates-1968-121009.html#ixzz3hyDQbKEA

The 10 Worst Moments in Presidential Debates

Lights, cameras, candidates! What could possibly go wrong? Here are the best of the worst moments in presidential debate history:

http://www.nationaljournal.com/pictures-video/the-10-worst-moments-in-presidential-debates-20150805?ref=facebook.com&mrefid=debatemistakes1

The Official GOP Debate Drinking Game Rules, Drive responsibly, ‘Murica’

On Thursday, August 6th, in Cleveland, Fox is hosting the first of many debates between candidates for the Republican Party presidential nomination. Actually there will be two debates. One is for the top 10 poll performers, a list that has now been confirmed to include frontrunner and King of All Media Donald Trump, along with Jeb Bush, Scott Walker, Mike Huckabee, Ben Carson, Ted Cruz, Marco Rubio, Rand Paul, Chris Christie and John Kasich. The second tier of seven candidates – what Trump would call “losers” – now includes Rick Santorum, Bobby Jindal, Carly Fiorina, Lindsey Graham, George Pataki and Jim Gilmore. They will be debating at a kiddie table separately from the other candidates, and will reportedly be euthanized by a veterinarian after the event. Listed below are rules for the GOP debate drinking game. Please do not drink yourself or anyone else to death. The game can be played without Jagermeister, but it’s not recommended. I will be live-Tweeting during the event. Drink THE FIRST TIME:  1. Donald Trump mentions his wealth, or how smart he is. 2. A candidate mentions Benghazi 3. A candidate says, “This president…” 4. A candidate whines about not getting called on enough. 5. Someone promises to “take America back.” 6. Trump interrupts someone by saying, “Excuse me, let me answer that…”7. Anyone mentions Hitler, Nazis or Neville Chamberlain. Includes related imagery, e.g. “ovens.” 8. The crowd cheers a racist/bigoted statement by a candidate. 9. A candidate mentions his poor/hardscrabble upbringing, or a parent who “worked every day of his life.” 10. A candidate talks about “stopping Hillary Clinton.” 11. Anyone warns the U.S. is becoming Greece. 12. Trump refers to himself in the third person. 13. Anyone invokes St. Ronald Reagan. Drink EVERY time a candidate:  14. Claims a positive relationship with a minority. Also known as the, “Some of my best friends are…” rule. 15. Tries to speak Spanish 16. Tries to warm up to the Ohio crowd with an awkward LeBron shout-out. Drink EVERY TIME you hear the word(s):  17. “I’m not a scientist.” 18. “You can keep your doctor.” 19. “ACORN.” 20. “The war on Christians.” 21. “Thug.” 22. “Right here in Ohio.” 23. “Culture of dependency.” TAKE A SHOT OF JAGER AT ANY MENTION OF:  24. “Kenya.” 25. “All Lives Matter.”

http://www.rollingstone.com/politics/news/the-official-gop-debate-drinking-game-rules-20150805

 

State/Local

Alabama House rejects, then approves, $156M Medicaid cut

The Alabama House of Representatives Wednesday narrowly rejected a $156 million cut to the state’s Medicaid program, a controversial move that led to lengthy debate inside and outside the chamber. Minutes later, the chamber reversed itself, approving the cut on another narrow margin. On a 46 to 45 vote, the House rejected an amendment to the General Fund that would have stripped the funding out of Medicaid. House Ways and Means General Fund committee chairman Steve Clouse, R-Ozark, had the General Fund carried over after the vote. House Majority Leader Micky Hammon, R-Decatur, moved reconsideration after the vote. On the second try, the move to cut Medicaid passed 46 to 44. A second vote led to passage of the General Fund, 53 to 40. The cut came out of the House Ways and Means General Fund committee Tuesday after members rejected an increase to the state cigarette tax, a key component of a House Republican plan to balance the General Fund budget. Clouse, who called Medicaid the “foundation” of health care in the state, said it was time to debate the program. That debate occurred Wednesday afternoon, as Democrats and a handful of Republicans expressed opposition to the proposal. Rep. John Knight, D-Montgomery, brought two signs to the podium to express his belief that the cut would be disastrous in Alabama. Knight also defended his no vote on the cigarette tax. “How can you justify an increase in taxes on consumers in state and not address the loopholes in the state?” he said. “There’s something unconscionable about that.” About 20 percent of Alabama’s residents qualify for Medicaid. More than half are children. Rep. April Weaver, R-Alabaster, a health care administrator, also defended Medicaid at the podium. “If anyone thinks this is an entitlement, come see me,” she said. “It is health care infrastructure in this state.”

http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/08/05/alabama-house-rejects-medicaid-cut/31182117/

Hospital leaders criticize plan to cut Medicaid

Hospital administrators say proposed cuts to Medicaid would jeopardize health care for everyone in Alabama, not just the residents who directly benefit from the program. The budget passed by the House yesterday would cut the Medicaid budget by $156 million, or 23 percent. The loss of federal matching funds would increase the funding loss to more than $400 million. State Health Officer Dr. Don Williamson said such deep cuts could end Medicaid in the state of Alabama. The average hospital may have half of its patients on Medicare or Medicaid, but rural and specialty hospitals may have a much higher percentage. Children’s Hospital in Birmingham and Women’s and Children’s in Mobile, for example, serve a population that relies heavily on Medicaid. More than 60 percent of the patients at Children’s Hospital are covered under Medicaid, according to a statement released by the hospital. “Medicaid reductions will not only affect Children’s of Alabama, but all children and communities throughout the state,” the statement read. “The reductions will reduce access to pediatricians, family practitioners and subspecialists who provide a medical home, immunizations, manage chronic conditions, and care for our children throughout Alabama.” Robin Rawls, a spokeswoman for the Alabama Medicaid Agency, offered an example related to Children’s Hospital. If the facility used Medicaid funds to buy an MRI machine, it would then use the equipment to treat all patients, regardless of insurance coverage. If the hospital did not have enough money to buy the equipment, then healthcare for all patients would suffer. That sentiment was echoed by Will Ferniany, CEO of the UAB Health System. “Alabama’s Medicaid program is much more than a health insurance program,” he wrote in an email. “It is a vital part of the state’s health care delivery system and supports the infrastructure of hospitals, physicians, nursing homes, and pharmacies.  In fact, Alabama Medicaid covers the health care needs of nearly one million Alabamians.”  Rural hospitals and nursing homes would also suffer under the cuts, wrote Rosemary Blackmon of the Alabama Hospital Association, in an email. About 60 percent of nursing home residents receive Medicaid, according to the agency. “While the average Alabama hospital might have half of its patients covered by Medicare and Medicaid, the rate can be as high as 75 percent for rural hospitals,” Blackmon wrote.

http://www.al.com/news/index.ssf/2015/08/hospital_leaders_criticize_pla.html

Gulf State Park: Economic Opportunity or Political Pipe Dream

MONTGOMERY— Gov. Bentley is asking the legislature during this 2015 Special Session, to allow him to borrow millions of dollars to build a luxury hotel, and conference center at Alabama’s Gulf State Park; even though there are already two just like it a few miles away. The Governor wants the legislature to approve a $50 million bond for the project, even though around 16 years ago, over $100 million in bonds were issued to build a similar facility on the same site; this, according to former Attorney General, Bill Baxley. He also said the insurance payouts after hurricane Ivan gave the State an estimated $45 million more for Gulf State Park. But, that money has now mysteriously disappeared into another government hole, and Baxley says he’s looked for it, but most of it simply cannot be found. As for the insurance payments there are other estimates but whomever knows for certain isn’t talking. In the 90’s, the plans to build a luxury resort at Gulf State Park never materialized. However, taxpayers were left to pay the bill on what turned out to be a very costly, political pipe dream.

http://www.alreporter.com/archives/2015/146-state/8063-gulf-state-park-economic-opportunity-or-political-pipe-dream.htm

Dr. Don Williamson planning to leave state posts

Dr. Don Williamson, the State Health Officer and director of an effort to change Medicaid delivery in the state, will leave his posts later this year to become president of the Alabama Hospital Association. “This is so hard for me,” Williamson said in an interview Wednesday. “I’ve done almost 20 years in this job. It was the hardest thing.” Williamson has been a common sight at press conferences on various health-related issues, including the recent investigation of Sunnyside Child Care Center in Montgomery over food poisoning. Much of his time in recent years was taken up directing the Medicaid transition. Alabama is trying to move from a fee-for-service model for Medicaid to something closer to managed care, with compensation being awarded based on outcomes. The delivery will not on its own cut Medicaid costs, but advocates hope it will slow or stop the cost growth in the program. Williamson will not lobby Public Health on hospital issues for two years after his departure, and said Wednesday he had turned over his hospital regulatory functions to Chief Medical Officer Thomas Miller. The Alabama House debated a $156 million cut to Medicaid Wednesday. Williamson, however, said the news of his departure was coincidental: He had been waiting for an opinion from the Alabama Ethics Commission about his departure. The Ethics Commission approved the arrangement in an opinion released Wednesday. “At a time when our Medicaid Agency needed major reform, Dr. Williamson more than three years ago stepped up and led the charge to make our Medicaid Agency stronger and more effective for the patients enrolled,” Gov. Robert Bentley said in a statement Tuesday. “We still have challenges to address at Medicaid, including agency funding and full implementation of the regional care organizations.” Williamson said Medicaid Commissioner Stephanie Azar had kept the agency running. “I don’t see the transition slowing down,” he said. “I just won’t be the face of the transition.” As president of the AHA, Williamson said he hoped to work on access to health care and keeping rural hospitals open. He also hopes to secure the flow of funding to hospitals. “Dr. Williamson has had a long and distinguished career in health care and is very aware of the future challenges and opportunities for hospitals and the patients we serve,” said Glenn Sisk, chairman of the Alabama Hospital Association’s Board of Trustees in a statement. “He has a long history of convening diverse groups to accomplish great things for our state.”

http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/08/05/dr-don-williamson-planning-leave-state-posts/31180429/

ServisFirst CEO recalls Brock’s impact on city’s banking industry

When Harry Brock died last week at the age of 89, the Birmingham business community truly lost one of its legends. There are some who say if Birmingham ever had a “Mt. Rushmore of Business,” Brock would be right there in the mix. Brock’s career in banking covered more than 50 years, founding Central Bancshares of the South, Inc., which would later become Compass Bancshares and Compass Bank of the South. He served as chairman and CEO of both firms until his retirement in 1991. When Central Bancshares in 1987 bought a bank in Texas, it became the first bank in Alabama to own a bank in another state and the first out-of-state bank to own a bank in Texas. Brock’s legacy extends far beyond just the banking community, as his contributions of time and funding has helped Birmingham’s Samford University exponentially. But Brock not only influenced business with his bank. He influenced everyone he ever worked with, for or around, as evidenced by the profound effect he had on Birmingham banking veteran and ServisFirst Bank CEO Tom Broughton. “Harry Brock was truly larger than life, and what I think made him so successful as a banker was his positive attitude and tremendous drive,” Broughton said. “He changed the banking industry in our state completely.”

http://www.bizjournals.com/birmingham/news/2015/08/05/servisfirst-ceo-recalls-brocks-impact-on-citys.html?ana=e_du_pub&s=article_du&ed=2015-08-05&u=XLAH3ddK7jyD7KQU5SDF0g0672b937&t=1438810227

Blogs/Opinions

Sick and tired, Alabama leaders screw the sick and tired

I guess we should give them credit for being honest. Two days back in session and Alabama legislators were already sick and tired, unable to find easy solutions or the littlest bit of humanity in souls devoured by politics and their own fears and frustrations. So they did what they always do. They took it out on the sicker and tireder. You know: When problems get to be too overwhelming, slough ’em off on them on the weak and the old, the mentally ill, the voiceless and the voteless.  Screw them. Because that’s way easier than trying to really step up and lead. A House committee on Tuesday refused to tack a 25-cent tax on cigarettes as part of a plan to try to balance the imbalanced budget, so Rep. Steve Clouse, a Republican from Ozark, unleashed another unbalanced beast – a plan to steal $156 million from Medicaid. And it passed the committee. Just like that. To hell with old people in nursing homes. It would jeopardize millions more in federal money and wreck Medicaid, which serves about a fifth of Alabama residents and keeps rural hospitals and other health care facilities from simply giving up the ghost. And maybe that’s the idea. “Are we going to be the first state in the United States of America that finally says, ‘We’re going to do away with the Medicaid system?” Clouse said. “I don’t know, we may make that decision as a citizenry. And it’s time that we had that debate.” Surely it cannot last. Surely it is but a message of frustration from Clouse. Surely, all of sound mind will cry in unison, surely it will not stand. And it probably won’t. It probably won’t even make it out of the House – though anything is possible in this environment. Gov. Robert Bentley has called the Medicaid raid unworkable and wrong. “When you put special interests and politics above people, that is unacceptable,” he said. And let’s face it. This late in the special session he can veto anything that comes out and there is no time left for a legislative override. But the committee’s message is loud and it is clear. It is ominous and it is incredibly revealing. This is a body that puts politics before people. This is a group that would let people die before it would consider raising a tax on a product with a warning label that describes in colorful detail how it kills people. This is a body that would prefer for your grandmother to suffer than to step off its high horse and increase one of the lowest cigarette taxes in the country. This is a body that proudly proclaims its principles. But not its people. Maybe Clouse was serious. Maybe he really does want to debate whether Medicaid — and poor people — are worth saving at all. Or maybe it was symbolic. But the danger of symbolic moves in this environment is that they can become real before anyone knows what hit them. And the ones who get hit the hardest are the weak and the poor, the old and the frail, the sick and the tired. Let’s be honest with ourselves. It’s high time we grew sick of politics that makes more problems than it fixes, tired of weak leaders who are so busy trying to look strong that they put people’s lives at risk. It is time – again – that Alabama grew truly sick and tired.

http://www.al.com/opinion/index.ssf/2015/08/sick_and_tired_alabama_leaders.html

 

Morning Money

MOODY’S MODEL: DEMS HOLD WHITE HOUSE — Via Moody’s Mark Zandi, Dan White and Michael Brisson on the firm’s consistently accurate electoral model: “The model is constructed based on presidential election results since the 1980 Reagan-Carter contest, and captures the impact on voting decisions of the health of state economies in the lead-up to the election as well as the party affiliation and political realities in each state. The model is similar to the one we used to successfully predict President Obama’s victories in 2008 and 2012. … To cut to the chase, we predict that the Democratic nominee for president will win the election by the slimmest of margins with precisely 270 electoral votes. The Republican nominee will fall just short with 268 votes.

“The election model explains the share of the popular vote in each state that the incumbent party will win based on the strength of each state’s economy and its politics. .. The most important economic variable in the election model is the growth in real personal income per household in the two years leading up to the election … It also captures how well households are doing on some of their investments, as it includes dividends, interest income and rents. …

“The economy’s performance strongly favors the Democratic nominee for president. The presidential election model has accurately predicted every presidential election since 1980. Over the nine elections since 1980, the model accurately predicted the winning party in 406 of the 459 elections in the 50 states and DC” http://bit.ly/1HrOEqo

DEBATE Qs 1 — The McGraw Hill Global Financial Institute has 5 pressing economic questions for the GOP candidates: http://bit.ly/1HrOpLX

DEBATE Qs 2 — The Club for Growth has a number of recommendations including for Donald Trump: “You called yourself a liberal on health care and said that you like universal coverage. Earlier this year you applauded the UK’s single-payer system. Why do you support government-run health care? You called for a one-time $5.7 trillion tax. How will raising taxes spur economic growth?” http://bit.ly/1hkpOnq

JOBS DAY PREVIEW — Via Goldman Sachs: “We forecast nonfarm payroll growth of 225k in July, in line with consensus expectations. Many labor market indicators were softer in July, but some important service sector indicators, such as ISM non-manufacturing employment, were significantly stronger. On balance, we expect job growth roughly consistent with the 223k increase in June. We expect the unemployment rate to hold steady at 5.3 percent. Participation should at least partially rebound following an unexpected dip in June”

Standard & Poor’s Beth Ann Bovino: “We expect another month of strong job gains of around 225,000 in July. While the softer than expected ADP private sector jobs survey on Wednesday increased worries that the BLS would disappoint, it may be the case that the ADP survey undershot in July, as has happened in two of the last three months. The unemployment rate will likely hold at 5.3 percent”

HOW THE GOP GOT TRUMPED — POLITICO’s Glenn Thrush and Alex Isenstadt: “Jeb Bush, the man who would be front-runner, was as surprised as anybody when Donald Trump jumped into the 2016 presidential race in June. His instinctive first reaction was to hold his tongue … Now it was Bush’s turn to rage at an outsider. ‘Seriously, what’s this guy’s problem?’ he asked one party donor he ran into recently according to accounts provided by several sources close to Bush — and he went on to describe the publicity seeking real estate developer now surging in public polls far ahead of Bush and all the 15 others in the Republican field as “a buffoon,” “clown” and “asshole.””

“Whatever Bush wants to call Trump, the most accurate appellation heading into Thursday night’s first big Republican debate of the chaotic 2016 contest in Cleveland is the label that should have been Bush’s: “front-runner.” … Bush may yet emerge as the party’s nominee, the third member of his family to claim the mantle, and his aides now claim Trump’s bloviating presence in a record-shattering field of 17 could be a blessing, allowing Bush to fly under the radar. But Trump’s rise has coincided with Bush’s awkward return to the national stage” http://politi.co/1gbBiJ6

GOOD THURSDAY MORNING — For early risers, M.M. is on “Squawk Box” at 6am talking about the debate, which begins at 9:00 p.m. following the b-squad undercard.

SEPT RATE HIKE ODDS RISE — Bloomberg: “Traders have never been more convinced of a September rate hike by the Federal Reserve. … The chances of an interest-rate increase next month reached 52 percent Wednesday, up from just 38 percent just two days earlier. What’s fueled the change of heart? Hawkish comments from Fed Bank of Atlanta President Dennis Lockhart on Tuesday, and a surprisingly strong report on U.S. service-sector growth Wednesday morning. …

“That’s helped drive bond yields higher before the week’s main event, Friday’s monthly report on unemployment and wages from the Labor Department. Fed officials have said that they will need signs of some further improvement in the jobs market before they raise rates. Yields on Treasury one-month bills rose Wednesday to the highest since November, while those on two-year notes touched the highest since 2011. Longer maturities slumped as well” http://bloom.bg/1ImHgR3

BOEING AND GE DUMP EX-IM OPPONENTS — POLITICO’s Anna Palmer and Jeremy Herb: “When House Majority Leader Kevin McCarthy headlined a fundraiser in early June the room was packed with defense industry lobbyists, but reps from one megacontractor were missing — Boeing. … Not only was Boeing absent at that fundraiser, the contractor has cut off all political contributions to the No. 2 House Republican over his support for killing the Export-Import Bank … General Electric, also a major supporter of renewing Ex-Im and a benefactor of the agency, has followed suit and has not contributed to the California Republican this year. …

“Combined, Boeing and GE have halted political contributions to more than a dozen Republican lawmakers opposed to reauthorizing the bank, after cutting checks to those lawmakers during the 2014 election cycle, according to a POLITICO analysis of Federal Election Commission records. And an additional 17 Ex-Im opponents that received contributions in 2014 from one of GE’s political action committees have gotten nothing this year from either company.” http://politi.co/1KS8Vx2

HELLO CLEVELAND: WELCOME TO THE INSANITY — WSJ’s Janet Hook: “Republican candidates will descend on Cleveland for a presidential debate Thursday that obliterates party precedent and tradition: The largest candidate field in the history of televised debates is spilling off the stage, and Donald Trump, a celebrity showman and first-time contender, threatens to steal the show. … Most candidates were meeting behind closed doors Wednesday, plotting to find a way to break out of the unwieldy pack or, in some cases, to improve on shaky performances at a candidate forum earlier this week.

“The showdown will be the first of nine official debates and it will provide a prime opportunity for many candidates to introduce themselves to voters. And, with such a crowded field also vying for volunteers and donors, first impressions will matter. For former Florida Gov. Jeb Bush, the event is the first debate he has taken part in since 2002. … Mr. Trump has had no experience in candidate debates, as this is his first run for public office. He has been reading voraciously on policy issues leading up to the debate and planned to continue studying during the flight to Cleveland” http://on.wsj.com/1IYb6yP

DIVIDED SEC ADOPTS PAY RULE — POLITICO’s Patrick Temple-West: “Bitterly divided SEC commissioners Wednesday adopted a controversial CEO ‘pay ratio’ disclosure rule along party lines as expected, while pro-business groups quickly indicated they are almost certain to sue the agency to void the final rule. After years of political fighting over this provision in the 2010 Dodd-Frank Act, the rule will require companies, beginning in 2017, to publish a comparison of the chief executive officer’s pay and the median annual compensation for all other employees — in the U.S. and abroad, full-time, part-time, temporary and seasonal.

“While companies now must report executives’ compensation, figures for other employees’ pay have not been public before. The final rule includes some changes that are designed to make it easier for companies to follow. They only need to update the median employee compensation once every three years. Companies with foreign workers can exclude up to 5 percent of those abroad from the pay ratio calculation. Companies can also exclude foreign workers in a jurisdiction with data privacy laws that make the company unable to comply with the rule without violating local laws”

OMB’S DONOVAN RIPS BANKING PROPOSALS IN SPENDING BILL — POLITICO’s Zachary Warmbrodt: “A top administration official [Wednesday] said the decision to include a Senate Banking Committee bill that would ease a wide range of financial regulations in a fiscal 2016 spending proposal was a ‘cynical abuse’ of the government funding process. … In a letter to top Senate appropriators, White House Office of Management and Budget director Shaun Donovan highlighted the measure as an example of ‘highly problematic ideological riders’ in a financial services spending bill that the Republican-led Senate Appropriations Committee approved along party lines in July.
“Donovan said the ‘package of unrelated special interest text would undercut Wall Street reform by impeding regulators’ ability to better oversee and address risks in the financial system, eroding safeguards in mortgage markets, letting large financial institutions off the hook for risky practices, and increasing the deficit, all under the guise of ‘regulatory relief.’” http://politico.pro/1T4XDop

DO CEO’s MAKE TOO MUCH? — NYT’s Neil Irwin: “At first glance, it seems like an outlandish question. After all, the ratio of what the C.E.O.s of America’s largest companies are paid to that of average workers has soared from 20 to 1 in 1965 to more than 300 to 1. Corporate chieftains used to be affluent professionals not unlike doctors or lawyers; now they are among the mega-wealthy. … On the other hand, the stewardship of large, complex companies is really important, and anyone who cares about the American economy should want the most capable people in charge of them. … Douglas McMillon, for example, makes more than $19 million a year (including unvested stock grants) to run Walmart, a company with 2.2 million employees and half a trillion dollars in revenue.

“That’s a lot of money, no doubt. But 26 Major League Baseball players make more than that. It is a safe bet that the future of the United States economy depends more heavily on how well Mr. McMillon does his job than how well Albert Pujols does his … All of which helps explain America’s confused approach to regulating executive pay” http://nyti.ms/1HrTaW0

DARK DAY FOR MEDIA STOCKS — FT’s Matthew Garrahan: “Lachlan Murdoch, executive co-chairman of 21st Century Fox, warned that the pace of change and disruption in television would be ‘overwhelming’ for many companies, on a dark day for media stocks. … Shares tumbled across the sector the day after Walt Disney warned of a dip in subscribers and revised its growth forecast for its ESPN channel. Mr Murdoch, leading a Fox investor call for the first time since a recent promotion put him in pole position to succeed his father, Rupert, said the ‘scale and speed’ of change wrought by new distribution channels could be too much for some media companies.

“However, Fox had more upbeat news for its investors. James Murdoch, the company’s new chief executive, said the total number of subscribers at its cable channels would increase in the 2016 fiscal year. … Fox beat analyst estimates for the fourth quarter with modest growth at its cable television channels offsetting a decline in revenues at its movie studio and broadcast network. After closing 7 percent down on the day, Fox shares dropped a further 4.5 percent in after-market trading to $30.50 following the release of the results” http://on.ft.com/1eUcbtu

HENSARLING ON THE PAY RULE — Financial Services Committee Chairman Jeb Hensarling: “[T]he 3-2 partisan vote is disappointing because it is the latest example of the SEC squandering its resources on rulemakings that do nothing to help small business startups and will instead harm U.S. companies and investors. … Chair White prioritized this rulemaking to appease those that want a government regulator-controlled economy. Instead of focusing on rules that would protect investors or facilitate capital formation for small and medium-sized businesses”

BUSH’S GAFFES ANNOYS GOP — POLITICO’s Eli Stokols: “Democratic critics of Jeb Bush’s ad-lib Tuesday about cutting women’s health spending were joined by conservatives, who are annoyed that the inartful statement may undermine their efforts to finally score a win against Planned Parenthood. … Despite his swift damage control efforts, Bush’s casual aside that ‘I’m not sure we need a half a billion dollars for women’s health programs’ threw the Democratic attack machine into overdrive Wednesday. It’s no surprise Democrats would seize any opening on an issue of women’s health and abortion funding, given the party’s reliance — some would say overreliance — on the subject matter in attacking Republican candidates.

“What bothers some conservatives about Bush’s comment, is that it comes as the Republican-controlled Congress is moving ahead with legislation to strip Planned Parenthood’s federal funding amid the outcry over videos that allegedly show organization officials talking about the sale of fetal tissue and organs” http://politi.co/1Druy4M

POTUS Events

2:10 pm The President participates in a video conference to commemorate the 50th Anniversary of the Voting Rights Act

Roosevelt Room

Floor Action

Senators are heading out of Washington for a five-week recess, punting a handful of issues until they return in September.

The Senate is effectively closed for business until Sept. 8, after paving the way to start work on a resolution of disapproval on the Iran nuclear deal as soon as they come back into session.

Senators are heading out of town after an unusually productive first half of the year, during which they passed a budget, an overhaul of the Bush-era No Child Left Behind law, an annual defense policy bill, a bill aimed to curbing human trafficking and a fast-track bill considered key to President Obama’s trade agenda.

Sen. John Cornyn (R-Texas) on Wednesday praised his party’s work since taking over the majority, saying they’ve gotten “pretty good” results.

“The voters in November decided to try something different. They’ve given us a chance to see what we can do when we’re in the majority, and I think the results are pretty good,” he added.

But Democrats have criticized Republicans for eating up floor time on legislation that was unlikely to pass, including a short-term extension of the Patriot Act or a vote to defund Planned Parenthood, despite a packed schedule.

Senate Majority Leader Mitch McConnell (R-Ky.) also punted on a long-stalled cyber bill Wednesday, which drew quick fire from Democrats.

“Everything we did this week — including the Planned Parenthood vote and the consent agreements — could have been wrapped up last week,” a senior Senate Democratic aide said.

The move to push back the Cybersecurity Information Sharing Act (CISA) adds to a growing list of issues that the Senate has to tackle in the back half of the year.

Lawmakers also face deadlines on passing a resolution on the Iran nuclear deal, getting a deal on a long-term highway bill, deciding how fund the government and raising the debt ceiling.

Democrats are pledging to block spending bills until Republicans sit down and negotiate a deal to raise the congressionally-mandated budget caps on defense and non-defense spending.

The already contentious fight over government funding has gotten another hurdle with conservative Republicans suggesting they won’t sign any spending bill that doesn’t defund Planned Parenthood.

Cornyn suggested lawmakers would have to pass a short-term spending bill, though he said it was “premature” to discuss what would be included in it.

Meanwhile, he sought to tamp down speculation that Republicans would let the government shut down, which could undercut McConnell’s push to use the Senate to show that Republicans can govern heading into the 2016 election.

“We’re not going to go there,” he told reporters earlier this week. “I wish there was some way to convince all of you guys that there will be no government shutdown.”

Announcements

 

Hold On to Your Tax Returns; Options for Students, Others to Get Help with Tax Information

IRS Special Edition Tax Tip 2015-16

 

The IRS recommends that you always keep a copy of your tax return for your records. You may need copies of your filed tax returns for many reasons. For example, they can help you prepare future tax returns. You’ll also need them if you have to amend a prior year tax return. You often need them when you apply for a loan to buy a home or to start a business. You may need them if you apply for student financial aid.

 

If you can’t find your copies, the IRS can provide a transcript of the tax information you need, or a copy of your tax return. Here’s more information, including how to get your federal tax return information from the IRS:

 

  • Transcripts are free and you can get them for the current year and the past three years. In most cases, a transcript includes the tax information you need.
  • A tax return transcript shows most line items from the tax return that you filed. It also includes items from any accompanying forms and schedules that you filed. It doesn’t reflect any changes you or the IRS may have made after you filed your original return.
  • A tax account transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income. It does include any changes that you or the IRS made to your tax return after you filed it.
  • You can order your free transcripts online, by phone, by mail or fax at this time.
  • The IRS has temporarily stopped the online functionality of the Get Transcript application process on the IRS.gov website that delivered your transcript immediately. The IRS is making modifications and further strengthening security for the online service. While you can still use the Get Transcript tool to order your transcript, the IRS will send it to you via mail to the last address we have on file for you.
  • To order your transcript online and have it delivered by mail, go to IRS.gov and use the Get Transcript tool.
  • To order by phone, call 800-908-9946 and follow the prompts.
  • To request an individual tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.
  • You should receive your transcript within five to 10 days from the time the IRS receives your request. Please note that ordering your transcript online or over the phone are the quickest options.
  • Keep in mind that the method you used to file your return and whether you have a refund or balance due affects your current year transcript availability. Use this chart to determine when you can order your transcript.
  • If you need a copy of your filed and processed tax return, it will cost $50 for each tax year. You should complete Form 4506, Request for Copy of Tax Return, to make the request. Mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. You should allow 75 days for delivery.

Mortgage Applicants. If you are applying for a mortgage, most mortgage companies only require a tax return transcript for income verification purposes and participate in our IVES (Income Verification Express Service) program. If you need to order a transcript, please follow the process described above and have it mailed to the address we have on file for you. Please plan accordingly and allow for time for delivery.

 

Disaster Victims. If you live in a federally declared disaster area, you can get a free copy of your tax return. Visit IRS.gov for more disaster relief information.

 

Financial Aid Applicants. If you are applying for financial aid, you can use the IRS Data Retrieval Tool on the FAFSA website to import your tax return information to your financial aid application. The temporary shutdown of the Get Transcript tool does not affect the Data Retrieval Tool. You may also click on their help page for more information.

 

If you need a copy of your transcript you should follow the information above to request it as soon as possible. It takes 5 to 10 calendar days for transcripts to arrive at the address the IRS has on file for you.

 

Identity Theft Victims. Did you receive a notice from the IRS about a suspicious return? Has the IRS notified you that it did not accept your e-filed return because of a duplicate Social Security Number? If you answered yes to either question, then you may be a victim of tax-related identity theft. If you are a tax-related identity theft victim you first need to file the Identity Theft Affidavit. If you are waiting for the IRS to resolve your case but need a transcript, you will need to call our Identity Protection Specialized Unit line to process your request. You can call the Unit at 800-908-4490. For more information please review our Taxpayer Guide to Identity Theft.

 

Tax forms are available 24/7 on IRS.gov/forms. You can also call 800-829-3676 to get them by mail.

Krebs Daily Briefing 5 August 2015

International

Kerry Warns Congress About Risk of ‘Screwing’ the Ayatollah

When I met with Secretary of State John Kerry in his office this past Friday, it was apparent that he was in an exceedingly feisty mood, and it’s not easy to display feistiness when you’re trapped, as he was, in a recliner. Kerry, who broke his leg two months ago, will be rid of his crutches soon, which for him is not soon enough, because he’d prefer to do battle in Congress for the Iran nuclear agreement—quite obviously the crowning achievement, in his mind, of his long and distinguished career in public life—with two good legs. Congress is the target of Kerry’s feistiness, as is his close friend and staunch adversary, the Israeli prime minister, Benjamin Netanyahu, who is leading the charge against congressional ratification of the deal. In the course of a lengthy and freewheeling interview—which you will find published in full, below—Kerry warned that if Congress rejects the Iran deal, it will confirm the anti-U.S. suspicions harbored by the Iranian supreme leader, Ayatollah Ali Khamenei, and eliminate any chance of a peaceful solution to the nuclear conundrum:  “The ayatollah constantly believed that we are untrustworthy, that you can’t negotiate with us, that we will screw them,” Kerry said. “This”—a congressional rejection—“will be the ultimate screwing.” He went on to argue that “the United States Congress will prove the ayatollah’s suspicion, and there’s no way he’s ever coming back. He will not come back to negotiate. Out of dignity, out of a suspicion that you can’t trust America. America is not going to negotiate in good faith. It didn’t negotiate in good faith now, would be his point.”

http://www.theatlantic.com/international/archive/2015/08/john-kerry-interview-iran-nuclear-deal/400457/

On Island of Lesbos, a Microcosm of Greece’s Other Crisis: Migrants

LESBOS, Greece — The immigration center here, a cluster of prefabricated buildings surrounded by rows of chain-link and barbed-wire fences, was full again on a recent evening, leaving hundreds of families, some with infants, to find a place among the piles of garbage outside. The toilets were clogged and the temperatures still well above 90 degrees. Flies and mosquitoes were everywhere. “Look, her eyes are sick,” said Ibrahim Nawrozi, a desperate 27-year-old Afghan mechanic, holding up his 10-month-old daughter for inspection. “We are in this garbage three days. We can’t stay here another day.” Since the beginning of the year, the number of refugees and migrants arriving here and on other Greek islands has surged to full-scale humanitarian-crisis levels. Arrivals by sea have surpassed 107,000 through July, according to United Nations figures, eclipsing even the numbers of people reaching Italy. Most of those who arrive on the shores of Lesbos, a popular tourist destination just off the coast of Turkey in the Aegean Sea, are fleeing the wars in Syria and Afghanistan and hoping to head deeper into Western Europe. In June, 15,254 migrants and refugees arrived on Lesbos, according to the Greek Coast Guard, compared with 921 the same month last year. But only squalor awaits them here. They arrive in a country that is deep in its own crisis, with an unemployment rate over 25 percent, banks not fully open and its government all but broke.

http://www.nytimes.com/2015/08/05/world/europe/lesbos-greece-migrant-refugee-crisis.html?emc=edit_th_20150805&nl=todaysheadlines&nlid=53476364&_r=0

National

The Republican Road Block Ahead

We head into the first presidential debate in Cleveland with Donald Trump leading the field and confounding the confident predictions of a slew of pundits that his collapse was at hand—whether after the Mexican-rapists comment, the slam at John McCain as no hero, or other statements that offended elites but only seemed to attract more support from Republican hoi polloi. What explains the Trump bump? The answer is the emerging, even dominant force in the GOP—an angry, anti-establishment, anti-leadership populism that was triggered by the financial crisis and the 2008 bailout, cynically exploited in 2010 and 2012 by the “Young Guns” in the House and other GOP leaders in Congress to convert anger into turnout and elect Tea Party-oriented candidates. This force is now turning on those leaders, creating problems not just in the presidential race, but in a Congress whose leaders face the possibility of implosion ahead. The angry populism has only grown with conservative rank and file incited to expect the repeal of Obamacare and an Obama capitulation on debt-ceiling showdowns and government shutdowns, ending repeatedly in disappointment. The sharp drop in Republican Party favorability shown in a recent Pew survey was driven by disenchantment among Republicans—an 18 percent decline in only six months. Trump has become the lead channel for angry populists. But following behind is Ted Cruz, who rode the wave to his Senate election—beating, in a primary, a bedrock conservative who had the misfortune of being an office holder—and then to his role as a thorn in the side of his own party’s establishment. Cruz upped the ante last week with the unprecedented step of calling Senate Majority Leader Mitch McConnell a liar on the Senate floor as McConnell maneuvered to assuage most of his conference and the business community by securing a vote to salvage the Export-Import Bank. And, the same week, another angry populist, House Republican Mark Meadows, dropped a resolution to remove the Speaker. Two shots across the bows of the top-Republican leaders in Congress both Boehner and McConnell—conservative by any objective standard, but neither conservative or radical enough to satisfy the large and restless populist wing of the party. The dysfunction of the majority in Congress was predictable (and predicted).

http://www.theatlantic.com/politics/archive/2015/08/why-the-gop-needs-to-brace-for-the-road-block-ahead/400499/

U.S. researchers show computers can be hijacked to send data as sound waves

A team of security researchers has demonstrated the ability to hijack standard equipment inside computers, printers and millions of other devices in order to send information out of an office through sound waves. The attack program takes control of the physical prongs on general-purpose input/output circuits and vibrates them at a frequency of the researchers’ choosing, which can be audible or not. The vibrations can be picked up with an AM radio antenna a short distance away. For decades, spy agencies and researchers have sought arcane ways of extracting information from keyboards and the like, successfully capturing light, heat and other emanations that allow the receivers to reconstruct content. The new makeshift transmitting antenna, dubbed “Funtenna” by lead researcher Ang Cui of Red Balloon Security, adds another potential channel that likewise be would be hard to detect because no traffic logs would catch data leaving the premises. Cui showed the system in action for a few reporters ahead of his talk Wednesday at the annual security conference Black Hat in Las Vegas. He said he would release “proof-of-concept” code after the talk, allowing other researchers and potentially malicious hackers to build on his work. Hackers would need an antenna close to the targeted building to pick up the sound waves, Cui said, and they would need to find some way to get inside a targeted machine and convert the desired data to the format for transmission. But the tool’s development over the past two years is another illustration that a broadening array of devices can be manipulated in unpredictable ways and that attackers increase their advantage over defenders as gadgets grow more complex.

http://www.reuters.com/article/2015/08/05/us-hacking-antenna-idUSKCN0QA13P20150805?feedType=nl&feedName=usmorningdigest

Judge Rejects Settlement in American Express Case

It sounded like an innocuous message: “Amex negotiation has gotten crazy,” Gary Friedman, representing merchants in a lawsuit against American Express, said in a text message to his friend and fellow lawyer Keila Ravelo two years ago. “Gmailed u the issue.” On Tuesday, a federal judge called the text, as well as emails from Mr. Friedman to Ms. Ravelo, “egregious conduct,” citing them as the basis for rejecting a proposed $75 million class-action settlement between American Express and a group of retailers that have been fighting for the right to charge consumers more for using Amex’s credit cards. The decision could have ripple effects for another settlement, a nearly $6 billion agreement between many of the same merchants and Visa and MasterCard in 2013. At the time, Ms. Ravelo was a partner at Willkie Farr & Gallagher, a New York law firm representing MasterCard. In his 44-page decision on Tuesday, Judge Nicholas G. Garaufis of United States District Court in Brooklyn said Mr. Friedman’s communications to Ms. Ravelo included confidential information that could have jeopardized the fairness of the proposed American Express settlement.

http://www.nytimes.com/2015/08/05/business/dealbook/judge-rejects-settlement-in-american-express-case.html?ref=dealbook&_r=0

US SEC debates rule governing waiver process for swap dealing firms

The debate over granting waivers to people with a history of regulatory violations heated up on Wednesday, when U.S. securities regulators proposed a process that would permit swap dealers to do business with those who have broken the law. The plan would permit large swap-dealing banks like Goldman Sachs (GS.N) or Morgan Stanley (MS.N) to petition the SEC for waivers so they can employ or do business with individuals who have criminal convictions or were found liable for civil violations, such as fraud. The issue of granting waivers has been controversial at the SEC since last year, when Democratic Commissioner Kara Stein started questioning whether the agency was too often granting waivers to big banks that break the law. Such waivers permit them to continue normal business operations, even if they have been convicted of a crime or found liable for civil fraud. In some cases, companies or individuals who break the law are automatically disqualified from engaging in certain activities, such as private capital-raising, unless the SEC grants them an exception. The SEC’s plan aims to address a measure in the 2010 Dodd-Frank Wall Street reform law, which gives the SEC new powers to police over-the-counter swaps that derive their underlying value from equity or debt products. Large dealers must register with the SEC and abide by rules on capital, margins and business conduct. The law states that dealers or major traders are prohibited from employing or doing business with staffers who are statutorily “disqualified” from participating in the securities industry due to prior misconduct. However, the law gives the SEC wiggle room to grant exemptions.

http://www.reuters.com/article/2015/08/05/us-sec-swaps-waivers-idUSKCN0QA1QB20150805

JPMorgan Ranks No. 1 as Bank Most Crucial to Financial Stability

JPMorgan Chase & Co. is the bank most integral to the stability of the global financial system, followed by HSBC Holdings Plc and Citigroup Inc., according to a U.S. study. U.S.-based banks account for half of the 10 lenders that ranked highest for “systemic importance” in the report released Tuesday by the Office of Financial Research. Bank of America Corp., Morgan Stanley and Goldman Sachs Group Inc. were also in the top 10. The researchers evaluated factors that global regulators use to assess systemic importance, including size, complexity and how difficult the bank would be to replace if it were to fail. U.S. banks “particularly dominate the complexity and substitutability categories,” according to the report, written by the OFR’s Paul Glasserman and Bert Loudis. Banks based outside of the U.S. that were in the top 10 include Deutsche Bank AG, BNP Paribas SA, Barclays Plc and Credit Suisse Group AG. The report said exchange-rate fluctuations could impact the rankings, and is a potential weakness in the criteria used by the Basel Committee on Banking Supervision, a group of international regulators. Banks might be encouraged to “adjust their business near the end of the year solely to offset currency effects,” the researchers said. JPMorgan was also first in a ranking of just U.S. banks that the research office released in February. The OFR conducts studies for U.S. regulators and the Financial Stability Oversight Council. JPMorgan, the biggest U.S. bank by assets, has a shortfall of as much as $12.5 billion to meet capital rules approved by the Federal Reserve last month. The New York-based lender was assigned the highest capital surcharge of the eight large U.S. banks that must comply with the new Fed rule.

http://www.bloomberg.com/news/articles/2015-08-04/jpmorgan-ranks-no-1-as-bank-most-crucial-to-financial-stability

Lawmakers Tap Campaign Funds to Pay for Criminal Defense

As more and more New York politicians find themselves in handcuffs, some lawmakers have questioned whether the criminal justice system is giving them a fair shake. But one advantage that the elected officials have over a lot of other criminal defendants is a pool of money they can tap to hire seasoned pros to represent them in court. Whether lawmakers are facing charges of drunken driving or political corruption, they’ve been aided by campaign war chests that have doubled as criminal defense funds, reports the New York Times NYT +0.30%, which tallied up the scandal-related legal fees: The New York Times examined the spending of 41 elected officials who have been connected to a scandal or investigation since 2005; those 41 politicians have spent at least $7 million of campaign funds on legal fees, based on a review of Board of Elections filings from 2005 to the present. The recent rash of arrests and convictions of Albany lawmakers has intensified the practice: Since mid-January, state lawmakers either accused of wrongdoing or simply caught up in a broader scandal have spent at least $1.9 million in campaign funds to cover their legal fees…The campaign of Assemblyman Sheldon Silver, one of the most powerful politicians to be indicted, has spent more than $1.5 million this year alone to pay for lawyers. Mr. Silver, a Democrat, resigned as speaker of the Assembly after he was arrested in January on federal corruption charges; his trial is scheduled for November. The article notes that state election law requires that spending of contributions be related to a “political campaign or the holding of a public office or party position.” Lawmakers say the scandalous circumstances that necessitate legal defense fit the bill, particularly in a job where getting in trouble with the law is practically an occupational hazard. A spokesman for Mr. Silver told Law Blog the lawmaker has complied with the law. Still, the donor-subsidized legal expenditures don’t sit well with good-government advocates, including Lauren George of Common Cause New York. “Campaign funds should not be used to keep someone out of jail,” she told the Times. “And most donors didn’t have that in mind when they contributed.”

http://blogs.wsj.com/law/2015/08/04/lawmakers-tap-campaign-funds-to-pay-for-criminal-defense/

A House GOP leader asked for Obamacare horror stories. Instead, she got love letters.

As we look ahead to Thursday night’s presidential debate, I’m interested in the question of what candidates will be saying about their plans for Obamacare now that it’s up and running and people are receiving subsidized health insurance plans. After all, it gets pretty difficult, politically speaking, to take something away from people that they already have. I’m reminded of what happened back in March when Cathy McMorris Rodgers, chair of the House GOP conference, took to Facebook to commemorate the fifth anniversary of the Affordable Care Act by asking to hear real-life horror stories from real people. This week marks the 5th anniversary of #Obamacare being signed into law. Whether it’s turned your tax filing into a nightmare, you’re facing skyrocketing premiums, or your employer has reduced your work hours, I want to hear about it. Please share your story with me so that I can better understand the challenges you’re facing: http://mcmorris.house.gov/your-story/ Top of Form

Bottom of Form

Instead she got this:

http://www.vox.com/2015/3/26/8296863/mcmorris-rodgers-obamacare

Cops Thought They Killed the Security Cameras—Then They Ate the Pot

Police officers disabled all but one of the pot dispensary’s cameras. Now they claim it was illegal to record them chowing down on the edibles. They were expecting this to happen, and they were ready. The folks at Sky High Collective in downtown Santa Ana had heard that local police had begun aggressively raiding medical marijuana dispensaries like theirs, and that their day was likely coming. They trained their dozen or so employees in what to do if and when it happened—first, look after the safety of their patients, any one of whom could be seriously ill; second, comply with the officers’ orders and don’t say anything beyond telling them their names and birthdays. They had even kept around a patient advocate who volunteered in their lawyer’s office to help handle things if and when it all went down. Still, when 12 officers charged in on May 26, some of them with their guns drawn and in masks and others with battering rams, it was a shock to employees and especially to the four or five patients there for what some call bud and others medicine. They were there on charges that the dispensary was operating without a proper business license, a misdemeanor, but according to witnesses, they were acting like they were gearing up to take down Tony Montana. “The police behaved very animal-like when they entered the dispensary,” said Marla James, the patient manager that day and a woman who gets around in a wheelchair. “I kept asking them for the search warrant and they would not show it. They said, ‘When we are good and ready we will show you the search warrant.’” “They were being bullies and I stand up to bullies. I know what my rights are and I know what the rights are for the patients too.” The officers also seemed keen to ensure that there would be no record of their actions that day, quickly dismantling and destroying the video cameras that were mounted on the walls of the dispensary. Or at least they tried to: At the advice of their attorney, the Sky High purchased an additional camera, a “nanny cam” well hidden on a high shelf—so well hidden in fact that James declined to say where because they might need to use it again someday. What that camera saw is now adding a new chapter to an ongoing and tragic American saga of the profoundly troubling behavior that some police officers engage in when they think no one is looking. It saw one male and one female officer talking threateningly about James, who is missing her left leg. “Did you punch that one-legged old Benita?” asks the guy. “I was about to kick her in her fucking nub,” the lady cop appears to reply. So what did James do to rile the cops up so much? She told the truth and she exercised her legal rights.

http://www.thedailybeast.com/articles/2015/08/05/stoned-cops-forgot-to-kill-security-cam.html

State/Local

Hubbard Uses Judge’s Words To Spin Continuance

MONTGOMERY—Speaker Mike Hubbard’s criminal defense team is twisting the words of trial Judge Jacob Walker III, to justify asking the court for a continuance. In the latest motion to delay Hubbard’s trial on 23 felony counts of public corruption, his criminal defense team writes, “In the conference call of July 22, 2015, this Court expressed its concern that this case would not be ready for trial in October. The Court noted that in this case “it will be like summoning jurors for a capital murder case, as far as the numbers that we’re going to need” and that the summons will need to be issued 40 to 45 days before trial.” (See Motion to Continue.) A respected Montgomery legal professional speaking on background said that “Twisting Judge Walker’s words is not going to make him happy.” Others predict the motion will be denied, while others see this as a desperate attempt by Hubbard to hang on to power as long as possible. Hubbard’s court date is set for October 19, almost a year after his indictment. Judge Walker has repeatedly said he wanted to keep to the schedule agreed upon almost a year ago. The defense team, once again, cites problem reading the 2.4 million pages of electronic documents that were a part of the Grand Jury investigation. Sources with a general knowledge of this type of file say the argument here is just another stalling tactic.  Hubbard’s criminal defense team also states, “Significant legal issues have yet to be resolved by this Court.” The court is scheduled to address those this month, but Hubbard’s lawyers keep pilling on more motions.  Hubbard’s white collar criminal defense attorney, J. Mark White has indicated that he plans to challenge the constitutionality of the ethics laws that his client is accused of breaking, the very laws Hubbard and former Gov. Bob Riley championed in 2010.

http://alreporter.com/archives/2015/146-state/8062-hubbard-uses-judge-s-words-to-spin-continuance.html

 

UPDATE: No Ebola found in Birmingham patient, family members, firefighters

UPDATE 9:03 a.m. Birmingham Fire and Rescue officials confirm tests of the patient, family members and firefighters were negative for the Ebola virus. A patient exhibiting Ebola-like symptoms was admitted to University of Alabama-Birmingham Hospital Tuesday night, and eight others are being quarantined or monitored after coming into contact with that patient. Officials said the patient is considered “at low risk” for having the disease, but multiple agencies are taking necessary precautions. The patient will be tested for Ebola tonight, and the results of the test should be released tomorrow. “We had a situation today in which somebody who had recently traveled to a country where there are still some active cases of Ebola had been returned to the U.S.,” Jefferson County Medical Director Edward Khan said. “This person would fit into our low-risk category, meaning they did not come into contact with any known Ebola cases while over there, and they didn’t participate in any high-risk activities such as burial ceremonies or health care work.” Two Birmingham rescue workers who came into contact with the patient were also taken to UAB Hospital, where they are being quarantined overnight. Two family members of the initial patient have been asked by officials to remain inside their home in the 1600 block of 17th Street SW overnight, Birmingham police Lt. Joe Roberts said. Roberts said police would be guarding the home Tuesday night. Additionally, four other Birmingham emergency responders were quarantined outside the home and later taken to a firehouse inside the Birmingham city limits, where they will remain overnight for monitoring.

http://www.al.com/news/birmingham/index.ssf/2015/08/birmingham_firefighters_quaran.html#incart_breaking

 

Gambling legislation clears first legislative hurdle
Gambling legislation has cleared its first hurdle in the Alabama Legislature. The Senate Tourism and Marketing Committee voted 6-2 Tuesday to establish a state lottery and casinos at four existing dog tracks.

 

http://altoday.com/archives/5165-gambling-legislation-clears-first-legislative-hurdle

 

Special Session: Cigarette tax defeated

Alabama Governor Robert Bentley’s plan to solve the state’s budget problems was handed its first major blow Tuesday as the House General Fund Ways and Means Committee snuffed out his proposed cigarette tax increase. The close vote, 8-7, happened right in front of the governor. He whispered something to Committee Chair Steve Clouse afterward and the committee recessed until 4 p.m. The defeat of the 25 cent cigarette tax increase so early in the special session was a bit of a shock for some, and without it there will have to be a major overhaul to the General Fund. The tax was expected to bring in around $66 million to the state’s coffers. Now that it has failed, there will need to be a major shift in the budgeting process. Governor Bentley’s office believes there is still some life in the bill. The committee can still bring it back up after the recess,but there is no guarantee that will happen. Alabama’s General Fund is facing a more than $200 million shortfall for the upcoming fiscal year, which starts on October 1.

http://www.wsfa.com/story/29707774/special-session-cigarette-tax-defeated

 

Alabama House committee approves pieces in budget puzzle

The House Ways and Means Education committee today approved several bills that the chairman called “pieces in the puzzle” to resolve shortfalls in the General Fund budget. The General Fund faces a projected shortfall of $200 million next budget year, which begins Oct. 1. The committee approved a bill to adjust the education Rolling Reserve Act to allow a one-time payment of up to $50 million to the General Fund for the 2016 budget. The committee approved another bill to benefit the General Fund that would take effect with the 2017 budget year. That bill, by Rep. Bill Poole, R-Tuscaloosa, the budget chairman, would move an estimated $225 million in annual revenue from the use tax from the Education Trust Fund to the General Fund, along with about $187 million in spending obligations. That would mean a net gain of about $38 million for the General Fund. Poole said he intends to make sure that the net loss to the ETF resulting from the two bills would be offset by other revenue sources. Poole said he would oppose any plan that takes away education dollars to fix the General Fund, saying that investment in education is the best way to expand the economy and boost revenue long-term. “That’s how we grow ourselves out of the problem that we have,” he said.

http://www.al.com/news/index.ssf/2015/08/alabama_house_committee_approv_2.html#incart_river

Panic Over Campaign Cash for Legal Defense

MONTGOMERY—Word around the State House is Speaker Mike Hubbard (R-Auburn) is in a panic to find sponsors for a bill that would exempt campaign contributions used for legal fees as being considered a “thing of value.” Even before Hubbard was indicted on 23 felony counts of pubic corruption, he was using campaign contributions to pay attorneys. Many believe that is contrary to the controversial Attorney General’s opinion from 2000. A 2000 opinion by then Attorney General Bill Pryor reads, “Excess campaign funds may be used by an incumbent office holder to pay legal fees incurred pursuant to the defense of a criminal indictment if the indictment is related to the performance of the duties of the office held.” It is important to note that an Attorney General’s opinion does not carry the weight of law. However, during the 2015 Regular Session , the Republican supermajority codified that opinion into law and expanded it allowing public office holders to use campaign contributions for, “Legal fees and costs associated with any civil action, criminal prosecution, or investigation related to conduct reasonably related to performing the duties of the office held.” What has not been address is whether this new law conflicts with the ethics laws passed in 2010. State ethics law – Section 36-25-6 passed by the Republican supermajority in 2010 states: “Contributions to an office holder, a candidate, or to a public official’s inaugural or transitional fund shall not be converted to personal use.” The code also states in Section 36-25-5.1: “(a) No lobbyist, subordinate of a lobbyist, or principal shall offer or provide a thing of value to a public employee or public official or to a family member of the public employee or family member of the public official; and no public employee or public official or family member of the public employee or family member of the public official shall solicit or receive a thing of value from a lobbyist, subordinate of a lobbyist, or principal. Notwithstanding the foregoing, a lobbyist, or principal may offer or provide and a public official, public employee, or candidate may solicit or receive items of de minimis value.” Hubbard has received hundreds of thousand of dollars from PACs controlled by lobbyists, as well as principles who have business before the legislature. Thomas B. Albritton, Director of the Alabama Ethics Commission said that his office has not been asked to issue a formal opinion on whether using campaign funds for a legal defense is in conflict with the current ethics laws; but, said, “That  raise is an interesting question. It is one that would make the subject of a good formal opinion request. But, we have not been asked to consider that issue.” Now, it appears that there may be even more trouble for the embattled speaker, who has relied on large campaign contributions from corporate big-wigs to mount an ever expanding and expensive legal defense.  Money from PACs controlled by lobbyists, which previously flowed abundantly into Hubbard’s campaign coffers, has now vanished into his legal fees.

http://alreporter.com/archives/2015/146-state/8071-panic-over-campaign-cash-for-legal-defense.html

 

Blogs/Opinions

The squirrels and others

The Alabama Legislature came back into special session this week, after a three-week pause to build consensus on solving the state’s $200 million deficit in the state General Fund budget (SGF). Lawmakers are rested and ready to get to work. They are focused, committed to finding a solution to this latest of Alabama’s serial budget crises. Lawmakers are determined to stay on track and not to get distracted by . . .Squirrel! Marriage licenses? We don’t need no stinkin’ marriage licenses. On the first day back to solve Alabama’s financial crisis, a Senate committee passed a bill that’ll take Alabama probate judges out of the marriage license business. That is, of course, a direct response to the U.S. Supreme Court’s earlier ruling that legalized same-sex marriages across the nation. Some Alabama probate judges refused to issue any marriage licenses rather than issue a few to same-sex couples. I guess where some Alabama probate judges are concerned, same-sex marriages ARE a threat to traditional marriages after all. We won’t have marriage licenses for anybody, just civil contracts. The Legislature’s response, in a special session specifically to fix the state’s budget, of which marriage licenses have no impact: Make spouses file a signed marriage contract at probate judges’ offices. The bill will need a two-thirds vote because it wasn’t part of Gov. Robert Bentley’s special session call. But don’t think the budget isn’t on lawmakers’ minds. The House Ways and Means General Fund committee defeated a bill to raise the cigarette tax by 25 cents a pack, which IS part of Bentley’s special session call. This would raise about $65 million a year, going a long way to solve the SGF shortfall. Alabama has one of the lowest cigarette taxes in the nation, yet our state has no real tobacco industry. Still, 25 cents extra for a pack of cigarettes is a no-go. Even though it would discourage teen smoking, bring in lots of money, and still leave Alabama with one of the lowest cigarette taxes in the nation. At least lawmakers remain determined to fix the budget in some other way. They’re not going to zero in on side issues that have nothing to do with repairing the ailing budget  . . .Squirrel! Squirrel! The Senate Finance and Taxation General Fund Committee did approve a bill that will allow people to carry loaded handguns in their cars without a concealed carry permit. No, that won’t help the state budget, but it’ll likely make road-rage interactions more interesting; it’ll give law enforcement officers something else to think about then they stop somebody for a DUI or for speeding. This isn’t a new idea. The bill has been introduced in previous sessions, but hasn’t yet passed, thank goodness. Right now, people must have a concealed carry gun permit if they want their Glock 9mm to ride beside them — or they must keep their handguns locked away and unloaded. What our state needs more than anything else is easier access to guns and the ability to keep them loaded and close by. That’s much more important than a piddlin’ $200 million deficit in the SGF. Focus, lawmakers. Focus. Remember, the budget! We need a budget, and by Oct. 1. Squirrel!!! This one is sure to make the SGF whole. Bills were introduced this week to make it a class B felony to offer or accept money for aborted fetuses. This brilliant state law was inspired by the secretly recorded videos of Planned Parenthood officials perhaps discussing selling fetal tissue. Who cares if it’s already a federal crime to make such deals? This special session of the Legislature, paid for by Alabama taxpayers, may have been called to solve problems in the budget, but there are more other considerations, too. Like being on the right side of a polarizing issue when elections roll around. So here we have it. A special legislative session called by Bentley in early July to fix a serious budget crisis; a three-week vacation break by lawmakers to mull over proposals to do that; and a Legislature returned, all mulled out, and determined to tackle issues like marriage equality (already settled), loaded guns in cars (a horribly dangerous idea, no matter how much we love our firearms) and a redundant law outlawing the selling of fetus tissue (which is already outlawed by the federal government). Yes, we may have to pay for another special session on the SGF, because so far it looks like the squirrels are winning the day.

http://www.alreporter.com/archives/2015/146-state/8072-the-squirrels-and-others.html

Can porn tax get Alabama off (its budget crisis)?

Alabama is facing a fiscal crisis, but it’s been a struggle to get anyone to pay attention. Ho-hum. The state has a hole in its General Fund budget of at least $250 million. Sigh. Lawmakers returned this week to Montgomery for a special session called by the governor to fix the problem. Their choices: Cut funding for prisons, Medicaid and mental health, raid the Education Trust Fund, or do the unthinkable — raise taxes. Yawn. Those hikes potentially include new or higher taxes on tobacco products, vaporized nicotine, and business privilege taxes. Is any of this going to be on the test? And porn. What? State Rep. Jack Williams, R-Vestavia Hills, has proposed a 40 percent sales tax on “receipts from the sale of sexually oriented materials.” What does that even mean? The bill defines “sexually oriented materials” as “any book, magazine, newspaper, printed or written matter, writing, description, picture, drawing, animation, photograph, motion picture, film, video tape, pictorial presentation, depiction, image, electrical or electronic reproduction, broadcast, transmission, video download, telephone communication, sound recording, article, device, equipment, matter, oral communication, depicting breast or genital nudity or sexual conduct.” Forty percent? That’s a lot. Yes, and that’s on top of the state, city and county sales taxes already in place, which usually runs up another 10 percent in costs. So what counts as porn? I’ve heard the argument that you know it when you see it, but what about Fifty Shades of Grey? According to the bill, it would not apply to “motion pictures designated by the rating board for the Motion Picture Association of America by the letter ‘R’ for restricted audiences, persons under 17 years of age not admitted unless accompanied by parent or adult guardian, or the designation ‘NC-17’ for persons under 17 years of age not 25 admitted.” Under this law, Fifty Shades of Grey the book might be porn, but the movie, which is rated ‘R,’ might not be. We’ll just have to see. How much money could this possibly raise? That, too, remains unclear. The Alabama Legislative Research Office has written an analysis, called a “fiscal note,” but it only says that it will have a positive impact on the state’s General Fund. That could mean a penny or a billion dollars. No one really knows. But this is Alabama. Sex toys and what not weren’t even legal here until a decade ago. Is this state really going to be affected by this? Possibly after Alabama games, especially if the Tide loses. Analytics released by PornHub.com show Alabama fans really went to town after the Sugar Bowl. I’ve heard the term ‘growth tax’ thrown around a lot, but I don’t know what that means. I’m not even going to go there. Surely, this isn’t serious, is it? It is serious, and don’t call me Shirley. If Alabama doesn’t pass a balanced General Fund budget by October 1, the state could face a government shutdown. I don’t care about that. I mean, does this thing stand a chance at passing? Williams has signed on 26 co-sponsors for his bill, including Alabama House Speaker Mike Hubbard, the chairman of the Rules Committee and the chairman of the General Fund Budget committee. This morning I asked Williams whether people should take this seriously. “Probably they will start taking it seriously when they have to pay it,” he said. “We have created a class of products in this state that you have to be 18 to purchase and they have excise taxes on them. The state is broke.” Williams thinks he has strong enough support in the Alabama House and Senate, and the governor indicated he’d support it earlier this summer, he said. I’m not sure you answered my questions. Will I still be able to afford HBO? I’m not sure, but I’m going to go out on a limb here and say yes. Cinemax might be a different story. So what am I supposed to do for  … you know … sexually oriented materials? You could always just read the bill.

http://www.al.com/opinion/index.ssf/2015/08/can_porn_tax_get_alabama_off_i.html

Gambling fever turns to Goat Hill psychosis

If you want to understand why legalized gambling is a bad idea, look at what happened in Montgomery on Tuesday. There are a number of reasons to be suspicious of gambling as a solution to the state’s budget woes. For starters, it’s another no-growth tax that primarily impacts low-income families. But forget that. It’s an industry that’s already over-saturated, with Wall Street ratings agencies saying that it’s a rotten investment. But never mind that, too. The trouble with gambling is that no matter what you think about (insert your favorite special interest boogeyman here — the Alabama Education Association, the Business Council of Alabama, ALFA, etc.) they don’t hold a candle to what gambling could do. It will hover over this state like that spaceship from “Independence Day,” blocking out the sun. Already, Montgomery is sweating like a gambling addict passing a racetrack. Let’s be perfectly clear about something — there is nothing that gambling money can do to fix the state’s budget problems this year. Not only that, but there’s probably nothing that gambling money could do to fix the state’s budget problems next year, either. Whether you’re talking about a lottery or casino gambling — even if the Alabama Legislature approved legalized gambling tomorrow — both would have to go before the people in a referendum on a constitutional amendment. Add to that another year or more to get casinos and a lottery running and you’re looking at 2017 or 2018 before the state would see a dime. Alabama needs money now. But gambling fever is getting in the way. On Tuesday, the Alabama House’s General Fund budget committee considered a package of bills, including an Alabama General Fund budget and an increase on cigarette taxes. The tax increase went before the committee first. The bill would increase the tax on cigarettes by a 25 cents per pack. It was projected to raise $66 million for the General Fund, and has been considered the most politically palatable tax proposal in this special session. And they shot it down. Democrats on the committee voting against it included Reps. Laura Hall of Huntsville, Napoleon Bracy of Mobile, John Knight of Montgomery and Pebblin Warren of Tuskegee. Republicans voting against it included Reps. Mike Holmes of Wetumpka, Mike Millican of Hamilton, Arnold Mooney of Birmingham and Chris Sells of Greenville. Altogether the tax failed by an 8-7 vote. In Alabama, that’s what counts as bipartisanship, which is weird considering that the cigarette tax was part of the Democrats’ legislative agenda in the regular session earlier this year. Lawmakers’ gambling fever has gotten so bad that it’s now inflicting brain damage. With the rug pulled out from under him, committee chairman Steve Clouse did the only thing, really, that he had left. He pulled the General Fund budget he wanted, which included the cigarette taxes and level-funding for Medicaid, and he replaced it with a budget to cut Medicaid by $156 million — a 23 percent reduction in the state’s contribution. If those cuts stick, Alabama’s Medicaid system will likely collapse, State Health Officer Don Williamson said. Clouse is no bully. In fact, he’s probably the most mild-mannered, even-tempered and honest lawmaker you’ll find on Goat Hill. But he’s a realist, even if some of his colleagues on his committee aren’t. But on Tuesday, he cracked. Call it gambling fever-induced psychosis. The message of this draconian budget is simple. You don’t want to raise taxes? Then let’s kill the poor, instead. Gambling fever must break, or it’s going to put a lot of people in the hospital. Only now there won’t be any way for them to pay the bills.

http://www.al.com/opinion/index.ssf/2015/08/gambling_fever_turns_to_goat_h.html

 

Morning Money

GOP DEBATE PREP — POLITICO’s Ben White: “When the Republican candidates take the debate stage in Cleveland on Thursday night they will confront an American public deeply anxious about the state of the economy and desperate for a fresh voice to offer a way out. … So far, that voice has largely belonged to Donald Trump, the brash billionaire whose promises to crush China and create tens of millions of new jobs propelled him to big leads in national polls.

“The task facing Jeb Bush, Marco Rubio, Scott Walker and the rest of the top tier in the GOP field is to acknowledge the current national malaise and present credible ideas that go beyond Trump’s braggadocio. It will be an especially difficult job, historians and political strategists say, because unlike Trump, none in the top tier have the kind of private sector success story or outsider, maverick credentials that are so tantalizing to disaffected voters right now.

“Bush will have to begin convincing voters his plan to double the nation’s economic growth rate is something more than a talking point. Rubio will have to translate his Reaganesque anecdotes about hard-working people keeping more of their paychecks into something more concrete. And Walker will have to prove that he has a vision broader than just busting unions.

STATE OF NATIONAL DISMAY — “The problem right now for all these candidates is that we have settled into this general state of national dismay. No one is happy and no one really believes that anyone can fix it anymore,’ said Jason Johnson, a political historian and professor at Hiram College. ‘People gravitate to Trump because he’s made money and built stuff and been very successful. None of the other Republican candidates can really say that and will have a hard time convincing anyone they have the answers.’

“The stakes on Thursday are perhaps highest for Bush, whose candidacy is based on a bold promise to double the current economic growth rate to 4 percent. Bush has seen his support fade as Trump’s has risen. Thursday’s debate offers the former Florida governor his first big chance to slow Trump’s rise and convince GOP primary voters that he offers something new despite his dynastic last name and massive establishment financial support.” http://politi.co/1M4kTlY

WHY THE TOP LINE ECON NUMBERS DON’T MATTER — Per a senior Democratic congressional aide: “I think one thing people tend to fail to appreciate is the extent to which the indicators Washington obsesses over have become more and more remote from most peoples’ actual lives. Productivity and GDP meant more when people actually shared in it. And same for employment rates — it meant more when more people were on the labor force.

“Now you see a small fraction of zip codes whose further wealth accumulation depends on this stuff — but distressed communities everywhere else are falling further and further behind and live with rising economic fragility and uncertainty regardless of what talking heads are saying on cable news about the go-to economic indicators. It just isn’t resonant with the larger patterns they are living with. So I think there’s something going on more than just the animal spirits point (though I don’t disagree with that).”

DEBATE FIELD SET — POLITICO’s Steve Shepard: “Chris Christie and John Kasich are in. Rick Perry is out. And Donald Trump will be center stage. The jockeying to win a ticket to the first Republican presidential debate in Cleveland ended Tuesday afternoon, when Fox News announced the roster of 10 candidates who will be on the stage Thursday evening. … The candidates, drawn from an average of the five most recent national polls, ranked from first to tenth: Trump, former Florida Gov. Jeb Bush, Wisconsin Gov. Scott Walker, former Arkansas Gov. Mike Huckabee, neurosurgeon Ben Carson, Texas Sen. Ted Cruz, Florida Sen. Marco Rubio, Kentucky Sen. Rand Paul, Christie and Kasich.

“Perry, the former three-term governor of Texas whose performance in the debates four years ago helped doom his campaign, finished in 11th place, eight-tenths of a point behind Kasich. Former Pennsylvania Sen. Rick Santorum, Louisiana Gov. Bobby Jindal, former Hewlett-Packard CEO Carly Fiorina, South Carolina Sen. Lindsey Graham, former Virginia Gov. Jim Gilmore and former New York Gov. George Pataki are farther behind. The top 10 candidates will debate in a two-hour event at 9 p.m. Eastern Time on Thursday night. The also-rans will be invited to appear at a separate, one-hour debate, which airs at 5 p.m. Eastern.” http://politi.co/1SKV3Jm

HOW JEB SPENT HIS WALL STREET YEARS — WSJ’s Justin Baer: “Ten weeks before the collapse of Lehman Brothers Holdings Inc., a financial disaster that ushered in the global economic crisis in September 2008, Jeb Bush was in Mexico City to seek help from billionaire Carlos Slim. … . Mr. Bush signed on with Lehman after leaving the Florida governor’s mansion, making it clear he wanted work as a hands-on investment banker rather than hold a ceremonial role typically given ex-politicians. Now was his chance. … More doors closed that summer before Lehman shut its own, but Mr. Bush, following in the footsteps of a grandfather and great-grandfather, latched onto investment banking through the worst downturn since the Great Depression.

“For more than seven years, nearly the length of his two gubernatorial terms … spent as much as half of his working hours advising Lehman and later Barclays, which bought the collapsed investment bank’s U.S. business. He wasn’t an employee of the firms … but was paid to attend meetings, dinners and conferences where he spoke to clients and bank executives on such subjects as health care, education, immigration and energy — matters he has started taking up this year with voters. Mr. Bush earned about $1.3 million a year at Lehman and some $2 million from Barclays

“Mr. Bush received a warm welcome on Wall Street, where financial firms often seek former political figures to help open doors. At least six firms offered Mr. Bush a position when he finished his second term as governor in January 2007, according to people familiar with the matter. … Mr. Bush would spend most of his time at Lehman working under Steve Lessing, who had been a “Ranger” for George W. Bush, a title for supporters who raised at least $200,000 for Mr. Bush’s 2004 presidential campaign. Mr. Lessing headed client-relationship management and was the face of the firm to many money managers, hedge funds and insurance companies. Mr. Bush soon drew the attention of Lehman’s senior investment bankers, who looked for ways to put him in front of clients. He appeared at conferences for health-care clients and corporate directors, and joined a ski junket for bankers … He crisscrossed the country and flew commercial, often alone. … More than a dozen of Mr. Bush’s former colleagues and clients described him as focused, blunt and often opinionated. Unlike most former politicians in finance, Mr. Bush was seen as a “commercial,” almost a term of endearment on Wall Street” http://on.wsj.com/1MaxRjy

GOOD WEDNESDAY MORNING — M.M. had some smart reader feedback suggesting that we are too obsessed with 2016 too far out from any actual voting and not focused enough on other financial services industry news. Very fair point and well taken. Today somewhat aside (because there’s the debate and everything!) we will try and curb our enthusiasm a bit. As always, constructive critiques very welcome (just be nice!). We are here to serve you and happy to hear when we miss he mark. OK, not happy but appreciative.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES –  Patrick Temple-West on the SEC’s plans to approve the controversial Dodd-Frank CEO pay-ratio rule today [http://politico.pro/1JLv0fn]. For Pro’s subscriber-only coverage — and to get Morning Money every day before 6 a.m.– please contact Pro Services at (703) 341-4600 or info@politicopro.com.

SMART POINT ON FINANCIAL CRIME — From a Democratic policy strategist: “Although your blurb on the story never said where the Libor Machiavelli was sentenced to prison, the fact that it was a criminal conviction and jail time for a misbehaving banker made it clear that it wasn’t the U.S. That is just another reason why there is so little passion from the masses (as opposed to elites) for Hillary or Jeb. Most people believe that our policy bias towards an entrenched financial elite would continue unabated either way — and the fundraising totals strongly suggest the people may be right.”

SPEAKING OF WHITE COLLAR CRIME — IBT: “New federal data shows that under Obama, prosecution of white collar crime has now hit a 20-year low. This development has occurred as the administration has significantly increased its use of so-called “deferred prosecution” agreements allowing corporations and their executives to avoid prosecution.” http://bit.ly/1UmTsqz

LOCKART: FED HAS A RIGHT TO RISE — WSJ’s Jon Hilsenrath: “Federal Reserve Bank of Atlanta President Dennis Lockhart said the economy is ready for the first increase in short-term interest rates in more than nine years and it would take a significant deterioration in the data to convince him not to move in September. ‘I think there is a high bar right now to not acting, speaking for myself,’ Mr. Lockhart said in an interview with The Wall Street Journal. He is among the first officials to speak publicly since the Fed’s policy meeting last week, at which the central bank dropped new hints that a rate increase is coming closer into view, a point he sought to underscore.”

“‘It will take a significant deterioration in the economic picture for me to be disinclined to move ahead,’ he said … His comments follow those of James Bullard, president of the St. Louis Fed, who said in an interview with the Journal on Friday, ‘we are in good shape’ for a rate increase in September. … In weighing when to move, Mr. Lockhart said he was looking at the economy’s cumulative progress over many months, particularly on the job front. ‘We’re getting positive signals from the employment numbers,’ he said” http://on.wsj.com/1IWC0qE

PUERTO RICO DEFAULT HITS MARKETS — NYT’s Mary Williams Walsh: “While Puerto Rico’s first bond default in its history reverberated through the financial markets on Tuesday, another move by the cash-poor island may provide a clue to where the next trouble spot lies … After openly acknowledging on Monday afternoon that it had not made a $58 million bond payment, the government quietly disclosed in a financial filing later that afternoon that it had temporarily stopped making contributions of $92 million a month into a fund that is used to make payments on an additional $13 billion in bond debt. A small payment from the fund is due on Sept. 1.

“[A] much bigger payment on the general obligation bonds, about $370 million, comes due on Jan. 1. If Puerto Rico misses that one, ‘it would be an earthquake for the markets,’ said Matt Fabian, a partner at Municipal Market Analytics, a financial research firm’ ‘Defaulting on the Public Finance Corporation bonds was a change in direction,’ he said, referring to the government unit whose bonds have been in default since Monday. ‘Defaulting on the general obligation bonds would change the game entirely.’” http://nyti.ms/1Ij7zaR

GREECE/LEDNERS STRIKE UPBEAT TONE — Reuters/Athens: “Both Greece and its lenders said on Tuesday they were optimistic they could broker a deal within days on a multi-billion euro bailout, striking a surprisingly upbeat tone on a process previously fraught with bitterness. … A bailout worth up to 86 billion euros ($94.5 billion) must be settled by Aug. 20 — or a second bridge loan agreed — if Greece is to pay off debt of 3.5 billion euros to the European Central Bank that matures on that day. Wrapping up a day of talks in Athens, Greek Finance Minister Euclid Tsakalotos said negotiations were going better than expected. In Brussels, a Commission official said they were ‘encouraged’ by progress. …

“It will be the indebted nation’s third bailout since 2010, designed to stave off bankruptcy and keep the country from toppling out of the euro zone. Negotiations have been tortuous in the past, bogged down in minutiae of reforms ranging from pensions to shop opening hours. Over much of this year they were also peppered with angry outbursts about responsibility, sovereignty and even blackmail. However, sources on the creditors’ side briefed on negotiations described the Greeks as being ‘very, very cooperative’ in talks which resumed in the last week of July after weeks of deadlock over bailout terms.” http://reut.rs/1P5N2sH

REGS SET TO APPROVE PAY GAP DISCLOSURE RULE — WSJ’s Victoria McGrane and Joann S. Lublin: ‘Regulators are set to approve a contentious new rule requiring companies to disclose the pay gap between rank-and-file employees and the chief executive, marking the culmination of years of debate and pressure on the Securities and Exchange Commission over a mandate from the 2010 Dodd-Frank law. … The SEC is slated to vote on a final version of the rule at a meeting Wednesday. The measure is expected to leave corporations and their trade groups disappointed by allowing companies to exclude only 5 percent of their overseas workers from the pay-ratio calculation …

“Companies had argued the SEC should allow them to exclude a much larger percentage of foreign workers, an approach that would have likely narrowed the reported pay gap at some multinational firms. … Some companies already reveal such pay-ratio information. In March, Noble Energy Inc.disclosed that former CEO Charles Davidson made 82 times more than the median employee, who took home $103,500 in direct compensation in 2014. Mr. Davidson made $8.5 million in direct compensation, Noble said … The rule would require companies to disclose median worker pay … and compare it with CEO compensation.” http://on.wsj.com/1W0tElL

JPM LEADS OFR RANKINGS OF SYSTEMIC IMPORTANCE — POLITICO’s Zachary Warmbrodt and Jon Prior: “JPMorgan Chase is the world’s most systemically important bank and its U.S. competitors are close behind in an Office of Financial Research ranking that highlights potential risks from big bank failures and raises questions about their capital levels. … In the report, a pair of OFR researchers compared the systemic importance of 30 U.S. and international banks using 2013 data.
“They found that U.S.-based firms make up half the list of the top 10 most systemically important banks in the world. JPMorgan is No. 1, followed in order by HSBC, Citigroup, Deutsche Bank, BNP Paribas, Barclays, Bank of America, Credit Suisse, Morgan Stanley and Goldman Sachs. Wells Fargo, the fourth-largest U.S. bank by assets, comes in at 19th. The metrics that OFR’s researchers used for the rankings are familiar to policymakers in the banking world: size, interconnectedness, substitutability, complexity and cross-border activity. They said one weakness in the methodology is exchange rate fluctuations.”

NEW REGS NEEDED IN ONLINE SMALL BUSINESS LENDING? — Brayden McCarthy in an American Banker op-ed: “Regulators have thus far permitted online small-business lending to flourish with minimal oversight. But several recent developments suggest that may be changing. … Chicago mayor Rahm Emanuel launched a city-wide campaign in January cautioning borrowers about ‘predatory online lending,’ and the state of Illinois is working on a bill to rein in unsavory practices. Meanwhile, federal regulators have largely taken a wait-and-see approach.

“But the Treasury’s July request for public input on marketplace lenders suggests that policymakers are keeping a close eye on the industry. … Many in the online lending industry are worried about the possibility that increased scrutiny could lead to regulations that stymie innovation. However, regulation doesn’t have to put a chill on genuine innovation” http://bit.ly/1IjYpe4

FIRST LOOK: NEW SIFMA SITE — Per release going out later this a.m.: “SIFMA has launched a microsite www.keepretirementopen.com as part of a larger industry-wide effort to highlight the unintended consequences of the Department of Labor’s retirement regulation, and encourage savers to contact Congress with their concerns”

LIVING WILL GUIDE — The Richmond Fed posted a new research paper, “Living Wills for Systemically Important Financial Institutions: Some Expected Benefits and Challenges” http://bit.ly/1IjYJtt

FIRST LOOK: NEW BANK PRESSURE GROUP LAUNCHING — Per release going out today: “Allied Progress, a new organization that deploys hard-hitting research and creative issue campaigns, launched today in an effort to hold accountable the powerful interests that all too often seek to silence or take advantage of hardworking American families. … The new endeavor will run aggressive issue campaigns that target a range of powerful interests including payday lenders, major financial institutions, leaders of industry, for-profit colleges, voter suppression advocates, and more.

“In the coming weeks, Allied Progress will launch initial initiatives targeting payday lenders influence over Congress, increasing awareness of the lending industry’s business model and practices, and exposing the large financial institutions underwriting these and other predatory lending practices.” http://bit.ly/1P5MgMk

YOU’RE INVITED, PLAYBOOK BREAKFAST: On Thursday, Secretary of Veterans Affairs Robert McDonald and David Brock, founder of Correct the Record, American Bridge 21st Century, and Media Matters for America, join Mike Allen at the Newseum for a Playbook Breakfast. Doors open at 7:30 a.m. RSVP: http://bit.ly/1Ita37W.

POTUS Events

The President and the Vice President receive the Presidential Daily Briefing

Oval Office

Closed Press

11:20 am The President deliver remarks on the nuclear deal reached with Iran

American University — Washington DC

Pooled TV, Open to Correspondents

Floor Action

Senators will take a procedural vote on taking up a long-stalled cyber bill as they try to wrap up their work ahead of a five-week break.

The Senate is currently scheduled to take a vote at 10:30 a.m. on ending debate on proceeding the Cybersecurity Information Sharing Act (CISA).

 

Senators are hoping to reach a deal that could speed up the process and allow each side to get votes on a certain number of amendments.

 

Senate Majority Leader Mitch McConnell (R-Ky.) offered a deal to Democrats on Tuesday, that would have allowed both parties to offer 10 amendments, but Minority Leader Harry Reid (D-Nev.) rejected it.

 

“Having a robust amendment process has nothing to do with having amendments pending,” Reid said at the time. “We want to have a reasonable number of amendments, and there will be votes on those amendments.”

 

Senators are expected to keep working to reach an agreement ahead of the vote.

 

Announcements

IRS Tax Tips for Starting a Business

When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules. Here are five IRS tax tips that can help you get your business off to a good start.

  1. Business Structure. An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you will file.
  2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.
  3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
  4. Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.
  5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers. ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their fulltime employees.  Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

Get all the tax basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.

Krebs Daily Briefing 4 August 2015

International

On Kerry visit, Arab nations express support for Iran nuclear agreement

DOHA, Qatar — Persian Gulf Arab states on Monday publicly endorsed the Iran nuclear deal during a visit by Secretary of State John F. Kerry, who said the United States would step up arms sales and intelligence-sharing to counter Iran’s “destabilizing activities” in the region. “This was the best option among other options — to come up with a solution . . . through dialogue” with Iran, said Qatari Foreign Minister Khalid bin Mohammed al-Attiyah, speaking for the six-member Gulf Cooperation Council, which he heads. “We are confident that all the efforts that have been exerted make this region very secure, very stable.” The unambiguous backing of the GCC countries could be helpful to the Obama administration as it tries to push the deal, reached in Vienna last month, through a skeptical Congress. Congress has 60 days to review the agreement and is expected to reject it, though not by enough votes to withstand a presidential veto.

https://www.washingtonpost.com/world/middle_east/on-kerry-visit-arab-nations-express-support-for-iran-nuclear-agreement/2015/08/03/36bbebea-36d3-11e5-ab7b-6416d97c73c2_story.html

China Seeks Businessman Said to Have Fled to U.S., Further Straining Ties

LOOMIS, Calif. — China is demanding that the Obama administration return a wealthy and politically connected businessman who fled to the United States, according to several American officials familiar with the case. Should he seek political asylum, he could become one of the most damaging defectors in the history of the People’s Republic. The case of the businessman, Ling Wancheng, has strained relations between two nations already at odds over numerous issues before President Xi Jinping’s first state visit to the United States in September, including an extensive cybertheft of American government data andChina’s aggressive territorial claims. Mr. Ling is the youngest brother of Ling Jihua, who for years held a post equivalent to that of the White House chief of staff, overseeing the Communist Party’s inner sanctum as director of its General Office. Ling Jihua is one of the highest-profile casualties of an anticorruption campaign that Mr. Xi has made a centerpiece of his government.

http://www.nytimes.com/2015/08/04/world/asia/china-seeks-ling-wancheng-businessman-said-to-have-fled-to-us.html?emc=edit_na_20150803&nlid=53476364&ref=cta

Moody’s: Puerto Rico in default after measly payment

Debt-ravaged Puerto Rico is in default after forking over only a fraction due in a bond payment, Moody’s said in a statement Monday afternoon. An agency associated the government of the island, a territory of the United States, only made a partial repayment Monday to creditors on bonds issued through the island’s Public Finance Corporation. Puerto Rico’s Government Development Bank, of which Public Finance is a subsidiary, paid only $628,000 of the $58 million due. “Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today,” Melba Acosta, the bank president, said in a statement. “This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.” Given the measly payout. “Moody’s views this event as a default,” said Emily Raimes, vice president at the credit giant. The fractional payoff shows Puerto Rico’s deepening debt crisis. The commonwealth is desperately trying to restructure its $72 billion debt.

http://www.usatoday.com/story/money/markets/2015/08/03/puerto-rico-default/31071407/?csp=breakingnews

The Company Getting Rich Off the ISIS War

The war against ISIS isn’t going so great, with the self-appointed terror group standing up to a year of U.S. airstrikes in Syria and Iraq. But that hasn’t kept defense contractors from doing rather well amidst the fighting. Lockheed Martin has received orders for thousands of more Hellfire missiles. AM General is busy supplying Iraq with 160 American-built Humvee vehicles, while General Dynamics is selling the country millions of dollars worth of tank ammunition. SOS International, a family-owned business whose corporate headquarters are in New York City, is one of the biggest players on the ground in Iraq, employing the most Americans in the country after the U.S. Embassy. On the company’s board of advisors: former Deputy Defense Secretary Paul Wolfowitz—considered to be one of the architects of the invasion of Iraq—and Paul Butler, a former special assistant to Pentagon chief Donald Rumsfeld. The company, which goes by “SOSi,” says on its website that the contracts it’s been awarded for work in Iraq in 2015 have a total value of more than $400 million. They include a $40 million contract to provide everything from meals to perimeter security to emergency fire and medical services at Iraq’s Besmaya Compound, one of the sites where U.S. troops are training Iraqi soldiers. The Army awarded SOSi a separate $100 million contract in late June for similar services at Camp Taji. The Pentagon expects that contract to last through June 2018. A year after U.S. airstrikes began targeting the so-called Islamic State in Iraq, there are 3,500 U.S. troops deployed there, training and advising Iraqi troops. But a number that is not discussed is the growing number of contractors required to support these operations. According to the U.S. military, there are 6,300 contractors working in Iraq today, supporting U.S. operations. Separately, the State Department is seeking janitorial services, drivers, linguists, and security contractors to work at its Iraqi facilities. While these numbers pale in comparison to the more than 163,000 working in Iraq at the peak of the Iraq War, they are steadily growing. And with the fight against ISIS expected to take several years, it also represents a growing opportunity for defense, security, and logistics contractors, especially as work in Afghanistan begins to dry up. “It allows us to maintain the façade of no boots on the ground while at the same time growing our footprint,” said Laura Dickinson, a law professor at George Washington University whose recent work has focused on regulating private military contractors.

http://www.thedailybeast.com/articles/2015/08/02/the-company-getting-rich-off-of-the-isis-war.html

National

Ex-S&P exec may proceed with case against SEC, U.S. judge rules

The U.S. Securities and Exchange Commission on Monday lost a bid to dismiss a constitutional challenge to its ability to pursue claims against a former Standard & Poor’s executive before one of its own in-house administrative judges rather than in federal court. The ruling, by U.S. District Judge Richard Berman in Manhattan, stopped short of declaring the administrative case against Barbara Duka, the former head of S&P’s commercial mortgage-backed securities group, unconstitutional. But Berman said Duka had shown that the SEC’s in-house judges, which the regulator considered regular employees, are officers who must be appointed by the commission itself to comply with the U.S. Constitution, a step which had not been taken. Berman reserved a decision on whether to block the SEC from moving forward with a Sept. 16 trial before an in-house judge. He gave the agency a week to “cure any violation” of the Constitution. Those fixes could potentially include having the commissioners appoint the judge or preside over the case themselves, according to the ruling. An SEC spokeswoman said the agency was reviewing the decision. Guy Petrillo, Duka’s lawyer, declined comment. The case is among a series of constitutional challenges to the SEC’s use of administrative proceedings, which have increased since the 2010 Dodd-Frank Wall Street law gave the agency the power to bring more cases in-house. SEC administrative law judges preside over the cases, which are typically fast-tracked and lack some protections defendants typically enjoy in more-traditional court settings. Defense lawyers say the process is unfair and point to statistics showing judges often rule for the SEC. The SEC filed its case in January against Duka, accusing her of concealing how the ratings agency eased its criteria for calculating some commercial mortgage ratings. The case was announced as S&P, a unit of McGraw Hill Financial Inc (MHFI.N), agreed to pay $77 million to settle related charges by the SEC and the New York and Massachusetts attorneys general. Even before she had been formally charged, Duka had sought a court order declaring administrative proceedings unconstitutional. Several federal judges have rejected similar challenges, and Berman himself in April originally denied Duka’s request to block her in-house case. But for the first time in June, a federal judge in Atlanta blocked the SEC from moving forward with a case before an administrative judge. The case is Duka v SEC, U.S. District Court, Southern District of New York, No. 15-00357.

http://www.reuters.com/article/2015/08/03/us-sec-s-p-lawsuit-idUSKCN0Q81VF20150803

Pimco May Face S.E.C. Action Over a Fund

A Pimco exchange-traded bond fund that once tracked the performance of a much larger fund formerly managed by the firm’s co-founder, William H. Gross, may have violated federal securities laws. Pimco on Monday disclosed that the Securities and Exchange Commission was considering filing an enforcement action over potential trading infractions that took place during the early days of the Pimco Total Return E.T.F., which started in February 2012. The firm said securities regulators were focused on the “fund’s performance and disclosures” for the period from Feb. 29, 2012, to June 30, 2012. It said regulators were looking at the pricing of small positions taken by the E.T.F. in some mortgage-backed securities. The investigation into the E.T.F. came to light in September 2014 around the time Mr. Gross abruptly resigned from the firm he co-founded and led for decades in the midst of dispute over his management style. Mr. Gross, known as “Bill” on Wall Street, now manages a bond fund at Janus Capital. When he was at Pimco, Mr. Gross managed the Total Return E.T.F. as well as the firm’s once-giant Total Return bond fund. The Total Return E.T.F. was the first exchange-traded fund started by Pimco. E.T.F.s are securities that trade throughout the day on stock exchanges. Pimco did not indicate in its news release whether any individuals received a so-called Wells notice from the S.E.C. Such a notice is a warning that regulatory action is likely to be taken. A spokesman for Pimco, based in Newport Beach, Calif., and officially known as Pacific Investment Management Company, declined to comment beyond the news release. A Janus spokesman did not return a request for comment. In the months since Mr. Gross left Pimco, the firm has been hit by a wave of investor redemptions. Tens of billions of dollars have been withdrawn from the Total Return bond fund.

http://www.nytimes.com/2015/08/04/business/dealbook/pimco-may-face-sec-action-over-a-fund.html?ref=dealbook

U.S. Dept of Justice initiates criminal probe against Deutsche Bank: Bloomberg

The United States Department of Justice is investigating trades worth billions of dollars that Germany’s Deutsche Bank AG made on behalf of its Russian clients, Bloomberg reported, citing people familiar with the matter. The probe investigates so-called mirror trades, where the bank’s Russian clients bought stocks in rubles, and through simultaneous transactions in London, bought the same stocks in U.S. dollars, thereby moving funds out of Russia without informing authorities, Bloomberg reported. Last month, The New York State Department of Financial Services (DFS) sought detailed information from Deutsche Bank on possible money-laundering transactions by some of its clients in Russia that could exceed $6 billion in total, a source familiar with the matter told Reuters. Deutsche Bank declined to comment on this development and referred to its earlier statement published on the issue along with its annual report on July 30.

http://www.reuters.com/article/2015/08/03/us-deutsche-bank-moscow-idUSKCN0Q827U20150803

U.S. officials eye risks from high frequency trading in bonds

High-frequency trading in the U.S. government bond market carries risks that threaten the ability of the market to function as well as the ability of investors to fairly value assets, two government officials said on Monday. The impact of high frequency trading has come under increased scrutiny since the “flash crash” last October, in which U.S. Treasuries registered wild price swings in just a 12-minute period. Critics of high-frequency trading, a computerized strategy that can move billions of dollars in fractions of a second, blame it for causing excessive price swings in the bond market, which is already facing a decline in liquidity. Federal Reserve Governor Jerome Powell acknowledged the innovation that high frequency trading has brought to the bond market, but he questioned how investors could value the long-term value of a bond or any asset. “If trading is at nanoseconds, there won’t be a lot of ‘fundamental’ news to trade on or much time to formulate views about the long-run value of an asset; instead, trading at these speeds can become a game played against order books and the market rules,” Powell said, speaking on a panel at a conference on U.S. bond market structure sponsored by the Brookings Institute. Antonio Weiss, counselor to the U.S. Treasury secretary, was blunter. “The constant pursuit to save one more millisecond not only consumes resources potentially better invested elsewhere, but increases the pressure on the plumbing of the system to handle ever-increasing speeds and messaging traffic,” he said in a speech prepared for deliver to the panel. The impact of high frequency trading on the $12.5 trillion Treasuries market was profound last Oct. 15, with many questions still unanswered. On that day, Treasuries trading volume exploded in a matter of 12 minutes. Benchmark 10-year Treasuries yields swung in a 37-basis-point range during that period, only to end 6 basis points lower on the day, according to a report released in July by the Treasury, the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission. The report said companies that engage in algorithmic trading, or Principal Trading Firms, accounted for 70 to 75 percent of total trading in both the cash and futures markets, up from about 50 percent on “normal” days. Weiss said high frequency trading “is, quite simply, a disruptive technological innovation, which has reshaped an entire industry structure.” Weiss and Powell said the changing bond market structure stemming from the growing role of high frequency trading warrants more examination. “Is the race for speed helping or hurting market function?” Weiss said.

http://www.reuters.com/article/2015/08/03/markets-bonds-liquidity-idUSL1N10E2PI20150803

The Challenges of Fighting Money Laundering

The Watergate credo to “follow the money” is the reason for a number of laws that require banks, credit unions and money-transmission businesses to keep track of who their customers are and report suspicious transactions. These financial firms are the first line of defense against money laundering, and recent cases highlight just how difficult it is for the government to police the tidal waves of cash that wash through the banking system. The effort to combat money laundering is never-ending because criminals always seek new ways to move the proceeds of crime. It is a battle that requires constant vigilance, and is not so much a matter of winning or losing, but of just trying to stay current with the latest tactics. Money laundering problems can afflict the largest banks, even though they now pour billions of dollars annually into anti-money laundering compliance programs. On July 22, the Federal Deposit Insurance Corporation and California’s Department of Business Oversight levied a $140 million civil penalty against Banamex USA, owned by Citigroup, for failing to have enough staff members and a “qualified and knowledgeable” official responsible for detecting and reporting illegal or suspicious transactions. Citigroup announced that it would close the small unit, which only had a few branches in California and Texas. This is not the only issue facing the bank as it deals with how well it monitors accounts. Bloomberg News reported that the Justice Department has issued a subpoena to Citigroup’s much larger Mexican bank subsidiary, Banco Nacional de Mexico, known as Banamex, as part of the money laundering investigation. This comes on top of a $400 million fraud involving a large Banamex client that came to light in 2014, resulting in a number of employees being fired. The New York Times reported that the United States attorney’s office in Manhattan was investigating Citigroup for whether it willfully ignored possible red flags about the fraud.

http://www.nytimes.com/2015/08/04/business/dealbook/the-challenges-of-fighting-money-laundering.html?ref=dealbook

Defund Planned Parenthood? Not so easy

Republicans may find that defunding Planned Parenthood is harder than it looks. Even if they manage to overcome the political obstacles — big ones like a Democratic filibuster, a presidential veto, or a battle royal over shutting down the government — they may still collide with Medicaid law. The fight could leap from Congress to the courts. The Senate has planned a test vote Monday on a bill to halt federal funding for Planned Parenthood after four sensational undercover videos by a previously unknown anti-abortion group portrayed the organization as allegedly profiteering from illegal fetal tissue sales — a charge Planned Parenthood denies. Planned Parenthood got most of its $528 million in taxpayer support last fiscal year from two main pots of money — the Medicaid health care program for low-income people and grants such as the Title X family planning program. By law, federal dollars don’t pay for abortions except in limited circumstances involving rape, incest or protecting the life of the woman. If any bill to cut funding to Planned Parenthood became law, stopping the flow of Title X money would be relatively easy. Congress controls that money and can decide who gets how much, or who gets none at all. Even there, the money goes out in grants to states and organizations over a multiyear cycle, so a cutoff might not be simple or immediate. But severing Planned Parenthood from Medicaid could be a lot more complicated, and that’s the bigger chunk of change. Planned Parenthood says roughly 75 percent of its government funding is state and federal Medicaid dollars, though it wouldn’t give a breakdown.

http://www.politico.com/story/2015/08/defund-planned-parenthood-not-so-easy-120924.html#ixzz3hmBE8Rni

Senate GOP blocked in effort to defund Planned Parenthood

A measure to defund Planned Parenthood failed in the Senate on Monday in a 53-46 vote, likely punting the issue into the fall debate over preventing a government shutdown. Republicans fell short of the 60 votes needed to move forward with the legislation, which was fast-tracked to the floor after the release of undercover videos that show Planned Parenthood officials discussing fetal tissue from abortions. Only two Democrats, Sens. Joe Donnelly (Ind.) and Joe Manchin (W.Va.), voted for the legislation, while two Republicans, Sen. Mark Kirk (Ill.) and Majority Leader Mitch McConnell (R-Ky.), voted against it. McConnell voted no to preserve the option of bringing up the bill again. Kirk, who is facing a tough reelection race in 2016, had signaled he was likely to break with his party on the vote, citing the preventive health services that Planned Parenthood provides. Sen. Lindsey Graham (R-S.C.), who is running for president, was the only member to miss the vote. McConnell and other supporters of the defunding bill said it would protect women’s access to medical services because the roughly $500 million in federal funding would be redistributed to other organizations, such as community health centers. “Instead of subsidizing a political group, this bill would ensure funds continue to flow to community health centers and hospitals that provide more comprehensive health services — and have many more facilities nationwide,” McConnell said Monday on the Senate floor.  Republicans noted that there are 21 million people served by community health centers across the country, compare with the 2.7 million people served by Planned Parenthood. Senate Minority Leader Harry Reid (D-Nev.) and other Democrats portrayed the legislation as an attack on women’s health and said community health centers would not be able to fill the gaps. “It’s our responsibility in the Senate to ensure that American women have access to care,” Reid said. “It’s our obligation to protect our wives our sisters, our daughters, our granddaughters. Protect them from the absurd policies of a Republican Party that has lost its moral compass.”

http://thehill.com/blogs/ballot-box/250140-senate-shoots-down-measure-to-defund-planned-parenthood

 

G.O.P. Senate Might Shut Down Government over Planned Parenthood Funding

Ted Cruz is at it again. It’s been almost two years since the last government shutdown,and once again, America must endure the threat of political gridlock: another government shutdown is looming on the horizon, this time over Planned Parenthood’s funding. Not only are shutdown talks a possibility during the upcoming budget battle in September, this one promises to be much more migraine-inducing than the shutdowns of previous years thanks to the potent combination of the 2016 elections and the recently released Planned Parenthood videos. The footage, released by anti-abortion activists, renewed the Republican Senate’s long-standing desire to defund the family planning center for its apparent sale of tissue from aborted fetuses. (Planned Parenthood has since apologized for the videos, but says that they did not break any federal laws, and successfully filed an injunction to block the release of any more videos.) For 2016 candidates with an axe to grind against Planned Parenthood, and the Obama administration, a potential government shutdown would give them something fun to throw their axes at. Currently, the organization receives $528 million in federal funding each year—funding that the newly elected G.O.P. Senate hopes to eliminate—and the videos have only renewed that push to defund. The plan, according to Politico, is to attach a provision to the current omnibus spending bill (a.k.a. The Bill That Funds the Government) that will prevent it from being passed unless Planned Parenthood’s funding is cut. Unsurprisingly, the first person to suggest a shutdown over Planned Parenthood funding was shutdown junkie Cruz, whose attempts to defund Obamacare led to the 2013 shutdown. Cruz is joined by several social conservatives in the Senate and House—not enough to successfully defund Planned Parenthood, but enough to force a stalemate from Democrats. Opposing the shutdown on the Republican side: Kentucky senator Rand Paul, who wants to defund Planned Parenthood, but thinks it’s foolish to start a push against it “with your objective to shut down the government,” and South Carolina senator Lindsey Graham, whothinks a shutdown effort would be futile due to the partisan opposition. Fellow candidate and senator Marco Rubio has wanted to defund Planned Parenthood for some time, but has yet to say whether he’d support plans for a shutdown.

http://www.vanityfair.com/news/2015/08/gop-congressmen-threaten-government-shutdown-planned-parenthood?mbid=nl_080315_Daily&CNDID=11508510&spMailingID=7954855&spUserID=NTMwMjA5Nzk0MjAS1&spJobID=740329499&spReportId=NzQwMzI5NDk5S0

Congress’ Summer Fling With Marijuana

It’s not easy being the DEA these days. After an unprecedented losing streak on Capitol Hill, the once-untouchable Drug Enforcement Administration suffered last week what might be considered the ultimate indignity: A Senate panel, for the first time, voted in favor of legal, recreational marijuana. Last Thursday, the Appropriations Committee voted 16-14 on an amendment to allow marijuana businesses access to federal banking services, a landmark shift that will help states like Colorado, where pot is legal, fully integrate marijuana into their economies. As significant as the vote was, it’s only the latest vote in a remarkable run of success marijuana advocates have had this year on Capitol Hill. “The amendment was a necessary response to an absurd regulatory morass,” Montana Sen. Steve Daines, one of the three Republicans to support Thursday’s amendment, tells Politico, referring to the multifaceted and complex system of laws that have been enacted over the past four decades to prosecute a war on marijuana. It’s a war that began on or about May 26, 1971, when President Richard Nixon told his chief of staff Bob Haldeman, “I want a goddamn strong statement on marijuana …I mean one on marijuana that just tears the ass out of them.” But that war appears to be winding down—potentially quickly. The summer of 2015 could be viewed historically as the tipping point against Nixon’s war on pot, the time when the DEA, a federal drug-fighting agency created by Nixon in 1973, found itself in unfamiliar territory as a target of congressional scrutiny, budget cuts and scorn. In a conference call this week, the new acting DEA administrator repeatedly downplayed marijuana enforcement efforts, saying that while he’s not exactly telling agents not to pursue marijuana cases, it’s generally not something anyone focuses on these days: “Typically it’s heroin, opioids, meth and cocaine in roughly that order and marijuana tends to come in at the back of the pack.” What a difference a year makes.

http://www.politico.com/magazine/story/2015/07/dea-marijuana-120674.html#ixzz3hmBlmK59

Genetic Privacy, as Explained by Mystery Poopers

My hometown has few claims to fame. It’s referenced in a Sufjan Stevens song. It’s the founding place of Domino’s Pizza. Its water tower was once named the “World’s Most Phallic Building” by Cabinet magazine. And last year, Ypsilanti, Michigan got a brief flare-up of Internet fame when Gawker reported on a scatological scofflaw who had been repeatedly pooping on local playground slides. A city council member told MLive the acts were “weird and deliberate.” The manhunt launched a hashtag (#YpsiPooper), and an advertising company put up messages on a billboard it owned over the highway, urging residents to say something if they saw something: “Help us flush the pooper,” “Do your civic doody, report the pooper,” and “Help us catch the poopetrator.” The culprit—a resident of a nearby halfway house—was eventually identified and warned, which seemed to do the trick. This is less of an isolated incident than it might seem. If the old journalistic rule that three occurrences makes a trend is true, then does five make a phenomenon? There have also been reports of mystery poopers in Akron, Ohio, Hafrsfjord, Norway (where someone has been relieving him or herself in the holes at a golf course for more than 10 years), and at the offices of the Environmental Protection Agency, where you’d think people would be a little more sensitive to pollutants. The fifth example comes from a recent lawsuit decided in U.S. district court in Atlanta, in which the case of a mystery pooper has real implications for the state of genetic privacy in the United States. Someone was dropping unauthorized packages in a warehouse that stored grocery store products. So Atlas Logistics Group Retail Services, which owned the warehouse, asked some employees to undergo a cheek swab, to try to find a match to the DNA in the feces. A pair of employees who were swabbed but were not a match filed a complaint under the Genetic Information Nondiscrimination Act (GINA) to the Equal Employment Opportunity Commission. The EEOC initially dismissed their charges, but when they filed suit in the district court, the judges sided with the employees. Atlas ultimately had to pay $2.25 million in damages.

http://www.theatlantic.com/technology/archive/2015/08/the-case-of-the-mystery-pooper-dna-privacy/400355/

 

Do Americans Really Believe All Men Are Created Equal?

What do we think about inequality? Well—all things being unequal—it kind of depends on who we are. That line from the Declaration of Independence about how “all men are created equal”? It rings true for most Americans but for a higher percentage of whites (78) than blacks (66). Know any 1-percenters? Well, nearly a third of us aren’t even sure what a “1-percenter” is. But who are the seven percent who claim that most of the people they know are 1-percenters? By definition they can’t all be 1-percenters. Are they chauffeurs? Caterers? Prep-school teachers? And even if there is a slight inequality problem here in the United States, in Saudi Arabia it’s far worse, right? Most people think so, but America is a not-too-distant second. And what is the great equalizer? If we’re religious, we’ll probably say a place of worship. If we’re not religious, we’ll say a cemetery. Before we get carried away equalizing things, though, note that some Americans don’t actually think inequality is so bad—because it creates ambition. By the way, when we say “some,” we mean 50 percent of Republicans and 38 percent of Democrats.

http://www.vanityfair.com/news/2015/07/vanity-fair-60-minutes-poll-inequality?mbid=nl_080315_Daily&CNDID=11508510&spMailingID=7954855&spUserID=NTMwMjA5Nzk0MjAS1&spJobID=740329499&spReportId=NzQwMzI5NDk5S0

Happy 53rd Birthday, President Obama!

Today, President Obama is celebrating his 53rd birthday. In honor of the occasion, we put together our top 10 photos from the past year — because we thought that means more than our “top 53.” Check out some of our favorites from the past year below:

https://www.whitehouse.gov/blog/2014/08/04/happy-53rd-birthday-president-obama

State/Local

Alabama House Speaker Mike Hubbard seeks postponement of ethics trial

Lawyers for House Speaker Mike Hubbard have asked a judge to postpone the speaker’s trial on ethics charges, which is scheduled to begin Oct. 19. The attorney general’s office said today it would oppose the motion. In a court motion filed Sunday, defense lawyers say they are unable to access much of the 2.4 million pages of documents turned over by the state in the discovery process. They say that’s because of the format and for other reasons. Hubbard’s lawyers also point out that there are significant legal issues still unresolved by the court. “The defense has been diligent and conscientious in its investigation and preparation of this case for trial,” the lawyers wrote. “Yet, with a 23 count indictment, the defense finds that it has much to do to effectively represent Hubbard at trial.” A special grand jury in Lee County last year charged Hubbard on 23 counts of violating the state ethics law. He has denied any wrongdoing. The speaker has asked to have his case dismissed, alleging misconduct by prosecutors and saying that the appointment of Acting Attorney General Van Davis, who is overseeing the prosecution, was not done according to the law. Hubbard attorney Mark White said the defense team would file constitutional challenges to the charges on Aug. 13. White said the judge’s decisions on whether to dismiss charges on constitutional grounds would be subject to appeal before the trial. Lee County Circuit Judge Jacob A. Walker III has set a hearing for Aug. 17 on pending motions in the case.

http://www.al.com/news/index.ssf/2015/08/alabama_house_speaker_mike_hub_4.html#incart_river

Committee approves bill to take Alabama out of marriage business

MONTGOMERY (AP) — A state Senate committee has approved a bill to take Alabama probate judges out of the wedding license business following the U.S Supreme Court ruling legalizing gay marriage. The Senate Finance and Taxation General Fund Committee on Monday approved the bill to do away with state-issued marriage licenses. Instead, spouses would file a signed marriage contract at probate offices. Several Alabama probate judges have shut down marriage license operations rather than give licenses to same-sex couples. Sen. Greg Albritton, the bill’s sponsor, says the bill could be a solution to lingering disputes over gay marriage. Lawmakers are in special session to deal with a budget shortfall. Bills outside the governor’s call for a special session have a slimmer chance at passing because they require a two-thirds vote.

http://www.cullmantimes.com/news/committee-approves-bill-to-take-alabama-out-of-marriage-business/article_2ee9a824-3a1d-11e5-84ad-c79bbb4b5fea.html

Bill to allow loaded handguns in vehicles clears Alabama Senate committee

A bill to allow people to carry loaded handguns in their vehicles without a concealed carry permit advanced today in an Alabama Senate committee. The Senate Finance and Taxation General Fund Committee approved the bill. It moves to the Senate. Under current law, handguns must be locked away and unloaded unless the owner has a concealed carry permit. The bill by Sen. Gerald Allen, R-Tuscaloosa, is not new. Allen proposed it during the regular session, and the Legislature also considered it last year. The committee also approved a bill by Allen that would restrict removal, relocation or renaming of historical monuments and plaques. The committee approved a bill by Sen. Greg Albritton, R-Bay Minette, that would abolish marriage licenses and instead allow people to enter civil contracts for marriage. Probate judges would record the contracts and report them to the state Office of Vital Statistics. It would take approval by two-thirds of the members of the House and the Senate to pass the bills on handguns, monuments and marriage licenses, because those subjects were not included in the governor’s special session proclamation. The committee did not vote on three bills that concern how the state will use oil spill settlement money from BP. It is expected to consider legislation on the BP money on Tuesday. That subject was included in the governor’s call for the session. He called the special session for legislators to pass a General Fund budget for the year that starts Oct. 1.

http://www.al.com/news/index.ssf/2015/08/bill_to_allow_loaded_handguns.html#incart_river

Senate GOP divided as General Fund work resumes

The major issues on the General Fund budget may not be divisions between the governor and Legislature. It could be divisions within the Senate’s majority caucus. Splits among Senate Republicans went on display Monday as the Legislature returned to address a $200 million shortfall in the General Fund, which pays for most noneducation services in the state. Many stumbling blocks remain outside the Senate chambers. But it seemed clear the Senate GOP hadn’t agreed on a budget plan. Senate President Pro Tem Del Marsh, R-Anniston, ducked questions at a Monday press conference on whether he had the votes for any proposal to fix the General Fund. The Senate leader said Monday there was “consensus” to move at least a portion of the state’s use tax, a tax on goods purchased out of state, from the education budget to the General Fund. But Marsh said debate remained on the amount of tax to move, as well as any measures to replace the money lost in the education budget. “To me the best thing we can do is move the use tax,” he said. “That provides the pressure to make a decision on these other elements.” The Senate uncertainty may not be the only source of friction in the special session, which could extend to Aug. 11. Gov. Robert Bentley Monday said he could not accept a General Fund budget with significantly less than $310 million in new revenues. That budget would level-fund most state agencies. The House, meanwhile, plans a $173 million package that could lead to cuts of more than five percent for many state agencies. “We’re just trying to come up with some things that have a chance of passing,” House Ways and Means General Fund chairman Steve Clouse, R-Ozark, said Monday.State agencies have warned that addressing the shortfall through cuts could mean layoffs and loss of services. Severe cuts could lead to lawsuits and, in the case of prisons, federal takeover.

http://www.montgomeryadvertiser.com/story/southunionstreet/2015/08/03/senate-gop-divided-as-general-fund-work-resumes/31083475/

The state Senate and budget fixes where the consensus is “to do nothing”

MONTGOMERY, Alabama – Sen. Trip Pittman, a Baldwin County Republican, maybe best summed up the news coming out of the state Senate Monday, a day the Legislature resumed a special session to deal with a pending budget crisis. Asked if there was a consensus in the Senate to fix the problem, Pittman said there is. “The consensus is to do nothing,” said Pittman, who is chairman of the Senate’s Education Budget Committee. Sen. Dick Brewbaker, R-Montgomery, summed up the Senate Monday comparing it to kudzu. “(We’re) all over the place and not worth a darn,” Brewbaker said. The two quotes sum up a day that saw an obviously frustrated Senate leader concede that the 35-member legislative body has little consensus on what to do to fix the general fund budget which is facing a $200 million shortfall. Gov. Robert Bentley has proposed $300 million in tax hikes to fix the problem along with some changes in how the general fund budget system works. Bentley’s plan seems to be enjoying some support in the House on Monday where leading lawmakers proposed some of Bentley’s tax plan but with lower amounts totally a little less than $180 million. Bentley late Monday called that amount not enough to address the crisis. Marsh said there is no “appetite” in the Senate for tax increases. He said at most maybe eight, nine or 10 senators had expressed support for tax increases. Marsh said the one area where he does see some support in the Senate for action is to remove $225 million from the state’s education budget and put it into the general fund. Marsh said such a move would solve the budget problem in time for the start of the Oct. 1 fiscal year. Marsh also suggested that perhaps lawmakers would not have to replace the money it takes. In the regular session of the Legislature the moving of the use tax became a major stumbling block in the session, especially over the issue of how to replace the dollars. Marsh’s suggestion that maybe the money will not have to be replaced, at least not until next years’ regular session, had education budget chairman Pittman shaking his head. Asked if Marsh’s proposal was a non-starter, Pittman chuckled. “It’s a no,” said Pittman, who called it a move that amounts to kicking the budget crisis can down the road. “There are people who don’t want to raise taxes yet they want to take the money from people who have voted to fund education either through the legislative process or the ballot,” said Pittman. “What we would be doing is taking money that’s about the future, about helping people be successful, support their families, be successful and we want to transfer it to the general fund, which does a lot of good things … but we need to support the general fund with new taxes.” The minority leader in the Senate, Sen. Quinton T. Ross, D-Montgomery, attempted to introduce a resolution opposing moving the use tax from the education budget but the move was ruled out of order. Ross said the general fund problem must not be fixed on what he called the “back of education.”

http://www.al.com/news/index.ssf/2015/08/the_state_senate_and_budget_fi.html#incart_river

Obama unveils clean power rule; Alabama AG vows to fight ‘war on affordable energy’

President Barack Obama on Monday unveiled the final version of the U.S. Environmental Protection Agency’s Clean Power Plan, the first time the federal government has specifically regulated carbon emissions from the nation’s electricity generation sector. Nationwide, burning fossil fuels to generate electricity is the single largest source of greenhouse gas emissions, which scientists say contribute to climate change, accounting for about 32 percent of total emissions. At a news conference detailing the plan, Obama said the plan marked an important step in reaching a global accord on climate change. “No challenge poses a greater threat to our future and future generations than climate change,” Obama said. “There is such a thing as being too late.” In a blog post promoting the plan, EPA Administrator Gina McCarthy said in addition to lessening the impact on climate, it would by 2030 would result in “up to 3,600 fewer premature deaths; 90,000 fewer asthma attacks in children; 1,700 fewer hospital admissions; and avoid 300,000 missed days of school and work.” The CPP seeks a nationwide reduction of carbon emissions from power plants by 32 percent from 2005 levels by 2030. Obama and McCarthy said states would be given individual targets based on their energy mixes and would be able to plot their own paths to meet their emissions reductions. Many states have already made significant reductions in carbon emissions since 2005 by shuttering older, inefficient coal-fired units and/or switching to natural gas. The domestic shale boom largely powered by hydraulic fracturing has kept gas prices low enough to be competitive with coal, while generating about half the carbon emissions. Natural gas briefly eclipsed coal as the top fuel for electricity generation in the U.S. earlier this year.  According to a White House fact sheet on Alabama, the state has reduced its carbon emissions from 2005 levels by 19 percent already, bringing the state more than halfway to the 2030 target. Alabama Power spokesman Ike Pigott said that the company would not have any comment on the plan until they had received and reviewed Alabama’s state-specific targets. The final version of the plan varied significantly from the draft released last year, based on the 4.3 million public comments the EPA received on the plan. According to an analysis by John Cushman of InsideClimate News, the final version contains slightly more aggressive targets for states, but gives them more flexible pathways to reach the targets and more time to come up with a plan to do so. Cushman said that by being more flexible, the plan is “better armored” against inevitable legal challenges from the states, the coal industry or utility companies. Alabama Attorney General Luther Strange issued a statement Monday afternoon that he intended to continue to fight what he described as the Obama administration’s “illegal and arbitrary plans to force power plants to greatly reduce carbon emissions.”

http://www.al.com/news/index.ssf/2015/08/obama_epa_clean_power_plant_ru.html

Alabama probate judge asks state supreme court to issue ‘landmark’ ruling against gay marriage

Washington County Probate Judge Nick Williams is urging the state’s high court to issue a “landmark” ruling challenging the U.S. Supreme Court’s legalization of same-sex marriage. And he wants Alabama Chief Justice Roy Moore, who had earlier recused himself because of his outspoken stance against gay marriage, to be able to vote on it. “Throughout the nation, defenders of traditional marriage and defenders of constitutional federalism looked – and continue to look – to Alabama as their last best hope,” Williams states in a brief filed Monday afternoon with the Alabama Supreme Court. Williams, in his 18-page brief defends attacks on Moore, urges Alabama justices to lead the charge for traditional marriage, and takes a swipe at the five-member majority on the U.S. Supreme Court that legalized gay marriage as lawyers who were elevated to roles as “semi-absolute rulers.” In the wake of the U.S. Supreme Court’s ruling June 26 legalizing same-sex marriage nationwide “the eyes of the nation are again turned upon Alabama. This court has the lifetime opportunity to issue a landmark ruling that could inspire other courts, officials, and legislatures to stand with us.” “For such a time as this, the justices of the Alabama Supreme Court have an opportunity to safety traditional marriage and spark a rebirth of constitutional federalism. Who knows when, or if, that opportunity will come again?” Williams, a graduate of Liberty University, lauded the Alabama Supreme Court for standing its ground and defending Alabama’s right to decide the marriage laws in their state when it ordered (on March 3 before the U.S. Supreme Court decision) probate judges to stop issuing marriage licenses to same-sex couples despite a federal court ruling. At that point, it made the Alabama Supreme Court the only court to defy a federal court on the issue.

http://www.al.com/news/birmingham/index.ssf/2015/08/alabama_probate_judge_asks_sta.html#incart_river

Alabama legislators seek state law banning fetal tissue sales

The controversy sparked by secretly recorded videos of Planned Parenthood officials has led two Alabama lawmakers to introduce bills to ban the sale of aborted fetuses, a practice already banned by federal law. Rep. Jack Williams, R-Vestavia Hills and Sen. Bill Hightower, R-Mobile, introduced identical bills on the second day of the special session Monday. They would make it a Class B felony to offer or accept money for aborted fetuses or parts of aborted fetuses. A Class B felony is punishable by 2-20 years in prison. Federal law prohibits profiting from the sale of fetal tissue, allowing only the recovery of costs. Critics of Planned Parenthood, citing the videos, accuse the organization of selling fetal body parts. One video shows the group’s medical director, during a meal, casually explaining how abortion doctors can avoid crushing certain organs to preserve them. The video was secretly recorded by the anti-abortion group the Center for Medical Progress using actors pretending to be interested in obtaining fetal tissue. A Planned Parenthood official on another video seems to indicate the price for fetal tissue can be negotiable. Planned Parenthood says some of its clinics provide fetal tissue for research with consent from patients and with no financial benefit to the organization or the patient. A federal law passed in 1993 allows donation of tissue from aborted fetuses under certain conditions, including that the procedure is not altered. The law allows for recovery of costs for preserving and transporting the tissue. On Monday, Democrats in the U.S. Senate blocked Republican-led efforts to strip Planned Parenthood of its federal funding.

http://www.al.com/news/index.ssf/2015/08/alabama_legislators_seek_state.html#incart_river

Blogs/Opinions

Bice’s pleas likely fell on deaf ears

Poor Tommy Bice. There he stood last week, the state superintendent, in front of a row of Montgomery’s buses, basically begging the Alabama Legislature not to take from the state’s public schools in order to pay for services it refuses to pay for through a proper tax structure. His plea would have been just as effective had he turned and given it to the buses. This is not to say that lawmakers will definitely rob the Alabama education trust fund in order to pay for general fund services that are on the chopping block due to a massive shortfall, although they’ve already proposed myriad ways to do just that. It just means that none of Bice’s very valid points will in any way sway lawmakers if the choice comes down to increased taxes or robbing public schools. Sorry, school kids, Mr. State Senator would like to be Mr. U.S. Senator someday. And you don’t get to the Big Show as a Republican in Alabama by jacking up taxes. And it doesn’t matter what polls say. Gov. Robert Bentley’s office released a poll showing the majority of respondents – around 62 percent – reacting favorably to small tax hikes on cigarettes or the state sales tax instead of cuts to certain services or state parks. But that’s a phone poll, not a voting booth. And when some guy screams at you in an election ad that Rep. X “went against Alabama’s conservative values and voted to raise taxes,” well, the mindset shifts. Because well maintained roads and prisons and state troopers and courts are naturally occurring resources in the minds of Alabama voters, apparently. Another poll released by the supporters of Senate President Pro Tem Del Marsh’s gambling/lottery plan demonstrated just how unpopular tax increases really are. Respondents in that poll found gambling the far better choice for increasing revenue and saving services. Nearly 90 percent wanted the option to vote on Marsh’s plan and 70 percent said they would vote for at least some form of gambling. (That first number is huge. Do you know how hard it is to get 90 percent of people to agree on something?) Also, 66 percent said they opposed raising taxes to fix the problem. So, that’s 62 percent in favor of raising taxes to fix the problem and 66 percent against raising taxes to fix the problem. At least we have everyone covered. But the real reason Bice was wasting his voice had little to do with polls and everything to do with mindset. Even as the superintendent was bemoaning the $500,000 that Montgomery County must pay each year to make up for the state shortfall in funding transportation, a new state school board member, Matthew Brown, was catching the eye of the Washington Post. Surprise: it’s not because he’s a super educator. It’s because Brown is anything but. In fact, he’s anti-public education, led an effort to defeat a tax increase in Baldwin County to pay for one of the state’s fastest growing school systems and has openly said his children will never attend a public school. In his entire life, Brown, who went to private school, has had zero involvement with public education, aside from undermining it. The Post called Brown’s appointment “scary.” But really, it was just business as usual in the world of Alabama public education, where the answer to over-populated prisons is somehow less education funding. So, when lawmakers return for their special session and start reaching for ideas to fill that $250 million hole, you can bet that public school kids are going to take a hit. Even though they’ve already taken a 20 percent hit over the last seven years. And even though they weren’t properly funded to start with. And even though teachers are now paying more for benefits and retirement and haven’t received a proper raise since today’s seniors were in elementary school. That’s why Bice’s speech, accurate as it was, was pointless. No one who matters cares.

http://www.montgomeryadvertiser.com/story/opinion/columnists/josh-moon/2015/07/31/bices-pleas-likely-fell-deaf-ears/30945713/

 

Morning Money

ALL YOU NEED TO KNOW ABOUT 2016 — The latest NBC/WSJ poll explains the rise of Trump and Sanders and the big problems facing Hillary Clinton, Jeb Bush and every other establishment candidate. The economy is growing around 2.5 percent and creating jobs at a solid clip but people just don’t feel like things are improving or that the U.S. is headed in the right direction. Slack wages explain some of it. But a lot of it is still hangover from the financial crisis and recession. The so-called “animal spirits” that drive better economic cycles — on both the corporate and consumer front — have just never emerged during this recovery. And they may never do so. It’s hard to see any development likely to shake the national malaise. And a government shutdown battle and possible debt limit crisis loom this fall. Along with Fed rate hikes.

All this presents both big hurdles for Clinton, Bush and the rest as well as big opportunities. If any candidate can sell Americans on an optimistic vision for better days ahead they will likely sail into the White House. It’s not going to be Donald Trump or Bernie Sanders. Trump’s negatives are sky-high and Sanders is a socialist. But beyond them it is completely wide open. The GOP debate Thursday will be the first big chance for Bush, Rubio, Walker and the rest to take their shot at both exciting the base and convincing an angry electorate that America still has a new chapter and it’s not far off.

THE NUMBERS — “On a benchmark measure of Americans’ unease, 65 percent of those surveyed said the country is on the wrong track. That is the highest level of unease since November 2014, and nears the levels seen at other historical moments of voter discontent … In May 1992, after H. Ross Perot had launched his populist independent run for president, 71 percent said the country was on the wrong track. In September 2007, when frustration with President George W. Bush was peaking, wrong-track sentiment was 63 percent.

“The new poll also found increased pessimism about the economy: 24 percent said they thought the economy would get worse over the next year, up from 17 percent in December. … Two-thirds of Americans want the next president to take a different tack from President Barack Obama, but the country remains split over which party would be better for the country: 39 percent want a Republican in the White House while 37 percent want a Democrat.” http://on.wsj.com/1OMbUFk

SOMETHING THAT WON’T HELP: SHUTDOWN FIGHT — POLITICO’s Burgess Everett and John Bresnahan: “Republicans are divided over whether they should use this fall’s government funding bill to attack Planned Parenthood — and risk a high-stakes shutdown fight — after Senate Democrats blocked a standalone bill to defund the organization on Monday evening. … On one side is presidential candidate Sen. Ted Cruz (R-Texas), who’s pushing Republicans to do everything within their power to strip the organization of federal support after Monday’s bill failed to clear a filibuster, 53-46.

“But a group of veteran Republican legislators is urging a more cautious approach, and reminding GOP colleagues that just two years ago their fight to defund Obamacare via a government funding bill produced a disastrous shutdown without making a dent on the Affordable Care Act” http://politi.co/1IlDCox

BUSH DINGS KRUGMAN — Jeb Bush at Monday’s voter forum in New Hampshire: “[T]he fact that Paul Krugman disagrees with me warms my heart. The fact is we can grow at that [4 percent] rate. It will require fixing a few really big complex things, the tax code, how we regulate, embracing the energy revolution with a North American strategy that will allow for high wage jobs to be created in our own country and fixing entitlements — along with moving from a broken legal immigration system to an economic driver.”

GREECE TANKS — Reuters/Athens: “Greek stocks were down 4.5 percent in early trade on Tuesday, dragged down by another near 30 percent plunge in banking stocks, a day after sustaining record losses when the bourse opened following a five-week shut down. The main Athens index lost 16.2 percent on Monday, the worst fall on record, as investors reacted to continuing questions about a new bailout from the European Union and to Greece’s worsening economy. … All four major Greek banking stocks were down more than 29 percent in early Tuesday trade, effectively their daily limit for losses.” http://reut.rs/1IVlt6r

KERRY BACK TO ASIA AMID CHINA TENSION — Bloomberg: “As U.S. Secretary of State John Kerry prepares to meet Southeast Asian counterparts in Malaysia, tension over China’s territorial aspirations risks overshadowing a gathering that aims to promote regional economic and security ties. … Kerry and China’s Wang Yi will join foreign ministers from the 10 members of the Association of Southeast Asian Nations in Kuala Lumpur Wednesday, days after China accused the U.S. of militarizing the South China Sea, the object of overlapping territorial claims by China and several Asean members. U.S. patrols in the area have riled the Chinese. …

“While the U.S. still wields considerable influence in Southeast Asia, much of the region is heavily dependent on trade and investment with China, which claims sovereignty over about four-fifths of the sea according to a so-called nine-dash line map it drew in the 1940s. Little progress has been made in adopting a code of conduct for the area, and China continues to develop artificial islands on disputed reefs.” http://bloom.bg/1KN4Pq1

GOOD TUESDAY MORNING — You can catch M.M. at 7:00 a.m. on CNBC’s “Squawk Box” talking about the grim NBC/WSJ poll

ERRATA — In Monday’s column we credited the note on the “paranormal” economy to Pantheon Macroeconomics. It was in fact by Jim O’Sullivan of HFE. Sorry Jim!

ENGAGED! — Per a little birdie: “Washington Post editor Dave Clarke proposed to Margaret Chadbourn of Fox News. The couple first met while working as reporters for Reuters News in Washington. They celebrated the engagement with family and a trip to Martha’s Vineyard ahead of the Republican presidential debate, which Margaret will travel to Cleveland to cover.” Image of the happy couple on the Vineyard: http://bit.ly/1MIMSck

DRIVING THE DAY — President Obama at 11 a.m. “holds a bilateral meeting with United Nation’s Secretary-General Ban Ki-moon … Senate Finance has a hearing at 10:00 a.m. on “A Way Back Home: Preserving Families and Reducing the Need for Foster Care” … The U.S. Chamber of Commerce Center for Capital Markets Competitiveness holds a discussion on the state of the Security and Exchange Commission’s regulatory agenda … Factory Orders at 10:00 a.m. expected to rise 1.8 percent …

PERRY OUT OF THE DEBATE — POLITICO’s Steve Shepard: “It appears increasingly unlikely that Rick Perry will get a chance to atone for his disastrous 2012 debate performance — or attack his 2016 nemesis, Donald Trump when Republicans spar for the first time Thursday in Cleveland. A Fox News poll out Monday night pegs the former Texas governor, who entered the race last cycle as the nominal favorite but has failed to gain traction this time around, at just 1 percent. … That puts Perry at only 2 percent in an average of polls that Fox News, which will air the first GOP presidential debate, will use to determine which candidates get the prime-time audience

GOP CANDIDATES ENJOY TRUMP-FREE EVENING — POLITICO’s Eli Stokols: “For the candidates, who appeared one by one for short, fast-paced question-and-answer sessions, and for New Hampshire and the trio of early states sponsoring the event, it was a temporary reprieve from a sprawling and chaotic primary battle currently dominated by Donald Trump’s bombast, even as deep-pocketed candidates like Jeb Bush lurk in the background. … But Monday night’s two-hour forum, a Trump-free zone open to every candidate no matter their standing in the polls, did little to bring clarity to a cluttered Republican field.

“Never pushed outside their comfort zones, they directed their attack lines at Hillary Clinton and Barack Obama. They all adhered to the conservative orthodoxies of the moment: a stronger foreign policy, a harder line on curtailing illegal immigration, cutting funding for Planned Parenthood. All of the candidates were simply aiming to make a strong introduction — and, due in part to the speed dating-like format, their points of emphasis were painted with a broad brush.” http://politi.co/1M86s1U

TRADE DEAL STILL STUCK ON DETAILS — NYT’s Jonathan Weisman: “Tokyo was ready to extend major concessions on American truck tariffs but was blocked by Mexico, which wanted less competition for its own trucks in the United States market. Canada held firm on protecting its politically sensitive dairy market ahead of elections in October, but for New Zealand, a tiny country with huge dairy exports, that was unacceptable. … And virtually all of the parties hated American protections of pharmaceutical firms, but a compromise on that issue could cost the support of Republicans in Congress.

“Final negotiations over the trade deal, the Trans-Pacific Partnership, are not like a checkers game with Congress, pitting two branches of government and two parties against each other. Rather, all 12 nations are asserting their particular economic and political interests in a multiple-dimension chess match, with one problem often setting off another. Whether all of those can be resolved is now a matter of will. But the disagreements are pushing any resolution of the trade deal further into the politically difficult presidential election season in the United States” http://nyti.ms/1MIS533

PUERTO RICO DEFAULTS — FT’s Eric Platt: “Puerto Rican government debt prices slid on Monday as investors sold off positions after the US commonwealth failed to make a requisite payment on one of its bonds on Saturday, setting off what is likely to be a long restructuring process for the territory’s $72bn debt load. …

“Puerto Rico general obligation bonds maturing in 2035 fell below 70 cents on the dollar on Monday in thin trading, touching levels first seen in June when governor Alejandro Garcia Padilla stunned the municipal bond market with comments that the island would be unable to pay off all of its debt … Puerto Rico has argued that a delinquency on its PFC debt would not constitute a wider default because they are morally obliged bonds, a claim investors reject.” http://on.ft.com/1M88xe2

WALKER HAS BIG CREDIT CARD DEBT — National Journal’s Shane Goldmacher: “Gov. Scott Walker has two credit-card debts of more than $10,000 apiece on separate cards and is paying an eye-popping 27.24 percent interest rate on one of them, new federal financial documents disclosed on Monday show. … The Republican presidential candidate has cast himself as both a fiscal conservative leader and a penny-pinching everyman on the campaign trail, often touting his love of Kohl’s, the discount department store. His newly published financial disclosure shows that, like many Americans, Walker has few assets, some major debts (including more than $100,000 for student loans for his children), and a punishing interest rate on his credit-card obligations.

“Walker, who has spent his adult life in elected office, is among the poorer Republican candidates for president. Donald Trump is worth billions. Jeb Bush, Carly Fiorina, and Ben Carson are all multimillionaires. … His carrying of high-interest credit-card debt makes Walker the second major candidate with some eyebrow-raising personal finances. Earlier this year, rival Sen. Marco Rubio, also among the less-well-off politicians in the field, reported cashing out one of his retirement accounts, another move not recommended by many financial professionals.” http://bit.ly/1K1dEXt

ALSO FOR YOUR RADAR

NEW MINIMUM WAGE VIDEO — American Action Forum today is releasing a new #Eakinomics video with Douglas Holtz-Eakin onn Tuesday in which he “explains how a minimum wage hike fails to help those in poverty and results in 6.6 million jobs lost” http://bit.ly/1E5q5zx

BROOKINGS EVENT REWIND — Here’s Better Market’s Dennis Kelleher’s presentation on possible structural issues in the bond markets: http://bit.ly/1N5XuPF

And here are remarks from Treasury’s Antonio Weiss: http://brook.gs/1IfPTNo

FORMER UBS STAR GUILTY IN RATE RIGGING PROBE — FT’s Lindsay Fortado and Caroline Binham: “Tom Hayes, a former star trader at UBS and Citigroup, has been found guilty of eight counts of conspiring to rig Libor, the first conviction in the global scandal over the manipulation of benchmark interest rates. … Hayes, a 35-year-old former yen derivatives trader who was described by one investigator in the case as ‘the Machiavelli of Libor’, was sentenced to 14 years in jail. … The conviction on Monday came three years after a then-record fine against Barclays sparked a global outcry over the rigging of benchmarks and billions of dollars in fines. …

“Dressed in a blue V-neck jumper over a light blue button-down shirt, Hayes appeared dejected as he sat in the dock during sentencing, looking at his wife or holding his head in his hands. The sentence is the latest of a string of harsh punishments handed out to bankers convicted of fraud, which highlight the judiciary’s toughening stance on financial crime. Magnus Peterson, the founder of collapsed hedge fund Weavering Capital, was given a 13-year prison sentence earlier this year while UBS rogue trader Kweku Adoboli received seven years in 2012.” http://on.ft.com/1SEZzJc

POTUS Events

10:00 am The President and the Vice President receive the Presidential Daily Briefing

Oval Office

Closed Press

11:00 am The President holds a bilateral meeting United Nations Secretary-General Ban Ki-moon; The Vice President also attends

Oval Office

Pool Spray at the Bottom

12:30 pm The President and the Vice President meet for lunch

Private Dining Room

Closed Press

Press Briefing by Press Secretary Josh Earnest

3:15 pm The President views White House Demo Day exhibits

State Floor

Pooled Press

3:40 pm The President delivers remarks at the White House Demo Day

East Room

Open Press

4:25 pm The President meets with American Jewish community leaders to discuss the Iran nuclear deal

Cabinet Room

Closed Press

Floor Action

Senators will continue debating on Tuesday whether or not to proceed to a long-stalled cyber bill.

Senate Majority Leader Mitch McConnell (R-Ky.) filed cloture on proceeding to the Cybersecurity Information Sharing Act (CISA) on Monday, paving the way for a procedural vote on Wednesday.

 

Backs of the bill have circulated a managers amendment that they hope could speed up the Senate’s consideration of the bill, while also tackling some privacy concerns that have delayed the legislation.

 

But Sen. Ron Wyden (D-Ore.) quickly raised concerns on Monday evening that trying to tackle the bill before a five-week break didn’t give lawmakers enough time, and that the agreement between Sens. Richard Burr (R-N.C.) and Dianne Feinstein (D-Calif.) doesn’t go far enough to protect privacy.

 

“My concern is that this bill, in its present form, will create more problems than it solves, and it would be a mistake to bring it up without agreeing to an inclusive process for considering relevant amendments,” he said, adding that the deal “does not fix the provision of this bill that allow private companies to hand large volumes of their customers’ personal information over to the government with only a cursory review.”

 

No votes are currently scheduled in the Senate, and senators are expected to recess from 12:30 p.m. to 2:15 p.m. for weekly party lunches.

 

Announcements

Back-to-School Education Tax Credits

If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time. You may be able to claim a tax credit on your federal tax return. Here are some key IRS tips that you should know about e tax credits:

  • American Opportunity Tax Credit. The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit.  The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student. You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the AOTC for one student, and claim the LLC for the other.
  • Qualified expenses. You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more on the rules that apply to each credit.
  • Eligible educational institutions. Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren’t sure if your school is eligible:

o Ask your school if it is an eligible educational institution, or

o See if your school is on the U.S. Department of Education’s Accreditation database.

  • Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit. Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
  • Nonresident alien. If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit U.S. Immigration Support. To learn more about resident and nonresident alien status and restrictions on claiming the education credits, refer to Publication 519, U.S. Tax Guide for Aliens.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits. Visit the IRS Education Credits Web page to learn more. Also see Publication 970, Tax Benefits for Education. You can get it on IRS.gov/forms at any time.

Krebs Daily Briefing 3 August 2015

Thomas L. Krebs, Securities Litigation, Regulation and Compliance Attorney Lawyer (c)2014 Brandon L. Blankenship
Thomas L. Krebs
(205)401-2383

International

China investigating liquor suppliers for Viagra in alcohol

Chinese police are investigating if two distillers in the southwestern region of Guangxi added impotence treatment drug Viagra to their liquor in the latest food-safety scare in China. The Liuzhou Food and Drug Administration said that it found the Guikun Alcohol Plant and the Deshun Alcohol Plant in Guangxi’s Liuzhou city were putting Sildenafil, more commonly known as Viagra, into three of their baijiu products. Baijiu is a fiery grain liquor that commands high prices in China. Law enforcement officers have confiscated 5,357 bottles of the suspect products, 1,124 kg of raw alcohol and a batch of white powder labeled Sildenafil, in a case worth more than 700,000 yuan ($112,726), according to a statement posted by the Liuzhou Food and Drug Administration on its website on Saturday. The case has been transferred to the police, the statement said. The products were all marketed as having health-preserving qualities, it said. Food safety is a chronic problem in China and public anxiety over cases of fake or toxic food often spreads quickly. In June, state media said Chinese customs have seized around 3 billion yuan ($483 million) worth of smuggled meat, some more than 40 years old and rotting, the latest in a grim series of food safety scares. In 2013, Chinese police said they broken a crime ring that passed off more than $1 million in rat and small mammal meat as mutton.

http://www.reuters.com/article/2015/08/02/us-china-foodsafety-viagra-idUSKCN0Q709520150802?feedType=nl&feedName=usmorningdigest

Mark Karpeles, Chief of Bankrupt Bitcoin Exchange, Is Arrested in Tokyo

TOKYO — Since the collapse last year of Mt. Gox, the exchange that served as the largest hub for storing and trading the virtual currency Bitcoin, law enforcement officials and angry clients have been asking what happened to nearly half a billion dollars in Bitcoins that the company said had vanished from its computer systems. On Saturday, the Japanese police arrested Mark Karpeles, the head of the exchange, which was based in Tokyo, on suspicion that he had used the popular online financial platform, which he developed, to illicitly add $1 million to an account under his control. But the arrest, and the small amount of information divulged by Japanese law enforcement officials, shed little light on the larger mystery of the missing Bitcoins. Television news video showed officers from the Tokyo Metropolitan Police Department leading Mr. Karpeles, a 30-year-old French national, from his apartment early Saturday morning. In a statement, the police said they believed that Mr. Karpeles had “unjustly inflated the balance” of an account held under his name by manipulating transaction records on a system that Mt. Gox used to swap Bitcoins for dollars. “He created false information that $1 million had been transferred into the account, when in fact it had not been,” the police said in a short statement.

http://www.nytimes.com/2015/08/02/business/dealbook/mark-karpeles-mt-gox-bitcoin-arrested.html?emc=edit_th_20150802&nl=todaysheadlines&nlid=53476364

Former Citigroup and UBS Trader Convicted in Libor Case

LONDON — Tom Hayes, a former trader at Citigroup and UBS, has been convicted on eight counts of conspiring to manipulate a global benchmark interest rate known as Libor, bolstering efforts by prosecutors here to pursue financial wrongdoing. The verdict on Monday came more than three years after a conspiracy among traders to manipulate the London interbank offered rate, or Libor, first came to light. The ensuing scandal has led to billions of dollars in fines and rocked the reputations of some of the world’s biggest banks, including Barclays, the Royal Bank of Scotland, UBS and Deutsche Bank. Mr. Hayes, 35, was the first person to go to trial in Britain on criminal charges related to Libor manipulation, and his case was seen as a bellwether for British authorities, who have been criticized in the United States for not being as aggressive as the Justice Department when it comes to pursuing financial crime. Six other traders from three other financial institutions will go to trial here in September on charges related to the manipulation of Libor.

http://www.nytimes.com/2015/08/04/business/dealbook/former-citigroup-and-ubs-trader-convicted-in-libor-case.html

A Photojournalist Fled Veracruz Under Threat, But Murder Found Him in Mexico City

A Mexican photojournalist who had fled the most dangerous state in the country for news reporters under threats was found bound and shot to death on Friday night in an apartment in Mexico City along with four others. The death of 31-year-old Ruben Espinosa is the seventh killing of a journalist so far this year in Mexico. According to the press-freedom group Article 19, relatives of Espinosa identified his body on Saturday. They had reported him missing since 2 pm the day before when he sent a text message saying he was heading home. Reporters facing threats or working in dangerous regions in Mexico often practice a “security protocol” of checking in with colleagues or loved ones every few hours. When Espinosa stopped communicating, his family reported him missing to local and federal authorities. The photographer publicly denounced threats in a July 9 segment of online television outlet Rompeviento TV. He was among five homicide victims found on Friday night in an apartment in Narvarte, a middle-class neighborhood of Mexico City. Press reports said the rest were women, three of whom were identified as roommates in the apartment and the fourth woman as the housecleaner. Espinosa had been tied up, showed signs of beating, and was shot twice, reports said. The other victims had not been identified as of early Sunday.

https://news.vice.com/article/a-photojournalist-fled-veracruz-under-threat-but-murder-found-him-in-mexico-city

National

Citigroup Said Facing Student-Loan Servicing Probe by CFPB

Citigroup Inc., the third-largest U.S. bank by assets, is being investigated by the Consumer Financial Protection Bureau over its student-loan servicing practices, a person with direct knowledge of the matter said. Citigroup is cooperating with the probe, the New York-based firm said Monday in a filing that didn’t disclose which regulator was involved. That agency is the CFPB, said the person, who asked not to be identified discussing an ongoing investigation. The inquiry may result in penalties or having the bank offer restitution to customers, and echoes an enforcement action against at least one other institution, according to the filing, which didn’t name the other firm. Spokesmen for Citigroup and the CFPB declined to comment. Discover Financial Services disclosed a similar probe by the CFPB in February 2014 and last month agreed to refund $16 million to consumers and pay a $2.5 million penalty. The agency found the Riverwoods, Illinois-based firm overstated minimum amounts due on billing statements and denied consumers information needed to obtain income-tax benefits. Discover also engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night, the CFPB said.

http://www.bloomberg.com/news/articles/2015-08-03/citigroup-subject-of-investigation-over-student-loan-servicing

Obama to Unveil Tougher Environmental Plan With His Legacy in Mind

WASHINGTON — In the strongest action ever taken in the United States to combat climate changePresident Obama will unveil on Monday a set of environmental regulations devised to sharply cut planet-warming greenhouse gas emissions from the nation’s power plants and ultimately transform America’s electricity industry. The rules are the final, tougher versions of proposed regulations that theEnvironmental Protection Agency announced in 2012 and 2014. If they withstand the expected legal challenges, the regulations will set in motion sweeping policy changes that could shut down hundreds of coal-fired power plants, freeze construction of new coal plants and create a boom in the production of wind and solar power and other renewable energy sources. As the president came to see the fight against climate change as central to his legacy, as important as the Affordable Care Act, he moved to strengthen the energy proposals, advisers said. The health law became the dominant political issue of the 2010 congressional elections and faced dozens of legislative assaults before surviving two Supreme Court challenges largely intact. “Climate change is not a problem for another generation, not anymore,” Mr. Obama said in a video posted on Facebook at midnight Saturday. He called the new rules “the biggest, most important step we’ve ever taken to combat climate change.” The most aggressive of the regulations requires the nation’s existing power plants to cut emissions 32 percent from 2005 levels by 2030, an increase from the 30 percent target proposed in the draft regulation. That new rule also demands that power plants use more renewable sources of energy like wind and solar power. While the proposed rule would have allowed states to lower emissions by transitioning from plants fired by coal to plants fired by natural gas, which produces about half the carbon pollution of coal, the final rule is intended to push electric utilities to invest more quickly in renewable sources, raising to 28 percent from 22 percent the share of generating capacity that would come from such sources.

http://www.nytimes.com/2015/08/02/us/obama-to-unveil-tougher-climate-plan-with-his-legacy-in-mind.html?emc=edit_na_20150802&nlid=53476364&ref=cta&_r=0

 

Goldman raises top end of legal-loss estimate

 Goldman Sachs Group Inc (GS.N) raised the top end of the range for possible legal losses to about $5.9 billion, the bank said in a regulatory filing on Monday. In May, the Wall Street bank estimated $3.8 billion in legal losses above what it had already set aside. Goldman said on Monday that it was in talks with U.S. regulators to resolve claims tied to the sale of residential mortgage-backed securities prior to the financial crisis. The bank said “potential resolution of this matter … may result in significant penalties and other costs.” Goldman reported its smallest quarterly profit in nearly four years in July as it set aside more than $1.45 billion to cover potential mortgage settlements.

http://www.reuters.com/article/2015/08/03/us-goldman-sachs-legal-losses-idUSKCN0Q818Y20150803?feedType=nl&feedName=businessNews

 

Onetime Allies on Wall Street Have Uneasy Prison Reunion After Insider Trading Trials

In their heyday, Raj Rajaratnam and Rajat K. Gupta were business partners who lent each other a helping hand. The two men were very different. Mr. Rajaratnam was a high-rolling hedge fund manager who loved to take risks, while Mr. Gupta was a consultant educated at Harvard Business School who worked all his life at one firm, McKinsey & Company. Years after their closely watched insider trading trials and two of the biggest victories for prosecutors in the government’s crackdown on insider trading on Wall Street, the men find themselves under the same roof: In a new development, both are now at the main prison at the Federal Medical Center Devens in Ayer, Mass., northwest of Boston, with 1,000 other inmates. Friends, a former inmate and those who have interacted extensively with the two men describe what has become an awkward relationship. The two lead parallel lives that sometimes intersect. They occasionally run into each other in the common areas at Devens and exchange pleasantries. Although both men are in prison for the same crime, their friendship is irrevocably broken.

http://www.nytimes.com/2015/08/03/business/dealbook/onetime-allies-on-wall-streethave-uneasy-prison-reunion-after-insider-trading-trials.html?emc=edit_th_20150803&nl=todaysheadlines&nlid=53476364

 

Grand Jury Indicts Texas Attorney General, Ken Paxton, on Felony Charges

HOUSTON — Ken Paxton, the Republican attorney general of Texas and a former state legislator, has been indicted by a grand jury on charges of securities fraud and of failing to register with the state securities board, officials said. The grand jury in the northern Dallas suburb of McKinney handed up a three-count indictment against Mr. Paxton on Tuesday, the officials said. The indictment is to be unsealed on Monday, when Mr. Paxton is expected to turn himself in to the authorities at the Collin County Jail. The charges — two counts of first-degree securities fraud and one count of third-degree failure to register — are tied to Mr. Paxton’s work soliciting clients and investors for two companies while he was a member of the Texas House of Representatives, before he was elected attorney general in November. In the most serious charges, first-degree securities fraud, Mr. Paxton is accused of misleading investors in a technology company, Servergy Inc., which is based in McKinney, his hometown. He is accused of encouraging the investors in 2011 to put more than $600,000 into Servergy while failing to tell them he was making a commission on their investment, and misrepresenting himself as an investor in the company, said Kent A. Schaffer, one of the two special prosecutors handling the case. The group of investors were Mr. Paxton’s friends and included a colleague in the Texas House, Representative Byron Cook. Mr. Schaffer said Mr. Paxton’s role in misleading the investors had come to light in an investigation by members of the Texas Ranger Division. Mr. Schaffer and the other special prosecutor, Brian Wice, are Houston defense lawyers appointed by a judge to act, effectively, as district attorneys in the case.

http://www.nytimes.com/2015/08/02/us/grand-jury-indicts-texas-attorney-general-ken-paxton-on-felony-charges.html?emc=edit_th_20150802&nl=todaysheadlines&nlid=53476364

 

New York Regulator Moves to Suspend Promontory Financial

The Promontory Financial Group occupies a position of trust in the global financial system, acting as a consultant to big banks, foreign nations and the Vatican. Its influence has soared over the years, positioning it as a sort of shadow regulator that provides government authorities with a window into bank misconduct. And the firm’s political ties run deep, thanks to its founder and chief executive, Eugene A. Ludwig, a former top banking regulator and a law school friend of Bill Clinton. But an important driver of Promontory’s success — guiding New York State banks through regulatory problems — is now in jeopardy, and so is the firm’s reputation for independence. On Monday, New York State’s financial regulator effectively suspended Promontory from conducting most assignments for banks that are licensed in New York State and suspected of wrongdoing. The decision to suspend the firm indefinitely, an unusually aggressive move even for the Department of Financial Services, a New York agency known to scuffle with Wall Street, was detailed in a report that accused Promontory of helping to obscure some of the same bank misconduct it was supposed to unearth.

http://www.nytimes.com/2015/08/04/business/dealbook/new-york-regulator-moves-to-suspend-promontory-financial.html?ref=dealbook

 

How Your Address Changes Your Politics

Americans like to imagine that their views are independent from their surroundings, but the way you vote in the next election will be heavily influenced by where you brush your teeth and shower the day that election occurs. “Mississippi consistently votes more Republican than San Francisco, and it’s not because people with Republican temperaments moved to Mississippi and people with Democratic temperaments moved to San Francisco,” says University of British Columbia psychologist Steven J. Heine. “There is a set of historical experiences in these different regions that shape the kinds of concerns that people have.” The power of our locations to affect our politics is of particular importance in the United States, which has always been a nation of people constantly packing boxes and exchanging house keys. In a recent Gallup survey, 24 percent of Americans reported that they had moved to a new home in the last five years, compared to around nine percent in the European Union and about five percent in China. We’ve traditionally imagined that those transplants will slowly become accustomed to eating new foods and cheering for new sports teams but will bring with them the ideas and beliefs of their hometowns. But experts now say that people likely form new identities once they move, and may even shed their old ones.

http://www.politico.com/magazine/story/2015/08/how-your-address-changes-your-politics-120899.html#ixzz3hlCANNlu

 

How to Succeed in Crowdfunding: Be Thin, White, and Attractive

The Internet is awash with guides for finding success on the crowdfunding website Kickstarter. But the best advice to those seeking money online might sound more like this: Be thin, fair-skinned, and attractive. It is true that in many realms, crowdfunding has delivered on its democratic promise. Take female entrepreneurship: It’s been shown that professional investors have consistently view pitches from men more favorably than those from women, even when the content of those pitches was the same. Kickstarter has subverted that. On the site, projects launched by women are more likely to secure funding than those started by men. That said, some recent research suggests that when it comes to websites that connect investors with entrepreneurs and donors with charitable recipients, the Internet’s levelling power is not strong enough to dissolve other types of longstanding bias. Fundraisers’ physical appearance, which is evident from their profile pictures on sites such as Kickstarter and Kiva, can subtly guide donation or investment decisions. That’s worrying as a trawl through beseeching online profiles has become a more and more common way for donors, investors, and shoppers to decide how to give their money not just to any given entrepreneur, but even to homeless people and prospective college students.

http://www.theatlantic.com/business/archive/2015/08/crowdfunding-success-kickstarter-kiva-succeed/400232/

 

State/Local

Propublica weighs in on inmate abortion case that pitted mother against fetus

The investigative journalism organization ProPublica weighed in today on the convoluted case of Jane Doe, the inmate who recently changed her mind about seeking an abortion. The article, written by Nina Martin, highlights the role of the state’s chemical endangerment law in the legal saga that started when Doe was arrested earlier this summer for drug-related crimes. The legislature passed a law against chemical endangerment of a child in 2006 that targeted adults who expose children to toxic substances from home-based meth labs. Prosecutors and judges have since stretched the law to include fetal exposure to drugs. Doe faced at least one charge of chemical endangerment at the time of her arrest, according to Lauderdale County District Attorney Chris Connolly. County officials appointed an attorney to represent the fetus and scheduled a hearing to strip Doe of her parental rights and force her to give birth to the child. Michele Bratcher Goodwin, a law professor at the University of California at Irvine who writes often about reproductive issues, reached back to the 19th century for an analogy. Forcing a woman to forgo an abortion that she wants and to bear a child that she has no desire to parent “conscripts [her] into a chattel-like status,” Goodwin said. “The Thirteenth Amendment abolished slavery. You can’t have enslaved bodies no matter what the state’s intention may be.””Nuts,” is how Heather Fann, a Birmingham lawyer who heads the state bar association’s family law section, described the juvenile court action. “In terms of how family court generally establishes these issues … you cannot adjudicate parental rights” until a child is born. On Wednesday, Doe dropped her request for an abortion.. U.S. District Court Judge Abdul K. Kallon dismissed Doe’s federal case requesting an abortion, according to the Associated Press. If Doe had decided to pursue abortion, the case could have had major implications on how far the state can go to use the criminal justice system to protect unborn children. Alabama is already one of the most aggressive states in the nation when it comes to prosecuting mothers who use drugs while pregnant. Civil liberties groups including the ACLU have watched this case closely, along with others that involve women who use drugs while pregnant. Sara Ainsworth, legal director of the New York–based National Advocates for Pregnant Women, has been tracking the Alabama cases and the larger national trend it represents. “This case, as wild as it is, is the next obvious step,” she said. “Once women are viewed as wholly separate from the fetuses they’re carrying, you’re pitting women in opposition to their own pregnancies, their own bodies. You have created a situation where a woman’s personhood is secondary.”

http://www.al.com/news/index.ssf/2015/07/propublica_weighs_in_on_inmate.html#incart_river

 

The special legislative session: It resumes today with still no agreement on budget fixes

MONTGOMERY, Alabama – State lawmakers return to this hot and humid capital city today to resume a special session they adjourned three weeks ago to work behind the scenes to find either a fix to or a bandage for a state budget crisis. Looming over their shoulders is the start of a new fiscal year beginning Oct. 1 and at least a $200 million hole in the state’s General Fund budget. If not addressed that hole will result in what Gov. Robert Bentley has called “unworkable” cuts to vital state services. On the chopping block are 20 state parks that could close, cuts to the number of already too few state troopers, medical and mental health care for some of the poorest Alabamians including children, slashed and every day court house services like renewing driver’s licenses cut back. Yet despite three weeks of closed door meetings among key legislators there appears no clear consensus among lawmakers as to what they will do. One veteran lawmaker talking on background Sunday night said that in decades in the Legislature he has never seen a more chaotic environment as lawmakers struggle with possible answers most of them deeply dislike. Among those include:

http://www.al.com/news/index.ssf/2015/08/the_special_legislative_sessio.html#incart_river

 

Tom Albritton, Alabama’s new ethics executive director, wants to be fair, consistent

Alabama’s new ethics executive director said consistency is the key to applying a broadly written ethics law in a way that both guards the public’s trust and encourages good people to run for office. Tom Albritton, 48, practiced law for 23 years in his hometown of Andalusia before replacing Jim Sumner as executive director. Sumner retired Oct. 1 after 17 years in the slot. The five-member commission chose Albritton from 27 applicants and the state Senate confirmed his appointment in March. The Ethics Commission issues opinions on the law, collects annual reports from public officials on their sources of income, maintains a registry of lobbyists, trains public officials on the law and investigates complaints, among other duties. Albritton said parts of the ethics law are nonspecific to the extent that it requires careful interpretation for every circumstance and event. “I don’t think having broad language is a bad thing,” Albritton said. “I think having broad language is a challenge to enforce consistently. And you can’t have a rigid set of rules that don’t work in the real world.” Interpreting the law in a way that works in the real world while upholding the intent of the law is central to his job, Albritton said. “Everything I do is with an eye toward getting the answer right, and applying it consistently,” said Albritton, son of former federal judge William Harold Albritton III, who served in the Middle District of Alabama from 1991-2004.

http://www.al.com/news/index.ssf/2015/07/alabamas_new_ethics_director_w.html#incart_river

 

Sarah Palin donates to campaigns of 2 Alabama congressmen

While former vice presidential candidate Sarah Palin has largely become a political afterthought, she’s still a behind-the-scenes player in Washington. Palin, who was Republican presidential nominee’s John Mc

Cain’s running mate in 2008, raked in almost $500,000 to her political action committee – Sarah PAC — over the first six months of 2015. And she has passed some of that money on to two Alabama Republican congressmen. U.S. Reps. Mo Brooks of Huntsville and Gary Palmer of Hoover each received $500 from Sarah PAC on June 29, according to Federal Election Commission campaign disbursement reports from Palin’s PAC. Brooks and Palmer have not yet reported the contribution from Palin, according to their federal campaign reports.

http://www.al.com/news/index.ssf/2015/08/sarah_palin_donates_to_campaig.html#incart_river

 

Blogs/Opinions

Johnson Center a poor steward of facts where RSA concerned

By David G. Bronner, CEO of the Retirement Systems of Alabama

“A lie gets halfway around the world before the truth has a chance to get its pants on.” -Winston Churchill

On July 29, AL.com published a guest opinion written by Daniel J. Smith, an associate professor of economics at the Johnson Center at Troy University criticizing the Retirement Systems of Alabama as a “poor steward” of retirement resources. The article is scandalously inaccurate and comes from an institution which is partially funded by an organization that seeks to abolish public pensions. The Johnson Center has a history of publishing debunked “studies” that are widely known to contain false claims, such as asserting that RSA is running out of money. The Johnson Center and Professor Smith’s continued reckless perpetuation of these falsehoods only serves to confuse people and make hundreds of thousands of RSA members and their families feel uncertain about their financial security. That is wrong and we have a duty at RSA to make sure that the public and our members know the truth. Here are a few examples of the most egregious of these misrepresentations and the facts that disprove them:  see more at link below.

http://www.al.com/opinion/index.ssf/2015/07/johnson_center_a_poor_steward.html#incart_river

 

Morning Money

BIDEN WORLD MIND MELD — Lot of chatter about a Joe Biden presidential campaign over the weekend spurred by a Maureen Dowd column and subsequent NYT piece. This is from a person in close touch with Biden world, based on many conversations with insiders over two years: “The Vice-President is the ultimate political animal, and political animals are constantly evaluating their opportunities. The Joe Biden pictured in What It Takes, the classic presidential campaign book about the 1988 presidential race, is a guy who desperately wants the ultimate prize. …

“Biden came from a dynastic political family long before anyone ever heard of Hillary Clinton. Once that bug bites you, you have it for life. Despite West Wing staff attempts to clip his political wings, Biden has a core group of very capable loyalists who are ready to jump at the chance to make him President.

“His senior consigliere, former Senator Ted Kaufmann, leads the pack, but he also has an experienced hand on staff in Steve Ricchetti, his current Chief-of-Staff and a former Deputy Chief-of-Staff for President Bill Clinton. There is no doubt that his family wants him to do it, and that he would like nothing more. Given the seemingly early Democratic Party consensus around Hillary’s candidacy, he and his team decided to take a pass on an active race, but they always understood that if Hillary implodes, the alternative would not be Sanders or O’Malley. No one is paying more attention to her high negatives in key states than Biden and his people.

“Later this summer the entire Biden family will be vacationing together, and topic number one will be whether Joe should run. … If Hillary falters on her own (as she appears to be doing), Biden would escape the epithets hurled his way by her loyalists that would blame him for standing in the way of her historic candidacy. Instead, he becomes the hero who saves the Party from an electoral debacle. It’s a tricky business that requires precise timing to work. He cannot afford to be perceived as the ‘unseen hand’ behind her collapse.

“Beau Biden’s desire to see his dad in the race has been campaign fodder for weeks now. Does anyone really think that leaking Beau’s deathbed wishes is an accident? In the end, Joe may not run, but only a fool would think he is not actively considering it. Hillary is no fool. … And Biden’s folks see the anemic fundraising of Priorities USA, Hillary’s so-called SuperPac, as an opening for their own fundraising.”

COFFEY NEXT NEW YORK FINANCIAL COP? — Capital New York’s Jimmy Vielkind scoops: “The Cuomo administration is seriously considering John P. ‘Sean’ Coffey, a former candidate for attorney general, as the next commissioner of the state’s Department of Financial Services, three people familiar with the search process said. … Coffey, an established trial lawyer and one-time federal prosecutor, has been advanced as a successor to Ben Lawsky, who left D.F.S. in June to start his own consulting firm. …
One source said Coffey had several advocates within the governor’s cabinet, but that Cuomo himself was not yet convinced. A spokesman for the governor, Rich Azzopardi, declined to comment on Coffey beyond saying, ‘the search is ongoing.’ Coffey did not return an email seeking comment.

“Coffey is a partner at Kramer Levin, but gained notoriety in the financial world when he won billions in settlements from Wall Street banks that had pumped up WorldCom stock. That company declared bankruptcy after an $11 billion accounting fraud. Coffey finished third in a five-way primary for the Democratic nomination to succeed Cuomo as attorney general. While he cast himself as a candidate with a long record of public service — he graduated from the U.S. Naval Academy and served 30 years of active and reserve duty — it was his first run for office” http://bit.ly/1eMqO1V 

OBAMA UNVEILS CARBON PLAN — Per the White House: “Today at the White House, President Obama and Environmental Protection Agency (EPA) Administrator Gina McCarthy will release the final Clean Power Plan, a historic step in the Obama Administration’s fight against climate change. … The Clean Power Plan establishes the first-ever national standards to limit carbon pollution from power plants. We already set limits that protect public health by reducing soot and other toxic emissions, but until now, existing power plants, the largest source of carbon emissions in the United States, could release as much carbon pollution as they wanted.

“The final Clean Power Plan sets flexible and achievable standards to reduce carbon dioxide emissions by 32 percent from 2005 levels by 2030, 9 percent more ambitious than the proposal … The Clean Power Plan, and other policies put in place to drive a cleaner energy sector, will reduce premature deaths from power plant emissions by nearly 90 percent in 2030 compared to 2005 and decrease the pollutants that contribute to the soot and smog and can lead to more asthma attacks in kids by more than 70 percent”

SHUTDOWN ODDS SPIKING — From Stan Collender’s Forbes column up this a.m.:  “The chance of a federal government shutdown increased dramatically and precipitously last week from 40 percent to 60 percent. It’s now more likely than not that a shutdown will result from the craziness going on in Washington. … With the House already in recess until after Labor Day and the Senate about to leave town this week, all of the components that had led to my previous 40 percent estimate got worse. There’s now even less time — Congress will be in session only a handful of days before the fiscal year begins on October 1 — for the House and Senate to devote to appropriations.

“The leadership has already admitted that nothing has been decided about how to deal with this situation. In other words, this will be the kind of last minute, ad hoc decision that in the past has repeatedly failed and led to unwanted consequences … like a shutdown.  … Add to the lack of time the ever-hardening positions on the key appropriations question of military vs. domestic spending. … [T]he biggest change from last week in the odds of a government shutdown is because of the emergence of the one big thing that has been missing so far from the appropriations debate: a highly emotional, politically toxic and take-no-prisoners issue. … This time it’s the new GOP push to defund Planned Parenthood”

TRUMP STILL SURGING — “Trump Surges in [national] NBC News/WSJ Poll,” by NBC’s Carrie Dann: 1) Trump — 19 percent … 2) Walker — 15 percent … 3) Bush — 14 percent … 4) Carson — 10 percent … 5) Cruz — 9 percent … 6-7) Huckabee, Paul: 6 percent … 8) Rubio — 5 percent … 9-10-11) Christie, Perry, Kasich — 3 percent … 12-13) Jindal, Santorum — 1 percent … Less than 1 percent: Fiorina, Graham, Pataki, Gilmore.” http://nbcnews.to/1DjayRU

THE NEW (CRUMMY) NORMAL — Pantheon’s Ian Shepherdson: “Paranormal? The economy is normalizing and the Fed is contemplating the start of policy normalization, but what is normal? For growth, it is certainly not what it used to be. … Real GDP growth now shows a 2.1 percent average annual rate since the recession ended six years ago, down from 2.2 percent previously.

“The slight lowering was despite a modest upward revision to the first quarter of this year — to a 0.6 percent rate from minus 0.2 percent — and a 2.3 percent pace in the second quarter. We thought GDP might be revised up toward the slightly stronger GDI data. Instead, real GDI was revised down a little … [W]e see little basis for expecting much change to the data any time soon and we are slightly lowering our projections for coming quarters”

GOOD MONDAY MORNING — Just an early warning that your regular M.M. will go on break for two weeks starting on Friday. But the column will keep cranking. Then the whole operation will go dark the final week of August.

DRIVING THE WEEK — First GOP debate on Thursday! Should be a blast with Trump in the mix … Jobs report Friday expected to show a solid gain of 225K with no change to the 5.3 percent jobless rate … President Obama this afternoon delivers remarks on the Clean Power Plan … Antonio Weiss, counselor to Treasury Secretary Jack Lew, delivers remarks and moderates a discussion at the Brookings Institution on whether there are structural problems in the U.S. bond market … Personal income and spending Monday at 8:30 a.m. expected to rise 0.3 percent and 0.2 percent respectively … Manufacturing ISM at 10:00 a.m. expected to be flat at 53.5 … Non-manufacturing ISM at 10:00 a.m. Wednesday expected to rise to 56.2 from 56.0 …

CLINTON GOING UP WITH FIRST ADS — POLITICO’s Annie Karni: “Hillary Clinton will become the first top-tier candidate to hit the airwaves in the early voting states of Iowa and New Hampshire starting Tuesday with a $2 million ad buy for five weeks of television commercials — a gambit intended to get out in front of her competitors and help boost her popularity before the airwaves are cluttered with competing messages from other candidates. …

“It’s also a show of force in Iowa where recent polls show Clinton’s favorability numbers dropping, and where Vermont Sen. Bernie Sanders has enjoyed surging popularity — the single ad buy is almost as large as Sanders’ total campaign spending of $3 million in the first quarter, and more than any top-tier Republican candidate has spent so far on ads. The television spots, each 60 seconds, focus on Clinton’s mother, Dorothy Rodham, the person she says inspired her to fight for women and children, and whom she highlighted in her kickoff speech on Roosevelt Island in June” http://politi.co/1KKPUfZ

FEAR FOR THE MILLENNIALS — Steve Rattner in the NYT: “[B]e fretful over their economic well-being and fearful — oh so fearful — for their prospects. The most educated generation in history is on track to becoming less prosperous, at least financially, than its predecessors. … They are faced with a slow economy, high unemployment, stagnant wages and student loans that constrict their ability both to maintain a reasonable lifestyle and to save for the future.

“Longer term, rising federal debt payments and increased spending on Social Security and Medicare will inflict a tremendous financial burden on them, threatening their own prospect of receiving promised retirement benefits. … Americans between 18 and 34 are earning less today (after adjustment for inflation) than the same age group did in the past. A typical millennial averaged earnings of $33,883 (in 2013 dollars) between 2009 and 2013. That was down 9.3 percent (after adjustment for inflation) in just a decade and is the lowest since 1980.” http://nyti.ms/1IyJcTG

CLINTON LAND DOESN’T BUY BIDEN RUN — POLITICO’s Annie Karni: “Vice President Joe Biden has earned the right to take a serious look at a presidential run. He’s a beloved figure in the Democratic party, a stand-up guy. That’s the party line being offered among many Hillary Clinton allies, who when asked about the latest Biden trial balloon are quick to stress that they consider him a friend, or that they are admirers from afar. … But behind the stated support for the Vice President is a harder calculation — that the latest flirtation is the last gasp before Biden puts to bed the possibility of his last shot at the White House …

“Biden has been meeting with friends and political allies in recent weeks, as he’s struggled to cope with the death of his eldest son, Beau. Often, the subject of a presidential run comes up. He remains open to a run, they say, but some who spoke to POLITICO on the condition of anonymity said he is not close to making a decision.” http://politi.co/1IdNByj

GOP RACE HEATS UP — WSJ’s Patrick O’Connor and Janet Hook: “The Republican Party enters its most competitive presidential contest in a generation buffeted by forces largely beyond the control of party leaders, from the unexpected surge of Donald Trump to the small pool of wealthy donors gathered here who are occasionally at odds with GOP brass in Washington. … Mr. Trump’s unanticipated ascent coincided with the arrival of five other Republican presidential candidates at a luxury resort here over the weekend to audition for hundreds of wealthy donors convened by billionaire industrialists Charles and David Koch.

… “The biannual Koch conference set the stage for the busiest week yet in the nominating contest, with a candidate forum Monday in New Hampshire and the first candidates’ debate on Thursday in Cleveland. The Koch conference is an unrivaled convergence of roughly 450 conservatives who have pledged at least $100,000 a year to various political and ideological endeavors. Many are also financing individual presidential candidates and the so-called super PACs that support them … Mr. Trump poses a more delicate short-term challenge for the GOP, thanks to high name recognition, celebrity appeal and a populist message that taps a powerful anti-Washington vein” http://on.wsj.com/1OJs9D3

JEB HEARTS TRUMP — NYT’s Jonathan Martin: “It may be the Summer of Trump, but the publicity-hungry real estate magnate is not the only Republican presidential candidate relishing all his attention. Donald J. Trump’s surge in the polls has been met with barely concealed delight by Jeb Bush and his supporters. Mr. Trump’s bombastic ways have simultaneously made it all but impossible for those vying to be the alternative to Mr. Bush to emerge, and easier for Mr. Bush, the former Florida governor, to position himself as the serious and thoughtful alternative to a candidate who has upended the early nominating process.

“With little indication that his support is slipping and the promise of the center stage at Thursday’s debate, Mr. Trump has essentially frozen the rest of the field … The broad attention given to his position atop national polls overshadows more worrisome indicators for him, including the substantial number of potential primary voters who say they would not support him under any circumstances. But for the moment he is depriving many of the other 16 Republican candidates of the political oxygen they need … That mainly helps Mr. Bush” http://nyti.ms/1DjMr5D

PUERTO RICO HEADES TO DEFAULT — FT’s Eric Platt and Nicole Bullock: “Puerto Rico defaulted on some of its debts this weekend after years of battling to stay current on its obligations, signalling the start of a long and contentious restructuring process for the US commonwealth’s $72bn debt pile. … The territory, which successfully scrambled to make a $169m payment on debts owed by the Government Development Bank on Friday, did not make a $58m payment on Public Finance Corporation bonds, according to Victor Suarez, chief of staff for Puerto Rico’s governor …

“The missed payment will push Puerto Rico formally into default after the close of business on Monday said credit rating agency analysts. The PFC bonds are the first to fall into arrears, and a government ‘working group’ is racing to come up with a plan to restructure the territory’s debts and overhaul its economy. Puerto Rico governor Alejandro Garcia Padilla startled investors earlier this year when he said the commonwealth would not be able to pay off all of its debts and required a restructuring, a move many bondholders — especially creditors to the government itself — are loath to accept.” http://on.ft.com/1SygLA4

ALSO FOR YOUR RADAR

STARTUP TO AID STARTUPS — NYT’s Dino Granoni: “Uber, the ride-hailing app, seems capable of the impossible: fighting City Hall and winning. In its recent tussle with the city of New York, the company emerged victorious after an all-out media blitz against Mayor Bill de Blasio … Now, one of the advisers behind that campaign wants to bring his touch with government to other technology start-ups. Bradley Tusk, a former campaign manager for New York’s last mayor, Michael R. Bloomberg, is starting Tusk Ventures, a political consulting firm geared toward helping start-ups work with — and in some cases, beat back — government regulators.” http://nyti.ms/1fXPlSw

IMF GETS SMART ON GREECE — Mohamed El-Erian: “By hesitating to play a full financing role in the latest bailout program for Greece, the International Monetary Fund risks alienating both the Greek government and its European partners. Yet the institution’s approach isn’t just warranted; it could well hold the key to the success of the challenging task of restoring Greece’s growth and financial viability within the euro zone. …

“The IMF, although willing to join in the creditor negotiations with Greece, has indicated that its willingness (indeed, ability) to participate in a new funding arrangement depends on progress on some important and long-standing unfinished business. It wants to see a comprehensive pro-growth economic reform program for Greece; progress in its implementation; guarantees for the country’s financing needs; and debt relief.” http://bv.ms/1IiIHOg

ATHENS EXCHANGE TO RE-OPEN — FT’s Kerin Hope in Athens: “The Athens stock exchange was set to reopen on Monday after a five-week shutdown due to the imposition of capital controls as local investors complained of discrimination over new restrictions on buying shares. The finance ministry banned Greeks from transferring money from their local bank accounts to buy shares over the weekend.

“Local investors would, however, be allowed to invest cash taken from safe deposit boxes or stored at home for buying shares, the ministry said … Analysts said based on the recent experience of GREK, an exchange-traded fund of US listings of Greek companies, the Athens index could fall sharply on Monday” http://on.ft.com/1VVOYc8

POTUS Events

10:00 am The President receives the Presidential Daily Briefing

Oval Office

Closed Press

11:10 am The President delivers remarks at the Young African Leaders Initiative (YALI) Mandela Washington Fellowship Presidential Summit

Omni Shoreham Hotel — Washington DC

Open to pre-credentialed media

2:15 pm The President delivers remarks at a Clean Power Plan event

East Room

Open Press

5:20 pm The President participates in an Ambassador Credentialing Ceremony

Oval Office

Closed Press

Floor Action

The Senate will take a procedural vote Monday on moving forward with legislation to defund Planned Parenthood.

Senators are expected to convene at 2 p.m. and vote at 5:30 p.m. on whether or not to end debate on a motion to proceed to a bill that would cut off funding for the organization and redirect it to other women’s health organizations.

Senate Majority Leader Mitch McConnell (R-Ky.) would need every Republican, as well as six Democrats, to support the bill to get the 60 votes needed to move forward on the proposal. But with Democrats, as well as a couple of Republicans, united against the bill, the Republican leader’s effort is expected to fall short.

Republicans are pushing to defund Planned Parenthood in the wake of a string of controversial videos about fetal tissue donations.

McConnell told reporters late last week that if the Senate isn’t able to take up the Planned Parenthood bill, he would then turn to cyber legislation.

Announcements

Ten Key Tax Facts about Home Sales

In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year.

  1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.
  2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, see Publication 523, Selling Your Home.
  3. Exclusion Limit.  The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
  4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
  6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.
  7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
  8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
  9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.

Report Your Address Change.  After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. You can find the address to send it to in the form’s instructions on page two. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Tom Kregs is a securities attorney in Birmingham, Alabama.